NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. BENEFIT PLANS The Company currently maintains a noncontributory defined benefit pension plan covering substantially all full-time employees of Radian Group, Radian Guaranty and RadianExpress.  Retirement benefits are a function of the years of service and the level of compensation. Assets of the plan are allocated in  a balanced fashion with approximately 40% in fixed income securities and 60% in equity securities. The Company also provides a nonqualified executive retirement plan covering certain key executives designated by the board of directors. Under this plan, participants are eligible to receive benefits in addition to those paid under the defined benefit pension plan if their base compensation is in excess of the current IRS compensation limitation for the defined benefit pension plan. Retirement benefits under the nonqualified  plan are a function of the years of service and the level of compensation and are reduced by any benefits paid under the defined benefit plan. In addition to providing pension benefits, the Company provides certain health care and life insurance benefits to retired employees of Radian Guaranty. The Company accrues the estimated cost of retiree medical and life benefits over the period during which employees render the service that qualifies them for benefits. All of these plans together are referred to in the tables below as the “Radian Plans.” Financial Guaranty maintains a noncontributory defined benefit pension plan including a non-qualified restoration pension plan, for the benefit of all eligible employees. Employers’ contributions are based upon a fixed percentage of employee salaries at the discretion of Financial Guaranty. Currently this is a separate plan, although it is expected that in the near future, the plans will be merged. The funded status of the defined benefit plans and the postretirement benefit plan were as follows (in thousands): The components of net defined benefit and net periodic postretirement benefit costs are as follows (in thousands): Radian Plans Postretirement Defined Benefit Plan Benefit Plan 2001 2000 2001 2000  Change in Benefit Obligation Benefit obligation at beginning of year $ 9,302 $ 5,844 $ 363 $ 314  Service cost 1,376 1,014 14 16  Interest cost 744 548 28 24  Increase due to Plan  amendments 564 406 41 —  Plan participants’  contributions — — 10 6  Actuarial loss 953 1,530 7 16  Benefits paid (159) (40) (19) (13)  Benefit obligation  at end of year $12,780 $ 9,302 $ 444 $ 363  Change in Plan Assets Fair value of plan  assets at beginning of year $ 5,103 $ 4,757 $— $— Actual return on  plan assets (437) (69) — —  Employer contributions 1,526 455 9 7  Plan participants’ contributions — — 10 6  Benefits paid (159) (40) (19) (13)  Fair value of plan  assets at end  of year $ 6,033 $ 5,103 $— $— Underfunded status of the plan $ (6,747) $(4,199) $(444) $(363)  Unrecognized prior service cost 1,197 764 (153) (168)  Unrecognized net actuarial loss (gain) 2,609 755 (81) (128)  Accrued benefit cost $ (2,941) $(2,680) $(678) $(659) Financial Guaranty Plan  Defined Benefit Plan 2001 Change in Benefit Obligation Benefit obligation at beginning of period $ 14,431 Service cost 2,531 Interest cost 1,060 Curtailments/settlements (771) Actuarial gain 1,563 Benefits paid (1,052) Benefit obligation at end of year $ 17,762 Change in Plan Assets Fair value of plan assets at beginning of period  $ 3,551 Actual return on plan assets (1,250) Employer contributions 1,311 Plan participants’ contributions — Benefits paid  (392) Fair value of plan assets at end of year $ 3,220 Underfunded status of the plan $(14,542) Unrecognized transition obligation 8 Unrecognized prior service cost 2,218 Unrecognized net actuarial loss (gain) 386 Accrued benefit cost $(11,930) Radian Plans Postretirement Defined Benefit Plan Benefit Plan 2001 2000 1999 2001 2000 1999  Service cost $1,376 $1,014 $ 797 $14 $ 16 $ 19  Interest cost 744 548 383 28 24 21  Expected return  on plan assets (461) (422) (320) — — — Amortization of prior service cost 132 98 69 (6) (11) (11)  Recognized net actuarial loss (gain) 34 17 10 (8) (10) (8)  Net periodic benefit cost $1,825 $1,255 $ 939 $28 $19 $21 >34