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Employee Benefit Plans
 12 Months Ended
Sep. 30, 2012
Employee Benefit Plans

(15) Employee Benefit Plans

Defined Benefit Plans

HGI

HGI has a noncontributory defined benefit pension plan (the “HGI Pension Plan”) covering certain former U.S. employees. During 2006, the HGI Pension Plan was frozen which caused all existing participants to become fully vested in their benefits.

Additionally, HGI has an unfunded supplemental pension plan (the “Supplemental Plan”) which provides supplemental retirement payments to certain former senior executives of HGI. The amounts of such payments equal the difference between the amounts received under the HGI Pension Plan and the amounts that would otherwise be received if HGI Pension Plan payments were not reduced as the result of the limitations upon compensation and benefits imposed by Federal law. Effective December 1994, the Supplemental Plan was frozen.

Spectrum Brands

Spectrum Brands has various defined benefit pension plans (the “Spectrum Brands Pension Plans”) covering some of its employees in the United States and certain employees in other countries, primarily the United Kingdom and Germany. The Spectrum Brands Pension Plans generally provide benefits of stated amounts for each year of service. Spectrum Brands funds its U.S. pension plans in accordance with the requirements of the defined benefit pension plans and, where applicable, in amounts sufficient to satisfy the minimum funding requirements of applicable laws. Additionally, in compliance with Spectrum Brands’ funding policy, annual contributions to non-U.S. defined benefit plans are equal to the actuarial recommendations or statutory requirements in the respective countries.

Spectrum Brands also sponsors or participates in a number of other non-U.S. pension arrangements, including various retirement and termination benefit plans, some of which are covered by local law or coordinated with government-sponsored plans, which are not significant in the aggregate and therefore are not included in the information presented below. Spectrum Brands also has various nonqualified deferred compensation agreements with certain of its employees. Under certain of these agreements, Spectrum Brands has agreed to pay certain amounts annually for the first 15 years subsequent to retirement or to a designated beneficiary upon death. It is management’s intent that life insurance contracts owned by Spectrum Brands will fund these agreements. Under the remaining agreements, Spectrum Brands has agreed to pay such deferred amounts in up to 15 annual installments beginning on a date specified by the employee, subsequent to retirement or disability, or to a designated beneficiary upon death.

Spectrum Brands also provides postretirement life insurance and medical benefits to certain retirees under two separate contributory plans.

Consolidated

The recognition and disclosure provisions of ASC Topic 715: “Compensation-Retirement Benefits” (“ASC 715”) requires recognition of the overfunded or underfunded status of defined benefit pension and postretirement plans as an asset or liability in the consolidated balance sheet, and to recognize changes in that funded status in AOCI. In accordance with the measurement date provisions of ASC 715, the Company measures all of its defined benefit pension and postretirement plan assets and obligations as of September 30, which is the Company’s fiscal year end.

The following tables provide additional information on the Company’s pension and other postretirement benefit plans which principally relate to Spectrum Brands:

 

     Pension and Deferred
Compensation Benefits		     Other Benefits  
     2012     2011     2012     2011  

Change in benefit obligation

         

Benefit obligation, beginning of year

    $ 228,662      $ 234,807      $ 542      $ 527   

Service cost

      2,048        2,543        12        11   

Interest cost

      11,436        11,239        27        27   

Actuarial (gain) loss

      31,251        (9,022 )      (14 )      (21 ) 

Participant contributions

      182        189        —          —     

Benefits paid

      (10,890 )      (10,189 )      (1 )      (2 ) 

Foreign currency exchange rate changes

      (1,969 )      (905 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Benefit obligation, end of year

    $ 260,720      $ 228,662      $ 566      $ 542   
  

 

 

    

 

 

    

 

 

    

 

 

  

Change in plan assets

         

Fair value of plan assets, beginning of year

    $ 143,668      $ 140,072      $ —        $ —     

Actual return on plan assets

      22,290        (501 )      —          —     

Employer contributions

      13,612        14,912        1        2   

Employee contributions

      182        189        —          —     

Benefits paid

      (10,890 )      (10,189 )      (1 )      (2 ) 

Plan expenses paid

      —          (226 )      —          —     

Foreign currency exchange rate changes

      (241 )      (589 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Fair value of plan assets, end of year

    $ 168,621      $ 143,668      $ —        $ —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Accrued Benefit Cost / Funded Status

    $ (92,099 )    $ (84,994 )    $ (566 )    $ (542 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Range of assumptions:

         

Discount rate

      4.0%-13.5 %      4.0%-13.6 %      4.0 %      5.0 % 

Expected return on plan assets

      4.0%-7.8 %      3.0%-7.8 %      N/A        N/A   

Rate of compensation increase

      2.3%-5.5 %      0.0%-5.5 %      N/A        N/A   

The net underfunded status as of September 30, 2012 and 2011 of $92,099 and $84,994, respectively, is recognized in the accompanying Consolidated Balance Sheets within “Employee benefit obligations.” Included in AOCI as of September 30, 2012 and 2011 are unrecognized net (losses) of $(21,306), net of tax benefit of $4,392 and noncontrolling interest of $14,239, and $(13,788), net of tax benefit of $1,542 and noncontrolling interest of $10,082, respectively, which have not yet been recognized as components of net periodic pension cost. The net loss in AOCI expected to be recognized during the year ending September 30, 2013 (“Fiscal 2013”) is $1,204.

At September 30, 2012, the Company’s total pension and deferred compensation benefit obligation of $260,720 consisted of $95,494 associated with U.S. plans and $165,226 associated with international plans. The fair value of the Company’s pension and deferred compensation benefit assets of $168,621 consisted of $66,415 associated with U.S. plans and $102,206 associated with international plans. The weighted average discount rate used for the Company’s domestic plans was approximately 4.4% and approximately 5.3% for its international plans. The weighted average expected return on plan assets used for the Company’s domestic plans was approximately 7.6% and approximately 5.4% for its international plans.

At September 30, 2011, the Company’s total pension and deferred compensation benefit obligation of $228,662 consisted of $86,801 associated with U.S. plans and $141,861 associated with international plans. The fair value of the Company’s pension and deferred compensation benefit assets of $143,668 consisted of $56,609 associated with U.S. plans and $87,059 associated with international plans. The weighted average discount rate used for the Company’s domestic plans was approximately 5.0% and approximately 4.9% for its international plans. The weighted average expected return on plan assets used for the Company’s domestic plans was approximately 7.6% and approximately 5.4% for its international plans.

 

     Pension and Deferred Compensation Benefits     Other Benefits  
     Year Ended September 30,     Year Ended September 30,  
         2012             2011             2010           2012         2011         2010    

Components of net periodic benefit cost:

             

Service cost

    $ 2,403      $ 2,689      $ 2,479      $ 12      $ 11      $ 9   

Interest cost

      11,436        11,239        8,515        27        27        26   

Expected return on assets

      (9,112 )      (8,835 )      (6,063 )      —          —          —     

Amortization of prior service cost

      72        —          535        —          —          —     

Amortization of transition obligation

      —          —          207        —          —          —     

Recognized net actuarial (gain) loss

      855        8        613        (54 )      (52 )      (58 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net periodic cost (benefit)

    $ 5,654      $ 5,101      $ 6,286      $ (15 )    $ (14 )    $ (23 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The discount rate is used to calculate the projected benefit obligation. The discount rate used is based on the rate of return on government bonds as well as current market conditions of the respective countries where such plans are established.

Below is a summary allocation of all pension plan assets as of the measurement date.

 

     Weighted Average Allocation  
     Target     Actual  
     2012     2012     2011  

Asset Category

       

Equity securities

      0-60 %      50 %      47 % 

Fixed income securities

      0-40 %      21 %      21 % 

Other

      0-100 %      29 %      32 % 
  

 

 

    

 

 

    

 

 

  
     100 %      100 %      100 % 
  

 

 

    

 

 

    

 

 

  

The weighted average expected long-term rate of return on total assets is 6.3%.

The Company has established formal investment policies for the assets associated with these plans. Policy objectives include maximizing long-term return at acceptable risk levels, diversifying among asset classes, if appropriate, and among investment managers, as well as establishing relevant risk parameters within each asset class. Specific asset class targets are based on the results of periodic asset liability studies. The investment policies permit variances from the targets within certain parameters. The weighted average expected long-term rate of return is based on a Fiscal 2012 review of such rates. The plan assets currently do not include holdings of common stock of HGI or its subsidiaries.

The Company’s fixed income securities portfolio is invested primarily in commingled funds and managed for overall return expectations rather than matching duration against plan liabilities; therefore, debt maturities are not significant to the plan performance.

The Company’s other portfolio consists of all pension assets, primarily insurance contracts, in the United Kingdom, Germany and the Netherlands.

 

The Company’s expected future pension benefit payments for Fiscal 2013 through its fiscal year 2022 are as follows:

 

Fiscal Year

       

2013

    $ 11,196   

2014

      10,301   

2015

      10,604   

2016

      10,939   

2017

      11,202   

2018 to 2022

      62,711   

The following table sets forth the fair value of the Company’s pension plan assets:

 

          September 30,  
     Fair Value Hierarchy  (a)    2012      2011  

U.S. defined benefit plan assets:

         

Mutual funds — equity

    Level 1    $ 20,520       $ 16,516   

Common collective trusts — equity

    Level 2      25,781         21,024   

Common collective trusts — fixed income

    Level 2      19,507         18,402   

Other

    Level 2      607         667   
     

 

 

     

 

 

  

Total U.S. defined benefit plan assets

         66,415         56,609   
     

 

 

     

 

 

  

International defined benefit plan assets:

         

Common collective trusts — equity

    Level 2      38,507         29,532   

Common collective trusts — fixed income

    Level 2      15,661         11,467   

Insurance contracts — general fund

    Level 2      40,651         37,987   

Other

    Level 2      7,387         8,073   
     

 

 

     

 

 

  

Total International defined benefit plan assets

         102,206         87,059   
     

 

 

     

 

 

  

Total defined benefit plan assets

       $ 168,621       $ 143,668   
     

 

 

     

 

 

  

 

(a)

The fair value measurements of the Company’s defined benefit plan assets are based on unadjusted quoted prices for identical assets and liabilities in active markets (Level 1) for mutual funds and observable market price inputs (Level 2) for common collective trusts and other investments. Each collective trust’s valuation is based on its calculation of net asset value per share reflecting the fair value of its underlying investments. Since each of these collective trusts allows redemptions at net asset value per share at the measurement date, its valuation is categorized as a Level 2 fair value measurement. The fair values of insurance contracts and other investments are also based on observable market price inputs (Level 2).

Defined Contribution Plans

Spectrum Brands sponsors a defined contribution pension plan for its domestic salaried employees, which allows participants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code. Spectrum Brands also sponsors defined contribution pension plans for employees of certain foreign subsidiaries. FGL sponsors a defined contribution plan in which eligible participants may defer a fixed amount or a percentage of their eligible compensation, subject to limitations, and FGL makes a discretionary matching contribution of up to 5% of eligible compensation. FGL has also established a nonqualified defined contribution plan for independent agents. FGL makes contributions to the plan based on both FGL’s and the agent’s performance. Contributions are discretionary and evaluated annually. HGI also sponsors a defined contribution plan for its corporate employees in which eligible participants may defer a fixed amount or a percentage of their eligible compensation, subject to limitations. HGI makes a discretionary matching contribution of up to 4% of eligible compensation. Aggregate contributions charged to operations for the defined contribution plans, including discretionary amounts, for Fiscal 2012, 2011 and 2010 were $2,795, $5,346 and $3,471, respectively.