Employee Retirement Benefits

3 Months Ended

12 Months Ended

Mar. 31, 2011

Dec. 31, 2010

Employee Retirement Benefits

Employee Retirement Benefits

Note 8—Employee Retirement Benefits

The following table sets forth the net periodic pension and postretirement (including health care, life insurance and auto) expense (in millions of dollars):

		Pension Benefits
														Postretirement Benefits (U.S.)
		U.S.						Non-U.S.
		Three Months Ended March 31,
		2011			2010			2011			2010			2011		2010
Components of Net Periodic Benefit Cost:
	Service cost	$	6.2		$	6.7		$	1.7		$	1.3		$	0.1	$	0.1
	Interest cost		6.5			6.8			2.8			2.6			0.2		0.2
	Expected return on plan assets		(7.1	)		(6.7	)		(3.1	)		(2.5	)		—		—
	Net amortization		2.0			1.7			(0.3	)		(0.1	)		—		(0.1	)
	Settlement loss		0.3			0.3			—			—			—		—
	Net pension/postretirement expense	$	7.9		$	8.8		$	1.1		$	1.3		$	0.3	$	0.2

Our policy for funded plans is to contribute annually, at a minimum, amounts required by applicable laws, regulations and union agreements. From time to time we make contributions beyond those legally required. For the three months ended March 31, 2011 and 2010, we contributed $44.8 million and $36.0 million, respectively, to our worldwide pension plans, including discretionary contributions of $12.3 million and $1.8 million, respectively, to our United Kingdom, or "U.K.," defined benefit pension plan and benefit payments made through unfunded plans. Based upon the significant decline in asset values in 2008, which were in line with the overall market declines, it is likely we will continue to make cash contributions in 2011 and possibly in future years.

We sponsor a defined benefit pension plan in the U.K. In January 2011, we tentatively agreed with the trustees of that plan to cease all future benefit accruals and to close the plan to members, contingent on the outcome of the consultation process with employees that ends in May. We will introduce a defined contribution plan with company matching contributions to replace the defined benefit pension plan. The company matching contributions will generally be 100% of the employee contributions, up to 8% of pay, except that current members of the defined benefit plan will receive an enhanced match for five years.

Our obligation for the U.K. pension plan was $163.4 million, with a fair value of assets of about $145.6 million, as of December 31, 2010. We recognized expense of $1.3 million in 2010.

If the proposal to close the scheme occurs during 2011, then this will result in somewhat lower contributions this year into the defined benefit plan, which will be offset by matching contributions to the new defined contribution plan.

We participate in various "multiemployer" pension plans. In the event that we withdraw from participation in one of these plans, then applicable law could require us to make an additional lump-sum contribution to the plan, and we would have to reflect that as an expense in our consolidated statement of operations and as a liability on our condensed consolidated balance sheet. Our withdrawal liability for any multiemployer plan would depend on the extent of the plan's funding of vested benefits. At least one multiemployer plan in which we participate is reported to have, and other of our multiemployer plans could have, significant underfunded liabilities. Such underfunding may increase in the event other employers become insolvent or withdraw from the applicable plan or upon the inability or failure of withdrawing employers to pay their withdrawal liability. In addition, such underfunding may increase as a result of lower than expected returns on pension fund assets or other funding deficiencies.

Note 5—Employee Retirement Benefits

Qualified U.S. employees, after completion of specified periods of service, are eligible to participate in The Hertz Corporation Account Balance Defined Benefit Pension Plan, or the "Hertz Retirement Plan," a cash balance plan. Under this qualified Hertz Retirement Plan, we pay the entire cost and employees are not required to contribute.

Most of our international subsidiaries have defined benefit retirement plans or participate in various insured or multiemployer plans. In certain countries, when the subsidiaries make the required funding payments, they have no further obligations under such plans. We participate in various multiemployer pension plans administered by labor unions representing some of our employees. We make periodic contributions to these plans to allow them to meet their pension benefit obligations to their participants. Contributions to U.S. multiemployer plans were $7.7 million, $6.3 million and $7.3 million for years ended December 31, 2010, 2009 and 2008, respectively.

Company plans are generally funded, except for certain nonqualified U.S. defined benefit plans and in Germany, where unfunded liabilities are recorded.

We sponsor defined contribution plans for certain eligible U.S. and non-U.S. employees. We match contributions of participating employees on the basis specified in the plans.

We also sponsor postretirement health care and life insurance benefits for a limited number of employees with hire dates prior to January 1, 1990. The postretirement health care plan is contributory with participants' contributions adjusted annually. An unfunded liability is recorded. We also have a key officer postretirement car benefit plan that provides the use of a vehicle for retired Senior Vice Presidents and above who have a minimum of 20 years of service and who retired at age 58 or above.

We use a December 31 measurement date for all our plans.

The following tables set forth the funded status and the net periodic pension cost of the Hertz Retirement Plan, other postretirement benefit plans (including health care and life insurance plans covering domestic ("U.S.") employees and the retirement plans for international operations ("Non-U.S."), together with amounts included in our consolidated balance sheets and statements of operations (in millions of dollars):

		Pension Benefits
														Postretirement Benefits (U.S.)
		U.S.						Non-U.S.
		2010			2009			2010			2009			2010			2009
Change in Benefit Obligation
	Benefit obligation at January 1	$	504.7		$	438.8		$	191.0		$	163.5		$	13.7		$	12.9
	Service cost		24.0			22.0			5.2			5.6			0.3			0.1
	Interest cost		26.1			27.9			9.7			9.5			0.9			0.8
	Employee contributions		—			—			1.1			1.1			0.9			0.5
	Plan amendments		—			—			(13.6	)		—			—			—
	Plan curtailments		—			—			(0.2	)		(0.3	)		—			—
	Plan settlements		(3.4	)		(11.0	)		(0.3	)		(1.6	)		—			—
	Benefits paid		(18.4	)		(36.4	)		(3.9	)		(4.7	)		(2.3	)		(1.3	)
	Foreign exchange translation		—			—			(9.4	)		15.5			—			—
	Actuarial loss		16.7			63.4			22.7			2.7			5.5			0.7
	Other		—			—			(0.8	)		(0.3	)		—			—
	Benefit obligation at December 31	$	549.7		$	504.7		$	201.5		$	191.0		$	19.0		$	13.7
Change in Plan Assets
	Fair value of plan assets at January 1	$	284.2		$	237.0		$	139.2		$	103.3		$	—		$	—
	Actual return on plan assets		43.5			39.3			17.6			23.1			—			—
	Company contributions		60.0			55.3			6.1			6.7			1.4			0.7
	Employee contributions		—			—			1.1			1.1			0.9			0.5
	Plan settlements		(3.4	)		(11.0	)		(0.3	)		(1.6	)		—			—
	Benefits paid		(18.4	)		(36.4	)		(3.9	)		(4.7	)		(2.3	)		(1.2	)
	Foreign exchange translation		—			—			(6.1	)		11.6			—			—
	Other		—			—			(0.9	)		(0.3	)		—			—
	Fair value of plan assets at December 31	$	365.9		$	284.2		$	152.8		$	139.2		$	—		$	—
Funded Status of the Plan
	Plan assets less than benefit obligation	$	(183.8	)	$	(220.5	)	$	(48.7	)	$	(51.8	)	$	(19.0	)	$	(13.7	)

		Pension Benefits
														Postretirement Benefits (U.S.)
		U.S.						Non-U.S.
		2010			2009			2010			2009			2010			2009
Amounts recognized in balance sheet:
	Liabilities	$	(183.8	)	$	(220.5	)	$	(48.7	)	$	(51.8	)	$	(19.0	)	$	(13.7	)
	Net obligation recognized in the balance sheet	$	(183.8	)	$	(220.5	)	$	(48.7	)	$	(51.8	)	$	(19.0	)	$	(13.7	)
	Prior service cost	$	(0.1	)	$	(0.1	)	$	12.9		$	—		$	—		$	—
	Net gain (loss)		(115.6	)		(120.7	)		(11.4	)		4.6			(1.9	)		3.6
	Accumulated other comprehensive income (loss)		(115.7	)		(120.8	)		1.5			4.6			(1.9	)		3.6
	Unfunded accrued pension or postretirement benefit		(68.1	)		(99.7	)		(50.2	)		(56.4	)		(17.1	)		(17.3	)
	Net obligation recognized in the balance sheet	$	(183.8	)	$	(220.5	)	$	(48.7	)	$	(51.8	)	$	(19.0	)	$	(13.7	)
	Total recognized in other comprehensive (income) loss	$	(5.1	)	$	45.0		$	3.1		$	(11.9	)	$	5.5		$	1.0
	Total recognized in net periodic benefit cost and other comprehensive (income) loss	$	23.4		$	74.0		$	6.8		$	(5.0	)	$	6.8		$	1.5
Estimated amounts that will be amortized from accumulated other comprehensive (income) loss over the next fiscal year:
	Net gain (loss)	$	(7.6	)	$	(5.6	)	$	1.1		$	0.4		$	(0.1	)	$	0.3
Accumulated Benefit Obligation at December 31		$	489.7		$	449.4		$	192.8		$	183.7			N/A			N/A
Weighted-average assumptions as of December 31
	Discount rate		5.12	%		5.42	%		5.36	%		5.78	%		4.95	%		5.40	%
	Expected return on assets		8.40	%		8.50	%		7.46	%		7.45	%		N/A			N/A
	Average rate of increase in compensation		4.4	%		4.4	%		3.7	%		3.7	%		N/A			N/A
	Initial health care cost trend rate		—			—			—			—			8.36	%		8.65	%
	Ultimate health care cost trend rate		—			—			—			—			4.5	%		4.5	%
	Number of years to ultimate trend rate		—			—			—			—			19			20

The discount rate used to determine the December 31, 2010 benefit obligations for U.S. pension plans is based on the rate from the Citigroup Pension Discount Curve that is appropriate for the duration of our plan liabilities. For our plans outside the U.S., the discount rate reflects the market rates for high-quality corporate bonds currently available. The discount rate in a country was determined based on a yield curve constructed from high quality corporate bonds in that country. The rate selected from the yield curve has a duration that matches our plan.

The expected return on plan assets for each funded plan is based on expected future investment returns considering the target investment mix of plan assets.

			Pension Benefits
			U.S.									Non-U.S.
			Years ended December 31,									Years ended December 31,
			2010			2009			2008			2010			2009			2008
Components of Net Periodic Benefit Cost:
	Service cost		$	24.0		$	22.0		$	23.1		$	5.2		$	5.6		$	8.1
	Interest cost			26.1			27.9			27.4			9.7			9.5			10.2
	Expected return on plan assets			(26.6	)		(22.7	)		(23.5	)		(10.0	)		(7.6	)		(11.4	)
	Amortization:
		Losses and other		4.6			0.4			0.4			(1.0	)		(0.4	)		(0.7	)
	Curtailment gain			—			—			—			(0.2	)		(0.3	)		(0.7	)
	Settlement loss			0.4			1.4			3.7			—			0.1			0.1
	Special termination cost			—			—			2.1			—			—			—
	Net pension expense		$	28.5		$	29.0		$	33.2		$	3.7		$	6.9		$	5.6
Weighted-average discount rate for expense (January 1)				5.42	%		6.39	%		6.30	%		5.71	%		5.59	%		5.51	%
Weighted-average assumed long-term rate of return on assets (January 1)				8.50	%		8.25	%		8.50	%		7.46	%		6.79	%		7.22	%

The balance in "Accumulated other comprehensive income (loss)" at December 31, 2010 and 2009 relating to pension benefits was $70.2 million and $66.5 million, respectively.

			Postretirement Benefits (U.S.)
			Years ended December 31,
			2010			2009			2008
Components of Net Periodic Benefit Cost:
	Service cost		$	0.3		$	0.1		$	0.1
	Interest cost			0.9			0.7			0.7
	Amortization:
		Losses and other		—			(0.3	)		(2.9	)
		Special termination benefit cost		—			—			—
	Net postretirement expense		$	1.2		$	0.5		$	(2.1	)
	Weighted-average discount rate for expense			5.4	%		6.2	%		6.3	%
	Initial health care cost trend rate			8.7	%		9.0	%		9.5	%
	Ultimate health care cost trend rate			4.5	%		5.0	%		5.0	%
	Number of years to ultimate trend rate			19			9			8

Changing the assumed health care cost trend rates by one percentage point is estimated to have the following effects (in millions of dollars):

	One Percentage Point
	Increase		Decrease
Effect on total of service and interest cost components	$	0.1	$	(0.1	)
Effect on postretirement benefit obligation	$	0.6	$	(0.6	)

The provisions charged to income for the years ended December 31, 2010, 2009 and 2008 for all other pension plans were approximately (in millions of dollars) $8.8, $7.3 and $8.0, respectively.

The provisions charged to income for the years ended December 31, 2010, 2009 and 2008 for the defined contribution plans were approximately (in millions of dollars) $14.8, $6.9 and $16.3, respectively.

Plan Assets

We have a long-term investment outlook for the assets held in our Company sponsored plans, which is consistent with the long-term nature of each plan's respective liabilities. We have two major plans which reside in the U.S. and the U.K.

The U.S. Plan, or the "Plan," currently has a target asset allocation of 70% equity and 30% fixed income. The equity portion of the Plan is invested in one passively managed S&P 500 index fund, one passively managed U.S. small/midcap fund and one actively managed international portfolio. The fixed income portion of the Plan is actively managed by a professional investment manager and is benchmarked to the Barclays Long Govt/Credit Index. The Plan assumes an 8.4% rate of return on assets, which represents the expected long-term annual weighted-average return for the Plan in total.

The U.K. Plan currently invests in a professionally managed Balanced Consensus Index Fund, which has the investment objective of achieving a total return relatively equal to its benchmark. The benchmark is based upon the average asset weightings of a broad universe of U.K. pension funds invested in pooled investment vehicles and each of their relevant indices. The asset allocation as of December 31, 2010, was 87% equity, 6% fixed income and 7% cash. The U.K. Plan currently assumes a rate of return on assets of 7.5%, which represents the expected long-term annual weighted-average return.

The fair value measurements of our U.S. pension plan assets are based upon significant observable inputs (Level 2) and relate to common collective trusts and other pooled investment vehicles consisting of the following asset categories (in millions of dollars):

			December 31,
Asset Category			2010		2009
Cash and cash equivalents			$	4.0	$	4.6
Equity Securities:
	U.S. Large Cap			106.3		80.2
	U.S. Mid Cap			29.5		23.8
	U.S. Small Cap			23.5		18.4
	International Large Cap			80.8		63.4
Fixed Income Securities:
	U.S. Treasuries			49.8		44.6
	Corporate Bonds			61.9		45.4
	Government Bonds			1.3		—
	Municipal Bonds			4.7		1.1
Real Estate (REITs)				4.1		2.7
		Total fair value of pension plan assets	$	365.9	$	284.2

The fair value measurements of our U.K. pension plan assets are based upon significant observable inputs (Level 2) and relate to common collective trusts and other pooled investment vehicles consisting of the following asset categories (in millions of dollars):

		December 31,
Asset Category		2010		2009
Cash and cash equivalents		$	10.7	$	8.4
U.K. Equities			54.1		48.7
Overseas Equities			72.3		60.6
U.K. Conventional Gilts			4.1		5.4
Overseas Bonds			—		4.9
Corporate Bonds			3.7		3.5
Index-Linked Gilts-Stocks			0.7		0.8
	Total fair value of pension plan assets	$	145.6	$	132.3

Contributions

Our policy for funded plans is to contribute annually, at a minimum, amounts required by applicable laws, regulations and union agreements. From time to time we make contributions beyond those legally required. In 2010, we made discretionary cash contributions to our U.S. qualified pension plan of $54.2 million. In 2009, we made discretionary cash contributions to our U.S. qualified pension plan of $42.6 million. Based upon the significant decline in asset values in 2008, which were in line with the overall market declines, it is likely we will continue to make cash contributions in 2011 and possibly in future years. We expect to contribute between $45 million and $90 million to our U.S. plan during 2011. The level of 2011 and future contributions will vary, and is dependent on a number of factors including investment returns, interest rate fluctuations, plan demographics, funding regulations and the results of the final actuarial valuation.

Estimated Future Benefit Payments

The following table presents estimated future benefit payments (in millions of dollars):

	Pension Benefits		Postretirement Benefits (U.S.)
2011	$	24.2	$	1.5
2012		28.5		1.4
2013		31.9		1.4
2014		34.5		1.5
2015		37.5		1.5
2016-2020		242.8		7.2
	$	399.4	$	14.5