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Retirement Plans And Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2011
Retirement Plans And Other Postretirement Benefits [Abstract]  
Retirement Plans And Other Postretirement Benefits

13 RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS

     We have noncontributory defined benefit (pension) plans covering most employees. The plans for salaried and hourly employees currently in effect are based on a formula using the participant's years of service and compensation or using the participant's years of service and a dollar amount.

     In addition to providing pension benefits, we provide postretirement life insurance and health care benefits for certain groups of employees. Tredegar and retirees share in the cost of postretirement health care benefits, with employees hired on or before January 1, 1993, receiving a fixed subsidy to cover a portion of their health care premiums. We eliminated prescription drug coverage for Medicare-eligible retirees as of January 1, 2006. Consequently, we are not eligible for any federal subsidies.

 

     Assumptions used for financial reporting purposes to compute net benefit income or cost and benefit obligations for continuing operations, and the components of net periodic benefit income or cost for continuing operations, are as follows:

                Other Post-    
    Pension Benefits     Retirement Benefits  
(In Thousands)   2011     2010     2011     2010  
Change in benefit obligation:                        
Benefit obligation, beginning of year $ 247,969   $ 235,015   $ 7,350   $ 8,687  
Service cost   3,361     3,315     54     76  
Interest cost   13,024     13,071     395     467  
Effect of actuarial (gains) losses related                        
to the following:                        
Discount rate change   16,986     8,587     414     307  
Retirement rate assumptions and                        
mortality table adjustments   6,314     1,175     (52 )   25  
Retiree medical participation rate change   -     -     449     (1,424 )
Other   (3,399 )   (1,853 )   122     (477 )
Benefits paid   (11,819 )   (11,341 )   (310 )   (311 )
Benefit obligation, end of year $ 272,436   $ 247,969   $ 8,422   $ 7,350  
Change in plan assets:                        
Plan assets at fair value,                        
beginning of year $ 239,706   $ 228,984   $ -   $ -  
Actual return on plan assets   (13,413 )   21,896     -     -  
Employer contributions   173     167     310     311  
Benefits paid   (11,819 )   (11,341 )   (310 )   (311 )
Plan assets at fair value, end of year $ 214,647   $ 239,706   $ -   $ -  
Funded status of the plans $ (57,789 ) $ (8,263 ) $ (8,422 ) $ (7,350 )
Amounts recognized in the consolidated                        
balance sheets:                        
Prepaid benefit cost $ -   $ -   $ -   $ -  
Accrued benefit liability   (57,789 )   (8,263 )   (8,422 )   (7,350 )
Net amount recognized $ (57,789 ) $ (8,263 ) $ (8,422 ) $ (7,350 )

 

 

     The following tables reconcile the changes in benefit obligations and plan assets in 2011 and 2010, and reconcile the funded status to prepaid or accrued cost at December 31, 2011 and 2010:

                      Other Post-        
    Pension Benefits           Retirement Benefits    
(In Thousands, Except Percentages)   2011     2010     2009     2011     2010     2009  
Weighted-average assumptions used                                    
to determine benefit obligations:                                    
Discount rate   4.95 %   5.45 %   5.70 %   4.90 %   5.35 %   5.75 %
Rate of compensation increases   n/a     n/a     n/a     4.00 %   4.00 %   4.00 %
Weighted-average assumptions used                                    
to determine net periodic benefit                                    
cost:                                    
Discount rate   5.45 %   5.70 %   6.50 %   5.35 %   5.75 %   6.50 %
Rate of compensation increases   n/a     n/a     n/a     4.00 %   4.00 %   4.00 %
Expected long-term return on                                    
plan assets, during the year   8.00 %   8.25 %   8.25 %   n/a     n/a     n/a  
Components of net periodic benefit                                    
cost:                                    
Service cost $ (3,361 ) $ (3,315 ) $ (3,077 ) $ (54 ) $ (76 ) $ (70 )
Interest cost   (13,024 )   (13,071 )   (13,287 )   (395 )   (467 )   (495 )
Expected return on plan assets   20,448     20,530     20,680     -     -     -  
Amortization of prior service                                    
costs and gains or losses   (6,359 )   (4,806 )   (1,224 )   264     79     127  
Net periodic benefit income (cost) $ (2,296 ) $ (662 ) $ 3,092   $ (185 ) $ (464 ) $ (438 )

 

     Net benefit income or cost is determined using assumptions at the beginning of each year. Funded status is determined using assumptions at the end of each year. Pension and other postretirement liabilities for continuing operations of $66.2 million and $15.6 million are included in "Other noncurrent liabilities" in the consolidated balance sheets at December 31, 2011 and 2010, respectively. The amount of our accumulated benefit obligation is the same as our projected benefit obligation.

     At December 31, 2011, the effect of a 1% change in the health care cost trend rate assumptions would be immaterial.

     Expected benefit payments for continuing operations over the next five years and in the aggregate for 2017-2021 are as follows:

        Other
      Post -
    Pension Retirement
(In Thousands)   Benefits   Benefits
2012 $ 13,291 $ 482
2013   13,982   508
2014   14,655   522
2015   15,348   536
2016   15,869   548
2017 - 2021   87,166   2,821

 

 

     Amounts recognized in 2011, 2010 and 2009 before related deferred income taxes in accumulated other comprehensive income consist of:

                      Other Post-        
          Pension               Retirement        
(In Thousands)   2011     2010     2009     2011     2010     2009  
Prior service cost (benefit) $ (1,890 ) $ (2,966 ) $ (4,035 ) $ -   $ -   $ -  
Net actuarial (gain) loss   148,364     102,037     101,368     (1,401 )   (2,598 )   (1,107 )

 

     The amounts before related deferred income taxes in accumulated other comprehensive income that are expected to be recognized as components of net periodic benefit or cost during 2012 are as follows:

          Other Post-  
(In Thousands)   Pension     Retirement  
Prior service cost (benefit) $ (1,077 ) $ -  
Net actuarial (gain) loss   11,583     (212 )

 

     The percentage composition of assets held by pension plans for continuing operations at December 31, 2011, 2010 and 2009 are as follows:

  % Composition of Plan Assets  
  at December 31,      
  2011   2010   2009  
Pension plans related to continuing operations:            
Low-risk fixed income securities 9.7 % 1.9 % 3.5 %
Large capitalization equity securities 15.9   22.3   21.7  
Small-capitalization equity securities 6.2   6.7   5.8  
International and emerging market equity securities 14.3   21.6   21.4  
Total equity securities 36.4   50.6   48.9  
Hedge and private equity funds 41.8   42.7   42.9  
Other assets 12.1   4.8   4.7  
Total for continuing operations 100.0 % 100.0 % 100.0 %

 

     Our targeted allocation percentage for pension plan assets and the expected long-term rate of return on assets is as follows:

  Target %   Expected  
  Composition of   Long-term  
  Plan Assets *   Return %  
Pension plans related to continuing operations:        
Low-risk fixed income securities 32.0 % 5.8 %
Large capitalization equity securities 6.0   8.7  
Mid-capitalization equity securities 4.0   10.5  
Small-capitalization equity securities 4.0   10.7  
International and emerging market equity securities 13.0   10.9  
Total equity securities 27.0   10.4  
Hedge and private equity funds 41.0   8.3  
Other assets -   -  
Total for continuing operations 100.0 % 8.0 %

 

*      Target percentages for the composition of plan assets represents a neutral position within the approved range of allocations for such assets.
 

     Expected long-term returns are estimated by asset class and generally are based on inflation-adjusted historical returns, volatilities, risk premiums and managed asset premiums. The portfolio of fixed income securities is structured with maturities that generally match estimated benefit payments over the next 1-2 years. Other assets are primarily comprised of cash and contracts with insurance companies. Our primary investment objective is to maximize total return with a strong emphasis on the preservation of capital. We believe that over the long term a diversified portfolio of equity securities, hedge funds and private equity funds has a better risk-return profile than fixed income securities. The average remaining duration of benefit payments for our pension plans is about 12 years. We expect our required contributions to be approximately $5.3 million in 2012.

     Estimates of the fair value of assets held by our pension plans are provided by third parties not affiliated with Tredegar. At December 31, 2011, the pension plan assets are categorized by level within the fair value measurement hierarchy as follows:

(In Thousands)       Quoted Prices   Signficant    
        in Active   Other   Significant
        Markets for   Observable   Unobservable
        Identical Assets   Inputs   Inputs
December 31, 2011   Total   (Level 1)   (Level 2)   (Level 3)
Large capitalization equity securities $ 34,095 $ 31,490 $ 2,605 $ -
Small-capitalization equity securities   13,281   13,281   -   -
International and emerging market                
equity securities   30,611   30,611   -   -
Hedge and private equity funds   89,620   -   82,628   6,992
Low-risk fixed income securities   20,895   10,960   9,935   -
Other assets   16,899   11,899   5,000   -
Total plan assets at fair value $ 205,401 $ 98,241 $ 100,168 $ 6,992
 
Contracts with insurance companies   9,246            
Total plan assets, December 31, 2011 $ 214,647            
December 31, 2010                
Large capitalization equity securities $ 53,543 $ 39,827 $ 13,716 $ -
Small-capitalization equity securities   16,170   16,170   -   -
International and emerging market                
equity securities   51,840   51,840   -   -
Hedge and private equity funds   102,309   -   94,267   8,042
Low-risk fixed income securities   4,469   1,613   2,856   -
Other assets   2,290   2,290   -   -
Total plan assets at fair value $ 230,621 $ 111,740 $ 110,839 $ 8,042
Contracts with insurance companies   9,085            
Total plan assets, December 31, 2010 $ 239,706            

 

 

     For fair value measurements of plan assets using significant unobservable inputs (Level 3), a reconciliation of the balances from January 1, 2010 to December 31, 2011 are as follows:

    Hedge and private  
(In Thousands)   equity funds  
Balance at January 1, 2010 $ 11,637  
Purchases   -  
Sales   (2,218 )
Distributions   (709 )
Actual return on plan assets still held      
at year end   (668 )
Transfers in and/or out of Level 3   -  
Balance at December 31, 2010 $ 8,042  
Purchases   2,554  
Sales   (663 )
Distributions   (2,673 )
Actual return on plan assets still held      
at year end   (268 )
Transfers in and/or out of Level 3   -  
Balance at December 31, 2011 $ 6,992  

 

     We also have a non-qualified supplemental pension plan covering certain employees. Effective December 31, 2005, further participation in this plan was terminated and benefit accruals for existing participants were frozen. The plan was designed to restore all or a part of the pension benefits that would have been payable to designated participants from our principal pension plans if it were not for limitations imposed by income tax regulations. The projected benefit obligation relating to this unfunded plan was $2.6 million at December 31, 2011 and $2.5 million at December 31, 2010. Pension expense recognized for this plan was $0.1 million in 2011, $0.2 million in 2010 and $0.2 million in 2009. This information has been included in the preceding pension benefit tables.

     Approximately 111 employees at our films manufacturing facility in Kerkrade, The Netherlands are covered by a collective bargaining agreement that includes participation in a multi-employer pension plan. Pension expense recognized for participation in this plan, which is equal to required contributions, was $0.6 million in 2011, $0.6 million in 2010 and $0.8 million in 2009. This information has been excluded from the preceding pension benefit tables.