12. Employee related pension obligation

A majority of the employees transferred as part of the MCA business acquisition were participants in the Fujitsu Corporate Pension Fund and Retirement Allowance Plan (together, the Fujitsu Defined Benefit Plan) until March 31, 2014. The Company accounted for its participation in the Fujitsu Defined Benefit Plan on behalf of these employees (Plan participants) as a multiemployer plan participant and recorded pension expense of $1.5 million for the quarter ended March 30, 2014.  

On January 15, 2014, the Company received approval from the transferred employees’ union to exit from the Fujitsu Defined Benefit Plan and establish the Spansion defined contribution and cash balance plans.           

On April 1, 2014, the Company withdrew from the Fujitsu Defined Benefit Plan and set up the Spansion Corporate Defined Contribution Pension Plan and the Spansion Innovates Group Cash Balance Plan, an unfunded defined benefit plan of our MCA Japan business subsidiaries (Spansion Pension Plans). In accordance with the Stock Purchase Agreement with FSL, the plan assets transferred from the Fujitsu Defined Benefit Plan to the Spansion Pension Plans were valued as of March 31, 2014, one day before the transfer. The Company was not subject to any liabilities upon withdrawal from the Fujitsu Defined Benefit Plan.

          The Company recognized a gain of $2.5 million in the second quarter of fiscal 2014 due to better than expected performance of the total fund assets in the pension plan. This gain was recorded within Interest income and other, net in the Company’s Condensed Consolidated Statement of Operations for the nine months ended September 28, 2014.

           The restricted cash that was received as a part of the MCA business acquisition for the underfunded portion of the Fujitsu managed pension plan was $21.5 million as of September 28, 2014. According to the employees’ election and the expected distribution schedule, the Company recorded $6.1 million in accrued compensation and benefits and $16.3 million in other long-term liabilities on the Condensed Consolidated Balance Sheet as of September 28, 2014. Restricted cash relating to these distributions has been recorded in short term and long term assets as appropriate.

Spansion Innovates Group Cash balance plan (Defined Benefit Plan)

The Spansion Innovates Group Cash balance plan (Cash Balance Plan) provides for the Company to set up a hypothetical cash balance account (CB account) for each plan participant and accumulates at a percentage of the annual pensionable salary and interest thereon. Only employees transferred as part of the MCA business acquisition are eligible to participate in the cash balance plan.

The pension charges under the Cash Balance Plan are based on certain actuarial assumptions, such as turnover rates, discount rates and other factors. The discount rate assumption is determined by comparing the expected benefit payments to the Japanese corporate bonds yield curve as of April 1, 2014. Actual results that differ from these assumptions will be accumulated and amortized over the future life of the plan participants if they exceed 10% of the projected benefit obligation (PBO).

The Company recorded a service cost of $0.3 million for the three months ended September 28, 2014 and accrued a liability of $0.6 million as of September 28, 2014. The Company expects to expense $1.0 million related to the Cash Balance Plan for fiscal year 2014.

Spansion Corporate Defined Contribution Plan

The Company recorded an expense of $0.6 million and $1.2 million under this plan for the three and nine months ended September 28, 2014, respectively, and accrued a liability of $0.2 million as of September 28, 2014.