Pension And Postretirement Benefits

6 Months Ended

Jun. 30, 2011

Pension And Postretirement Benefits

Pension And Postretirement Benefits

NOTE 5. PENSION AND POSTRETIREMENT BENEFITS

Substantially all of our employees are covered by one of various noncontributory pension and death benefit plans. We also provide certain medical, dental and life insurance benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs as active employees earn these benefits. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to meet the plans' obligations to provide benefits to employees upon their retirement. No significant cash contributions are required under ERISA regulations during 2011.

The following details pension and postretirement benefit costs included in operating expenses (in cost of sales and selling, general and administrative expenses) in the accompanying consolidated statements of income. In the following table, gains are denoted with parentheses. A portion of these expenses is capitalized as part of the benefit load on internal construction and capital expenditures, providing a small reduction in the net expense recorded.

		$0000296			$0000296			$0000296			$0000296
	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010
Pension cost:
Service cost – benefits earned during the period	$	296		$	269		$	593		$	538
Interest cost on projected benefit obligation		739			788			1,479			1,575
Expected return on assets		(922	)		(944	)		(1,844	)		(1,887	)
Amortization of prior service benefit		(4	)		(4	)		(8	)		(8	)
Net pension cost	$	109		$	109		$	220		$	218
Postretirement cost:
Service cost – benefits earned during the period	$	91		$	87		$	181		$	174
Interest cost on accumulated postretirement benefit obligation		512			566			1,025			1,129
Expected return on assets		(260	)		(238	)		(520	)		(473	)
Amortization of prior service benefit		(173	)		(156	)		(347	)		(312	)
Net postretirement cost	$	170		$	259		$	339		$	518
Combined net pension and postretirement cost	$	279		$	368		$	559		$	736

Our combined net pension and postretirement cost decreased $89 in the second quarter and $177 for the first six months of 2011. The decrease was primarily related to lower interest costs due to our reduction in the discount rate from 6.50% in 2010 to 5.80% in 2011.

In January 2011, we announced a change in our method of recognizing actuarial gains and losses for pension and other postretirement benefits for all benefit plans. Historically, we recognized the actuarial gains and losses as a component of "Stockholder's Equity" on our consolidated balance sheets on an annual basis and amortized them into our operating results over the average future service period of the active employees of these plans, to the extent such gains and losses were outside of a corridor. We have elected to immediately recognize actuarial gains and losses in our operating results, noting that it is generally preferable to accelerate the recognition of deferred gains and losses into income rather than to delay such recognition. Generally, these gains and losses are measured annually as of December 31 and accordingly will be recorded during the fourth quarter.

 We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental retirement pension benefits cost, which is not included in the table above, was $36 in the second quarter of 2011, of which $32 was interest cost and $71 for the first six months, of which $63 was interest cost. In 2010, net supplemental retirement pension benefits cost was $38 in the second quarter, of which $34 was interest cost and $76 for the first six months, of which $68 was interest cost.