13. Pension Benefits

As part of the acquisition of Former SFEC, we assumed the obligations related to the SFTP Defined Benefit Plan (the "SFTP Benefit Plan"). The SFTP Benefit Plan covered substantially all of SFTP's employees. During 1999, the SFTP Benefit Plan was amended to cover substantially all of our domestic full-time employees. During 2004, the SFTP Benefit Plan was further amended to cover certain seasonal workers, retroactive to January 1, 2003. The SFTP Benefit Plan permits normal retirement at age 65, with early retirement at ages 55 through 64 upon attainment of ten years of credited service. The early retirement benefit is reduced for benefits commencing before age 62. Plan benefits are calculated according to a benefit formula based on age, average compensation over the highest consecutive five-year period during the employee's last ten years of employment and years of service. The SFTP Benefit Plan assets are invested primarily in equity and fixed income securities, as well as alternative investments, such as hedge funds. The SFTP Benefit Plan does not have significant liabilities other than benefit obligations. Under our funding policy, contributions to the SFTP Benefit Plan are determined using the projected unit credit cost method. This funding policy meets the requirements under the Employee Retirement Income Security Act of 1974.

We froze our pension plan effective March 31, 2006, pursuant to which most participants no longer earned future pension benefits. Effective February 16, 2009, the remaining participants in the pension plan no longer earned future benefits.

As of the Effective Date, the pension liability was adjusted by $1.6 million to its fair value as described in Note 1(b).

Obligations and Funded Status

The following table sets forth the change in our benefit plan obligation and fair value of plan assets (in thousands):

	Successor									Predecessor

	Year Ended December 31, 2012			Year Ended December 31, 2011			Eight Months Ended December 31, 2010			Four Months Ended April 30, 2010



Change in benefit obligation:
Beginning balance	$	218,806		$	183,048		$	170,944		$	167,391
Interest cost		9,226			9,741			6,481			3,225
Actuarial loss		14,616			32,385			9,731			2,326
Benefits paid		(7,146	)		(6,368	)		(4,108	)		(1,998	)

Benefit obligation at end of period	$	235,502		$	218,806		$	183,048		$	170,944

Change in fair value of plan assets:
Beginning balance	$	146,630		$	143,818		$	137,374		$	131,110
Actual return on assets		19,648			6,480			9,747			7,182
Employer contributions		6,075			3,750			1,080			1,080
Administrative fees		(1,159	)		(1,050	)		(275	)		—
Benefits paid		(7,146	)		(6,368	)		(4,108	)		(1,998	)

Fair value of plan assets at end of period	$	164,048		$	146,630		$	143,818		$	137,374

Employer contributions and benefits paid in the above table include only those amounts contributed directly to, or paid directly from, plan assets. The accumulated benefit obligation for the SFTP Benefit Plan at the end of 2012 and 2011 was $235.5 million and $218.8 million, respectively. We use December 31 as our measurement date.

At December 31, 2012 and 2011, the SFTP Benefit Plan's projected benefit obligation exceeded the fair value of SFTP Benefit Plan assets resulting in the SFTP Benefit Plan being underfunded, which we recognized in other long-term liabilities in our consolidated balance sheets. The following is a reconciliation of the SFTP Benefit Plan funded status to the amounts recognized in our consolidated balance sheets at December 31, 2012 and 2011 (in thousands):

	December 31,

	2012			2011
Fair value of plan assets	$	164,048		$	146,630
Benefit obligation		(235,502	)		(218,806	)

Funded status (deficit)	$	(71,454	)	$	(72,176	)

Other long-term liabilities	$	(71,454	)	$	(72,176	)

The weighted average assumptions used to determine benefit obligations are as follows:

	December 31,

	2012			2011
Discount rate		3.850	%		4.300	%
Rate of compensation increase		N/A			N/A

Net periodic benefit cost and other comprehensive income (loss)

The following table sets forth the components of net periodic benefit cost and other comprehensive income (loss) (in thousands):

	Successor									Predecessor

	Year Ended December 31, 2012			Year Ended December 31, 2011			Eight Months Ended December 31, 2010			Four Months Ended April 30, 2010



Net periodic benefit cost:
Service cost	$	1,150		$	1,050		$	275		$	—
Interest cost		9,226			9,741			6,481			3,225
Expected return on plan assets		(10,982	)		(10,662	)		(6,747	)		(3,226	)
Amortization of net actuarial loss		666			—			—			273

Total net periodic benefit cost	$	60		$	129		$	9		$	272

Other comprehensive (loss) income:
Current year actuarial (loss) gain	$	(5,293	)	$	(36,566	)	$	(6,731	)	$	1,630
Amortization of actuarial gain		—			—			—			42,809
Effect of curtailment loss		—			—			—			—
Effects of curtailment on prior service costs		—			—			—			—

Total other comprehensive (loss) income	$	(5,293	)	$	(36,566	)	$	(6,731	)	$	44,439

On the Effective Date, the $44.4 million accumulated other comprehensive loss balance was eliminated during the application of fresh start accounting as discussed in Note 1(b). As of December 31, 2012 and 2011, we have recorded $29.4 million (net of $19.2 million of tax) and $43.3 million in accumulated other comprehensive loss in our consolidated balance sheets, respectively.

The estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2013 are as follows (in thousands):


Actuarial loss	$	804
Prior service cost		—

Total	$	804

The weighted average assumptions used to determine net costs are as follows:



Discount rate	4.300	%	5.400	%	5.800	%
Rate of compensation increase	N/A		N/A		N/A
Expected return on plan assets	7.500	%	7.500	%	7.500	%

The discount rate assumption was developed based on high-quality corporate bond yields as of the measurement date. High quality corporate bond yield indices on over 500 Aa high grade bonds are considered when selecting the discount rate.

The return on plan assets assumption was developed based on consideration of historical market returns, current market conditions, and the SFTP Benefit Plan's past experience. Estimates of future market returns by asset category are reflective of actual long-term historical returns. Overall, it was projected that the SFTP Benefit Plan could achieve a 7.50% net return over time based on a consistent application of the existing asset allocation strategy and a continuation of the SFTP Benefit Plan's policy of monitoring manager performance.

Description of Investment Committee and Strategy

The Committee is responsible for managing the investment of SFTP Benefit Plan assets and ensuring that the SFTP Benefit Plan's investment program is in compliance with all provisions of ERISA, other relevant legislation, related SFTP Benefit Plan documents and the Statement of Investment Policy. The Committee has retained several mutual funds, commingled funds and/or investment managers to manage SFTP Benefit Plan assets and implement the investment process. The investment managers, in implementing their investment processes, have the authority and responsibility to select appropriate investments in the asset classes specified by the terms of the applicable prospectus or other investment manager agreements with the SFTP Benefit Plan.

The primary financial objective of the SFTP Benefit Plan is to secure participant retirement benefits. As such, the key objective in the SFTP Benefit Plan's financial management is to promote stability and, to the extent appropriate, growth in funded status. Other related and supporting financial objectives are also considered in conjunction with a comprehensive review of current and projected SFTP Benefit Plan financial requirements.

The assets of the fund are invested to achieve the greatest reward for the SFTP Benefit Plan consistent with a prudent level of risk. The asset return objective is to achieve, as a minimum over time, the passively managed return earned by market index funds, weighted in the proportions outlined by the asset class exposures in the SFTP Benefit Plan's long-term target asset allocation.

The SFTP Benefit Plan's portfolio may be allocated across several hedge fund styles and strategies.

Plan Assets

The target allocations for plan assets are 25% domestic equity securities, 37% fixed income securities, 13% international equity securities, and 25% alternative investments. Equity securities primarily include investments in large-cap companies located in the United States and abroad. Fixed income securities include bonds and debentures issued by domestic and foreign private and governmental issuers. Alternative investments are comprised of hedge fund of funds.

The fair value of plan assets was $164.0 million and $146.6 million at December 31, 2012 and 2011, respectively. The expected long term rate of return on these plan assets was 7.50% in 2012, 2011 and 2010. The following table presents the categories of our plan assets and the related levels of inputs in the fair value hierarchy, as defined in Note 3(f), used to determine the fair value (in thousands):

	Fair Value Measurements at December 31, 2012

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category:
Equity Securities
Large-Cap Disciplined Equity(a)	$	37,942	$	37,942	$	—	$	—
Small/Mid-Cap Equity(a)		9,212		9,212		—		—
International Equity(b)		21,618		21,618		—		—
Fixed Income
Long Duration Fixed Income(c)		46,084		46,084		—		—
Core Fixed Income(c)		3,081		3,081		—		—
High Yield(d)		6,145		6,145		—		—
Emerging Markets Debt(e)		4,638		4,638		—		—
Alternatives
Hedge Fund of Funds(f)		22,618		—		—		22,618
Cash(g)		4,510		4,510		—		—
Other Investments(h)		8,200		8,200		—		—

Total	$	164,048	$	141,430	$	—	$	22,618

	Fair Value Measurements at December 31, 2011

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category:
Equity Securities
Large-Cap Disciplined Equity(a)	$	39,335	$	39,335	$	—	$	—
Small/Mid-Cap Equity(a)		8,869		8,869		—		—
International Equity(b)		17,915		17,915		—		—
Fixed Income
Long Duration Fixed Income(c)		45,961		45,961		—		—
High Yield(d)		8,665		8,665		—		—
Emerging Markets Debt(e)		4,289		4,289		—		—
Alternatives
Hedge Fund of Funds(f)		21,596		—		—		21,596

Total	$	146,630	$	125,034	$	—	$	21,596

(a): These categories are comprised of mutual funds actively traded on the registered exchanges or over the counter markets. The mutual funds are invested in equity securities of U.S. issuers.
(b): This category consists of mutual funds invested primarily in equity securities (common stocks, securities that are convertible into common stocks, preferred stocks, warrants and rights to subscribe to common stocks) of non-U.S. issuers purchased in foreign markets. The mutual funds are actively traded on U.S. or foreign registered exchanges, or the over-the-counter markets.
(c): The assets are comprised of mutual funds which are actively traded on the registered exchanges. The mutual funds are invested primarily in high quality government and corporate fixed income securities, as well as synthetic instruments or derivatives having economic characteristics similar to fixed income securities.
(d): The high yield portion of the fixed income portfolio consists of mutual funds invested primarily in fixed income securities that are rated below investment grade. The mutual funds are actively traded on the registered exchanges.
(e): The emerging debt portion of the portfolio consist of mutual funds primarily invested in the debt securities of government, government-related and corporate issuers in emerging market countries and of entities organized to restructure outstanding debt of such issuers. The mutual funds are actively traded on the registered exchanges.
(f): Hedge Fund of Funds consists primarily of investments in underlying hedge funds. Management of the hedge funds has the ability to choose and combine hedge funds in order to target the fund's return objectives. Individual hedge funds hold their assets primarily in investment funds and engage in investment strategies that include temporary or dedicated directional market exposures.
(g): Cash held at year end was to be used to purchase equity based securities in January 2013.

(h): This category is comprised of an investment in a common collective trust with the underlying assets invested in asset-backed securities, money market funds, corporate bonds and bank notes. The underlying assets are actively traded on the registered exchanges.

The following table represents a rollforward of the December 31, 2012 and 2011 balances of our plan assets that are valued using Level 3 inputs (in thousands):

	Hedge Fund of Funds

Beginning balance at December 31, 2010	$	20,700
Actual return on plan assets:
Relating to assets still held at the reporting date		(143	)
Relating to assets sold during the period		39
Purchases, sales and settlements, net		1,000

Beginning balance at December 31, 2011	$	21,596
Actual return on plan assets:
Relating to assets still held at the reporting date		1,022

Ending balance at December 31, 2012	$	22,618

Expected Cash Flows

The following table summarizes expected employer contributions and future benefit payments (in thousands):


Employer Contributions for Fiscal Year 2012
2013 (expected) to plan trusts	$	6,000

Expected benefit payments:
2013	$	8,174
2014		8,575
2015		9,035
2016		9,460
2017		9,863
2018 - 2022		57,293

	$	102,400