Note 8. Employee Benefit Plans

12 Months Ended

Dec. 31, 2011

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 8: Employee Benefit Plans

Pensions and Post-retirement Plans

We sponsor defined benefit pension plans covering substantially all U.S. employees and provide certain post-retirement benefits for qualifying retired employees. The following tables provide a reconciliation of the changes in the plans’ benefit obligations and fair value of assets over the two-year period ended December 31, 2011, and the funded status as of December 31, 2011 and 2010 (in thousands):

	Pension Benefits						Other Benefits
	2011			2010			2011			2010
Change in benefit obligation:
Benefit obligation at beginning of year	$	76,925		$	66,813		$	1,430		$	1,295
Service cost		3,877			2,203			54			46
Interest cost		4,114			3,724			77			73
Amendments		396			—			—			—
Actuarial loss		6,476			7,907			127			40
Benefits paid		(3,893	)		(3,722	)		(17	)		(24	)
Benefit obligation at end of year		87,895			76,925			1,671			1,430
Change in fair value of plan assets:
Fair value of plan assets at beginning of year		70,462			64,889			—			—
Actual return (loss) on plan assets		(1,818	)		8,976			—			—
Employer contributions		331			319			17			24
Benefits paid		(3,893	)		(3,722	)		(17	)		(24	)
Fair value of plan assets at end of year		65,082			70,462			—			—
Funded status at end of year	$	(22,813	)	$	(6,463	)	$	(1,671	)	$	(1,430	)

The following table provides the amounts recognized in the consolidated balance sheets as of December 31, 2011 and 2010 (in thousands):

	Pension Benefits						Other Benefits
	2011			2010			2011			2010
Other non-current assets:
Prepaid benefit costs	$	—		$	1,438		$	—		$	—
Current liabilities:
Accrued benefit liability		(330	)		(323	)		(52	)		(54	)
Other non- current liabilities:
Accrued benefit liability		(22,484	)		(7,577	)		(1,620	)		(1,375	)
Accumulated other comprehensive (income) loss		30,747			17,859			(269	)		(395	)
Net amount recognized	$	7,933		$	11,397		$	(1,941	)	$	(1,824	)

The benefit obligation and prepaid benefit costs were calculated by applying the following weighted average assumptions:

	Pension Benefits						Other Benefits
	2011			2010			2011			2010
Discount rate: net periodic pension cost		5.50	%		5.75	%		—	%		—	%
Discount rate: projected benefit obligation		4.75	%		5.50	%		4.75	%		5.50	%
Expected rate of return on plan assets		8.00	%		8.00	%		—	%		—	%
Rate of compensation increase		4.00	%		4.00	%		—	%		—	%

The above assumptions were calculated based on information as of December 31, 2011and 2010, the measurement dates for the plans. The discount rate is generally based on the rates of return available as of the measurement date from high-quality fixed income investments, which in past years we have used Moody’s AA bond index as a guide to setting the discount rate. The expected rate of return on plan assets is based upon consideration of the plan’s current asset mix, historical long-term return rates and the plan’s historical performance. Our current expected rate on plan assets of 8.0% is based on historical returns over the past ten years.

Net periodic pension cost for the plans consisted of the following in 2011, 2010 and 2009 (in thousands):

	Pension Benefits									Other Benefits
	2011			2010			2009			2011			2010			2009
Service cost	$	3,877		$	2,203		$	2,269		$	54		$	46		$	15
Interest cost		4,114			3,724			3,661			77			73			55
Expected return on plan assets		(5,481	)		(5,041	)		(4,673	)		—			—			—
Amortization of prior service cost		403			602			602			45			53			(3	)
Amortization of net gain (loss) from earlier periods		880			867			1,232			(43	)		(46	)		(43	)
Net periodic pension cost	$	3,793		$	2,355		$	3,091		$	133		$	126		$	24

The allocations of investments at December 31, 2011 and 2010, the measurement dates of the plan, by asset category in the Hecla Mining Company Retirement Plan and the Lucky Friday Pension Plan are as follows:

	Hecla						Lucky Friday
	2011			2010			2011			2010
Interest-bearing cash		1	%		3	%		1	%		3	%
Equity securities		35	%		34	%		35	%		34	%
Debt securities		43	%		39	%		44	%		39	%
Real estate		13	%		10	%		12	%		10	%
Precious metals and other		8	%		14	%		8	%		14	%
Total		100	%		100	%		100	%		100	%

The "Precious metals and other" asset category in the table above includes our common stock in the amounts of $2.6 million and $5.2 million at December 31, 2011 and 2010, the measurement dates of the plan, respectively. These investments represent approximately 4% and 7% of the total combined assets of these plans at December 31, 2011 and 2010, respectively.

Our statement of investment policy and objectives lays out the responsibilities of the board, the management investment committee, the investment manager(s), and investment adviser/consultant, and provides guidelines on investment and investment management. Investment objectives are established for each of the asset categories included in the pension plans with comparisons of performance against appropriate benchmarks. Our policy calls for each portion of the investments to be supervised by a qualified investment manager. The investment managers are monitored on an ongoing basis by our outside consultant, with formal reporting to us and the consultant performed each quarter. The policy sets forth the following allocation of assets:

	Target			Minimum			Maximum
Large cap U.S. equities		10	%		7	%		13	%
Small cap U.S. equities		5	%		4	%		6	%
Non-U.S. equities		10	%		8	%		12	%
Fixed income		35	%		29	%		43	%
Real estate		15	%		12	%		18	%
Absolute return hedge funds		15	%		12	%		18	%
Real return		10	%		8	%		12	%

Our statement of investment policy and objectives specifies over the long term to achieve the assumed long term rate of return on plan assets established by the plan’s actuary plus one percent.

Accounting guidance has established a hierarchy of assets that are measured at fair value on a recurring basis. The three levels included in the hierarchy are:

Level 1: quoted prices in active markets for identical assets or liabilities

Level 2: significant other observable inputs

Level 3: significant unobservable inputs

The fair values by asset category in each plan, along with their hierarchy levels, are as follows as of December 31, 2011 (in thousands):

	Hecla								Lucky Friday
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Interest-bearing cash	$	609	$	—	$	—	$	609	$	166	$	—	$	—	$	166
Common stock		2,071		—		—		2,071		527		—		—		527
Closely held instruments		—		2,777		13,300		16,077		—		738		3,566		4,304
Partnership/joint venture interests		—		1,836		—		1,836		—		523		—		523
Common collective funds		—		8,028		—		8,028		—		2,049		—		2,049
Mutual funds		22,667		—		—		22,667		6,225		—		—		6,225
Total fair value	$	25,347	$	12,641	$	13,300	$	51,288	$	6,918	$	3,310	$	3,566	$	13,794

The following is a reconciliation of assets in level 3 of the fair value hierarchy (in thousands):

	Hecla		Lucky Friday
Beginning balance at December 31, 2010	$	12,508	$	3,356
Net unrealized gains on assets held at the reporting date		391		104
Purchases		401		106
Ending balance at December 31, 2011	$	13,300	$	3,566

The fair values by asset category in each plan, along with their hierarchy levels, are as follows as of December 31, 2010 (in thousands):

	Hecla								Lucky Friday
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Interest-bearing cash	$	1,495	$	—	$	—	$	1,495	$	466	$	—	$	—	$	466
Common stock		4,460		—		—		4,460		1,135		—		—		1,135
Closely held instruments		—		3,660		12,508		16,168		—		994		3,356		4,350
Partnership/joint venture interests		—		3,360		—		3,360		—		935		—		935
Common collective funds		—		4,305		—		4,305		—		1,109		—		1,109
Mutual funds		25,882		—		—		25,882		6,797		—		—		6,797
Total fair value	$	31,837	$	11,325	$	12,508	$	55,670	$	8,398	$	3,038	$	3,356	$	14,792

The following is a reconciliation of assets in level 3 of the fair value hierarchy (in thousands):

	Hecla		Lucky Friday
Beginning balance at December 31, 2009	$	11,027	$	2,947
Net unrealized gains on assets held at the reporting date		1,237		330
Purchases		244		79
Ending balance at December 31, 2010	$	12,508	$	3,356

Generally, investments are valued based on information provided by fund managers to our trustee as reviewed by management and its investment advisers. Mutual funds and equities are valued based on available exchange data. Commingled equity funds consist of publicly-traded investments. Fair value for real estate and private equity partnerships is primarily based on valuation methodologies that include third-party appraisals, comparable transactions, and discounted cash flow valuation models.

Future benefit payments, which reflect expected future service as appropriate, are estimates of what will be paid in the following years (in thousands):

Year Ending December 31,	Pension Plans		Other Post- Employment Benefit Plans
2012	$	4,474	$	52
2013		4,748		57
2014		4,905		63
2015		5,041		65
2016		5,343		71
Years 2017-2021		32,141		418

We expect to contribute approximately $1.1 million to the Hecla pension plan and $0.3 million related to our unfunded supplemental executive retirement plan during 2012.  We do not expect to contribute to the Lucky Friday pension plan during 2012.

The following table describes plans for which accumulated benefit obligations ("ABO") were in excess of plan assets, and for which plan assets exceeded ABO (in thousands).

	December 31, 2011				December 31, 2010
	ABO Exceeds Plan Assets		Plan Assets Exceed ABO		ABO Exceeds Plan Assets		Plan Assets Exceed ABO
Projected benefit obligation	$	87,895	$	—	$	22,655	$	54,269
Accumulated benefit obligation		81,018		—		20,578		48,857
Fair value of plan assets		65,082		—		14,755		55,707

For the pension plans and other benefit plans, the following amounts are included in "Accumulated other comprehensive loss, net" on our balance sheet as of December 31, 2011, that have not yet been recognized as components of net periodic benefit cost (in thousands):

	Pension Benefits		Other Benefits
Unamortized net (gain)/loss	$	28,450	$	(488	)
Unamortized prior service cost		2,297		219

The amounts in "Accumulated other comprehensive loss, net" expected to be recognized as components of net periodic benefit cost during 2012 are (in thousands):

	Pension Benefits		Other Benefits
Amortization of net (gain)/loss	$	2,826	$	(30	)
Amortization of prior service cost		401		44

During 2012, we do not expect to have any of the plans’ assets returned.

Capital Accumulation Plans

Our employees’ Capital Accumulation Plan is available to all U.S. salaried and certain hourly employees and applies immediately upon employment. Employees may contribute from 1% to 50% of their annual compensation to the plan. We make a matching contribution of 100% of an employee’s contribution up to, but not exceeding, 6% of the employee’s earnings. Our matching contributions were approximately $2.2 million in 2011, $2.1 million in 2010, and $2.0 million in 2009.

We also maintain an employees’ 401(k) plan, which is available to all hourly employees at the Lucky Friday unit after completion of six months of service. Employees may contribute from 2% to 50% of their compensation to the plan. We make a matching contribution of 35% of an employee’s contribution up to, but not exceeding, 5% of the employee’s earnings. In May 2010, union contract negotiations resulted in a change to the matching contribution of 35%.  Starting after May 10, 2010 the matching contribution is 55% of an employee’s contribution up to, but not exceeding, 5% of the employee’s earnings.  Our contributions were approximately $246,000 in 2011, $229,000 in 2010, and $147,000 in 2009.