Retirement Benefits

12 Months Ended

Jun. 30, 2012

Retirement Benefits [Abstract]

Retirement Benefits

Note 10 — Retirement Benefits

Defined Benefit Plans

Towers Watson sponsors both qualified and non-qualified defined benefit pension plans and other post-retirement benefit plan (“OPEB”) plans in North America and Europe. As of June 30, 2012, these funded and unfunded plans represented 98 percent of Towers Watson's pension and OPEB obligations and are disclosed herein. Towers Watson also sponsors funded and unfunded defined benefit pension plans in certain other countries, representing an additional $80.9 million in projected benefit obligations, $54.9 million in assets and a net liability of $26.0 million.

Under the legacy Watson Wyatt plans in North America, benefits are based on the number of years of service and the associate's compensation during the five highest paid consecutive years of service. The non-qualified plan provides for pension benefits that would be covered under the qualified plan but are limited by the Internal Revenue Code. The non-qualified plan is unfunded. In the U.K., benefits earned prior to January 2008 are based on the number of years of service and the associate's compensation during the three years before leaving the plan. Benefits earned after January 2008 are based on the number of years of service and the associate's average compensation during the associate's term of service since that date. The plan liabilities in Germany represent the grandfathered pension benefit for employees hired prior to July 1991. The pension plan for associates hired after July 1991 is a defined contribution arrangement.

The legacy Towers Perrin pension plans in the U.S. accrue benefits under a cash-balance formula for associates hired or rehired after 2002 and for all associates for service after 2007. For associates hired prior to 2003 and active as of January 2003, benefits prior to 2008 are based on a combination of a cash balance formula, for the period after 2002, and a final average pay formula based on years of plan service and the highest five consecutive years of plan compensation prior to 2008. Under the cash balance formula, benefits are based on a percentage of the associate's plan compensation each year. The Canadian Retirement Plan provides a choice of a defined benefit or a defined contribution. The non-qualified plans in North America provide for the additional pension benefits that would be covered under the qualified plan in the respective country were it not for statutory maximums. The non-qualified plans are unfunded. The U.K. Plan provides predominantly lump sum benefits. Benefit accruals under the U.K. plan ceased on March 31, 2008. The plans in Germany mostly provide benefits under a cash balance benefit formula. Benefits under the Netherlands plan accrue on a final pay basis on earnings up to a maximum amount each year.

Effective December 31, 2010, the existing U.S. qualified and non-qualified pension plans were closed to new participants, and benefit accruals were frozen under the current benefit formulas effective December 31, 2011. Beginning January 1, 2012, U.S. associates, including U.S. named executive officers, accrue qualified and non-qualified benefits under a new stable value pension design . Retiree medical benefits provided under our U.S. postretirement benefit plans were closed to new hires effective January 1, 2011. Life insurance benefits under the same plans were frozen with respect to service, eligibility and amounts as of January 1, 2012 for active associates.

The determination of Towers Watson's obligations and annual expense under the plans is based on a number of assumptions that, given the longevity of the plans, are long-term in focus. A change in one or a combination of these assumptions could have a material impact on Towers Watson's pension benefit obligation and related cost. Any difference between actual and assumed results is amortized into Towers Watson's pension cost over the average remaining service period of participating associates. Towers Watson considers several factors prior to the start of each fiscal year when determining the appropriate annual assumptions, including economic forecasts, relevant benchmarks, historical trends, portfolio composition and peer company comparisons.

Funding is based on actuarially determined contributions and is limited to amounts that are currently deductible for tax purposes. Since funding calculations are based on different measurements than those used for accounting purposes, pension contributions are not equal to net periodic pension cost.

On January 1, 2012, the legacy Watson Wyatt U.S. pension plan merged into the legacy Towers Perrin U.S. pension plan and it was renamed the Towers Watson pension plan. Prior to the plan merger, the legacy Towers Perrin and legacy Watson Wyatt plans had different accounting policies related to the determination of the market-related value of plan assets that is used to calculate expected return on plan assets, a component of net periodic benefit cost. However as a result of the merger of the two plans, the company was required to adopt a single method, resulting in a change in accounting principle. Previously, the legacy Towers Perrin plans in North America used a calculated value for the non-fixed income portion of the portfolio and fair value for the fixed income investments. The legacy Watson Wyatt plan used fair value for all investments in determining the market-related value of plan assets. The company elected to adopt the fair value method in determining the market-related value of plan assets of the merged plans and the legacy Towers Perrin pension plan in Canada. The company considers the fair value method for determining market-related value of plan assets to be a preferable method of accounting because asset-related gains and losses are subject to amortization into pension cost immediately.

We evaluated the effect of this change in accounting method and deemed it immaterial to the historical and current financial statements and therefore did not account for the change retrospectively. Accordingly, the company calculated the cumulative difference of using a calculated value to determine market-related value of plan assets versus the fair value method for the legacy Towers Perrin plans over the period of time from the date of the merger between Towers Perrin and Watson Wyatt through January 1, 2012 to determine the cumulative impact of this accounting change. The cumulative effect of the change, as of January 1, 2012, resulted in an increase to salary and employee benefit expense of $9.5 million, a reduction in income tax expense of $3.7 million and a reduction to net income of $5.8 million for the fiscal year ended June 30, 2012 and an increase to accumulated other comprehensive income of $5.8 million. The cumulative effect of the change in accounting method decreased diluted earnings per share by $0.08 for the fiscal year ended June 30, 2012. Related to the change in accounting method, the $9.5 million expense is offset by a benefit of $6.6 million for the six months ended June 30, 2012.

Assumptions Used in the Valuations of the Defined Benefit Pension Plans

The following assumptions were used in the valuations of Towers Watson's defined benefit pension plans. The assumptions presented for the North American plans represent the weighted-average of rates for all U.S. and Canadian plans. The assumptions presented for Towers Watson's European plans represent the weighted-average of rates for the U.K., Germany and Netherlands plans. In relation to the acquisition of Towers Perrin on January 1, 2010, the legacy plans of Towers Perrin have been included in the assumptions as of and for the years ended June 30, 2010 and 2011.

The assumptions used to determine net periodic benefit cost for the fiscal years ended June 30, 2012, 2011 and 2010 were as follows:

	Year Ended June 30,
	2012				2011				2010
	North				North				North
	America		Europe		America		Europe		America		Europe
Discount rate	5.79	%	5.59	%	5.80	%	5.25	%	6.43	%	6.03	%
Expected long-term rate of return on assets	8.14	%	6.78	%	8.16	%	6.79	%	8.11	%	6.48	%
Rate of increase in compensation levels	3.82	%	3.93	%	3.88	%	3.88	%	3.93	%	5.09	%

The following table presents the assumptions used in the valuation to determine the projected benefit obligation for the fiscal years ended June 30, 2012 and 2011:

	June 30, 2012				June 30, 2011
	North				North
	America		Europe		America		Europe
Discount rate	4.86	%	4.80	%	5.79	%	5.62	%
Rate of increase in compensation levels	4.35	%	3.93	%	3.82	%	3.93	%

As a result of plan changes adopted during the first quarter of fiscal year 2011, the legacy Watson Wyatt U.S. Pension Plans were remeasured as of September 30, 2010. Upon remeasurement the discount rate assumption was changed for these plans and the net periodic benefit cost for the remainder of fiscal year 2011 was calculated using a weighted average discount rate of 5.79%.

Components of Net Periodic Benefit Cost for Defined Benefit Pension Plans

The following tables set forth the components of net periodic benefit cost for our defined benefit pension plans for North America and Europe for the fiscal years ended June 30, 2012, 2011 and 2010:

	Year ended June 30,
	2012				2011				2010
	North				North				North
	America		Europe		America		Europe		America		Europe
Service cost	$	61,158	$	10,199	$	58,050	$	12,218	$	38,068	$	9,844
Interest cost		141,390		38,173		139,840		39,000		95,845		30,631
Expected return on plan assets		(172,827)		(44,922)		(158,708)		(40,420)		(93,257)		(27,078)
Amortization of net loss/(gain)		18,240		(3,717)		23,997		5,574		15,275		2,615
Amortization of prior service
(credit)/cost		(8,338)		41		(6,632)		41		(1,623)		41
Settlement/curtailment loss/(gain)		-		4,258		4,170		(2,323)		2,293		64
Other adjustments (a)		9,512		545		868		44		-		860
Net periodic benefit cost	$	49,135	$	4,577	$	61,585	$	14,134	$	56,601	$	16,977

• This adjustment is primarily due to the cumulative effect of the change in the method of determining the market-related value of plan assets.The change was not recorded or reflected in our fiscal year 2011 or 2010 net periodic benefit cost.

Changes to other comprehensive income for the Company's defined benefit pension plans as follows:

	2012				2011
	North				North
	America		Europe		America		Europe
Current year actuarial loss/(gain)	$	314,754		110,377	$	(172,078)	$	(107,560)
Amortization of actuarial (gain)/loss		(18,240)		3,717		(23,997)		(5,574)
Current year prior service credit		-		-		(73,926)		-
Amortization of prior service credit/(cost)		8,338		(41)		6,632		(41)
Recognition of actuarial gain/(loss)
due to settlement/curtailment		-		(4,258)		(4,170)		2,323
Other		(13,477)		(1,512)		5,378		4,058
Total recognized in other comprehensive loss/(income)	$	291,375	$	108,283	$	(262,161)	$	(106,794)

The current year actuarial loss is primarily due to a significant decrease in the discount rates used for our plans. The change in other is primarily due to the currency impact and, in the current year, includes the effect of the change in the method of determining the market-related value of plan assets. The change was not recorded or reflected in our fiscal year 2011 other comprehensive income.

The estimated amounts that will be amortized from other comprehensive income into net periodic benefit cost during fiscal 2013 for the Company's defined benefit pension plans are shown below:

	2013
	North
	America		Europe
Actuarial loss	$	45,608	$	5,865
Prior service (credit)/cost		(8,378)		41
Total	$	37,230	$	5,906

The following table provides a reconciliation of the changes in the projected benefit obligations and fair value of assets for the qualified plans for the years ended June 30, 2012 and 2011, and the funded status as of June30, 2012 and 2011:

	2012				2011
	North				North
	America		Europe		America		Europe
Change in Benefit Obligation
Benefit obligation at beginning of year	$	2,052,003	$	622,364	$	1,974,882	$	617,365
Service cost		49,512		6,787		46,955		8,239
Interest cost		116,660		33,074		112,391		34,236
Actuarial losses/(gains)		297,678		86,884		32,756		(68,732)
Benefit payments		(88,462)		(43,336)		(83,171)		(15,332)
Participant contributions		-		-		-		1,740
Plan amendments and other		-		-		(55,930)		44
Curtailments		-		-		-		(4,889)
Foreign currency adjustment		(15,387)		(17,023)		24,120		49,693
Benefit obligation at end of year	$	2,412,004	$	688,750	$	2,052,003	$	622,364
Change in Plan Assets
Fair value of plan assets at beginning of year	$	2,174,879	$	679,159	$	1,832,004	$	562,542
Actual return on plan assets		172,520		50,934		369,875		64,026
Company contributions		22,472		20,437		36,346		19,216
Participant contributions		-		-		-		1,740
Benefit payments		(88,462)		(43,336)		(83,171)		(15,332)
Other		-		698		-		(116)
Foreign currency adjustment		(12,091)		(18,909)		19,825		47,083
Fair value of plan assets at end of year	$	2,269,318	$	688,983	$	2,174,879	$	679,159
Funded status at end of year	$	(142,686)	$	233	$	122,876	$	56,795
Accumulated Benefit Obligation	$	2,370,664	$	667,092	$	2,013,171	$	602,193
	2012				2011
	North				North
	America		Europe		America		Europe
Amounts recognized in Consolidated Balance
Sheets consist of:
Noncurrent assets	$	-	$	8,802	$	179,546	$	56,795
Noncurrent liabilities		(142,686)		(8,569)		(56,670)		-
Net amount recognized	$	(142,686)	$	233	$	122,876	$	56,795
Amounts recognized in Accumulated Other
Comprehensive Income consist of:
Net actuarial loss/(gain)	$	405,943	$	48,623	$	136,080	$	(30,437)
Net prior service (credit)/cost		(54,726)		520		(61,210)		573
Accumulated Other Comprehensive Loss/(Income)	$	351,217	$	49,143	$	74,870	$	(29,864)

The following table presents the projected benefit obligation and fair value of plan assets for our qualified plans that have a projected benefit obligation in excess of plan assets as of June 30, 2012 and 2011:

	2012				2011
	North				North
	America		Europe		America		Europe
Projected benefit obligation at end of year	$	1,175,875	$	273,845	$	972,481	$	-
Fair value of plan assets at end of year	$	939,772	$	265,276	$	915,811	$	-

The following table presents the projected benefit obligation, accumulated benefit obligation and fair value of plan assets for our qualified plans that have an accumulated benefit obligation in excess of plan assets as of June 30, 2012 and 2011:

	2012				2011
	North				North
	America		Europe		America		Europe
Projected benefit obligation at end of year	$	1,175,875	$	273,845	$	277,907	$	-
Accumulated benefit obligation at end of year	$	1,134,535	$	273,845	$	243,221	$	-
Fair value of plan assets at end of year	$	939,772	$	265,276	$	223,457	$	-

The following table provides a reconciliation of the changes in the North American and European non-qualified plans projected benefit obligations for the years ended June30, 2012 and 2011, and a statement of funded status as of June30, 2012 and 2011. The non-qualified plans reflect only the U.S., Canadian and German plans and are unfunded.

	June 30,
	2012		2011
Change in Benefit Obligation
Benefit obligation at beginning of year	$	601,604	$	627,474
Service cost		15,059		15,075
Interest cost		29,829		32,213
Actuarial losses/(gains)		46,273		(4,117)
Benefit payments		(84,419)		(78,242)
Plan amendments and other		-		(17,127)
Foreign currency adjustment		(20,413)		26,328
Benefit obligation at end of year	$	587,933	$	601,604
Change in Plan Assets
Fair value of plan assets, beginning of year	$	-	$	-
Actual return on plan assets		-		-
Company contributions		84,419		78,242
Participant contributions		-		-
Benefit payments		(84,419)		(78,242)
Foreign currency adjustment		-		-
Fair value of plan assets, end of year	$	-	$	-
Funded status at end of year	$	(587,933)	$	(601,604)
Amounts recognized in Consolidated Balance Sheets consist of:
Noncurrent assets	$	-	$	-
Current liabilities		(93,180)		(91,499)
Noncurrent liabilities		(494,753)		(510,105)
Net amount recognized	$	(587,933)	$	(601,604)
Amounts recognized in Accumulated Other Comprehensive Income consist of:
Net actuarial loss	$	69,280	$	26,826
Net prior service credit		(14,751)		(16,600)
Accumulated Other Comprehensive Income	$	54,529	$	10,226
Information for plans with obligations in excess of plan assets:
Projected benefit obligation	$	587,933	$	601,604
Accumulated benefit obligation		576,420		590,644
Fair value of plan assets		-		-

Our investment strategy is designed to generate returns that will reduce the interest rate risk inherent in each of the plans' benefit obligations and enable the plans to meet their future obligations. The precise amount for which these obligations will be settled depends on future events, including the life expectancy of the plan's members and salary inflation. The obligations are estimated using actuarial assumptions, based on the current economic environment.

Each pension plan seeks to achieve total returns sufficient to meet expected future obligations when considered in conjunction with expected future company contributions and prudent levels of investment risk and diversification. Each plan's targeted asset allocation is determined through a plan-specific Asset-Liability Modeling study. These comprehensive studies provide an evaluation of the projected status of asset and benefit obligation measures for each plan under a range of both positive and negative environments. The studies include a number of different asset mixes, spanning a range of diversification and potential equity exposures.

In evaluating the strategic asset allocation choices, an emphasis is placed on the long-term characteristics of each individual asset class, such expected return, volatility of returns and correlations with other asset classes within the portfolios. Consideration is also given to the proper long-term level of risk for each plan, the impact on the volatility and magnitude of plan contributions and cost, and the impact certain actuarial techniques may have on the plan's recognition of investment experience.

For the Towers Watson funded plan in the U.S., the targeted equity allocation as of June 30, 2012 is 67%. For the legacy Watson Wyatt funded plans, the targeted equity allocation as of June 30, 2012 65% in the Canadian plan, and 40% in the U.K. plan. For the legacy Towers Perrin funded plans, the targeted equity allocation as of June 30, 2012 is 50% in the Canadian plan and 40% in the U.K. plan. The duration of the fixed income assets is plan specific and each has been targeted to minimize fluctuations in plan funded status as a result of changes in interest rates. The Netherlands plan is invested in an insurance contract. Consequently, the asset allocation of the plan is managed by the insurer.

We monitor investment performance and portfolio characteristics on a quarterly basis to ensure that managers are meeting expectations with respect to their investment approach. With the exception of securities issued by the U.S. Government and its agencies, no single issue is to comprise more than 5% of the portfolio's value although index fund managers are exempt from the security weighting constraints. There are also various restrictions and controls placed on managers, including prohibition from investing in our stock.

The expected rate of return on assets assumption is developed in conjunction with advisors and using our asset model that reflects a combination of rigorous historical analysis and the forward-looking views of the financial markets as revealed through the yield on long-term bonds, the price-earnings ratios of the major stock market indices and long-term inflation.

The fair value of our plan assets by asset category at June30, 2012and 2011 are as follows (see Note 1for a description of the fair value levels and Note 6 for a summary of management's procedures around prices received from third-parties):

		Fair Value Measurements at June 30, 2012
		Level 1				Level 2						Level 3				Total
		North				North						North
		America		Europe		America			Europe			America		Europe
Asset category:
Cash		$	4,342		15,844		-		$	-		$	-		-	$	20,186
Cash equivalents			-		-		22,988			-			-		-		22,988
Equity securities:
	U.S. large cap companies		37,422		-		-			-			-		-		37,422
	U.S. mid cap companies		72,427		-		-			-			-		-		72,427
	U.S. small cap companies		82,686		-		-			-			-		-		82,686
	International equities		274,893		14,984		-			-			-		-		289,877
Fixed income:
	U.S. treasuries		252,512		-		11,241			-			-		-		263,753
	Corporate bonds (S&P rating of A or higher)		-		-		236,033			122,236			-		-		358,269
	Corporate bonds (S&P rating of lower than A)		-		-		248,120			-			-		-		248,120
	Other fixed income		-		138,028		45,772	(b)		-	(b)		-		-		183,800
Pooled funds			-		-		415,416	(c)		353,071	(c)		-		-		768,487
Mutual funds			-		-		504,756			-			-		-		504,756
Private equity			-		-		-			-			62,601		28,973		91,574
Derivatives			-		-		12,968	(d)		-			-		-		12,968
Insurance contracts			-		-		-			-			-		15,848		15,848
	Total assets	$	724,282	$	168,856	$	1,497,294		$	475,307		$	62,601	$	44,821	$	2,973,161
Liability category:
Derivatives		$	-	$	-	$	13,133	(d)	$	-		$	-	$	-	$	13,133
	Net assets	$	724,282	$	168,856	$	1,484,161		$	475,307		$	62,601	$	44,821	$	2,960,028

		Fair Value Measurements at June 30, 2011
		Level 1				Level 2						Level 3				Total
		North				North						North
		America		Europe		America			Europe			America		Europe
Asset category:
Cash		$	5,837	$	15,179	$	-		$	-		$	-	$	-	$	21,016
Cash equivalents			-		-		40,053			-			-		-		40,053
Equity securities:
	U.S. large cap companies		30,479		-		-			-			-		-		30,479
	U.S. mid cap companies		73,887		-		-			-			-		-		73,887
	U.S. small cap companies		86,199		-		-			-			-		-		86,199
	International equities		213,275		14,452		-			-			-		-		227,727
Fixed income:
	U.S. treasuries		46,660		-		152,986			-			-		-		199,646
	Corporate bonds		-		-		428,156			112,930			-		-		541,086
	Other fixed income		72,002		121,247		50,183	(b)		26,263	(b)		-		-		269,695
Pooled funds			-		-		434,208	(c)		353,161	(c)		-		-		787,369
Mutual funds			-		-		488,495			-			-		-		488,495
Private equity			-		-		-			-			50,066		18,085		68,151
Derivatives			-		-		30,377	(d)		-			-		-		30,377
Insurance contracts			-		-		-			-			-		17,841		17,841
	Total assets	$	528,339		150,878		1,624,458			492,354			50,066		35,926		2,882,021
Liability category:
Derivatives		$	-	$	-	$	32,542	(d)	$	-		$	-	$	-	$	32,542
	Net assets	$	528,339		150,878		1,591,916			492,354			50,066		35,926		2,849,479

• This category includes municipal and foreign bonds.
• This category includes pooled funds of both equity and fixed income securities. Fair value is based on the calculated net asset value of shares held by the plan as reported by the sponsor of the funds.
• We use various derivatives such as interest rate swaps, futures and options to match the duration of the corporate bond portfolio with the duration of the plan liability.

Following is a description of the valuation methodologies used for investments at fair value:

Cash equivalents: Valued at the net value of shares held by the Company at year end as reported by the sponsor of the funds.

U.S. treasury securities: Valued at the closing price reported in the active market in which the individual security is traded. Government bonds are valued at the closing price reported in the active market in which the bond is traded.

Fixed Income: Foreign and municipal bonds are valued at the closing price reported in the active market in which the bond is traded. Corporate bonds are valued based on yields currently available on comparable securities of issuers with similar credit ratings.

Pooled Funds and Mutual Funds: Valued at the net value of shares held by the Company at year end as reported by the sponsor of the funds.

Derivative investments: Valued at the closing level of the relevant index or security and interest accrual through the valuation date.

Private equity: These underlying investments, which includes limited partnerships, are recorded at estimated fair value. In the absence of readily determinable fair value, fair value of each investment is determined based on a review of the audited financial statements of the underlying funds, when available, and other information from independent third parties including information provided by the fund managers. Investments in such funds do carry certain risks including lack of regulatory oversight, interest rate risk and market risk.

Insurance contracts: The fair values are determined using model-based techniques that include option-pricing models, discounted cash flow models, and similar techniques.

The following table reconciles the net plan investments to the total fair value of the plan assets:

	June 30,
	2012		2011
Net assets held in investments	$	2,960,028	$	2,849,479
Dividend and interest receivable		-		4,559
Administrative Expenses		(1,727)		-
Fair value of plan assets	$	2,958,301	$	2,854,038

The following table sets forth a summary of changes in the fair value of the plan's Level3 assets for the years ended June30, 2012 and 2011:

	Private		Insurance
	Equity		Contracts		Total
Beginning balance at June 30, 2010	$	46,843	$	14,406	$	61,249
Net actual return on plan assets relating to assets still held at the
end of the year		6,817		55		6,872
Net purchases, sales and settlements		13,624		719		14,343
Change in foreign currency exchange rates		867		2,661		3,528
Ending balance at June 30, 2011	$	68,151	$	17,841	$	85,992
Net actual return on plan assets relating to assets still held at the
end of the year		2,648		633		3,281
Net purchases, sales and settlements		21,652		(468)		21,184
Change in foreign currency exchange rates		(877)		(2,158)		(3,035)
Ending balance at June 30, 2012	$	91,574	$	15,848	$	107,422

The following table sets forth our projected pension contributions for fiscal year 2013, as well as the pension contributions to our various plans in fiscal years 2012 and 2011:

	2013		2012		2011
	(Projected)		(Actual)		(Actual)
U.S	$	50,000	$	7,000	$	30,000
Canada		27,661		15,473		6,346
Europe		38,820		20,437		19,216

Expected benefit payments from our defined benefit pension plans to current plan participants, including the effect of their expected future service, as appropriate, are as follows:

	Benefit Payments
	North
Fiscal Year	America		Europe		Total
2013	$	184,520	$	44,934	$	229,454
2014		169,947		19,500		189,447
2015		156,556		24,341		180,897
2016		158,247		23,691		181,938
2017		162,668		27,863		190,531
Years 2018 - 2022		931,636		172,955		1,104,591
	$	1,763,574	$	313,284	$	2,076,858

Defined Contribution Plan

Eligible Towers Watson U.S. associates hired on or after January 1, 2011 participate in a new savings plan design which provides for 100% match on the first 2% of pay and 50% match on the next 4% of pay; associates vest in the employer match upon two years of service. Associates hired prior to 2011 continued participation in their respective legacy plans until January 1, 2012 at which time the legacy plans were frozen to new contributions and the associates began participation in the new savings plan design. Under the legacy U.S. Watson Wyatt plan, associate contributions were matched at a rate of 50% of the first 6% up to $60,000 of associates' eligible compensation. The legacy U.S. Towers Perrin plan provided a matching contribution of 100% of the first 5% of associate contributions. The cost of the Company's contributions to the plans for the fiscal years ended June 30, 2012, 2011 and 2010 amounted to $28.7 million, $25.2 million and $17.0 million, respectively.

The Towers Watson U.K. pension plan has a money purchase feature to which we make core contributions plus additional contributions matching those of the participating associates up to a maximum rate. Contribution rates depend on the age of the participant and whether or not they arise from salary sacrifice arrangements through which the associate has elected to receive a pension contribution in lieu of additional salary. The cost of the Company's contributions to the plan for the fiscal years ended June 30, 2012, 2011 and 2010 amounted to $21.4 million, $16.5 million, and $10 million respectively.

Health Care Benefits

We sponsor a contributory health care plan that provides hospitalization, medical and dental benefits to substantially all U.S. associates. We accrue a liability for estimated incurred but unreported claims.The liability totaled $4.5 million and $6.8million at June 30, 2012 and 2011, respectively. This liability is included in accounts payable and accrued liabilities in the consolidated balance sheets.

Postretirement Benefits

We provide certain health care and life insurance benefits for retired associates. The principal plans cover associates in the U.S. and Canada who have met certain eligibility requirements. Our principal post-retirement benefit plans are primarily unfunded. Retiree medical benefits provided under our U.S. postretirement benefit plans were closed to new hires effective January 1, 2011. Life insurance benefits under the plans were frozen with respect to service, eligibility and amounts as of January 1, 2012 for active associates.

The assumptions used in the valuation of the postretirement benefit cost and obligation were as follows:

	Year Ended June 30,
	2012		2011		2010
Discount rate	5.65	%	5.59	%	6.53	%
Expected long-term rate of return on assets	2.00	%	2.00	%	2.00	%
Rate of increase in compensation levels	4.06	%	4.07	%	3.29	%
Health care cost trend (decreasing to 5.00% in 2016 and thereafter)	7.61	%	8.03	%	9.63	%
	June 30,
	2012		2011
Health care cost trend (decreasing to 5.00% in 2016 and thereafter)	7.16	%	7.61	%
Discount rate, accumulated postretirement benefit obligation	4.80	%	5.65	%
Rate of compensation increase	4.50	%	4.06	%

Actuarial gains and losses associated with changing any of the assumptions are accumulated as part of the unrecognized net gain or loss and amortized into the net periodic postretirement costs over the average remaining service period of participating associates, which is approximately 8 years.

A one percentage point change in the assumed health care cost trend rates would have the following effect:

	1%		1%
	Increase		Decrease
Effect on net periodic postretirement benefit cost in fiscal year 2012	$	258	$	(212)
Effect on accumulated postretirement benefit obligation as of June 30, 2012		4,280		(3,537)

Net periodic postretirement benefit cost consists of the following:

	Year Ended June 30,
	2012		2011		2010
Service cost	$	2,987	$	4,211	$	3,313
Interest cost		10,966		11,706		8,387
Expected return on assets		(132)		(132)		(66)
Amortization of net unrecognized losses/(gains)		2,206		1,674		(1,151)
Amortization of prior service credit		(8,705)		(6,842)		(571)
Curtailment		-		(2,209)		-
Net periodic postretirement benefit cost	$	7,322	$	8,408	$	9,912

Changes in other comprehensive income for the Company's postretirement benefit plans as follows:

	2012		2011
Current year actuarial (gain)/loss	$	(19,357)	$	12,771
Amortization of actuarial loss		(2,206)		(1,674)
Current year prior service credit		-		(63,745)
Amortization of prior service credit		8,705		6,842
Accelerated recognition of prior service credit
due to curtailment		-		2,209
Other		(187)		(53)
Total recognized in other comprehensive income	$	(13,045)	$	(43,650)

The estimated amounts that will be amortized from other comprehensive income into net periodic benefit cost during fiscal 2013 for the Company's other postretirement benefit plans are shown below:

	2013
Actuarial loss	$	346
Prior service credit		(8,212)
Total	$	(7,866)

The following table provides a reconciliation of the changes in the accumulated postretirement benefit obligation and fair value of assets for the years ended June 30, 2012 and 2011 and a statement of funded status as of June 30, 2012 and 2011:

	June 30,
	2012		2011
Change in Benefit Obligation
Benefit obligation at beginning of year	$	201,929	$	245,540
Service cost		2,987		4,211
Interest cost		10,965		11,706
Actuarial (gains)/losses		(19,537)		12,645
Benefit payments		(16,077)		(14,397)
Less: Medicare Part D		904		809
Participant contributions		9,206		2,795
Plan amendments and other		-		(63,745)
Foreign currency adjustment		(1,514)		2,365
Benefit obligation at end of year	$	188,863	$	201,929
Change in Plan Assets
Fair value of plan assets at beginning of year	$	6,580	$	6,575
Actual return on plan assets		(55)		5
Company contributions		6,871		11,602
Participant contributions		9,206		2,795
Benefit payments		(16,077)		(14,397)
Fair value of plan assets at end of year	$	6,525	$	6,580
Funded status at end of year	$	(182,338)	$	(195,349)
Amounts recognized in Consolidated Balance Sheets consist of:
Noncurrent assets	$	-	$	-
Current liabilities		(7,070)		(5,245)
Noncurrent liabilities		(175,268)		(190,104)
Net amount recognized	$	(182,338)	$	(195,349)
Amounts recognized in Accumulated Other Comprehensive Income consist of:
Net actuarial loss	$	(9,481)	$	12,397
Net prior service credit		(49,056)		(57,899)
Accumulated Other Comprehensive Income	$	(58,537)	$	(45,502)

Expected benefit payments to current plan participants, including the effect of their future service, as appropriate, and the related retiree drug subsidy expected to be received, are as follows:

	Expected
	benefit		Retiree drug
Fiscal Year	payments		subsidy
2013	$	17,225		548
2014		18,092		355
2015		19,381		121
2016		20,825		118
2017		22,241		114
Years 2018-2022		130,861		475
	$	228,625	$	1,731