Note 8 - Employee Benefit Plans

12 Months Ended

Dec. 31, 2012

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 8: Employee Benefit Plans

Pensions and Other Post-retirement Plans

We sponsor defined benefit pension plans covering substantially all U.S. employees and we 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, 2012, and the funded status as of December 31, 2012 and December 31, 2011 (in thousands):

	Pension Benefits						Other Benefits
	2012			2011			2012			2011
Change in benefit obligation:
Benefit obligation at beginning of year	$	87,895		$	76,925		$	65		$	68
Service cost		3,974			3,877			—			—
Interest cost		4,069			4,114			3			3
Participants' contributions		29			—			—			—
Amendments		—			396			—			—
Actuarial loss		7,450			6,476			7			4
Benefits paid		(4,050	)		(3,893	)		(12	)		(10	)
Benefit obligation at end of year		99,367			87,895			63			65
Change in fair value of plan assets:
Fair value of plan assets at beginning of year		65,082			70,462			—			—
Actual return (loss) on plan assets		6,007			(1,818			—			—
Employer contributions		1,447			331			12			10
Participants' contributions		29			—			—			—
Benefits paid		(4,050	)		(3,893	)		(12	)		(10	)
Fair value of plan assets at end of year		68,515			65,082			—			—
Funded status at end of year	$	(30,852	)	$	(22,813	)	$	(63	)	$	(65	)

We also sponsor post-retirement term life insurance benefits for substantially all retirees who retire from active service. The accumulated post-retirement benefit obligation under all such plans totaled $1.9 million at December 31, 2012  and $1.6 million at December 31, 2011. We are indemnified by insurance carriers for all retiree term life coverage.

The following table provides the amounts recognized in the consolidated balance sheets as of December 31, 2012 and December 31, 2011 (in thousands):

	Pension Benefits						Other Benefits
	2012			2011			2012			2011
Current liabilities:
Accrued benefit liability	$	(322	)	$	(330	)	$	(3	)	$	(3	)
Other non- current liabilities:
Accrued benefit liability		(30,530	)		(22,484	)		(60	)		(62	)
Accumulated other comprehensive (income) loss		33,545			30,747			(305	)		(340	)
Net amount recognized	$	2,693		$	7,933		$	(368	)	$	(405	)

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

	Pension Benefits						Other Benefits
	2012			2011			2012			2011
Discount rate: net periodic pension cost		4.75	%		5.50	%		—			—
Discount rate: projected benefit obligation		4.00	%		4.75	%		4.00	%		4.75	%
Expected rate of return on plan assets		7.20	%		8.00	%		—			—
Rate of compensation increase		4.00	%		4.00	%		—			—

The above assumptions were calculated based on information as of December 31, 2012 and December 31, 2011, the measurement dates for the plans. The discount rate is  based on the yield curve for investment-grade corporate bonds as published by the U.S. Treasury Department. 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 7.2% is based on historical returns over the past ten years.

Net periodic pension cost for the plans consisted of the following in 2012, 2011, and 2010 (in thousands):

	Pension Benefits									Other Benefits
	2012			2011			2010			2012			2011			2010
Service cost	$	3,974		$	3,877		$	2,203		$	—		$	—		$	—
Interest cost		4,068			4,114			3,724			3			4			4
Expected return on plan assets		(4,581	)		(5,481	)		(5,041	)		—			—			—
Amortization of prior service cost		401			403			602			—			—			—
Amortization of net gain (loss) from earlier periods		2,826			880			867			(28	)		(31	)		(33	)
Net periodic pension cost	$	6,688		$	3,793		$	2,355		$	(25	)	$	(27	)	$	(29	)

The allocations of investments at December 31, 2012 and December 31, 2011, 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
	2012			2011			2012			2011
Cash		1	%		1	%		1	%		1	%
Large cap U.S. equities		11	%		13	%		9	%		12	%
Small cap U.S. equities		4	%		4	%		5	%		4	%
Non-U.S. equities		10	%		9	%		10	%		9	%
Fixed income		33	%		37	%		34	%		38	%
Real estate		18	%		13	%		17	%		13	%
Absolute return hedge funds		13	%		13	%		14	%		13	%
Real return		10	%		10	%		10	%		10	%
Total		100	%		100	%		100	%		100	%

The "Precious metals and other" asset category in the table above includes our common stock in the amounts of $2.9 million and $2.6 million at December 31, 2012 and December 31, 2011. These investments represent approximately  4% of the total combined assets of these plans at both December 31, 2012 and December 31, 2011.

Our statement of investment policy delineates the responsibilities of the board, the management investment committee, the investment manager(s), and investment adviser/consultant, and provides guidelines on  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 investments to be supervised by qualified investment managers. 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 aspires 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 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, 2012 (in thousands):

	Hecla								Lucky Friday
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Interest-bearing cash	$	683	$	—	$	—	$	683	$	198	$	—	$	—	$	198
Common stock		2,309		—		—		2,309		588		—		—		588
Real estate		—		—		9,611		9,611		—		—		2,513		2,513
Collective investment funds		—		10,095		7,251		17,346		—		2,469		1,978		4,447
Mutual funds		24,183		—		—		24,183		6,637		—		—		6,637
Total fair value	$	27,175	$	10,095	$	16,862	$	54,132	$	7,423	$	2,469	$	4,491	$	14,383

The following is a roll-forward of assets in Level 3 of the fair value hierarchy (in thousands):

	Hecla		Lucky Friday
Beginning balance at December 31, 2011	$	13,300	$	3,566
Net unrealized gains on assets held at the reporting date		838		187
Purchases		2,724		738
Ending balance at December 31, 2012	$	16,862	$	4,491

Of the $21.4 million in plan assets classified as Level 3, $12.1 million was invested in real estate, while $8.2 million was invested in collective investment funds.

The fair values by asset category in each plan, along with their hierarchy levels, were 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
Real estate		—		—		6,497		6,497		—		—		1,709		1,709
Common collective funds		—		12,641		6,803		19,444		—		3,310		1,857		5,167
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 roll-forward 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

Of the $16.9 million reported as level 3 assets above, $8.2 million was comprised of real estate funds, while the remainder was invested in common collective funds.

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
2013	$	4,769	$	3
2014		4,951		8
2015		5,083		6
2016		5,320		8
2017		5,601		7
Years 2018-2022		34,011		26

We expect to contribute approximately $1.0 million to our funded pension plans and $0.3 million related to our unfunded supplemental executive retirement plan during 2013.

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, 2012						December 31, 2011
	ABO Exceeds Plan Assets			Plan Assets  Exceed ABO			ABO Exceeds  Plan Assets			Plan Assets  Exceed ABO
Projected benefit obligation		$	99,367		$	—		$	87,895		$	—
Accumulated benefit obligation			92,590			—			81,018			—
Fair value of plan assets			68,515			—			65,082			—

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, 2012, that have not yet been recognized as components of net periodic benefit cost (in thousands):

	Pension Benefits		Other Benefits
Unamortized net (gain)/loss	$	31,649	$	305
Unamortized prior service cost		1,896		—

The amounts in "Accumulated other comprehensive loss, net" expected to be recognized as components of net periodic benefit cost during 2013 are (in thousands):

	Pension Benefits		Other Benefits
Amortization of net (gain)/loss	$	3,103	$	25
Amortization of prior service cost		390		—

We do not expect to have any of the plans’ assets returned during 2013.

 Capital Accumulation Plans

Our employees’ Capital Accumulation (401(k)) 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 (subject to statutory limits). We make a matching contribution of 100% of an employee’s contribution up to 6% of the employee’s earnings. Our matching contributions were approximately $2.5 million in 2012, $2.2 million in 2011, and $2.1 million in 2010.

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 (subject to statutory limits). We make a matching contribution of 35% of an employee’s contribution up to 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 $407,000 in 2012, $246,000 in 2011, and $229,000 in 2010.