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Employee Benefit Plans | 12 Months Ended
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Dec. 31, 2012
Employee Benefit Plans |
Employee Benefit Plans | (10) Employee Benefit Plans Overview — Defined benefit pension plans cover a portion of our salaried and hourly paid employees, including certain employees in foreign countries. Beginning in 2001, we discontinued providing these pension benefits generally to newly hired employees. In addition, we no longer provide service credits to certain active participants. Of the U.S. employees covered by a defined benefit pension plan and actively accruing a benefit, most are covered by an account balance plan or are part of a collectively bargained plan. We have domestic postretirement plans that provide health and life insurance benefits to certain retirees and their dependents. Beginning in 2003, we discontinued providing these postretirement benefits generally to newly hired employees. Some of these plans require retiree contributions at varying rates. Not all retirees are eligible to receive these benefits, with eligibility governed by the plan(s) in effect at a particular location. The plan year-end date for all our plans is December 31. Defined Benefit Pension Plans Plan assets— Our investment strategy is based on the long-term growth of principal while mitigating overall risk to ensure that funds are available to pay benefit obligations. The domestic plan assets are invested in a broad range of investment classes, including domestic and international equities, fixed income securities and other investments. We engage various investment managers who are regularly evaluated on long-term performance, adherence to investment guidelines and the ability to manage risk commensurate with the investment style and objective for which they were hired. We continuously monitor the value of assets by class and routinely rebalance our portfolio with the goal of meeting our target allocations. The strategy for equity assets is to minimize concentrations of risk by investing primarily in companies in a diversified mix of industries worldwide, while targeting neutrality in exposure to global versus regional markets, fund types and fund managers. The strategy for bonds emphasizes investment-grade corporate and government debt with maturities matching a portion of the longer duration pension liabilities. The bonds strategy also includes a high yield element, which is generally shorter in duration. A small portion of U.S. plan assets is allocated to private equity partnerships and real estate asset fund investments for diversification, providing opportunities for above market returns. Allowable investments under the plan agreements include equity securities, fixed income securities, mutual funds, venture capital funds, real estate and cash and equivalents. In addition, investments in futures and option contracts, commodities and other derivatives are allowed in commingled fund allocations managed by professional investment managers. Investments prohibited under the plan agreements include private placements and short selling of stock. No shares of our common stock were held by our defined benefit pension plans as of December 31, 2012 and 2011. Actual asset allocation percentages of each class of our domestic and foreign pension plan assets as of December 31, 2012 and 2011, along with the targeted asset investment allocation percentages, each of which is based on the midpoint of an allocation range, were as follows: Domestic Pension Plans
|  | Actual Allocations |  | Mid-point of Target Allocation Range |
--- | --- | --- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2012 |
Global equities |  |  | 12 | % |  | 16 | % |  | 20 | %
Global equity common trust funds |  |  | 28 | % |  | 27 | % |  | 30 | %
Fixed income common trust funds |  |  | 29 | % |  | 27 | % |  | 20 | %
Commingled global fund allocations |  |  | 26 | % |  | 25 | % |  | 30 | %
Short term investments(1) |  |  | 4 | % |  | 4 | % |  | 0 | %
Other(2) |  |  | 1 | % |  | 1 | % |  | 0 | %
Total |  |  | 100 | % |  | 100 | % |  | 100 | %
(1) Short term investments are generally invested in actively managed common trust funds or interest-bearing accounts. (2) Assets included in this class at December 31, 2012 and 2011 comprised primarily insurance contracts, private equity and publicly traded real estate trusts. Foreign Pension Plans
|  | Actual Allocations |  | Mid-point of Target Allocation Range |
--- | --- | --- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2012 |
Global equity common trust funds |  |  | 38 | % |  | 38 | % |  | 43 | %
Fixed income common trust funds |  |  | 40 | % |  | 40 | % |  | 30 | %
Non-U.S. Government securities |  |  | 13 | % |  | 15 | % |  | 25 | %
Short term investments(1) |  |  | 8 | % |  | 5 | % |  | 1 | %
Other(2) |  |  | 1 | % |  | 2 | % |  | 1 | %
Total |  |  | 100 | % |  | 100 | % |  | 100 | %
(1) Short term investments are generally invested in actively managed common trust funds or interest-bearing accounts. (2) Assets included in this class comprised primarily insurance contracts. The fair value of pension plan assets at December 31, 2012, by asset class, were as follows:
|  | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Asset class: |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Global equities: |  |  |  |  |  |  |  |  |  |  |  |  |
Capital equipment |  | $ | 20.2 |  | $ | 20.2 |  | $ | — |  | $ | — |
Consumer goods |  |  | 17.7 |  |  | 17.7 |  |  | — |  |  | — |
Energy |  |  | 8.8 |  |  | 8.8 |  |  | — |  |  | — |
Finance |  |  | 8.2 |  |  | 8.2 |  |  | — |  |  | — |
Materials |  |  | 9.4 |  |  | 9.4 |  |  | — |  |  | — |
Services |  |  | 10.6 |  |  | 10.6 |  |  | — |  |  | — |
Miscellaneous |  |  | 37.3 |  |  | 37.3 |  |  | — |  |  | — |
Global equity common trust funds(1) |  |  | 366.1 |  |  | 103.6 |  |  | 233.5 |  |  | 29.0 |
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income common trust funds(2) |  |  | 380.5 |  |  | 69.4 |  |  | 309.7 |  |  | 1.4 |
Non-U.S. Government securities |  |  | 36.3 |  |  | — |  |  | 36.3 |  |  | — |
Alternative investments: |  |  |  |  |  |  |  |  |  |  |  |  |
Commingled global fund allocations(3) |  |  | 247.1 |  |  | 91.2 |  |  | 0.3 |  |  | 155.6 |
Other: |  |  |  |  |  |  |  |  |  |  |  |  |
Short term investments(4) |  |  | 61.5 |  |  | 61.5 |  |  | — |  |  | — |
Other(5) |  |  | 10.1 |  |  | 2.4 |  |  | 0.3 |  |  | 7.4 |
Total |  | $ | 1,213.8 |  | $ | 440.3 |  | $ | 580.1 |  | $ | 193.4 |
The fair value of pension plan assets at December 31, 2011, by asset class, were as follows:
|  | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Asset class: |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Global equities: |  |  |  |  |  |  |  |  |  |  |  |  |
Capital equipment |  | $ | 27.1 |  | $ | 27.1 |  | $ | — |  | $ | — |
Consumer goods |  |  | 16.5 |  |  | 16.5 |  |  | — |  |  | — |
Energy |  |  | 12.3 |  |  | 12.3 |  |  | — |  |  | — |
Finance |  |  | 10.1 |  |  | 10.1 |  |  | — |  |  | — |
Materials |  |  | 17.2 |  |  | 17.2 |  |  | — |  |  | — |
Services |  |  | 12.7 |  |  | 12.7 |  |  | — |  |  | — |
Miscellaneous |  |  | 39.4 |  |  | 39.4 |  |  | — |  |  | — |
Global equity common trust funds(1) |  |  | 328.9 |  |  | 91.6 |  |  | 212.9 |  |  | 24.4 |
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income common trust funds(2) |  |  | 331.9 |  |  | 64.0 |  |  | 266.5 |  |  | 1.4 |
Non-U.S. Government securities |  |  | 36.0 |  |  | — |  |  | 36.0 |  |  | — |
Alternative investments: |  |  |  |  |  |  |  |  |  |  |  |  |
Commingled global fund allocations(3) |  |  | 231.9 |  |  | 96.7 |  |  | 5.3 |  |  | 129.9 |
Other: |  |  |  |  |  |  |  |  |  |  |  |  |
Short term investments(4) |  |  | 43.5 |  |  | 43.5 |  |  | — |  |  | — |
Other(5) |  |  | 7.7 |  |  | 1.7 |  |  | — |  |  | 6.0 |
Total |  | $ | 1,115.2 |  | $ | 432.8 |  | $ | 520.7 |  | $ | 161.7 |
(1) This class represents investments in actively managed common trust funds that invest primarily in equity securities, which may include common stocks, options and futures. The funds are valued at the net asset value per share multiplied by the number of shares held as of the measurement date. The investments are valued based on market values and yields currently available for comparable securities of issuers with similar credit ratings. The Level of the fund(s) (Level 1, 2 or 3) is determined based on the classification of the significant holdings within the fund. (2) This class represents investments in actively managed common trust funds that invest in a variety of fixed income investments, which may include corporate bonds, both U.S. and non-U.S. municipal securities, interest rate swaps, options and futures. The funds are valued at the net asset value per share multiplied by the number of shares held as of the measurement date. The investments are valued based on yields currently available for comparable securities of issuers with similar credit ratings. The Level of the fund(s) (Level 1, 2 or 3) is determined based on the classification of the significant holdings within the fund. (3) This class represents investments in actively managed common trust funds with investments in both equity and debt securities. The investments may include common stock, corporate bonds, U.S. and non-U.S. municipal securities, interest rate swaps, options and futures. The funds are valued at the net asset value per share multiplied by the number of shares held as of the measurement date. The investments are valued based on market values and yields currently available for comparable securities of issuers with similar credit ratings. The Level of the fund(s) (Level 1, 2 or 3) is determined based on the classification of the significant holdings within the fund. (4) Short term investments are valued at $1.00/unit, which approximates fair value. Amounts are generally invested in actively managed common trust funds or interest bearing accounts. (5) This category represents investments in insurance contracts, private equity and publicly traded real estate investment trusts. The insurance contracts and private equity investments are valued using unobservable inputs from the fund manager, primarily based on discounted cash flow models. Our domestic pension plans participate in a securities lending program through J.P. Morgan Chase Bank, National Association. Securities loaned are required to be fully collateralized by cash or other securities. The gross collateral and the related liability to return collateral amounted to $31.4 at December 31, 2012 and $47.4 at December 31, 2011, and have been included within "Level 2" of the fair value hierarchy in the tables above. There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy during 2012 and 2011. It is our policy to recognize transfers between Levels at the beginning of the fiscal year. The following table summarizes changes in the fair value of Level 3 assets for the years ended December 31, 2012 and 2011:
|  | Global Equity Common Trust Funds |  | Commingled Global Fund Allocations |  | Fixed Income Common Trust Funds |  | Other |  | Total |
--- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Balance at December 31, 2010 |  | $ | — |  | $ | 122.4 |  | $ | 1.3 |  | $ | 8.2 |  | $ | 131.9 |
Realized gains |  |  | — |  |  | 0.7 |  |  | — |  |  | 0.6 |  |  | 1.3 |
Unrealized gains (losses) relating to instruments still held at period end |  |  | 1.6 |  |  | 13.1 |  |  | 0.1 |  |  | (0.9 | ) |  | 13.9 |
Purchases |  |  | 24.3 |  |  | — |  |  | — |  |  | — |  |  | 24.3 |
Sales |  |  | (1.5 | ) |  | (6.3 | ) |  | — |  |  | (1.9 | ) |  | (9.7 | )
Balance at December 31, 2011 |  |  | 24.4 |  |  | 129.9 |  |  | 1.4 |  |  | 6.0 |  |  | 161.7 |
Realized gains |  |  | — |  |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
Unrealized gains relating to instruments still held at period end |  |  | 1.8 |  |  | 12.7 |  |  | — |  |  | 2.0 |  |  | 16.5 |
Purchases |  |  | 2.8 |  |  | 13.0 |  |  | — |  |  | — |  |  | 15.8 |
Sales |  |  | — |  |  | — |  |  | — |  |  | (0.7 | ) |  | (0.7 | )
Balance at December 31, 2012 |  | $ | 29.0 |  | $ | 155.6 |  | $ | 1.4 |  | $ | 7.4 |  | $ | 193.4 |
There were no transfers in or out of Level 3 assets in 2012 and 2011. Employer Contributions — We currently fund U.S. pension plans in amounts equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus additional amounts that may be approved from time to time. During 2012, we made contributions of $35.4 to our qualified domestic pension plans and direct benefit payments of $4.5 to our non-qualified domestic pension plans. In 2013, we expect to make minimum required funding contributions of $27.9 to our qualified domestic pension plans and direct benefit payments of $6.0 to our non-qualified domestic pension plans. Many of our foreign plan obligations are unfunded in accordance with local laws. These plans have no assets and instead are funded by us on a pay as you go basis in the form of direct benefit payments. To our foreign plans that are funded, we made contributions of $10.4 in 2012, which included $1.8 of contributions that relate to businesses that have been classified as discontinued operations. In addition, to our foreign plans that are unfunded, we made direct benefit payments of $2.3 in 2012. In 2013, we expect to make minimum required funding contributions of $17.7, which will include $2.5 of contributions that relate to businesses that have been classified as discontinued operations, and $2.8 of direct benefit payments to our foreign pension plans. Estimated Future Benefit Payments — Following is a summary, as of December 31, 2012, of the estimated future minimum benefit payments for our pension plans in each of the next five fiscal years and in the aggregate for five fiscal years thereafter. Benefit payments are paid from plan assets or directly by us for our non-funded plans. The expected benefit payments are estimated based on the same assumptions used at December 31, 2012 to measure our obligations and include benefits attributable to estimated future employee service. Estimated minimum benefit payments: (Domestic and foreign pension plans)
|  | Domestic Pension |  | Foreign Pension |
--- | --- | --- | --- | --- | ---
|  | Benefits |  | Benefits |
2013 |  | $ | 80.5 |  | $ | 12.2 |
2014 |  |  | 80.3 |  |  | 12.6 |
2015 |  |  | 145.0 |  |  | 13.4 |
2016 |  |  | 79.8 |  |  | 14.0 |
2017 |  |  | 80.3 |  |  | 14.9 |
Subsequent five years |  |  | 406.7 |  |  | 77.6 |
Obligations and Funded Status — The funded status of our pension plans is dependent upon many factors, including returns on invested assets and the level of market interest rates. The combined funded status of our pension plans as of December 31, 2012 has decreased since December 31, 2011, primarily as a result of lower discount rates being used to value the plans in 2012 compared to 2011. Our non-funded pension plans account for $142.6 of the current underfunded status, as these plans are not required to be funded. The following tables show the domestic and foreign pension plans' funded status and amounts recognized in our consolidated balance sheets:
|  | Domestic Pension Plans |  | Foreign Pension Plans |
--- | --- | --- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2012 |  | 2011 |
Change in projected benefit obligation: |  |  |  |  |  |  |  |  |  |  |  |  |
Projected benefit obligation — beginning of year |  | $ | 1,193.5 |  | $ | 1,148.3 |  | $ | 280.4 |  | $ | 254.5 |
Service cost |  |  | 9.8 |  |  | 9.9 |  |  | 2.5 |  |  | 2.5 |
Interest cost |  |  | 54.4 |  |  | 57.4 |  |  | 14.3 |  |  | 14.0 |
Employee contributions |  |  | — |  |  | — |  |  | 0.2 |  |  | 0.2 |
Actuarial losses |  |  | 170.6 |  |  | 53.0 |  |  | 26.3 |  |  | 9.6 |
Curtailment gain |  |  | (4.0 | ) |  | (0.1 | ) |  | — |  |  | (0.1 | )
Acquisitions |  |  | — |  |  | 1.0 |  |  | — |  |  | 16.1 |
Benefits paid |  |  | (78.5 | ) |  | (76.0 | ) |  | (11.6 | ) |  | (13.7 | )
Foreign exchange and other |  |  | — |  |  | — |  |  | 10.9 |  |  | (2.7 | )
Projected benefit obligation — end of year |  | $ | 1,345.8 |  | $ | 1,193.5 |  | $ | 323.0 |  | $ | 280.4 |
Change in plan assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets — beginning of year |  | $ | 868.2 |  | $ | 867.5 |  | $ | 247.0 |  | $ | 227.8 |
Return on plan assets |  |  | 107.1 |  |  | 71.8 |  |  | 19.2 |  |  | 12.0 |
Benefits paid |  |  | (78.5 | ) |  | (76.0 | ) |  | (9.3 | ) |  | (13.7 | )
Contributions (employer and employee) |  |  | 40.0 |  |  | 4.2 |  |  | 10.6 |  |  | 10.9 |
Acquisitions |  |  | — |  |  | 0.7 |  |  | — |  |  | 11.8 |
Foreign exchange and other |  |  | — |  |  | — |  |  | 9.5 |  |  | (1.8 | )
Fair value of plan assets — end of year |  | $ | 936.8 |  | $ | 868.2 |  | $ | 277.0 |  | $ | 247.0 |
Funded status at year-end |  |  | (409.0 | ) |  | (325.3 | ) |  | (46.0 | ) |  | (33.4 | )
Amounts recognized in the consolidated balance sheets consist of: |  |  |  |  |  |  |  |  |  |  |  |  |
Other assets |  | $ | — |  | $ | — |  | $ | 24.9 |  | $ | 23.7 |
Accrued expenses |  |  | (5.9 | ) |  | (6.4 | ) |  | (2.6 | ) |  | (2.3 | )
Other long-term liabilities |  |  | (403.1 | ) |  | (318.9 | ) |  | (68.3 | ) |  | (54.8 | )
Net amount recognized |  | $ | (409.0 | ) | $ | (325.3 | ) | $ | (46.0 | ) | $ | (33.4 | )
Amounts recognized in accumulated other comprehensive loss (pre-tax) consist of: |  |  |  |  |  |  |  |  |  |  |  |  |
Net actuarial loss |  | $ | 710.8 |  | $ | 616.4 |  | $ | 76.0 |  | $ | 51.3 |
Net prior service costs (credits) |  |  | (0.1 | ) |  | (0.7 | ) |  | (0.1 | ) |  | 0.1 |
Total accumulated comprehensive loss (pre-tax) |  | $ | 710.7 |  | $ | 615.7 |  | $ | 75.9 |  | $ | 51.4 |
The following is information about our pension plans that had accumulated benefit obligations in excess of the fair value of their plan assets at December 31, 2012 and 2011:
|  | Domestic Pension Plans |  | Foreign Pension Plans |
--- | --- | --- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2012 |  | 2011 |
Projected benefit obligation |  | $ | 1,345.8 |  | $ | 1,193.5 |  | $ | 119.3 |  | $ | 112.3 |
Accumulated benefit obligation |  |  | 1,331.5 |  |  | 1,176.7 |  |  | 116.4 |  |  | 111.0 |
Fair value of plan assets |  |  | 936.8 |  |  | 868.2 |  |  | 48.5 |  |  | 55.3 |
The accumulated benefit obligation for all domestic and foreign pension plans was $1,331.5 and $314.8, respectively, at December 31, 2012 and $1,176.7 and $275.3, respectively, at December 31, 2011. Components of Net Periodic Pension Benefit Expense — Net periodic pension benefit expense for our domestic and foreign pension plans included the following components: Domestic Pension Plans
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2010 |
Service cost |  | $ | 9.8 |  | $ | 9.9 |  | $ | 9.3 |
Interest cost |  |  | 54.4 |  |  | 57.4 |  |  | 61.1 |
Expected return on plan assets |  |  | (63.4 | ) |  | (65.6 | ) |  | (68.4 | )
Amortization of unrecognized losses(1) |  |  | 28.5 |  |  | 23.2 |  |  | 36.4 |
Amortization of unrecognized prior service credits |  |  | (0.6 | ) |  | (0.9 | ) |  | (0.9 | )
Curtailment loss |  |  | 0.1 |  |  | — |  |  | — |
Total net periodic pension benefit expense |  |  | 28.8 |  |  | 24.0 |  |  | 37.5 |
Less: Net periodic pension benefit expense of discontinued operations |  |  | — |  |  | — |  |  | — |
Net periodic pension benefit expense of continuing operations |  | $ | 28.8 |  | $ | 24.0 |  | $ | 37.5 |
(1) An increase in the number of inactive participants in one of our domestic pension plans resulted in almost all of the plan participants being inactive. Accordingly, in 2011 we began amortizing the unrecognized gains/losses over the average remaining life expectancy of the inactive participants as opposed to the average remaining service period of the active participants. This change resulted in a reduction to pension expense of approximately $20.0 for the year ended December 31, 2011. Foreign Pension Plans
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2010 |
Service cost |  | $ | 2.8 |  | $ | 2.8 |  | $ | 2.3 |
Interest cost |  |  | 14.6 |  |  | 14.2 |  |  | 14.1 |
Expected return on plan assets |  |  | (16.6 | ) |  | (16.2 | ) |  | (14.3 | )
Amortization of unrecognized losses |  |  | 1.5 |  |  | 0.9 |  |  | 1.7 |
Curtailment gain |  |  | — |  |  | (0.1 | ) |  | — |
Total net periodic pension benefit expense |  |  | 2.3 |  |  | 1.6 |  |  | 3.8 |
Less: Net periodic pension benefit expense of discontinued operations |  |  | (1.2 | ) |  | (0.7 | ) |  | (0.3 | )
Net periodic pension benefit expense of continuing operations |  | $ | 1.1 |  | $ | 0.9 |  | $ | 3.5 |
Other changes in plan assets and benefit obligations recognized in other comprehensive income in 2012 were as follows:
|  | Domestic Plans |  | Foreign Plans |
--- | --- | --- | --- | --- | ---
Current year actuarial loss |  | $ | 126.9 |  | $ | 23.6 |
Amortization of actuarial loss |  |  | (28.5 | ) |  | (1.5 | )
Amortization of prior service credits |  |  | 0.6 |  |  | — |
Curtailment gain |  |  | (4.0 | ) |  | — |
Foreign exchange and other |  |  | — |  |  | 2.4 |
|  | $ | 95.0 |  | $ | 24.5 |
The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic pension benefit expense in 2013 are as follows:
|  | Domestic Plans |  | Foreign Plans |
--- | --- | --- | --- | --- | ---
Net actuarial loss |  | $ | 35.9 |  | $ | 2.7 |
Net prior service credits |  |  | — |  |  | — |
|  | $ | 35.9 |  | $ | 2.7 |
Assumptions — Actuarial assumptions used in accounting for our domestic and foreign pension plans were as follows:
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2010 |
Domestic Pension Plans |  |  |  |  |  |  |  |  |  |
Weighted-average actuarial assumptions used in determining net periodic pension expense: |  |  |  |  |  |  |  |  |  |
Discount rate |  |  | 4.69 | % |  | 5.22 | % |  | 5.80 | %
Rate of increase in compensation levels |  |  | 3.75 | % |  | 4.00 | % |  | 4.00 | %
Expected long-term rate of return on assets |  |  | 7.25 | % |  | 7.25 | % |  | 8.25 | %
Weighted-average actuarial assumptions used in determining year-end benefit obligations: |  |  |  |  |  |  |  |  |  |
Discount rate |  |  | 3.74 | % |  | 4.69 | % |  | 5.22 | %
Rate of increase in compensation levels |  |  | 3.75 | % |  | 3.75 | % |  | 4.00 | %
Foreign Pension Plans |  |  |  |  |  |  |  |  |  |
Weighted-average actuarial assumptions used in determining net periodic pension expense: |  |  |  |  |  |  |  |  |  |
Discount rate |  |  | 5.10 | % |  | 5.42 | % |  | 5.50 | %
Rate of increase in compensation levels |  |  | 3.92 | % |  | 4.15 | % |  | 4.10 | %
Expected long-term rate of return on assets |  |  | 6.56 | % |  | 7.00 | % |  | 7.04 | %
Weighted-average actuarial assumptions used in determining year-end benefit obligations: |  |  |  |  |  |  |  |  |  |
Discount rate |  |  | 4.35 | % |  | 5.10 | % |  | 5.42 | %
Rate of increase in compensation levels |  |  | 3.91 | % |  | 3.92 | % |  | 4.15 | %
We review the pension assumptions annually. Pension income or expense is determined using assumptions as of the beginning of the year, while the funded status is determined using assumptions as of the end of the year. We determined assumptions and established them at the respective balance sheet date using the following principles: (i) the expected long-term rate of return on plan assets is established based on forward looking long-term expectations of asset returns over the expected period to fund participant benefits based on the target investment mix of our plans; (ii) the discount rate is determined by matching the expected projected benefit obligation cash flows for each of the plans to a yield curve that is representative of long-term, high-quality (rated AA or higher) fixed income debt instruments as of the measurement date; and (iii) the rate of increase in compensation levels is established based on our expectations of current and foreseeable future increases in compensation. In addition, we consider advice from independent actuaries. Multiemployer Benefit Plans Upon acquisition of Clyde Union, we assumed participation in a multiemployer benefit plan under the terms of a collective-bargaining agreement that covers Clyde Union's domestic union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: • Assets contributed to the multiemployer plan by us may be used to provide benefits to employees of other participating employers; • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and • If we choose to stop participating in the multiemployer plan, we may be required to pay an amount based on the underfunded status of the plan, referred to as a withdrawal liability. We participate in the following multiemployer benefit plan:
Pension Fund |  | EIN Pension Plan Number |  | Pension Protection Act Zone Status — 2012 |  | Financial Improvement Plan / Rehabilitation Plan Status Pending |  | 2012 Contributions |  | 2011 Contributions |  | Surcharge Imposed |  | Expiration Date of Collective Bargaining Agreement |
--- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ---
IAM National Pension Fund, National Pension Plan |  |  | 51-6031295-002 |  |  | Green |  |  | No |  | $ | 0.3 |  | $ | 0.3 |  | No |  |  | August 10, 2013 |
The contributions made by Clyde Union during 2012 and 2011 were not more than 5% of the total contributions made to the IAM National Pension Fund, National Pension Plan ("IAM"). In 2011, the IAM began applying an election for funding relief which allows the IAM to amortize the investment losses incurred for the plan year ended December 31, 2008 over a period of up to 29 years (as opposed to 15 years that would otherwise have been required). Furthermore, in accordance with the election, the current asset valuation method has been updated to recognize the investment losses incurred during the 2008 plan year over a ten year period as opposed to the previous period of five years. Postretirement Benefit Plans Employer Contributions and Future Benefit Payments — Our postretirement medical plans are unfunded and have no plan assets, but are instead funded by us on a pay as you go basis in the form of direct benefit payments or policy premium payments. In 2012, we made benefit payments of $13.8 (net of federal subsidies of $1.7) to our postretirement benefit plans. Following is a summary, as of December 31, 2012, of the estimated future benefit payments and expected federal subsidies for our postretirement plans in each of the next five fiscal years and in the aggregate for five fiscal years thereafter. The expected benefit payments and federal subsidies are estimated based on the same assumptions used at December 31, 2012 to measure our obligations and include benefits attributable to estimated future employee service.
|  | Postretirement Payments, net of Subsidies |  | Postretirement Subsidies |
--- | --- | --- | --- | --- | ---
2013 |  | $ | 14.8 |  | $ | 1.5 |
2014 |  |  | 14.2 |  |  | 1.5 |
2015 |  |  | 13.6 |  |  | 1.5 |
2016 |  |  | 12.9 |  |  | 1.5 |
2017 |  |  | 12.2 |  |  | 1.4 |
Subsequent five years |  |  | 51.2 |  |  | 6.1 |
Obligations and Funded Status — The following tables show the postretirement plans' funded status and amounts recognized in our consolidated balance sheets:
|  | Postretirement Benefits |
--- | --- | --- | ---
|  | 2012 |  | 2011 |
Change in accumulated postretirement benefit obligation: |  |  |  |  |  |  |
Accumulated postretirement benefit obligation — beginning of year |  | $ | 148.7 |  | $ | 152.5 |
Service cost |  |  | 0.5 |  |  | 0.4 |
Interest cost |  |  | 6.1 |  |  | 7.0 |
Actuarial (gain) loss |  |  | 7.2 |  |  | (3.9 | )
Benefits paid |  |  | (13.8 | ) |  | (14.3 | )
Acquisitions |  |  | — |  |  | 7.0 |
Accumulated postretirement benefit obligation — end of year |  | $ | 148.7 |  | $ | 148.7 |
Funded status at year-end |  | $ | (148.7 | ) | $ | (148.7 | )
Amounts recognized in the balance sheet consist of: |  |  |  |  |  |  |
Accrued expenses |  | $ | (14.6 | ) | $ | (15.7 | )
Other long-term liabilities |  |  | (134.1 | ) |  | (133.0 | )
Net amount recognized |  | $ | (148.7 | ) | $ | (148.7 | )
Amounts recognized in accumulated other comprehensive loss (pre-tax) consist of: |  |  |  |  |  |  |
Net actuarial loss |  | $ | 48.6 |  | $ | 44.9 |
Net prior service credit |  |  | (1.7 | ) |  | (3.1 | )
Total accumulated comprehensive loss (pre-tax) |  | $ | 46.9 |  | $ | 41.8 |
The net periodic postretirement benefit expense included the following components:
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2010 |
Service cost |  | $ | 0.5 |  | $ | 0.4 |  | $ | 0.3 |
Interest cost |  |  | 6.1 |  |  | 7.0 |  |  | 8.0 |
Amortization of unrecognized loss |  |  | 3.6 |  |  | 4.5 |  |  | 4.2 |
Amortization of unrecognized prior service credits |  |  | (1.4 | ) |  | (1.4 | ) |  | (1.3 | )
Net periodic postretirement benefit expense |  | $ | 8.8 |  | $ | 10.5 |  | $ | 11.2 |
Other changes in benefit obligations recognized in other comprehensive income in 2012 were as follows:
Current year actuarial loss |  | $ | 7.2 |
Amortization of actuarial loss |  |  | (3.6 | )
Amortization of prior service credits |  |  | 1.4 |
|  | $ | 5.0 |
The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic postretirement benefit expense in 2013 include net actuarial losses of $4.0 and prior service credits of $1.4. Actuarial assumptions used in accounting for our domestic postretirement plans were as follows:
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2010 |
Assumed health care cost trend rates: |  |  |  |  |  |  |  |  |  |
Heath care cost trend rate for next year |  |  | 7.13 | % |  | 7.52 | % |  | 7.86 | %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) |  |  | 5.00 | % |  | 5.00 | % |  | 5.00 | %
Year that the rate reaches the ultimate trend rate |  |  | 2019 |  |  | 2019 |  |  | 2019 |
Discount rate used in determining net periodic postretirement benefit expense |  |  | 4.36 | % |  | 4.85 | % |  | 5.46 | %
Discount rate used in determining net year-end postretirement benefit obligation |  |  | 3.37 | % |  | 4.36 | % |  | 4.85 | %
The accumulated postretirement benefit obligation was determined using the terms and conditions of our various plans, together with relevant actuarial assumptions and health care cost trend rates. It is our policy to review the postretirement assumptions annually. The assumptions are determined by us and are established based on our prior experience and our expectations that future rates will decline. In addition, we consider advice from independent actuaries. Assumed health care cost trend rates can have a significant effect on the amounts reported for the postretirement benefit plans. A percentage point change in assumed health care cost trend rates would have had the following effects on 2012 postretirement expense
|  | 1% Increase |  | 1% Decrease |
--- | --- | --- | --- | --- | ---
Effect on total of service and interest costs |  | $ | 0.4 |  | $ | (0.3 | )
Effect on postretirement benefit obligation |  | $ | 9.2 |  | $ | (8.2 | )
Defined Contribution Retirement Plans We maintain a defined contribution retirement plan (the "Plan") pursuant to Section 401(k) of the U.S. Internal Revenue Code. Under the Plan, eligible U.S. employees may voluntarily contribute up to 50% of their compensation into the Plan and we match a portion of participating employees' contributions. Our matching contributions are primarily made in newly issued shares of company common stock and are issued at the prevailing market price. The matching contributions vest with the employee immediately upon the date of the match and there are no restrictions on the resale of common stock held by employees. Under the Plan, we contributed 0.266, 0.271 and 0.269 shares of our common stock to employee accounts in 2012, 2011 and 2010, respectively. Compensation expense is recorded based on the market value of shares as the shares are contributed to employee accounts. We recorded $15.3 in 2012, $14.8 in 2011 and $13.9 in 2010 as compensation expense related to the matching contribution. We also maintain a Supplemental Retirement Savings Plan ("SRSP"), which permits certain members of our senior management and executive groups to defer eligible compensation in excess of the amounts allowed under the Plan. We match a portion of participating employees' deferrals to the extent allowable under the SRSP provisions. The matching contributions vest with the participant immediately. Our funding of the participants' deferrals and our matching contributions are held in certain mutual funds (as allowed under the SRSP), as directed by the participant. The fair values of these assets, which totaled $45.9 and $47.0 at December 31, 2012 and 2011, respectively, are based on quoted prices in active markets for identical assets (Level 1). In addition, the assets under the SRSP are available to the general creditors in the event of our bankruptcy and, thus, are maintained on our consolidated balance sheets within other non-current assets, with a corresponding amount in other long-term liabilities for our obligation to the participants. Lastly, these assets are accounted for as trading securities. During 2012, 2011 and 2010, we recorded additional compensation expense of $0.3, $0.4 and $0.4, respectively, relating to our matching contributions to the SRSP. Certain collectively-bargained employees participate in the Plan with company contributions not being made in company common stock, although company common stock is offered as an investment option under these plans.

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