Note 16: Pension and Employee Benefit Plans

Defined Contribution Employee Benefit Plans:

401(k) plans: The Company maintains domestic 401(k) plans that allow employees to choose among various investment alternatives, including (subject to restrictions) Modine stock. The Company's matching contribution is discretionary. The Company matched 50 percent of employee contributions, up to 5 percent of employee contributions, during fiscal 2013, 2012 and 2011.

Defined contribution plan: The Company maintains a domestic defined contribution plan that covers all eligible salaried employees and non-union hourly employees. Modine makes annual discretionary contributions based on a percentage of compensation, which is determined by management. Employees can choose among various investment alternatives, including Modine stock.

Deferred compensation plan: The Company maintains a non-qualified deferred compensation plan for eligible employees. The plan allows qualified employees to choose among various investment alternatives.

Modine's expense for defined contribution employee benefit plans during fiscal 2013, 2012 and 2011 was $4.1 million, $4.4 million, and $4.3 million, respectively.

In addition, various Modine foreign subsidiaries have in place government-required defined contribution plans under which Modine contributes a percentage of employee earnings into accounts, consistent with local laws.

Statutory Termination Plans:

Certain of Modine's foreign subsidiaries have statutory termination indemnity plans covering eligible employees. The benefits under these plans are based upon years of service and final average compensation levels or a monthly retirement benefit amount. These programs are all substantially unfunded in accordance with local laws, but are often covered by national obligatory umbrella insurance programs that protect employees from losses in the event that an employer defaults on its obligations.

Defined Benefit Employee Benefit Plans:

Pension plans: Modine has a non-contributory defined benefit pension plan that covers most of its domestic employees hired on or before December 31, 2003. The benefits provided are based primarily on years of service and average compensation for salaried and some hourly employees. Benefits for other hourly employees are based on a monthly retirement benefit amount. Domestic salaried employees hired after December 31, 2003 are not covered under any defined benefit plan. Currently no domestic pension plans include increases in annual earnings or future service to be performed in calculating the average annual earnings and years of credited service under the pension plan formula. Certain of Modine's foreign subsidiaries also have legacy defined benefit plans covering a small number of active employees.

Company contributions of $9.2 million, $11.5 million and $17.9 million to its U.S. pension plans during fiscal 2013, 2012 and 2011, respectively, are included in the change in other noncurrent assets and liabilities in the consolidated statements of cash flows.

In March 2011, the Company announced that effective January 1, 2012, the Non-Union Hourly Factory component of the Modine Manufacturing Company Pension Plan for Non-Union Hourly Factory and Salaried Employees was modified so that no increases in annual earnings and no service performed after December 31, 2011 will be included in the pension plan formula. Modine recorded a pension curtailment charge of $1.6 million in fiscal 2011 to reflect these modifications.

Postretirement plans: Modine and certain of its domestic subsidiaries provide selected healthcare and life-insurance benefits for retired employees. Designated employees may become eligible for benefits when they retire. These plans are unfunded. Modine periodically amends the plans, changing the contribution rate of retirees and the amounts and forms of coverage. An annual limit on Modine's liability was established for most plans between fiscal 1994 and fiscal 1996 after original recognition of the liability in fiscal 1993. It caps future costs at 200 percent of Modine's then-current cost. These changes reduced the accrued obligation, and the reduction is being amortized as a component of the benefit cost.

During fiscal 2012, the Company recorded a postretirement curtailment gain of $0.3 million related to the closure of the Camdenton, Missouri manufacturing facility. During fiscal 2011, the Company recorded a postretirement curtailment gain of $2.1 million related to the closure of the Harrodsburg, Kentucky manufacturing facility.

Measurement Date: Modine uses March 31 as the measurement date for its pension and postretirement plans.

The change in benefit obligations and plan assets as well as the funded status of Modine's pension and postretirement plans were as follows:

	Pensions Plans						Postretirement Plans
Years ended March 31	2013			2012			2013			2012

Change in benefit obligation:
Benefit obligation at beginning of year	$	281.8		$	246.0		$	7.2		$	6.6
Service cost		0.6			1.4			0.1			-
Interest cost		13.5			13.9			0.3			0.4
Actuarial loss		27.1			35.6			0.1			0.5
Benefits paid		(12.6	)		(13.8	)		(0.2	)		(0.5	)
Settlement/curtailment adjustment		-			-			-			0.2
Currency translation adjustment		(0.8	)		(1.3	)		-			-
Benefit obligation at end of year	$	309.6		$	281.8		$	7.5		$	7.2

Change in plan assets:
Fair value of plan assets at beginning of year	$	186.6		$	182.1		$	-		$	-
Actual return on plan assets		16.2			5.5			-			-
Benefits paid		(12.6	)		(13.8	)		(0.2	)		(0.5	)
Employer contributions		10.4			12.8			0.2			0.5
Fair value of plan assets at end of year	$	200.6		$	186.6		$	-		$	-
Funded status at end of year	$	(109.0	)	$	(95.2	)	$	(7.5	)	$	(7.2	)

Amounts recognized in the consolidated balance sheets consist of:
Current liability	$	(1.0	)	$	(1.1	)	$	(0.8	)	$	(0.8	)
Noncurrent liability		(108.0	)		(94.1	)		(6.7	)		(6.4	)
	$	(109.0	)	$	(95.2	)	$	(7.5	)	$	(7.2	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial loss (gain)	$	176.4		$	154.4		$	(0.3	)	$	(0.4	)
Prior service credit		-			-			(1.5	)		(3.0	)
	$	176.4		$	154.4		$	(1.8	)	$	(3.4	)

The accumulated benefit obligation for all defined benefit pension plans was $307.2 million and $280.3 million as of March 31, 2013 and 2012, respectively.

Pension plans with accumulated benefit obligations in excess of plan assets consist of the following:

March 31	2013		2012

Projected benefit obligation	$	309.6	$	281.8
Accumulated benefit obligation		307.2		280.3
Fair value of the plan assets		200.6		186.6

Costs for Modine's pension and postretirement benefit plans include the following components:

	Pension Plans									Postretirement Plans
Years ended March 31	2013			2012			2011			2013			2012			2011

Components of net periodic benefit costs:
Service cost	$	0.6		$	1.4		$	1.9		$	0.1		$	-		$	-
Interest cost		13.5			13.9			13.7			0.3			0.4			0.4
Expected return on plan assets		(16.1	)		(15.7	)		(15.2	)		-			-			-
Amortization of:
Unrecognized net loss (gain)		5.0			7.0			7.7			-			-			(0.1	)
Unrecognized prior service cost (credit)		-			-			0.4			(1.5	)		(1.7	)		(1.8	)
Adjustment for settlement/curtailment		-			-			1.6			-			(0.3	)		(2.1	)
Net periodic benefit cost (income)	$	3.0		$	6.6		$	10.1		$	(1.1	)	$	(1.6	)	$	(3.6	)

Other changes in plan assets and benefit obligation recognized in other comprehensive loss (income):
Net actuarial loss (gain)	$	27.0		$	45.7		$	(3.7	)	$	-		$	0.7		$	(2.2	)
Prior service (credits) costs		-			-			(1.6	)		-			0.3			2.3
Reversal of amortization items:
Net actuarial (gain) loss		(5.0	)		(7.0	)		(7.7	)		0.1			-			0.1
Prior service (credit) costs		-			-			(0.4	)		1.5			1.7			1.8
Total recognized in other comprehensive loss (income)	$	22.0		$	38.7		$	(13.4	)	$	1.6		$	2.7		$	2.0

Total recognized in net periodic benefit costs and other comprehensive income	$	25.0		$	45.3		$	(3.3	)	$	0.5		$	1.1		$	(1.6	)

The estimated net actuarial loss for the pension plans that is expected to be amortized from accumulated other comprehensive loss into net periodic benefit cost during fiscal 2014 is $6.3 million. The estimated prior service credit for the postretirement plans that is expected to be amortized from accumulated other comprehensive loss into net periodic benefit income during fiscal 2014 is $1.2 million.

The weighted average assumptions used to determine Modine's benefit obligation under the plans were as follows:

Years ended March 31	2013						2012
	U.S. Plans			Foreign Plans			U.S. Plans			Foreign Plans
Pension plans:
Discount rate		4.4	%		3.5	%		4.9	%		5.0	%
Postretirement plans:
Discount rate		3.7	%		N/A			4.4	%		N/A

The weighted average assumptions used to determine Modine's costs under the plans were as follows:

Years ended March 31	2013						2012						2011
	U.S. Plans			Foreign Plans			U.S. Plans			Foreign Plans			U.S. Plans			Foreign Plans
Pension plans:
Discount rate		4.9	%		5.0	%		5.8	%		5.8	%		5.9	%		5.0	%
Expected return on plan assets		8.0	%		N/A			8.0	%		N/A			8.1	%		N/A
Postretirement plans:
Discount rate		4.4	%		N/A			5.4	%		N/A			5.4	%		N/A

The discount rates used to determine the present value of the Company's future U.S. pension obligations as of the measurement date use a methodology that equates the plans' projected benefit obligations to a present value, calculated using a yield curve. The yield curve was constructed from a portfolio of high quality, non-callable corporate debt securities with maturities ranging from six months to thirty years. The discount rate was determined by matching the pension plans' expected cash flows with spot rates developed from the yield curve. The discount rate used to determine the present value of the Company's future foreign pension obligations as of the measurement date is based upon the yield for zero coupon bonds plus a yield margin measured as the difference between euro denominated corporate bonds (AA or higher) in Europe and government bonds.

Plan assets in the U.S. defined benefit plans comprise 100 percent of the Company's world-wide benefit plan assets. Modine's U.S. pension plan weighted average asset allocations at the measurement dates of March 31, 2013 and 2012 by category, and the target allocations are summarized below:

	Target allocation						Plan assets
	2013			2012			2013			2012

Equity securities		55	%		55	%		57	%		56	%
Debt securities		38	%		38	%		37	%		37	%
Alternative assets		5	%		5	%		5	%		5	%
Cash		2	%		2	%		1	%		2	%
		100	%		100	%		100	%		100	%

Due to market conditions and other factors including timing of benefit payments, actual asset allocation may vary from the target allocation outlined above. The assets are periodically rebalanced to the target allocations. There were no shares of Modine common stock included in the plan assets at the end of fiscal 2013 and 2012.

Modine employs a total return investment approach, whereby a mix of equities and fixed-income investments are used to maximize the long-term return of plan assets while avoiding excessive risk. Pension plan guidelines have been established based upon an evaluation of market conditions, tolerance for risk and cash requirements for benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements and periodic asset/liability studies.

The expected rate of return on U.S. plan assets is based upon historical return experience and forward-looking return expectations for major asset class categories. For fiscal 2013, Modine assumed a rate of return of 8.0 percent for purposes of determining the U.S. pension plan expense. For fiscal year 2014 U.S. pension plan expense, Modine has assumed a rate of 8.0 percent, net of administrative expenses.

With respect to the postretirement plans, for measurement purposes, the assumed healthcare cost trend rates were as follows:

Years ended March 31	2013			2012

Healthcare costs trend rate assumed for next year (pre-65)		7.5	%		7.5	%
Healthcare costs trend rate assumed for next year (post-65)		7.5	%		7.5	%
Ultimate trend rate		5.0	%		5.0	%
Year the rate reaches the ultimate trend rate		2019			2017

Assumed healthcare cost trend rates affect the amounts reported for the postretirement plans. One percentage point change would have a less than $0.1 million effect on the total service and interest cost. While one percentage point increase or decrease would have a $0.2 million and ($0.2) million effect, respectively, on the postretirement benefit obligation.

The Company's funding policy for domestic qualified pension plans is to contribute annually, at a minimum, the amount necessary on an actuarial basis to provide for benefits in accordance with applicable laws and regulations. Modine anticipates that it will make contributions of $8.0 million to these plans during fiscal 2014.

Estimated pension benefit payments for the next ten fiscal years are as follows:

Years ended March 31
	Pension
2014	$	14.5
2015		15.1
2016		15.5
2017		16.2
2018		17.5
2019-2023		92.5