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Pension Benefits
 12 Months Ended
Dec. 31, 2011
Pension Benefits [Abstract]  
Pension Benefits
22. Pension Benefits

 

  a) Defined Contribution Pension Plans

With the exception of the Company’s employees in Norway and certain of its employees in Australia, the Company’s employees are generally eligible to participate in defined contribution plans. These plans allow for the employees to contribute a certain percentage of their base salaries into the plans. The Company matches all or a portion of the employees’ contributions, depending on how much each employee contributes. During the years ended December 31, 2011, 2010 and 2009, the amount of cost recognized for the Company’s defined contribution pension plans was $18.3 million, $17.1 million and $15.0 million, respectively.

 

  b) Defined Benefit Pension Plans

The Company has a number of defined benefit pension plans (or the Benefit Plans) which primarily cover its employees in Norway and certain employees in Australia. As at December 31, 2011, approximately 75% of the defined benefit pension assets were held by the Norwegian plans and approximately 25% are held by the Australia plan. The pension assets in the Norwegian plans have been guaranteed a minimum rate of return by the provider, thus reducing potential exposure to the Company to the extent the counterparty honors its obligations. Potential exposure to the Company has also been reduced, particularly for the Australian plans, as a result of certain of its time-charter and management contracts that allow the Company, under certain conditions, to recover pension plan costs from its customers.

In 2010, the Norwegian Parliament enacted a new early retirement plan for the private sector in Norway, which was effective January 1, 2011. As a result of the legislation, the Company was substantially released from its obligation under the Company’s prior early retirement plan (a single-employer defined benefit pension plan) and the Company recorded income of $3.7 million in the consolidated statement of income (loss).

The following table provides information about changes in the benefit obligation and the fair value of the Benefit Plans assets, a statement of the funded status, and amounts recognized on the Company’s balance sheets:

 

 

                 
    Year Ended     Year Ended  
    December 31, 2011     December 31, 2010  
    $     $  

Change in benefit obligation:

                

Beginning balance

     120,723       114,256  

Service cost

     8,829       8,345  

Interest cost

     5,167       5,148  

Contributions by plan participants

     739       579  

Actuarial loss

     9,408       730  

Benefits paid

     (4,395 )      (7,333 ) 

Settlements and curtailments

     —         (4,937 ) 

Foreign currency exchange rate changes

     (3,299 )      3,635  

Other

     —         300  
   

 

 

    

 

 

  

Ending balance

     137,172       120,723  
   

 

 

    

 

 

  

Change in fair value of plan assets:

                

Beginning balance

     102,085       95,495  

Actual return on plan assets

     2,931       125  

Contributions by the employer

     12,061       11,649  

Contributions by plan participants

     739       579  

Benefits paid

     (4,339 )      (7,259 ) 

Settlements and curtailments

     —         (1,314 ) 

Foreign currency exchange rate changes

     (2,357 )      3,110  

Other

     (422 )      (300 ) 
   

 

 

    

 

 

  

Ending balance

     110,698       102,085  
   

 

 

    

 

 

  

Funded status deficiency

     (26,474 )      (18,638 ) 
   

 

 

    

 

 

  

Amounts recognized in the balance sheets:

                

Other long-term liabilities

     26,474       18,638  

Accumulated other comprehensive (loss) income:

                

Net actuarial losses (1)

     (19,929 )      (18,279 ) 
   

 

 

    

 

 

  

 

  (1) As at December 31, 2011, the estimated amount that will be amortized from accumulated other comprehensive (loss) income into net periodic benefit cost in 2012 is $(0.2) million.

As of December 31, 2011 and 2010, the accumulated benefit obligation for the Benefit Plans was $100.4 million and $114.3 million, respectively. The following table provides information for those pension plans with a benefit obligation in excess of plan assets and those pension plans with an accumulated benefit obligation in excess of plan assets:

 

                 
    December 31, 2011     December 31, 2010  
    $     $  

Benefit obligation

     113,460       72,180  

Fair value of plan assets

     85,432       53,421  
     

Accumulated benefit obligation

     35,358       62,405  

Fair value of plan assets

     31,815       39,134  
   

 

 

    

 

 

  

The components of net periodic pension cost relating to the Benefit Plans for the years ended December 31, 2011, 2010 and 2009 consisted of the following:

 

                         
   

Year Ended

December 31,

2011

    

Year Ended

December 31,

2010

    

Year Ended

December 31,

2009

  
    $     $     $  

Net periodic pension cost:

                        

Service cost

     8,978       8,616       9,753  

Interest cost

     5,250       5,091       4,548  

Expected return on plan assets

     (5,805 )      (5,431 )      (4,624 ) 

Amortization of net actuarial loss

     371       281       1,394  

Other

     421       (3,390 )      184  
   

 

 

    

 

 

    

 

 

  

Net cost

     9,215       5,167       11,255  
   

 

 

    

 

 

    

 

 

  

 

The components of other comprehensive (income) loss relating to the Plans for the years ended December 31, 2011, 2010 and 2009 consisted of the following:

 

                         
   

Year Ended

December 31,

2011

    

Year Ended

December 31,

2010

    

Year Ended

December 31,

2009

  
    $     $     $  

Other comprehensive (income) loss:

                        

Net loss (gain) arising during the period

     12,052       5,711       (13,524 ) 

Amortization of net actuarial (gain) loss

     (319 )      1,026       (1,394 ) 

Other loss (gain)

     —         390       (785 ) 
   

 

 

    

 

 

    

 

 

  

Total loss (income)

     11,733       7,127       (15,703 ) 
   

 

 

    

 

 

    

 

 

  

The Company estimates that it will make contributions into the Benefit Plans of $10.7 million during 2012. The following table provides the estimated future benefit payments, which reflect expected future service, to be paid by the Benefit Plans:

 

         
    Pension Benefit  
    Payments  

Year

   $  

2012

     8,000  

2013

     4,969  

2014

     6,361  

2015

     6,251  

2016

     5,704  

2017—2021

     29,263  
   

 

 

  

Total

     60,548  
   

 

 

  

The fair value of the plan assets, by category, as of December 31, 2011 and 2010 were as follows:

 

                 
   

December 31,

2011

    

December 31,

2010

  
    $     $  

Pooled Funds (1)

     82,501       74,826  

Mutual Funds (2)

                

Equity investments

     13,852       13,073  

Debt securities

     3,445       3,197  

Real estate

     2,092       2,327  

Cash and money market

     291       1,034  

Other

     8,517       7,628  
   

 

 

    

 

 

  

Total

     110,698       102,085  
   

 

 

    

 

 

  

 

  (1) The Company has no control over the investment mix or strategy of the pooled funds. The pooled funds guarantee a minimum rate of return. If actual investment returns are less than the guarantee minimum rate, then the provider’s statutory reserves are used to top up the shortfall. The pooled funds primarily invest in hold to maturity bonds, real estate and other fixed income investments, which are expected to provide a stable rate of return.
  (2) The mutual funds primary aim is to provide investors with an exposure to a diversified mix of predominantly growth oriented assets (70%) with moderate to high volatility and some defensive assets (30%).

The investment strategy for all plan assets is generally to actively manage a portfolio that is diversified among asset classes, markets and regions. Certain of the investment funds do not invest in companies that do not meet certain socially responsible investment criteria. In addition to diversification, other risk management strategies employed by the investment funds include gradual implementation of portfolio adjustments and hedging currency risks.

The Company’s plan assets are primarily invested in commingled funds holding equity and debt securities, which are valued using the net asset value (or NAV) provided by the administrator of the fund. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares or units outstanding. Commingled funds are classified within Level 2 of the fair value hierarchy as the NAVs are not publicly available.

The Company has a pension committee that is comprised of various members of senior management. Among other things, the Company’s pension committee oversees the investment and management of the plan assets, with a view to ensuring the prudent and effective management of such plans. In addition, the pension committee reviews investment manager performance results annually and approves changes to the investment managers.

 

The weighted average assumptions used to determine benefit obligations at December 31, 2011 and 2010 were as follows:

 

                 
    December 31, 2011     December 31, 2010  

Discount rates

     3.2 %      4.4 % 

Rate of compensation increase

     4.4 %      4.6 % 
   

 

 

    

 

 

  

The weighted average assumptions used to determine net pension expense for the years ended December 31, 2011, 2010 and 2009 were as follows:

 

                         
    Year Ended
December 31,
2011		     Year Ended
December 31,
2010		     Year Ended
December 31,
2009		  

Discount rates

     3.2 %      4.4 %      5.0 % 

Rate of compensation increase

     4.4 %      4.6 %      4.7 % 

Expected long-term rates of return (1)

     5.0 %      5.7 %      6.0 % 

 

  (1) To the extent the expected return on plan assets varies from the actual return, an actuarial gain or loss results. The expected long-term rates of return on plan assets are based on the estimated weighted-average long-term returns of major asset classes. In determining asset class returns, the Company takes into account long-term returns of major asset classes, historical performance of plan assets, as well as the current interest rate environment. The asset class returns are weighted based on the target asset allocations.