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Pensions and Other Postretirement Benefit Plans | 12 Months Ended
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Dec. 31, 2011
Pensions and Other Postretirement Benefit Plans [Abstract] |
Pensions and Other Postretirement Benefit Plans | 4 . Pensions and Other Postretirement Benefit Plans Pension Plans The Company has defined benefit pension plans covering certain U.S. and non-U.S. employees. The U.S. qualified defined benefit pension plan has been closed to new participants since October 1998 and, as of February 2009, benefits accrued under this plan were frozen, resulting in a charge of $2.5 million that was recorded in 2008. As a result of the freeze, employees covered by the pension plan will receive, at retirement, benefits already accrued through February 2009, but no new benefits accrue after that date. Benefit accruals under the U.S. Supplemental Executive Retirement Plan ("SERP") were similarly frozen. The U.S. pension plan accounts for 67% of consolidated pension plan assets, and 60% of consolidated pension plan obligations. The eligibility, benefit formulas, and contribution requirements for plans outside of the U.S. vary by location. Other Postretirement Benefits In addition to providing pension benefits, the Company provides various medical, dental, and life insurance benefits for certain retired United States employees. U.S. employees hired prior to 2005 may become eligible for these benefits if they reach normal retirement age while working for the Company. Benefits provided under this plan are subject to change. Retirees share in the cost of these benefits. Effective January 2005, any new employees who wish to be covered under this plan will be responsible for the full cost of such benefits, except for life insurance benefits, which continue to be provided. The Company also provides certain postretirement life insurance benefits to retired employees in Canada. As of December 31, 2011, the accrued postretirement liability was $77.9 million in the U.S. and $1.1 million in Canada. The Company accrues the cost of providing postretirement benefits during the active service period of the employees. The Company currently funds the plan as claims are paid. Accounting guidance requires the recognition of the funded status of each defined benefit and other postretirement benefit plan. Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a liability. Company pension plan data for U.S. and non-U.S. plans has been combined for both 2011 and 2010, except where indicated below. The Company's pension and postretirement benefit costs and benefit obligations are based on actuarial valuations that are affected by many assumptions, the most significant of which are the assumed discount rate, expected rate of return on pension plan assets, and mortality. Each of the assumptions is reviewed and updated annually, as appropriate. The assumed rates of return for pension plan assets are determined for each major asset category based on historical rates of return for assets in that category and expectations of future rates of return based, in part, on simulated future capital market performance. The assumed discount rate is based on yields from a portfolio of currently available high-quality fixed-income investments with durations matching the expected future payments, based on the demographics of the plan participants and the plan provisions. The benefit obligation as of December 31, 2011 and 2010, as well as pension expense for those years, was calculated using the RP-2000 Combined Healthy Mortality table projected to 2016 using Scale AA with phase-out to the IRS Static Mortality table. Gains and losses arise from changes in the assumptions used to measure the benefit obligations, and experience different from what had been assumed, including asset returns different than what had been expected. The Company amortizes gains and losses in excess of a "corridor" over the average future service of the plan's current participants. The corridor is defined as 10% of the greater of the plan's projected benefit obligation or market-related value of plan assets. The market-related value of plan assets is also used to determine the expected return on plan assets component of net periodic cost. The Company's market-related value for its U.S. plan is measured by first determining the absolute difference between the actual and the expected return on the plan assets. The absolute difference in excess of 5% of the expected return is added to the market-related value over two years; the remainder is added to the market-related value immediately. To the extent the Company's unrecognized net losses and unrecognized prior service costs, including the amount recognized through accumulated other comprehensive income, are not reduced by future favorable plan experience, they will be recognized as a component of the net periodic cost in future years. The Company's unrecognized net loss in its pension plans is primarily attributable to recent declines in interest rates and unfavorable investment returns in 2008. The Company has classified $3.6 million of its accrued pension liability as a current liability at December 31, 2011. Company contributions into pension investment funds totaled $37.2 million in 2011, and the Company also paid $4.0 million directly to retirees. For U.S. pension funding purposes, the Company uses the plan's IRS-basis current liability as its funding target, which is determined based on mandated assumptions. Weak investment returns and low interest rates could result in equal or greater contributions to the pension plans in future years. The following table sets forth the plan benefit obligations:
| As of December 31, 2011 |  | As of December 31, 2010
(in thousands) | Pension plans | Other postretirement benefits |  | Pension plans | Other postretirement benefits
Benefit obligation, beginning of year | $374,115 | $72,137 |  | $353,971 | $73,208
Service cost | 3,117 | 931 |  | 3,572 | 910
Interest cost | 19,958 | 3,869 |  | 19,645 | 4,054
Plan participants' contributions | 387 | - |  | 378 | 607
Actuarial loss/(gain) | 39,712 | 6,977 |  | 26,013 | 2,539
Curtailments | - | - |  | (1,619) | (1,921)
Benefits paid | (26,598) | (5,823) |  | (23,797) | (7,260)
Settlements | (891) | - |  | (5,722) | -
Special / Contractual Termination Benefits | 233 | - |  | - |
Plan amendments | - | - |  | 346 | -
Other | - | 945 |  | - |
Removal of defined contribution component | - | - |  | (1,710) | -
Foreign currency changes | (4,153) | (27) |  | 3,038 | -
Benefit obligation, end of year | $405,880 | $79,009 |  | $374,115 | $72,137
Accumulated benefit obligation | $391,457 | - |  | $356,691 | -
Weighted average assumptions used to |  |  |  |  |
determine benefit obligations, end of year: |  |  |  |  |
Discount rate - U.S. plan | 4.82% | 4.85% |  | 5.59% | 5.55%
Discount rate - non-U.S. plans | 4.48% | - |  | 5.27% | -
Compensation increase - U.S. plan | - | 3.00% |  | - | 3.00%
Compensation increase - non-U.S. plans | 3.19% | 3.00% |  | 3.47% | 3.00%
The following sets forth information about plan assets:
| As of December 31, 2011 |  | As of December 31, 2010
(in thousands) | Pension plans | Other postretirement benefits |  | Pension plans | Other postretirement benefits
Fair value of plan assets, beginning of year | $262,376 | $ - |  | $247,072 | $ -
Actual return on plan assets, net of expenses | 34,176 | - |  | 21,936 | -
Employer contributions | 37,174 | 5,823 |  | 22,075 | 6,653
Plan participants' contributions | 387 | 1,319 |  | 378 | 607
Benefits paid | (26,562) | (7,142) |  | (23,956) | (7,260)
Settlements | (891) | - |  | (5,722) | -
Removal of defined contribution component | - | - |  | (1,710) | -
Foreign currency changes | (2,002) | - |  | 2,303 | -
Fair value of plan assets, end of year | $304,658 | $ - |  | $262,376 | $ -
The funded status of the plans, reconciled to the amount on the Consolidated Balance Sheet, was as follows:
| As of December 31, 2011 | As of December 31, 2010
(in thousands) | Pension plans | Other postretirement benefits | Pension plans | Other postretirement benefits
Fair value of plan assets | $304,658 | $ - | $262,376 | $ -
Benefit obligation | 405,880 | 79,009 | 374,115 | 72,137
Funded status | ($101,222) | ($79,009) | ($111,739) | ($72,137)
Accrued benefit cost, end of year | ($101,222) | ($79,009) | ($111,739) | ($72,137)
Amounts recognized in the statement of financial position consist of the following: |  |  |  |
Noncurrent asset | $7,779 | $ - | $ 715 | $ -
Current liability | (3,576) | (5,949) | (3,764) | (6,223)
Noncurrent liability | (105,425) | (73,060) | (108,690) | (65,914)
Net amount recognized | ($101,222) | ($79,009) | ($111,739) | ($72,137)
Amounts recognized in accumulated other comprehensive income consist of: |  |  |  |
Net actuarial loss | $164,246 | $54,835 | $150,062 | $50,884
Prior service cost/(credit) | 432 | (43,995) | 480 | (47,662)
Transition obligation | 138 | - | 240 | -
Net amount recognized | $164,816 | $10,840 | $150,782 | $3,222
The composition of the net periodic benefit plan cost for the years ended December 31, 2011, 2010, and 2009, was as follows:
| Pension plans |  | Other postretirement benefits
(in thousands) | 2011 | 2010 | 2009 |  | 2011 | 2010 | 2009
Components of net periodic benefit cost: |  |  |  |  |  |  |
Service cost | $3,117 | $3,572 | $3,574 |  | $931 | $910 | $1,126
Interest cost | 19,958 | 19,644 | 18,448 |  | 3,869 | 4,054 | 3,820
Other adjustments | - | - | - |  | 945 | - | -
Expected return on assets | (15,858) | (15,127) | (20,754) |  | - | - | -
Amortization of prior service cost/(credit) | 37 | 16 | 102 |  | (3,666) | (3,666) | (4,327)
Amortization of transition obligation | 83 | 94 | 88 |  | - | - | -
Amortization of net actuarial loss | 5,672 | 4,738 | 2,085 |  | 3,022 | 2,923 | 2,780
Settlement | 327 | 839 | 368 |  | - | - | -
Curtailment (gain)/loss | - | 34 | (541) |  | - | (1,921) | (6,452)
Special / contractual termination benefits | 233 | - | - |  | - | - | -
Net periodic benefit cost | $13,569 | $13,810 | $3,370 |  | $5,101 | $2,300 | ($3,053)
Weighted average assumptions used to determine net cost: |  |  |  |  |  |  |
Discount rate - U.S. plan | 5.59% | 5.80% | 6.25% |  | 5.55% | 5.70% | 6.10%
Discount rate - non -U.S. plan | 5.29% | 5.84% | 5.81% |  | - | - | -
Expected return on plan assets - U.S. plans | 5.80% | 6.10% | 8.50% |  | - | - | -
Expected return on plan assets - non-U.S. plans | 6.80% | 6.91% | 6.91% |  | - | - | -
Rate of compensation increase - U.S. plan | - | - | - |  | 3.00% | 3.00% | 3.00%
Rate of compensation increase - non-U.S. plans | 3.47% | 3.42% | 3.24% |  | - | - | -
Health care cost trend rate (U.S. and non-U.S. plans): |  |  |  |  |  |  |
Initial rate | - | - | - |  | - | - | -
Ultimate rate | - | - | - |  | - | - | -
Years to ultimate | - | - | - |  | - | - | -
Other changes in plan assets and benefit obligations recognized in other comprehensive income during 2011 were as follows:
|  |  | Other
| Pension |  | postretirement
(in thousands) | plan |  | benefits
Settlements | $ (327) |  | $ -
Exchange rate effect | (1,204) |  | -
Current year actuarial loss | 39,713 |  | 6,977
Asset loss (gain) | (18,355) |  | -
Amortization of actuarial (loss) | (5,672) |  | (3,022)
Amortization of prior service (cost)/credit | (37) |  | 3,666
Amortization of transition (obligation) | (83) |  | -
Currency impact | - |  | (3)
Total recognized in other comprehensive income | $14,035 |  | $7,618
Total recognized in net periodic benefit cost and other comprehensive income | $27,604 |  | $12,719
The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2012 are as follows:
|  |  | Total
| Total |  | postretirement
(in thousands) | pension |  | benefits
Actuarial loss | $7,092 |  | $3,215
Prior service cost/(benefit) | 35 |  | (3,666)
Transition obligation | 74 |  | -
Total | $7,201 |  | ($451)
Investment Strategy Our investment strategy for pension assets differs for the various countries in which we have defined benefit pension plans. Some of our defined benefit plans do not require funded trusts and, in those arrangements, the Company funds the plans on a "pay as you go" basis. The largest of the funded defined benefit plans is the United States plan, which accounts for 67% of the Company's pension plan assets. United States plan: During 2009, we changed our investment strategy for the United States pension plan by adopting a liability-driven investment strategy. Under this arrangement, the Company seeks to invest in assets that track closely to the discount rate that is used to measure the plan liabilities. Accordingly, the plan assets are primarily debt securities. The change in investment strategy is reflective of the Company's 2008 decision to freeze benefit accruals under the plan. Non United States plans: For the countries in which the Company has funded pension trusts, the investment strategy is to achieve a competitive, total investment return, achieving diversification between and within asset classes and managing other risks. Investment objectives for each asset class are determined based on specific risks and investment opportunities identified. Actual allocations to each asset class vary from target allocations due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully implement investment allocation positions, and the timing of benefit payments and contributions. Fair-Value Measurements The following tables present plan assets as of December 31, 2011 and 2010, using the fair-value hierarchy, which has three levels based on the reliability of inputs used, as described in Note 13:
|  | Total fair |  | Quoted prices |  | Significant other |  | Significant
|  | value at |  | in active |  | observable |  | unobservable
|  | December 31, |  | markets |  | inputs |  | inputs
(in thousands) |  | 2011 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Common stocks |  | $48,993 |  | $48,993 |  | $ - |  | $ -
Debt securities |  | 243,839 |  | - |  | 243,839 |  | -
Insurance contracts |  | 2,361 |  | - |  | - |  | 2,361
Limited partnerships |  | 8,676 |  | - |  | - |  | 8,676
Hedge funds |  | 557 |  | - |  | - |  | 557
Cash and short-term investments |  | 232 |  | 232 |  | - |  | -
Total plan assets |  | $304,658 |  | $49,225 |  | $243,839 |  | $11,594
|  | Total fair |  | Quoted prices |  | Significant other |  | Significant
|  | value at |  | in active |  | observable |  | unobservable
|  | December 31, |  | markets |  | inputs |  | inputs
(in thousands) |  | 2010 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Common stocks |  | $44,181 |  | $44,181 |  | $ - |  | $ -
Debt securities |  | 190,170 |  | - |  | 190,170 |  | -
Insurance contracts |  | 2,050 |  | - |  | - |  | 2,050
Limited partnerships |  | 9,115 |  | - |  | - |  | 9,115
Hedge funds |  | 10,699 |  | - |  | - |  | 10,699
Cash and short-term investments |  | 6,161 |  | 6,161 |  | - |  | -
Total plan assets |  | $262,376 |  | $50,342 |  | $190,170 |  | $21,864
The following tables present a reconciliation of Level 3 assets held during the years ended December 31, 2011 and 2010:
(in thousands) | December 31, 2010 | Net realized (losses)/ gains | Net unrealized gains/(losses) | Net purchases, issuances and settlements | Net transfers (out of) Level 3 | December 31, 2011
Insurance contracts | $2,050 | $ - | $311 | $ - | $ - | $2,361
Limited partnerships | 9,115 | 107 | 235 | - | (781) | 8,676
Hedge funds | 10,699 | (19) | (132) | - | (9,991) | 557
Total | $21,864 | $88 | $414 | $0 | ($10,772) | $11,594
(in thousands) | December 31, 2009 | Net realized (losses)/gains | Net unrealized gains/(losses) | Net purchases, issuances and settlements | Net transfers (out of) Level 3 | December 31, 2010
Insurance contracts | $1,549 | $ (25) | $203 | $426 | ($103) | $2,050
Limited partnerships | 9,066 | (2) | 1,247 | - | (1,196) | 9,115
Hedge funds | 19,594 | 1,194 | 928 | - | (11,017) | 10,699
Total | $30,209 | $1,167 | $2,378 | $426 | ($12,316) | $21,864
The asset allocation for the Company's U.S. and non-U.S. pension plans for 2011 and 2010, and the target allocation for 2012, by asset category, are as follows:
| United States Plan |  | Non-U.S. Plans
| Target |  | Percentage of plan assets |  | Target |  | Percentage of plan assets
| Allocation |  | at plan measurement date |  | Allocation |  | at plan measurement date
Asset category | 2012 |  | 2011 |  | 2010 |  | 2012 |  | 2011 |  | 2010
Equity securities |  | - |  |  |  | - |  |  |  | - |  |  |  | 51 | % |  |  | 49 | % |  |  | 51 | %
Debt securities |  | 100 | % |  |  | 92 | % |  |  | 86 | % |  |  | 43 | % |  |  | 45 | % |  |  | 46 | %
Real estate |  | - |  |  |  | 2 | % |  |  | 3 | % |  |  | 3 | % |  |  | 3 | % |  |  | - |
Cash |  | - |  |  |  | 3 | % |  |  | 3 | % |  |  | - |  |  |  | - |  |  |  | - |
Other (1) |  | - |  |  |  | 3 | % |  |  | 8 | % |  |  | 3 | % |  |  | 3 | % |  |  | 3 | %
|  | 100 | % |  |  | 100 | % |  |  | 100 | % |  |  | 100 | % |  |  | 100 | % |  |  | 100 | %
(1) |  | Other includes hedged equity and absolute return strategies, and private equity. The Company has procedures to closely monitor the performance of these investments and compares asset valuations to audited financial statements of the funds.
The targeted plan asset allocation is based on an analysis of the actuarial liabilities, a review of viable asset classes, and an analysis of the expected rate of return, risk, and other investment characteristics of various investment asset classes. At the end of 2011 and 2010, the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with projected benefit obligation in excess of plan assets and for pension plans with an accumulated benefit obligation in excess of plan assets were as follows:
| Projected and accumulated benefit obligation
| exceeds plan assets
(in thousands) | 2011 |  | 2010
Projected benefit obligation | $376,595 |  | $341,870
Accumulated benefit obligation | 363,228 |  | 325,602
Fair value of plan assets | 267,594 |  | 227,784
Information about expected cash flows for the pension and other benefit obligations are as follows:
(in thousands) | Pension plans | Other postretirement benefits
Expected employer contributions in the next fiscal year | $37,144 | $5,949
Expected benefit payments |  |
2012 | $23,160 | $5,949
2013 | 24,087 | 5,765
2014 | 23,551 | 5,577
2015 | 23,656 | 5,354
2016 | 24,094 | 5,174
2017-2021 | 123,344 | 24,195

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- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 87 -Paragraph 264 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 158 -Paragraph 7, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Staff Position (FSP) -Number FAS106-2 -Paragraph 20, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Implementation Guide (Q and A) -Number FAS88 -Paragraph 63 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph h -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 30 -Paragraph 26 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph a -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 03-2 -Paragraph 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5, 6, 7, 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 8 -Subparagraph m -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph q -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 106 -Paragraph 518 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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