Pension Plans, Postretirement and Other Employee Benefits

12 Months Ended

Dec. 31, 2011

Pension Plans, Postretirement and Other Employee Benefits [Abstract]

Pension Plans, Postretirement and Other Employee Benefits

10. Pension Plans, Postretirement and Other Employee Benefits

Pension benefits are based on years of service and, for most salaried employees, on average compensation. Our funding policy is to contribute to the plans amounts necessary to satisfy the funding requirement of applicable federal or foreign laws and regulations. Of our $784 million benefit obligation at December 31, 2011, approximately $710 million required funding under applicable federal and foreign laws. At December 31, 2011, we had approximately $529 million in assets to fund that obligation. The balance of our benefit obligation, $74 million, did not require funding under applicable federal or foreign laws and regulations. Pension plan assets were invested in the following classes of securities:

	Percentage of Fair Market Value
	December 31, 2011						December 31, 2010
	US			Foreign			US			Foreign
Equity Securities		70	%		53	%		71	%		57	%
Debt Securities		29	%		40	%		28	%		36	%
Real Estate		—			2	%		—			2	%
Other		1	%		5	%		1	%		5	%

The assets of some of our pension plans are invested in trusts that permit commingling of the assets of more than one employee benefit plan for investment and administrative purposes. Each of the plans participating in the trust has interests in the net assets of the underlying investment pools of the trusts. The investments for all our pension plans are recorded at estimated fair value, in compliance with the accounting guidance on fair value measurement.

The following table presents our plan assets using the fair value hierarchy as of December 31, 2011 and 2010, respectively. The fair value hierarchy has three levels based on the methods used to determine the fair value. Level 1 assets refer to those asset values based on quoted market prices in active markets for identical assets at the measurement date. Level 2 assets refer to assets with values determined using significant other observable inputs, and Level 3 assets include values determined with non-observable inputs.

	Fair Value Level as of December 31, 2011
	US						Foreign
Asset Category	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	(Millions)
Equity securities:
U.S. large cap	$	24	$	102	$	—	$	23	$	9	$	—
U.S. mid cap		—		—		—		—		2		—
U.S. Small Cap		—		18		—		—		1		—
Non-U.S. large cap		—		—		—		26		63		—
Non-U.S. mid cap		—		17		—		3		19		—
Non-U.S. small cap		—		—		—		—		5		—
Emerging markets		—		5		—		1		—		—
Debt securities:
U.S. corporate bonds		—		4		—		—		—		—
U.S. other fixed income		—		67		—		—		—		—
Non-U.S. treasuries/government bonds		—		—		—		37		35		—
Non-U.S. corporate bonds		—		—		—		17		20		—
Non-U.S. mortgage backed securities		—		—		—		—		3		—
Non-U.S. municipal obligations		—		—		—		1		—		—
Non-U.S. asset backed securities		—		—		—		—		3		—
Non-U.S. other fixed income		—		—		—		—		1		—
Real Estate:
Non-U.S. real estate		—		—		—		—		5		—
Other:
Insurance contracts		—		—		—		—		7		6
Cash held in bank accounts		2		—		—		3		—		—
Total	$	26	$	213	$	—	$	111	$	173	$	6

	Fair Value Level as of December 31, 2010
	US						Foreign
Asset Category	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	(Millions)
Equity securities:
U.S. large cap	$	33	$	96	$	—	$	25	$	7	$	—
U.S. mid cap		—		—		—		—		1		—
U.S. Small Cap		—		18		—		—		1		—
Non-U.S. large cap		—		18		—		36		65		—
Non-U.S. mid cap		—		—		—		—		19		—
Non-U.S. small cap		—		—		—		—		8		—
Emerging markets		—		6		—		1		—		—
Debt securities:
U.S. treasuries/government bonds		20		—		—		—		—		—
U.S. corporate bonds		—		20		—		—		—		—
U.S. mortgage backed securities		—		24		—		—		—		—
U.S. asset backed securities		—		1		—		—		—		—
U.S. other fixed income		—		4		—		—		—		—
Non-U.S. treasuries/government bonds		—		1		—		59		5		—
Non-U.S. corporate bonds		—		1		—		15		21		—
Non-U.S. other fixed income		—		—		—		—		—		6
Real Estate:
Non-U.S. real estate		—		—		—		—		5		—
Other:
Insurance contracts		—		—		—		—		7		—
Cash held in bank accounts		—		—		—		6		—		—
Total	$	53	$	189	$	—	$	142	$	139	$	6

Level 1 assets were valued using market prices based on daily net asset value (NAV) or prices available daily through a public stock exchange. Level 2 assets were valued primarily using market prices, sometimes net of estimated realization expenses, and based on broker/dealer markets or in commingled funds where NAV is not available daily or publicly. For insurance contracts, the estimated surrender value of the policy was used to estimate fair market value. Level 3 assets in the Netherlands were valued using an industry standard model based on certain assumptions such as the U-return and estimated technical reserve.

The table below summarizes the changes in the fair value of the Level 3 assets:

	December 31, 2011				December 31, 2010
	Level 3 Assets				Level 3 Assets
	US		Foreign		US		Foreign
	(Millions)				(Millions)
Balance at December 31 of the previous year	$	—	$	6	$	—	$	6
Actual return on plan assets:
Relating to assets still held at the reporting date		—		—		—		—
Ending Balance at December 31	$	—	$	6	$	—	$	6

The following table contains information about significant concentrations of risk, including all individual assets that make up more than 5% of the total assets and any direct investments in Tenneco stock:

Asset Category	Fair Value Level		Value		Percentage of Total Assets
	(Millions)
2011:
Tenneco Stock		1	$	24		4.6	%
2010:
Tenneco Stock		1	$	34		6.3	%

Our investment policy for both our domestic and foreign plans is to invest more heavily in equity securities than debt securities. Targeted pension plan allocations are 70 percent in equity securities and 30 percent in debt securities, with acceptable tolerance levels of plus or minus five percent within each category for our domestic plans. Our foreign plans are individually managed to different target levels depending on the investing environment in each country.

Our approach to determining expected return on plan asset assumptions evaluates both historical returns as well as estimates of future returns, and adjusts for any expected changes in the long-term outlook for the equity and fixed income markets for both our domestic and foreign plans.

A summary of the change in benefit obligation, the change in plan assets, the development of net amount recognized, and the amounts recognized in the balance sheets for the pension plans and postretirement benefit plan follows:

	Pension												Postretirement
	2011						2010						2011			2010
	US			Foreign			US			Foreign			US			US
	(Millions)
Change in benefit obligation:
Benefit obligation at December 31 of the previous year	$	354		$	361		$	341		$	333		$	135		$	142
Currency rate conversion		—			(6	)		—			(3	)		—			—
Settlement		—			(4	)		—			(2	)		—			—
Service cost		1			6			1			5			1			1
Interest cost		20			19			20			19			7			8
Administrative expenses/taxes paid		—			(1	)		—			(1	)		—			—
Plan amendments		—			—			—			1			—			—
Actuarial (gain)/loss		56			8			22			21			5			(7	)
Benefits paid		(17	)		(15	)		(30	)		(15	)		(8	)		(9	)
Participants’ contributions		—			2			—			3			—			—
Benefit obligation at December 31	$	414		$	370		$	354		$	361		$	140		$	135
Change in plan assets:
Fair value at December 31 of the previous year	$	242		$	287		$	199		$	262		$	—		$	—
Currency rate conversion		—			(4	)		—			(1	)		—			—
Settlement		—			(4	)		—			(2	)		—			—
Actual return on plan assets		(7	)		—			40			20			—			—
Employer contributions		21			24			33			20			9			9
Prescription drug subsidy received		—			—			—			—			(1	)		—
Participants’ contributions		—			2			—			3			—			—
Benefits paid		(17	)		(15	)		(30	)		(15	)		(8	)		(9	)
Fair value at December 31	$	239		$	290		$	242		$	287		$	—		$	—
Development of net amount recognized:
Unfunded status at December 31	$	(175	)	$	(80	)	$	(112	)	$	(74	)	$	(140	)	$	(135	)
Unrecognized cost:
Actuarial loss		248			138			165			120			64			63
Prior service cost/(credit)		1			9			2			11			(29	)		(35	)
Net amount recognized at December 31	$	74		$	67		$	55		$	57		$	(105	)	$	(107	)
Amounts recognized in the balance sheets as of December 31
Noncurrent assets	$	—		$	—		$	—		$	1		$	—		$	—
Current liabilities		(3	)		(2	)		(3	)		(3	)		(9	)		(10	)
Noncurrent liabilities		(172	)		(78	)		(109	)		(72	)		(131	)		(125	)
Net amount recognized	$	(175	)	$	(80	)	$	(112	)	$	(74	)	$	(140	)	$	(135	)

Assets of one plan may not be utilized to pay benefits of other plans. Additionally, the prepaid (accrued) pension cost has been recorded based upon certain actuarial estimates as described below. Those estimates are subject to revision in future periods given new facts or circumstances.

Net periodic pension costs (income) for the years 2011, 2010, and 2009, consist of the following components:

	2011						2010						2009
	US			Foreign			US			Foreign			US			Foreign
	(Millions)
Service cost — benefits earned during the year	$	1		$	6		$	1		$	5		$	1		$	4
Interest cost		20			19			20			19			20			18
Expected return on plan assets		(23	)		(20	)		(21	)		(19	)		(22	)		(19	)
Curtailment loss		—			—			—			—			1			—
Settlement loss		—			1			6			—			2			—
Net amortization:
Actuarial loss		4			5			3			3			2			2
Prior service cost		—			2			—			2			1			2
Net pension costs	$	2		$	13		$	9		$	10		$	5		$	7

Amounts recognized in accumulated other comprehensive loss for pension benefits consist of the following components:

	2011				2010
	US		Foreign		US		Foreign
	(Millions)
Net actuarial loss	$	248	$	138	$	165	$	120
Prior service cost		1		9		2		11
	$	249	$	147	$	167	$	131

In 2012, we expect to recognize the following amounts, which are currently reflected in accumulated other comprehensive loss, as components of net periodic benefit cost:

	2012
	US		Foreign
	(Millions)
Net actuarial loss	$	6	$	7
Prior service cost		—		1
	$	6	$	8

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for all pension plans with accumulated benefit obligations in excess of plan assets at December 31, 2011 and 2010 were as follows:

	December 31, 2011				December 31, 2010
	US		Foreign		US		Foreign
	(Millions)
Projected benefit obligation	$	414	$	363	$	354	$	332
Accumulated benefit obligation		414		355		352		328
Fair value of plan assets		239		284		242		257

The following estimated benefit payments are payable from the pension plans to participants:

Year	US		Foreign
	(Millions)
2012	$	19	$	16
2013		24		15
2014		22		16
2015		20		17
2016		20		18
2017-2021		122		100

The following assumptions were used in the accounting for the pension plans for the years of 2011, 2010, and 2009:

	2011						2010
	US			Foreign			US			Foreign
Weighted-average assumptions used to determine benefit obligations
Discount rate		4.8	%		4.9	%		5.6	%		5.4	%
Rate of compensation increase		N/A			3.5	%		N/A			3.5	%

	2011						2010						2009
	US			Foreign			US			Foreign			US			Foreign
Weighted-average assumptions used to determine net periodic benefit cost
Discount rate		5.6	%		5.4	%		6.1	%		6.0	%		6.2	%		6.3	%
Expected long-term return on plan assets		8.3	%		6.4	%		8.3	%		6.9	%		8.8	%		7.3	%
Rate of compensation increase		N/A			3.5	%		N/A			3.5	%		N/A			3.1	%

We made contributions of $45 million to our pension plans during 2011. Based on current actuarial estimates, we believe we will be required to make contributions of $48 million to those plans during 2012. Pension contributions beyond 2012 will be required, but those amounts will vary based upon many factors, including the performance of our pension fund investments during 2012.

We have life insurance plans which provided benefit to a majority of our U.S. employees. We also have postretirement plans for our U.S. employees hired before January 1, 2001. The plans cover salaried employees retiring on or after attaining age 55 who have at least 10 years of service with us after attaining age 45. For hourly employees, the postretirement benefit plans generally cover employees who retire according to one of our hourly employee retirement plans. All of these benefits may be subject to deductibles, co-payment provisions and other limitations, and we have reserved the right to change these benefits. For those employees hired after January 1, 2001, we do not provide any postretirement benefits. Our postretirement healthcare and life insurance plans are not funded. The measurement date used to determine postretirement benefit obligations is December 31.

Net periodic postretirement benefit cost for the years 2011, 2010, and 2009, consists of the following components:

	2011			2010			2009
	(Millions)
Service cost — benefits earned during the year	$	1		$	1		$	1
Interest on accumulated postretirement benefit obligation		7			8			8
Net amortization:
Actuarial loss		4			4			5
Prior service credit		(6	)		(6	)		(6	)
Net periodic postretirement benefit cost	$	6		$	7		$	8

In 2012, we expect to recognize the following amounts, which are currently reflected in accumulated other comprehensive loss, as components of net periodic benefit cost:

	2012
	(Millions)
Net actuarial loss	$	5
Prior service credit		(6	)
	$	(1	)

The following estimated postretirement benefit payments are payable from the plan to participants:

Year	Postretirement Benefits
	(Millions)
2012		9
2013		10
2014		10
2015		10
2016		10
2017-2021		48

The following estimated subsidies under the Medicare Prescription Drug, Improvement, and Modernization Act are expected to be received:

Year	Postretirement Benefits
	(Millions)
2012		1
2013		1
2014		1
2015		1
2016		1
2017-2021		4

The weighted-average assumed health care cost trend rate used in determining the 2011 accumulated postretirement benefit obligation was 8.0 percent, declining to 4.5 percent by 2019. The health care cost trend rate was 7.5 percent for 2010 and 8.3 percent in 2009, declining to five percent over succeeding periods.

The following assumptions were used in the accounting for postretirement cost for the years of 2011, 2010 and 2009:

	2011			2010
Weighted-average assumptions used to determine benefit obligations
Discount rate		4.8	%		5.6	%
Rate of compensation increase		N/A			N/A

	2011			2010			2009
Weighted-average assumptions used to determine net periodic benefit cost
Discount rate		5.6	%		6.1	%		6.2	%
Rate of compensation increase		N/A			N/A			4.0	%

A one-percentage-point increase in the 2011 assumed health care cost trend rates would increase total service and interest cost by less than $1 million and would increase the postretirement benefit obligation by $10 million. A one-percentage-point decrease in the 2011 assumed health care cost trend rates would decrease the total service and interest cost by less than $1 million and decrease the postretirement benefit obligation by $8 million.

Based on current actuarial estimates, we believe we will be required to make postretirement contributions of approximately $9 million during 2012.

We have established Employee Stock Ownership Plans for the benefit of U.S. employees. Under the plans, subject to limitations in the Internal Revenue Code, participants may elect to defer up to 75 percent of their salary through contributions to the plan, which are invested in selected mutual funds or used to buy our common stock. We match in cash 50 percent of each employee’s contribution up to eight percent of the employee’s salary. In 2009, we temporarily discontinued these matching contributions, as a result of the global economic downturn that began in 2008. We restored the matching contributions to salaried and non-union hourly U.S. employees beginning on January 1, 2010. In connection with freezing the defined benefit pension plans for nearly all U.S. based salaried and non-union hourly employees effective December 31, 2006, and the related replacement of those defined benefit plans with defined contribution plans, we are making additional contributions to the Employee Stock Ownership Plans. We recorded expense for these contributions of approximately $18 million, $17 million, and $10 million in 2011, 2010 and 2009, respectively. Matching contributions vest immediately. Defined benefit replacement contributions fully vest on the employee’s third anniversary of employment.

Effective January 1, 2012, the Tenneco Employee Stock Ownership Plan for Hourly Employees and the Tenneco Employee Stock Ownership Plan for Salaried Employees were merged into one plan called the Tenneco 401(k) Retirement Savings Plan (the “Retirement Savings Plan”). The Retirement Savings Plan has been designed to adopt a Safe-Harbor approach approved by the Internal Revenue Service and which will provide for increased company matching contributions at lower percentages of employee deferrals. The company matching contribution will increase from 50 percent on the first eight percent of employee contributions to 100 percent on the first three percent and 50 percent on the next two percent of employee contributions.