Pension and other postretirement benefits

12 Months Ended

Dec. 31, 2011

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Pension and other postretirement benefits

Note 12: Pension and other postretirement benefits

We have historically provided certain health care benefits for a large number of retired U.S. employees. Employees hired prior to January 1, 2002 become eligible for benefits if they attain the appropriate years of service and age prior to retirement. Employees hired on January 1, 2002 or later are not eligible to participate in our retiree health care plan. In addition to our retiree health care plan, we also have a supplemental executive retirement plan (SERP) in the United States. Additionally, we had a pension plan that covered certain Canadian employees which was settled during 2009.

Effective April 30, 2009, we amended our postretirement benefit plan to decrease the minimum age for eligibility to receive the maximum available benefits from age 58 to age 51 and to decrease the service requirement for maximum retiree cost sharing from 30 years to 25 years. As a result of this amendment, the plan assets and liabilities were re-measured as of April 30, 2009, reducing the underfunded amount of the plan from $60,437 as of December 31, 2008 to $55,928 as of April 30, 2009. The reduction in the underfunded amount was primarily due to a change in the discount rate assumption from 6.6% as of December 31, 2008 to 7.25% as of April 30, 2009. The other actuarial assumptions were consistent with those utilized in our determination of the benefit obligation and funded status as of December 31, 2008. Prior to the April 30, 2009 plan amendment and re-measurement, unrecognized actuarial gains and losses were being amortized over the average remaining service period of plan participants, which was 8.2 years as of December 31, 2008. Because the plan amendment increased the number of participants currently eligible to receive the maximum available benefits, almost all of the plan participants were classified as inactive subsequent to the plan amendment. As such, actuarial gains and losses are required to be amortized over the average remaining life expectancy of inactive plan participants, which was 18.8 years as of April 30, 2009. This change resulted in a $5,208 decrease in postretirement benefit expense for 2009, as compared to the expense we had expected for 2009 prior to the plan amendments.

Obligations and funded status – The following tables summarize the change in benefit obligation, plan assets and funded status during 2011 and 2010:

	Postretirement benefit plan			Pension plan
Change in benefit obligation:
Benefit obligation, December 31, 2009	$	138,915		$	3,455
Interest cost		7,282			179
Actuarial loss – net		5,781			198
Benefits paid from the VEBA trust (see Note 11) and company funds		(11,363	)		(324	)
Medicare Part D reimbursements		726			-
Benefit obligation, December 31, 2010		141,341			3,508
Interest cost		6,669			164
Actuarial loss – net		8,199			332
Benefits paid from the VEBA trust (see Note 11) and company funds		(10,940	)		(324	)
Medicare Part D reimbursements		856			-
Benefit obligation, December 31, 2011	$	146,125		$	3,680
Change in plan assets:
Fair value of plan assets, December 31, 2009	$	90,320		$	-
Actual gain on plan assets		10,990			-
Fair value of plan assets, December 31, 2010		101,310			-
Actual loss on plan assets		(688	)		-
Fair value of plan assets, December 31, 2011	$	100,622		$	-
Funded status, December 31, 2010	$	(40,031	)	$	(3,508	)
Funded status, December 31, 2011	$	(45,503	)	$	(3,680	)

 

As of December 31, 2011 and 2010, the accumulated benefit obligation equaled the projected benefit obligation for the United States SERP plan.

Plan assets of our postretirement medical plan do not include the assets of the VEBA trust discussed in Note 11. Plan assets consist only of those assets invested in a trust established under section 401(h) of the Internal Revenue Code. These assets can be used only to pay retiree medical benefits for employees who retired after 1986, which represents 80% of the total number of retirees receiving medical benefits as of December 31, 2011. The assets of the VEBA trust may be used to pay medical and severance benefits for both active and retired employees.

Amounts recognized in the consolidated balance sheets as of December 31 were as follows:

	Postretirement benefit plan				Pension plan
	2011		2010		2011		2010
Accrued liabilities	$	-	$	-	$	324	$	324
Other non-current liabilities		45,503		40,031		3,356		3,184

Amounts included in accumulated other comprehensive loss that have not been recognized as components of postretirement benefit expense were as follows:

	Postretirement benefit plan						Pension plan
	2011			2010			2011			2010
Unrecognized prior service credit	$	(20,697	)	$	(24,440	)	$	-		$	-
Unrecognized net actuarial loss		119,681			108,358			493			161
Tax effect		(37,021	)		(31,334	)		(178	)		(53	)
Amount recognized in accumulated other comprehensive loss, net of tax	$	61,963		$	52,584		$	315		$	108

The unrecognized prior service credit for our postretirement benefit plan resulted from a 2003 curtailment and other plan amendments. These changes resulted in a reduction of the accumulated postretirement benefit obligation. This reduction was first used to reduce any existing unrecognized prior service cost, then to reduce any remaining unrecognized transition obligation. The excess is the unrecognized prior service credit. The prior service credit is being amortized on the straight-line basis over a weighted-average period of 16 years. Unrecognized actuarial gains and losses are being amortized over the average remaining life expectancy of inactive plan participants, which is currently 17.9 years. The unrecognized net actuarial loss for our postretirement benefit plan resulted from experience different from that assumed and from changes in assumptions.

Amounts included in accumulated other comprehensive loss as of December 31, 2011 which we expect to recognize in postretirement benefit expense during 2012 are as follows:

	Postretirement benefit plan			Pension plan
Prior service credit	$	(3,055	)	$	-
Net actuarial loss		5,870			9
Total	$	2,815		$	9

Net pension and postretirement benefit expense – Net pension and postretirement benefit expense for the years ended December 31 consisted of the following components:

	Postretirement benefit plan									Pension plans
	2011			2010			2009			2011		2010		2009
Interest cost	$	6,669		$	7,282		$	8,560		$	164	$	179	$	262
Expected return on plan assets		(7,851	)		(7,226	)		(5,919	)		-		-		(57	)
Amortization of prior service credit		(3,743	)		(3,742	)		(3,815	)		-		-		-
Amortization of net actuarial loss		5,415			5,406			8,383			-		-		9
Total periodic benefit expense		490			1,720			7,209			164		179		214
Settlement loss		-			-			-			-		-		402
Net periodic benefit expense	$	490		$	1,720		$	7,209		$	164	$	179	$	616

Actuarial assumptions – In measuring benefit obligations as of December 31, the following discount rate assumptions were used:

	Postretirement benefit plan						Pension plan
	2011			2010			2011			2010
Discount rate		4.2	%		4.9	%		4.2	%		4.9	%

The discount rate assumption is based on the rates of return on high-quality, fixed-income instruments currently available whose cash flows match the timing and amount of expected benefit payments. In determining the discount rate, we utilize the Aon Hewitt AA Above Median Curve and the Citigroup Pension Discount yield curves to discount each cash flow stream at an interest rate specifically applicable to the timing of each respective cash flow. The present value of each cash flow stream is aggregated and used to impute a weighted-average discount rate.

In measuring net periodic benefit expense for the years ended December 31, the following assumptions were used:

	Postretirement benefit plan									Pension plans
	2011			2010			2009			2011			2010			2009
Discount rate(1)		4.90	%		5.45	%		7.25	%		4.90	%		5.45	%		4.06% - 6.60	%
Expected return on plan assets		7.75	%		8.00	%		8.50	%		-			-			4.50	%

(1) For 2009, the rate presented for our postretirement benefit plan was used from April 30, 2009 through December 31, 2009, the period subsequent to the 2009 plan amendments. A discount rate of 6.60% was used for the period from January 1, 2009 through April 30, 2009.

In determining the expected long-term rate of return on plan assets, we utilize our historical returns and then adjust these returns for estimated inflation. Our inflation assumption is primarily based on analysis of historical inflation data.

In measuring the benefit obligation for our postretirement benefit plan, the following assumptions for health care cost trend rates were used:

	2011	2010	2009
Health care cost trend rate assumed for next year	7.50%	7.75%	8.00%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5.00%	5.00%	5.00%
Year that the rate reaches the ultimate trend rate	2017	2017	2017

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	One- percentage- point increase		One- percentage- point decrease
Effect on total of service and interest cost	$	92	$	(87	)
Effect on benefit obligation		2,185		(2,069	)

Plan assets – The allocation of plan assets by asset category as of December 31 was as follows:

	Postretirement benefit  plan
	2011		2010
U.S. large capitalization equity securities		33%		34%
U.S. corporate debt securities		19%		10%
International equity securities		16%		18%
Government debt securities		14%		13%
Mortgage-backed securities		10%		14%
U.S. small and mid-capitalization equity securities		8%		8%
Other debt securities		-		3%
Total		100%		100%

Our postretirement benefit plan has assets that are intended to meet long-term obligations. In order to meet these obligations, we employ a total return investment approach which considers cash flow needs and balances long-term projected returns against expected asset risk, as measured using projected standard deviations. Risk tolerance is established through consideration of projected plan liabilities, the plan's funded status, projected liquidity needs and current corporate financial condition.

The target asset allocation percentages for our postretirement benefit plan are based on our liability and asset projections. The targeted allocation of plan assets is 33% large capitalization equity securities, 42% fixed income securities, 18% international equity securities and 7% small and mid-capitalization equity securities.

There were no significant transfers of plan assets between fair value measurement levels during 2011. Information regarding fair value measurements of plan assets as of December 31, 2011 was as follows:

			Fair value measurements using
	Fair value as of December 31, 2011		Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
U.S. large capitalization equity securities	$	33,613	$	-		$	33,613	$	-
U.S. corporate debt securities		19,319		5,655			13,664		-
International equity securities		16,023		15,615			408		-
Government debt securities		14,151		12,006			2,145		-
Mortgage-backed securities		9,698		2,193			7,505		-
U.S. small and mid-capitalization equity securities		7,803		7,606			197		-
Other debt securities		15		(95	)		110		-
Total	$	100,622	$	42,980		$	57,642	$	-

Information regarding fair value measurements of plan assets as of December 31, 2010 was as follows:

			Fair value measurements using
	Fair value as of December 31, 2010		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
U.S. large capitalization equity securities	$	34,332	$	16,554	$	17,778	$	-
International equity securities		18,357		18,027		330		-
Mortgage-backed securities		14,113		-		14,113		-
Government debt securities		13,531		7,544		5,987		-
U.S. corporate debt securities		9,725		8,611		1,114		-
U.S. small and mid-capitalization equity securities		8,153		8,064		89		-
Other debt securities		3,099		2,825		274		-
Total	$	101,310	$	61,625	$	39,685	$	-

The information as of December 31, 2010 shown in the table above contains corrections to the classifications within the fair value hierarchy reported in the prior year.

The fair value of mortgage-backed securities is estimated using pricing models with inputs derived principally from observable market data. The fair value of our other Level 2 debt securities is typically estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flow calculations that maximize observable inputs, such as current yields for similar instruments adjusted for trades and other pertinent market information.

Cash flows – While we are not contractually obligated to make contributions to the assets of our postretirement benefit plan, we made contributions of $7,000 to the plan in January 2012. We may make additional contributions to plan assets during 2012, although the amount and timing of any such contributions has not yet been determined.

We have fully funded the United States SERP obligation with investments in company-owned life insurance policies. The cash surrender value of these policies is included in long-term investments in the consolidated balance sheets and totaled $6,619 as of December 31, 2011 and $6,291 as of December 31, 2010.

The following benefit payments are expected to be paid during the years indicated:

	Postretirement benefit plan						Pension plan
	Gross benefit payments		Expected Medicare subsidy		Net benefit payments		Gross benefit payments
2012	$	12,000	$	1,200	$	10,800	$	320
2013		12,600		1,200		11,400		310
2014		13,100		1,300		11,800		300
2015		13,400		1,400		12,000		300
2016		13,300		1,500		11,800		290
2017 – 2021		61,600		7,500		54,100		1,330