XML 68 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
Retirement Beneifts
 12 Months Ended
Dec. 31, 2011
Pension And Other Postretirement Benefit Disclosure [Abstract]  
Pension And Other Postretirement Benefits Disclosure [Text Block]

Note 10 — Retirement Benefits

 

The Company has funded and unfunded non-contributory U.S. and foreign defined benefit pension plans. Benefits under these plans are generally provided based on either years of service and final average pay or a specified dollar amount per year of service.

 

Effective January 1, 2004, the defined benefit pension plans for U.S. salaried and non-collectively bargained hourly employees were closed to employees hired on or after January 1, 2004. Effective January 1, 2006, the defined benefit pension plan for the Hubbell Canada salaried employees was closed to existing employees who did not meet certain age and service requirements as well as all new employees hired on or after January 1, 2006. Effective January 1, 2007 the defined benefit pension plan for Hubbell's UK operations was closed to all new employees hired on or after January 1, 2007. These U.S., Canadian and UK employees are eligible instead for defined contribution plans. On December 3, 2002, the Company closed its Retirement Plan for Directors to all new directors appointed after that date. Effective December 31, 2007, benefits accrued under this plan for eligible active directors were converted to an actuarial lump sum equivalent and transferred to the Company's Deferred Compensation Plan for Directors.

 

The Company also has a number of health care and life insurance benefit plans covering eligible employees who reached retirement age while working for the Company. These benefits have been discontinued for substantially all future retirees. The Company anticipates future cost-sharing changes for its discontinued plans that are consistent with past practices.

 

The Company uses a December 31 measurement date for all of its plans. There were no amendments made in 2011 or 2010 to the defined benefit pension plans which had a significant impact on the total pension benefit obligation. During 2010, amendments made to the Hubbell and Burndy Retiree Medical Plans resulted in a reduction of $7.5 million to the liability.

 

The following table sets forth the reconciliation of beginning and ending balances of the benefit obligations and the plan assets for the Company's defined benefit pension and other benefit plans at December 31, (in millions):

 

 Pension Benefits  Other Benefits
 2011 2010 2011 2010
Change in benefit obligation           
Benefit obligation at beginning of year $ 722.5 $ 647.0 $ 33.0 $ 39.7
Service cost   13.6   12.7   -   0.3
Interest cost   38.1   37.8   1.6   2.1
Plan participants’ contributions   0.7   0.7   -   -
Amendments   -   -   -   (7.5)
Actuarial loss  90.6   61.0   1.8   2.1
Currency impact  (0.5)  (1.3)   -   -
Other  (1.0)  (0.7)  (0.3)  (0.5)
Benefits paid   (31.6)   (34.7)   (2.4)   (3.2)
Benefit obligation at end of year $ 832.4 $ 722.5 $ 33.7 $ 33.0
Change in plan assets           
Fair value of plan assets at beginning of year $ 622.0 $ 575.8 $ - $ -
Actual return on plan assets   31.7   54.6   -   -
Employer contributions   25.4   26.5   -   -
Plan participants’ contributions   0.7   0.7   -   -
Currency impact   (0.6)   (0.9)   -   -
Benefits paid   (31.6)   (34.7)   -   -
Fair value of plan assets at end of year $ 647.6 $ 622.0 $ - $ -
FUNDED STATUS$ (184.8) $ (100.5) $ (33.7) $ (33.0)
Amounts recognized in the consolidated balance sheet consist of:           
Prepaid pensions (included in Other long-term assets) $ 6.0 $ 6.2 $ - $ -
Accrued benefit liability (short-term and long-term)   (190.8)   (106.7)   (33.7)   (33.0)
NET AMOUNT RECOGNIZED IN THE CONSOLIDATED BALANCE SHEET$ (184.8) $ (100.5) $ (33.7) $ (33.0)
Amounts recognized in Accumulated other comprehensive loss (income) consist of:           
Net actuarial loss $ 245.3 $ 153.8 $ 2.6 $ 0.8
Prior service cost (credit)   1.0   1.2   (8.1)   (9.1)
NET AMOUNT RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE LOSS$ 246.3 $ 155.0 $ (5.5) $ (8.3)

The accumulated benefit obligation for all defined benefit pension plans was $773.0 million and $669.6 million at December 31, 2011 and 2010, respectively. Information with respect to plans with accumulated benefit obligations in excess of plan assets is as follows, (in millions):

 

  2011 2010 
 Projected benefit obligation$ 764.0 $ 623.3 
 Accumulated benefit obligation$ 717.6 $ 586.1 
 Fair value of plan assets$ 573.1 $ 517.4 

The following table sets forth the components of pension and other benefit costs for the years ended December 31, (in millions):

 

  Pension Benefits Other Benefits
  2011 2010 2009 2011 2010 2009
                   
Components of net periodic benefit cost                  
Service cost$ 13.6 $ 12.7 $ 12.2 $ - $ 0.3 $ 0.6
Interest cost  38.1   37.8   36.9   1.6   2.1   1.7
Expected return on plan assets  (41.8)   (41.7)   (37.2)   -   -   -
Amortization of prior service cost/(credit)  0.2   0.3   0.3   (1.0)   (0.3)   (0.2)
Amortization of actuarial losses  8.4   5.4   7.3   -   -   -
Curtailment and settlement losses (gains)  (0.1)   (0.1)   0.1   -   (0.6)   -
Net periodic benefit cost$ 18.4 $ 14.4 $ 19.6 $ 0.6 $ 1.5 $ 2.1
Changes recognized in other comprehensive loss (income), before tax, (in millions):                 
Current year net actuarial (gain)/loss$ 99.8 $ 46.7 $ (14.8) $ 1.8 $ 2.1 $ (0.3)
Current year prior service (cost)/credit  -   -   -   -   (7.6)   (0.8)
Amortization of prior service (cost)/credit  (0.2)   (0.3)   (0.3)   1.0   0.9   0.2
Amortization of net actuarial loss  (8.4)   (5.4)   (7.3)   -   -   -
Currency impact  0.1   (3.3)   -   -   -   -
Other adjustments  -   0.5   0.4   -   -   -
Total recognized in accumulated other comprehensive (income) loss  91.3   38.2   (22.0)   2.8   (4.6)   (0.9)
Total recognized in net periodic pension cost and other comprehensive loss (income)$ 109.7 $ 52.6 $ (2.4) $ 3.4 $ (3.1) $ 1.2
Amortization expected to be recognized through income during 2012                 
Amortization of prior service cost/(credit)$ 0.2       $(1.0)      
Amortization of net loss  16.6         -      
Total expected to be recognized through income during next fiscal year$ 16.8       $(1.0)      

The Company also maintains six defined contribution pension plans. The total cost of these plans was $8.8 million in 2011, $6.5 million in 2010 and $5.9 million in 2009, excluding the employer match for the 401(k) plan. This cost is not included in the above net periodic benefit cost for the defined benefit pension plans.

 

In addition, the Company participates in four multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover its union represented employees.  Of these four plans, three are considered to be less than 65 percent funded. The Company's total contributions to these plans was $0.7 million in both 2011 and 2010 and $0.8 million in 2009.  These contributions represent more than five percent of the total contributions made to each of these plans during the past three years.  After assessing future required contributions and/or the potential liabilities associated with withdrawing from these plans, the Company has concluded that none of these plans are significant.

 

Assumptions

 

The following assumptions were used to determine the projected benefit obligations at the measurement date and the net periodic benefit cost for the year:

 

   Pension Benefits Other Benefits 
   2011 2010 2009 2011 2010 2009 
                     
 Weighted-average assumptions used to determine benefit obligations at December 31,                  
 Discount rate4.42% 5.38% 5.96% 4.40% 5.40% 6.00% 
 Rate of compensation increase3.53% 3.56% 3.57% 3.50% 3.50% 3.50% 
 Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31,                  
 Discount rate5.38% 5.96% 6.46% 5.40% 6.00% 6.50% 
 Expected return on plan assets7.00% 7.50% 8.00% N/A  N/A  N/A  
 Rate of compensation increase3.56% 3.57% 4.07% 3.50% 3.50% 4.00% 

At the end of each calendar year, the Company determines the appropriate expected return on assets for each plan based upon its strategic asset allocation (see discussion below). In making this determination, the Company utilizes expected returns for each asset class based upon current market conditions and expected risk premiums for each asset class.

 

The assumed health care cost trend rates used to determine the projected postretirement benefit obligation are as follows:

 

   Other Benefits 
   2011 2010 2009 
         
 Assumed health care cost trend rates at December 31,      
 Health care cost trend assumed for next year9.0% 9.0% 8.0% 
 Rate to which the cost trend is assumed to decline5.0% 5.0% 5.0% 
 Year that the rate reaches the ultimate trend rate2017 2017 2015 

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

 

   One Percentage Point Increase One Percentage Point Decrease 
         
 Effect on total of service and interest cost$ 0.1 $(0.1) 
 Effect on postretirement benefit obligation$ 1.7 $(1.5) 

Plan Assets

 

The Company's combined targeted and actual domestic and foreign pension plan weighted average asset allocation at December 31, 2012, 2011 and 2010 by asset category are as follows:

 

    Percentage of Plan Assets
    Target Actual
 Asset Category  2012 2011 2010
 Equity securities   38%  40%  44%
 Debt securities & Cash   42%  41%  38%
 Alternative Investments   20%  19%  18%
 Total   100%  100%  100%

At the end of each year, the Company estimates the expected long-term rate of return on pension plan assets based on the strategic asset allocation for its plans. In making this determination, the Company utilizes expected rates of return for each asset class based upon current market conditions and expected risk premiums for each asset class. The Company has written investment policies and asset allocation guidelines for its domestic and foreign pension plans. In establishing these policies, the Company has considered that its various pension plans are a major retirement vehicle for most plan participants and has acted to discharge its fiduciary responsibilities with regard to the plans solely in the interest of such participants and their beneficiaries. The goal underlying the establishment of the investment policies is to provide that pension assets shall be invested in a prudent manner and so that, together with the expected contributions to the plans, the funds will be sufficient to meet the obligations of the plans as they become due. To achieve this result, the Company conducts a periodic strategic asset allocation study to form a basis for the allocation of pension assets between various asset categories. Specific policy benchmark percentages are assigned to each asset category with minimum and maximum ranges established for each. The assets are then tactically managed within these ranges. Equity securities include investments in large-cap, mid-cap and small-cap companies located inside and outside the United States. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities and US Treasuries. Derivative investments include futures contracts used by the plan to adjust the level of its investments within an asset allocation category. All futures contracts are 100% supported by cash or cash equivalent investments. At no time may derivatives be utilized to leverage the asset portfolio.

 

Equity securities include Company common stock in the amounts of $21.6 million (3.9% of total domestic plan assets) and $20.0 million (3.7% of total domestic plan assets) at December 31, 2011 and 2010, respectively.

The fair value of the Company's pension plan assets at December 31, 2011 and 2010, by asset category are as follows (in millions):

 

 Asset Category Total Quoted Prices in Active Markets for Identical Assets (Level 1) Quoted Prices in Active Market for Similar Asset (Level 2) Significant Unobservable Inputs (Level 3) 
 Cash and cash equivalents $ 56.0 $ 56.0 $ - $ - 
 Equity securities:             
  US Large-cap (a)   144.9   144.9   -   - 
  US Mid-cap and Small-cap Growth (b)   24.1   24.1   -   - 
  International Large-cap   37.1   37.1   -   - 
  Emerging Markets   39.8   39.8   -   - 
 Fixed Income Securities:             
  US Treasuries   56.2   56.2   -   - 
  Corporate Bonds (c)   75.9   75.9   -   - 
  Asset Backed Securities and Other   47.1   47.1   -   - 
 Derivatives:             
  Equity Futures (d)   30.2   -   30.2   - 
 Alternative Investment Funds   110.7   -   -   110.7 
 Balance at December 31, 2010 $ 622.0 $ 481.1 $ 30.2 $ 110.7 
                
    Total Quoted Prices in Active Markets for Identical Assets (Level 1) Quoted Prices in Active Market for Similar Asset (Level 2) Significant Unobservable Inputs (Level 3) 
 Cash and cash equivalents $ 46.3 $ 46.3 $ - $ - 
 Equity securities:             
  US Large-cap (a)   110.4   110.4   -   - 
  US Mid-cap and Small-cap Growth (b)   25.3   25.3   -   - 
  International Large-cap   49.7   49.7   -   - 
  Emerging Markets   32.0   32.0   -   - 
 Fixed Income Securities:             
  US Treasuries   106.6   106.6   -   - 
  Corporate Bonds (c)   92.9   92.9   -   - 
  Asset Backed Securities and Other   57.0   57.0   -   - 
 Derivatives:             
  Equity Futures (d)   44.2   -   44.2   - 
  Debt Futures (e)   (34.6)   -   (34.6)   - 
 Alternative Investment Funds   117.8   -   -   117.8 
 Balance at December 31, 2011 $ 647.6 $ 520.2 $ 9.6 $ 117.8 
                
  (a) Includes an actively managed portfolio of large-cap US stocks 
  (b) Includes $21.6 million and $20.0 million of the Company's common stock at December 31, 2011 and 2010, respectively, and an investment in actively managed mid-cap and small-cap US stocks 
  (c) Includes primarily investment grade bonds of US issuers from diverse industries 
  (d) Includes primarily large-cap US and foreign equity futures 
  (e) Includes short positions in US Treasuries which are utilized to adjust the duration of the portfolio 

The fair value of the Company's alternative investment funds measured using significant unobservable inputs (Level 3) at December 31, 2011, are as follows (in millions):

 

    Alternative Investment Funds 
 Balance at December 31, 2009 $104.7 
 Actual return on plan assets:    
  Relating to assets still held at the reporting date   5.7 
  Relating to assets sold during the period   - 
 Purchases, sales and settlements, net   0.3 
 Transfers in and/or out of Level 3   - 
 Balance at December 31, 2010 $ 110.7 
 Actual return on plan assets:    
  Relating to assets still held at the reporting date   2.3 
  Relating to assets sold during the period   - 
 Purchases, sales and settlements, net   4.8 
 Transfers in and/or out of Level 3   - 
 Balance at December 31, 2011 $ 117.8 

All of the alternative investments held by the Company's pension plans consist of fund of fund products. Funds of funds invest in a number of investment funds managed by a diversified group of third-party investment managers who employ a variety of alternative investment strategies, including relative value, security selection, distressed value, global macro, specialized credit and directional strategies. The objective of these funds is to achieve the desired capital appreciation with lower volatility than either traditional equity or fixed income securities.

 

The Company's other postretirement benefits are unfunded; therefore, no asset information is reported.

 

Contributions

 

Although not required under the Pension Protection Act of 2006, the Company intends to make a voluntary contribution to its qualified domestic defined benefit pension plans in 2012. The Company expects to contribute approximately $2 million to its foreign plans in 2012.

 

Estimated Future Benefit Payments

 

The following domestic and foreign benefit payments, which reflect future service, as appropriate, are expected to be paid as follows, (in millions):

      Other Benefits
   Pension Benefits Gross Medicare Part D Subsidy Net
              
 2012$ 33.9 $ 2.9 $ 0.2 $2.7
 2013$ 36.3 $ 2.8 $ 0.2 $2.6
 2014$ 38.3 $ 2.8 $ 0.2 $2.6
 2015$ 40.3 $ 2.7 $ 0.2 $2.5
 2016$ 42.6 $ 2.7 $ 0.2 $2.5
 2017-2021$ 242.2 $ 12.3 $ 0.8 $11.5