11. EMPLOYEE BENEFIT PLANS

As of October 31, 2012, the Company had the following defined benefit and other post-retirement benefit plans, all of which have been previously amended to preclude new participants:

Supplemental Executive Retirement Plan. The Company has unfunded retirement agreements for certain current and former senior executives. The retirement agreements provide for monthly benefits for ten years commencing at the later of the respective retirement dates of those executives or age 65. The benefits are accrued over the vesting period. Effective December 31, 2002, this plan was amended to preclude new participants.

Service Award Benefit Plan. The Company has an unfunded service award benefit plan that meets the definition of a “severance pay plan” as defined by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and covers certain qualified employees. The plan provides participants, upon termination, with a guaranteed seven days pay for each year of employment subsequent to November 1, 1989. Effective January 1, 2002, no new participants were permitted under this plan. The Company will continue to incur interest costs related to this plan as the value of the previously earned benefits continues to increase.

OneSource Employees’ Retirement Pension Plan (“OneSource Pension Plan”). On November 14, 2007, the Company acquired OneSource, which sponsored a funded, qualified employee retirement plan. The plan was amended to preclude participation and benefit accruals several years prior to the acquisition.

Death Benefit Plan. The Company’s unfunded Death Benefit Plan covers certain qualified employees upon retirement on or after the employee’s 62^nd birthday. This plan provides 50% of the death benefit that the employee was entitled to prior to retirement, subject to a maximum of $150,000. Coverage commencing upon retirement or 62^ndbirthday continues until death for retired employees hired before September 2, 1980. On March 1, 2003, the post-retirement death benefit for any active employees hired after September 1, 1980 was eliminated. Active employees hired before September 1, 1980 who retire on or after their 62^nd birthday will continue to be covered between retirement and death. For certain plan participants who retired before March 1, 2003, the post-retirement death benefit continues until the retired employee’s 70^th birthday. An exemption to the “age 62” retirement rule has been made for certain employees who were terminated as a result of the Company’s restructuring to a corporate shared service center.

OneSource Post-Retirement Medical and Life Benefit Plan. OneSource sponsored a post-retirement benefit plan that provides medical and life insurance benefits to certain OneSource retirees. Since the date of acquisition, new participants have been precluded from participation.

Benefit Obligation and Net Obligation Recognized in Financial Statements

The significant components of the above mentioned plans as of and for the years ended October 31, 2012 and 2011 are summarized as follows:


	Defined Benefit Plans at October 31,						Post-Retirement Benefit Plan at October 31,
(in thousands)	2012			2011			2012			2011
Change in benefit obligation
Benefit obligation at beginning of year	$	12,075		$	12,018		$	5,595		$	5,297
Service cost		48			46			12			13
Interest cost		495			569			246			256
Actuarial loss		1,233			944			322			329
Benefits and expenses paid		(1,137	)		(1,502	)		(339	)		(300	)

Benefit obligation at end of year	$	12,714		$	12,075		$	5,836		$	5,595

Change in Plan Assets*
Fair value of plan assets at beginning of year	$	5,917		$	5,589		$	—		$	—
Actual return on plan assets		384			176			—			—
Employer contributions		1,490			1,654			339			300
Benefits and expenses paid		(1,137	)		(1,502	)		(339	)		(300	)

Fair value of plan assets at end of year	$	6,654		$	5,917		$	—		$	—

Unfunded status at end of year	$	(6,060	)	$	(6,158	)	$	(5,836	)	$	(5,595	)

Current liabilities	$	(1,288	)	$	(1,001	)	$	(250	)	$	(301	)
Non-current liabilities		(4,772	)		(5,157	)		(5,586	)		(5,294	)

Net obligation	$	(6,060	)	$	(6,158	)	$	(5,836	)	$	(5,595	)

Total affecting retained earnings	$	(2,535	)	$	(3,765	)	$	(5,232	)	$	(5,315	)
Amount recognized in accumulated other comprehensive income		(3,525	)		(2,393	)		(604	)		(280	)

Net obligation	$	(6,060	)	$	(6,158	)	$	(5,836	)	$	(5,595	)

*	Amounts relate to the OneSource Pension Plan which is the only Company funded defined benefit pension plan.

Components of Net Periodic Benefit Cost Recognized in the Accompanying Consolidated Statements of Income

The components of net periodic benefit cost of the defined benefit and other post-retirement benefit plans for the years ended October 31, 2012, 2011 and 2010 were as follows:


(in thousands)	2012			2011			2010
Defined Benefit Plans
Service cost	$	48		$	46		$	44
Interest		495			569			592
Expected return on assets		(486	)		(373	)		(399	)
Amortization of actuarial loss		97			114			66
Settlement loss recognized		107			126			91

Net expense	$	261		$	482		$	394

Post-Retirement Benefit Plans
Service cost	$	12		$	13		$	15
Interest		246			256			281

Net expense	$	258		$	269		$	296

In the year ending October 31, 2013, the Company expects to recognize, on a pre-tax basis, approximately $0.1 million of net actuarial losses as a component of net periodic benefit cost.

Assumptions

The weighted average assumptions used to determine benefit obligations and net periodic benefit cost for the years ended October 31, 2012, 2011 and 2010 were as follows:

Defined Benefit Plans

Post-Retirement Benefit Plan

Assumptions to measure

net periodic cost

2012

2011

2010

2012

2011

2010

Discount rate

4.12% – 4.51%

4.50% – 4.98%

5.50%

4.04% – 4.56%

4.31% – 5.02%

5.50%

Rate of health care cost increase

N/A*

4.50% – 7.80%

4.50% – 8.00%

5.50%

Rate of compensation increase

3.50%

Rate of return on plan assets

6.00%

8.00%

N/A*

Assumptions to measure
obligation at year end

Discount rate

2.84% – 3.50%

4.12% – 4.51%

4.50% – 4.98%

3.15% – 3.58%

4.04% – 4.56%

4.31% – 5.02%

*	Not Applicable

The discount rate is used for determining future net periodic benefit cost. The Company’s discount rates were determined, as of the October 31, 2012 measurement date, using the individual cash flows of each plan. In determining the long-term rate of return for a plan, the Company considers the nature of the plan’s investments, historical rates of return, and an expectation for the plan’s investment strategies. All defined benefit and post-retirement plans have been amended to preclude new participants. The Company believes changes in assumptions would not have a material impact on the Company’s financial position and operating performance. The Company expects to fund payments required under the plans with cash flows from operating activities when due in accordance with the plans.

Expected Future Benefit Payments

The expected future benefit payments were calculated using the same assumptions used to measure the Company’s benefit obligation as of October 31, 2012. This expectation is based upon expected future service:


(in thousands)	Defined Benefit Plans		Post-Retirement Benefit Plan
2013	$	1,288	$	250
2014		846		265
2015		906		279
2016		754		293
2017		709		307
2018 through 2022	$	3,930	$	1,705

OneSource Pension Plan

The OneSource Pension Plan is a funded benefit plan that requires an estimate of the long-term rate of return on plan assets to measure benefit obligations. The expected long-term rate of return on plan assets represents the rate of earnings expected in the funds invested to provide for anticipated benefit payments. With input from the Company’s investment advisors and actuaries, the Company has analyzed the expected rates of return on assets and determined that an estimated long-term rate of return of 6.0% is reasonable based on: (1) the current and expected asset allocations; (2) the plan’s historical investment performance; and (3) best estimates for future investment performance. The obligation attributable to medical benefits is small, as is the future obligation that varies with changes in compensation. Accordingly, changes in the health care trend assumption rate and the compensation increase assumption have an immaterial impact on measuring the obligation.

The investment objectives for the assets associated with the OneSource Pension Plan are to maintain acceptable levels of risk through the diversification of assets among asset classes and to optimize long-term returns. The Company is responsible for selecting investment managers, setting asset allocation targets and monitoring asset allocations and investment performance. The Company’s external investment professionals have the authority to manage assets within pre-established asset allocation ranges set by the Company. The OneSource Pension Plan is the Company’s only funded defined benefit plan.

The target allocation ranges and asset allocations for the year ended October 31, 2012 were:


	Target Allocation		Percentage of Plan Assets
Asset Category	2012		2012
U.S. Equity		43%-63%		55	%
Fixed Income		27%-47%		37	%
International Equity		0% - 20%		8	%

The following table presents the fair value hierarchy for the assets associated with the OneSource Pension Plan measured at fair value as of October 31, 2012 and 2011. These assets and liabilities are measured as Level 1:


	October 31,
(in thousands)	2012		2011
Cash and cash equivalents	$	1,716	$	1,276
Equity
Large-Cap Growth		1,260		1,090
Large-Cap Value		727		1,090
Small/Mid-Cap Growth		334		140
Small/Mid-Cap Value		163		140
International Equity		558		464
Equities Blend		53		—
Fixed Income
Long-Term Bond		777		157
Intermediate Bond		503		789
Short-Term Bond		541		771
Fixed Income Blend		16		—
Other		6		—

	$	6,654	$	5,917

Deferred Compensation Plans

The Company accounts for deferred compensation and accrues interest thereon for employees who elect to participate in one of the following Company plans:

Employee Deferred Compensation Plan. This plan is available to executive, management, administrative and sales employees who have an annualized base salary that equals or exceeds $140,000 for the year ended October 31, 2012. This plan allows employees to defer 1% to 50% of their pre-tax compensation. The average rate of interest earned by the employees in this plan was 3.01%, 3.25% and 3.25% for the years ending October 31, 2012, 2011 and 2010, respectively.

Director Deferred Compensation Plan. This plan allows directors to defer receipt of all or any portion of the compensation that he or she would otherwise receive from the Company. The average rate of interest earned by the directors in this plan was 3.01%, 3.25%, and 3.25% for the years ending October 31, 2012, 2011, and 2010, respectively.

The deferred compensation under both the Employee and Director Deferred Compensation Plans earns interest equal to the prime interest rate on the last day of the calendar quarter. If the prime rate exceeds 6%, the interest rate is equal to 6% plus one half of the excess over 6%. Interest earned under both deferred compensation plans is capped at 120% of the long-term applicable federal rate as discussed in the plans.

OneSource Deferred Compensation Plan. On November 14, 2007, the Company acquired OneSource, which sponsored a deferred compensation plan. Under this deferred compensation plan, a rabbi trust was created to fund the obligation. The plan requires the Company to contribute 50% of the participant’s deferred compensation contributions but only to the extent that the deferred contribution does not exceed 5% of the participant’s compensation for the contribution allocation period. This liability is adjusted, with a corresponding charge (or credit) to the deferred compensation cost, to reflect changes in the fair value. On December 31, 2008, the plan was amended to preclude new participants. The assets held in the rabbi trust are not available for general corporate purposes.

Aggregate expense recognized under these deferred compensation plans for the years ended October 31, 2012, 2011 and 2010 were $0.4 million, $0.4 million and $0.4 million, respectively. The total long-term liability of all deferred compensation plans at October 31, 2012 and 2011 was $16.4 million and $15.5 million (excluding the fair value of the assets held in the rabbi trust), respectively, and is included in Retirement plans and other on the accompanying consolidated balance sheets. The fair value of the assets held in the rabbi trust at October 31, 2012 and 2011 was $5.0 million and $4.7 million, respectively.

401(k) Plans

The Company sponsors six 401(k) savings plans covering certain employees, as set forth in the respective plan documents. These 401(k) plans are subject to the applicable provisions of ERISA and the Internal Revenue Code (“IRC”). Certain plans permit a Company match of a portion of the participant’s contributions or a discretionary contribution after the participant has met the eligibility requirements set forth in the plan. The Company made matching 401(k) contributions required by the 401(k) plans during the years ended October 31, 2012, 2011 and 2010 in the amounts of $7.9 million, $8.3 million and $6.2 million, respectively.

Multiemployer Pension and Postretirement Plans

Multiemployer Defined Benefit Pension Plans

Certain union-represented employees of the Company are covered by multiemployer defined benefit pension plans. Multiemployer pension plans are different from single-employer pension plans, in the following respects:

•

Contributions to multiemployer pension plans by one employer may be used to provide benefits to employees of other participating employers;

•

If a participating employer stops contributing to the plan, some or all of the unfunded obligations pertaining to the departing employer may be allocated to the remaining participating employers; and

•

Certain events could result in a requirement that the Company pay amounts to a plan based on the underfunded status of the plan, commonly referred to as a “withdrawal liability”.

The information in the following tables relates to multiemployer defined benefit pension plans that we have determined to be individually significant to us. To determine individually significant plans, we evaluated several factors, including our total contributions to the plan, our significance to the plan in terms of participating employees and contributions, and the funded status of the plan.

The following table provides information about the funded status of individually significant plans:

•

The “EIN/PN” column provides the Employee Identification Number and the three-digit plan number assigned to a plan by the Internal Revenue Service.

•

The most recent Pension Protection Act Zone Status available as of October 31, 2012 and 2011 is for plan years indicated in the table below. The zone status is based on information provided to us and other participating employers by each plan and is certified by the plan’s actuary. A plan in the “red” zone has been determined to be in “critical status”, based on criteria established under the IRC, and is generally less than 65% funded. A plan in the “yellow” zone has been determined to be in “endangered status”, based on criteria established under the IRC, and is generally less than 80% funded. A plan in the “green” zone has been determined to be neither in “critical status” nor in “endangered status”, and is generally at least 80% funded.

•

The “FIP/RP Status Pending/Implemented” column indicates whether a Financial Improvement Plan (“FIP”), as required under the IRC to be adopted by plans in the “yellow” zone, or a Rehabilitation Plan (“RP”), as required under the IRC to be adopted by plans in the “red” zone, is pending or has been implemented.

•

Contributions by the Company are the amounts contributed by us in the fiscal years ended October 31, 2012, 2011 and 2010.

•

The “Surcharge Imposed” column indicates whether the Company’s contribution rate in its fiscal year ended October 31, 2012 included an amount in addition to the contribution rate specified in the applicable collective bargaining agreement, as imposed by a plan in “critical status”, in accordance with the requirements of the IRC.

•

The last column lists the expiration dates of the collective bargaining agreements pursuant to which the Company contributes to the plans.

For plans that are not individually significant to us, the total amount of contributions is presented in the aggregate.

(in thousands)

Pension Protection Act

Zone Status

FIP/RP Status

Contributions by the Company

Expiration
Dates of
Collective
Bargaining
Agreements

Pension Fund

EIN/PN

2012

2011

Pending/

Implemented

2012

2011

2010

Surcharge
Imposed

Building Service 32BJ Pension Fund

13-1879376 /

001

Red

6/30/2011

Yellow 6/30/2010

Implemented

14,439

13,720

12,065

Yes

4/20/2014 and 12/31/2015

Central pension fund of the IUOE & Participating Employers

36-6052390 /

001

Green

1/31/2012

Green 1/31/2011

N/A*

9,176

8,339

7,631

N/A*

2/28/2013 –9/30/2015

Local 25 SEIU & Participating Employers Pension Trust

36-6486542 /

001

Green

9/30/2011

Green

9/30/2010

N/A*

7,453

7,059

6,137

N/A*

4/5/2015

IUOE Stationary Engineers Local 39 Pension Fund

94-6118939 /

001

Green 12/31/2011

Red

12/31/2010

Implemented

5,342

6,972

6,723

8/31/2017

S.E.I.U. National Industry Pension Fund

52-6148540 /

001

Red

12/31/2011

Red

12/31/2010

Implemented

3,136

2,929

2,678

Yes

6/30/2016

Local 68 Engineers Union Pension Plan

51-0176618 /

001

Green 6/30/2011

Red 6/30/2010

N/A*

3,426

3,435

3,671

8/31/2014

Service Employees International Union Local 32BJ, District 36 Building Operators Pension Trust Fund

23-6546776 /

001

Yellow

12/31/2012

Yellow

12/31/2011

Implemented

2,175

2,414

2,297

N/A*

10/15/2015

IUOE Local 30 Pension Fund

51-6045848 /

001

Green 12/31/2011

Green

12/31/2010

N/A*

1,459

1,230

1,127

N/A*

2/28/2014

Other Plans

12,948

11,782

7,448

Total Contributions

59,554

57,880

49,777

*	Not applicable

The Company was listed in the Forms 5500 of the following plans as providing more than 5 percent of total contributions for the plan years presented below.


Pension Fund		Contributions to the plan exceeded more than 5% of total contributions (as of the Plan’s year end)
Building Service 32BJ Pension Fund		6/30/2011
Local 25 SEIU & Participating Employers Pension Trust		9/30/2011 and 9/30/2010
IUOE Stationary Engineers Local 39 Pension Fund		12/31/2011 and 12/31/2010
Service Employees International Union Local 32BJ, District 36 Building Operators Pension Trust Fund		12/31/2011 and 12/31/2010
IUOE Local 30 Pension Fund		12/31/2011 and 12/31/2010

There have been no significant changes that affect the comparability of total contributions from the year ended October 31, 2011 to 2012. The increase in contributions from the year ended October 31, 2010 to 2011 is due to the acquisition of Linc in December 2010.

Other Postretirement Benefit Plans

In addition to contributions to the defined benefit pension plans described above, ABM also contributes to several multiemployer plans that provide other postretirement benefits based on obligations arising under collective bargaining agreements covering union-represented employees. These plans may provide medical, pharmacy, dental, vision, mental health and other benefits to active employees as determined by the trustees of each plan. The Company’s contributions to such plans were $193.1 million, $177.0 million and $163.7 million in the years ended October 31, 2012, 2011 and 2010, respectively. There have been no significant changes that affect the comparability of total contributions from the year ended October 31, 2011 to 2012. The increase in contributions from the year ended October 31, 2010 to 2011 is due to the acquisition of Linc in December 2010.