13.

Retiree Benefits

Pension and Defined Contribution Benefit Plans

The Company and its subsidiaries have defined benefit, defined contribution, and government mandated pension plans covering substantially all employees. Benefits from these plans are based on factors that include various combinations of years of service, fixed monetary amounts per year of service, employee compensation during the last years of employment, and the recipient’s social security benefit. Our funding policy with respect to qualified plans is to contribute annually not less than the minimum required by applicable law and regulation nor more than the amount which can be deducted for income tax purposes. We also have an unfunded nonqualified supplemental pension plan that is based on credited years of service and compensation during the last years of employment. For our qualified and non-qualified pension plans and the post-retirement welfare plans, we use the last Friday in October as our measurement date which coincides with our fiscal year end.

Certain plans outside the United States, which supplement or are coordinated with government plans, many of which require funding through mandatory government retirement or insurance company plans, have pension funds or balance sheet accruals which approximate the actuarially computed value of accumulated plan benefits as of October 26, 2012 and October 28, 2011.

We also have a defined contribution benefit plan (401(k) plan). Substantially every U.S. employee of the Company (except any employee who is covered by a collective bargaining agreement which does not provide for such employee’s participation in the plan) is eligible to participate in the plan. Under the terms of the plan, the Company matches 25% to 50% of participant salary deferral contributions up to the first 6% of the participant’s compensation. For employees that do not participate in the U.S. defined benefit plan, the Company contributes a defined benefit contribution of 1% to 5% of eligible employee compensation depending on the employee group. The employer match and defined benefit contribution expense are as follows:


In millions	2012		2011		2010
Employer matching expense	$	12.2	$	8.1	$	6.7
Defined benefit contribution expense	$	30.6	$	22.3	$	17.8

The 2012 defined benefit contribution expense includes $5.6 million of costs associated with transitioning certain defined benefit plan participants to a defined contribution plan.

Total pension expense for all defined benefit plans is as follows:


In millions	2012		2011		2010
Pension expense	$	46.5	$	50.3	$	50.3

Other Postretirement Benefits

In 1993, our Board of Directors approved a general approach that culminated in the elimination of all Company contributions towards postretirement health care benefits. Increases in costs paid by us were capped for certain plans beginning in 1994 extending through 1998 and Company contributions were eliminated as of January 11, 1999 for most employee groups, excluding certain Underground Mining Machinery employees, certain early retirees, and specific discontinued operation groups. For certain Underground Mining Machinery employees, based upon existing plan terms, future eligible retirees will participate in a premium cost-sharing arrangement which is based upon age as of March 1, 1993 and position at the time of retirement. Active employees under age 45 as of March 1, 1993 and any new hires after April 1, 1993 will be required to pay 100% of the applicable premium.

Net periodic pension costs for U.S. plans and plans of subsidiaries outside the United States included the following components:


	U.S. Pension Plans									Non-U.S. Pension Plans
In thousands	2012			2011			2010			2012			2011			2010

Components of net periodic benefit cost:
Service cost	$	9,975		$	14,438		$	14,636		$	5,878		$	6,099		$	6,135
Interest cost		52,604			56,268			54,473			29,297			28,715			28,244
Expected return on assets		(61,420	)		(56,269	)		(52,723	)		(36,033	)		(35,529	)		(32,451	)
Amortization of:
Prior service cost		1,307			1,374			1,158			—			10,051			—
Actuarial loss		20,324			25,179			23,347			13,085			—			7,434
Curtailment loss		11,491			—			—			—			—			12


Total net periodic benefit cost	$	34,281		$	40,990		$	40,891		$	12,227		$	9,336		$	9,374

In the second quarter of 2012 a modification was made to the Joy Global Pension Plan freezing benefits for all salaried and non-bargained hourly participants effective May 1, 2012. In addition, in the fourth quarter of 2012 a modification was made to the Joy Global Pension Plan freezing benefits for certain bargained hourly participants effective in 2013. We recorded curtailment charges of $1.1 million and $10.4 million in the second and fourth quarters of fiscal 2012, respectively, in conjunction with the freezes.

The components of the net periodic benefit cost associated with our other postretirement benefit plans (other than pensions), all of which relate to operations in the U.S., are as follows:


	Other Postretirement Benefit Plans
In thousands	2012			2011			2010

Components of net periodic benefit cost:
Service cost	$	960		$	981		$	916
Interest cost		1,371			1,540			1,618
Expected return on assets		(371	)		(342	)		(223	)
Amortization of:
Prior service cost		52			48			—
Actuarial (gain) loss		(1,160	)		(1,308	)		173
Special termination benefits charge		981			—			—

Total net periodic benefit cost of continuing operations	$	1,833		$	919		$	2,484

In conjunction with the fourth quarter modification of the Joy Global Pension Plan, additional postretirement benefits of $1.0 million were recorded as a special termination benefits charge.

For other postretirement benefit obligation measurement purposes, the assumed annual rate of increase in the per capita cost of covered health care benefits is 7.5% for fiscal year 2013. The per capita cost of covered health care benefits rate is assumed to decrease 0.5% per year to an ultimate rate of 5% by fiscal 2018, and remain at that level thereafter. The effect of one percentage point increase in the assumed health care cost trend rates each year would increase the accumulated postretirement benefit obligation as of October 26, 2012 by $1.0 million. The service cost and interest cost components of the net periodic postretirement benefit cost for the year would increase by $0.1 million. A one percentage point decrease in the assumed health care cost trend rates each year would decrease the accumulated postretirement benefit obligation as of October 26, 2012 by $0.9 million. The service cost and interest cost components of the net periodic postretirement benefit cost for the year would decrease by $0.1 million. Postretirement life insurance benefits have a minimal effect on the total benefit obligation.

The principal assumptions used in determining the funded status and net periodic benefit cost of our pension plans and other postretirement benefit plans are set forth in the following tables. The assumptions for non-U.S. plans were developed on a basis consistent with that for U.S. plans, adjusted to reflect prevailing economic conditions and interest rate environments.

Significant assumptions used in determining net periodic benefit cost for the year ended are as follows (in weighted averages):


	U.S. Pension Plans									Non-U.S. Pension Plans									Other Postretirement Benefit Plans
	2012			2011			2010			2012			2011			2010			2012			2011			2010

Discount rate*		5.00	%		5.60	%		5.55	%		5.28	%		5.24	%		5.66	%		4.65	%		4.85	%		4.90	%
Expected return on plan assets**		7.00	%		7.51	%		8.10	%		6.93	%		7.22	%		7.22	%		7.50	%		8.00	%		8.00	%
Rate of compensation increase		4.25	%		4.25	%		4.25	%		4.22	%		4.36	%		4.70	%		—			—			—

*	Due to mid-year curtailment and special termination benefit measurements, the 2012 weighted average discount rate ranged from 3.95% – 5.00% and 3.60% – 4.65% throughout the year for the U.S. Pension Plans and the Other Postretirement Benefit Plans, respectively.

**	Due to mid-year curtailment measurements, the 2012 weighted average expected return on plan assets ranged from 6.75% – 7.00% for the U.S. Pension Plans.

The expected rate of return on pension plan assets for the U.S. pension plan is based on the investment policies adopted by our Pension and Investment Committee. We also used the results from a portfolio simulator as input into our decision. The simulator is based on U.S. capital market conditions as of the valuation date and projects returns based on the U.S. plan’s current asset allocation. The simulation model calculates an expected rate of return for each asset class by forecasting a range of plausible economic conditions. The model starts with the capital market conditions prevailing at the start of the forecast period and trends the rates of return by asset class to its long-term average. A long-term average return is calculated using a blend of historical capital market data and future expectations.

The expected rate of return on non-U.S. pension plans is based on the plan’s current asset allocation policy. An average long-term rate of return is developed for each asset class and the portfolio return is the weighted average return based on the current asset allocation.

Significant assumptions used in determining benefit obligations as of the fiscal year ended are as follows (in weighted averages):


	U.S. Pension Plans						Non-U.S. Pension Plans						Other Postretirement Benefit Plans
	2012			2011			2012			2011			2012			2011

Discount rate		3.95	%		5.00	%		4.28	%		5.28	%		3.60	%		4.65	%
Rate of compensation increase		—			4.25	%		4.23	%		4.22	%		—			—

Changes in the projected benefit obligations and pension plan assets relating to the Company’s defined benefit pension plans and other postretirement benefit obligations together with a summary of the amounts recognized in the Consolidated Balance Sheet are set forth in the following tables:


	U.S. Pension Plans						Non -U.S. Pension Plans						Other Postretirement Benefit Plans
In thousands	October 26, 2012			October 28, 2011			October 26, 2012			October 28, 2011			October 26, 2012			October 28, 2011
Change in Benefit Obligations
Net benefit obligations at beginning of year	$	1,108,386		$	1,016,027		$	573,608		$	550,801		$	32,078		$	34,293
Service cost		9,975			14,438			5,878			6,099			960			981
Interest cost		52,604			56,268			29,297			28,715			1,371			1,540
Plan participants’ contributions		—			—			1,164			1,147			—			—
Plan amendments		7,157			336			—			—			813			—
Actuarial loss (gain)		162,370			70,355			114,815			8,889			674			(2,044	)
Currency fluctuations		—			—			2,449			6,123			—			—
Curtailments		(37,796	)		—			—			—			—			—
Special termination benefits		—			—			—			—			981			—
Gross benefits paid		(52,012	)		(49,038	)		(28,755	)		(28,166	)		(2,677	)		(2,692	)


Net benefit obligations at end of year	$	1,250,684		$	1,108,386		$	698,456		$	573,608		$	34,200		$	32,078


Change in Plan Assets

Fair value of plan assets at beginning of year	$	833,849		$	652,355		$	513,528		$	483,043		$	5,370		$	4,602

Actual return on plan assets		104,729			89,173			50,986			11,739			526			89
Currency fluctuations		—			—			1,644			5,384			—			—
Employer contributions		140,940			141,359			43,925			39,538			3,096			3,371
Plan participants’ contributions		—			—			1,164			1,147			—			—
Gross benefits paid		(52,012	)		(49,038	)		(28,755	)		(28,166	)		(2,677	)		(2,692	)


Fair value of plan assets at end of year	$	1,027,506		$	833,849		$	582,492		$	512,685		$	6,315		$	5,370


Funded Status

Net amount recognized at end of year	$	(223,178	)	$	(274,537	)	$	(115,964	)	$	(60,923	)	$	(27,885	)	$	(26,708	)


Amounts Recognized in the Consolidated Balance Sheet Consist of:

Current liabilities	$	(2,620	)	$	(2,253	)	$	(709	)	$	(755	)	$	(2,321	)	$	(2,653	)

Other non-current liabilities		(220,558	)		(272,284	)		(115,255	)		(60,168	)		(25,564	)		(24,055	)


Net amount recognized at end of year	$	(223,178	)	$	(274,537	)	$	(115,964	)	$	(60,923	)	$	(27,885	)	$	(26,708	)


Accumulated benefit obligation	$	1,250,684		$	1,059,049		$	644,125		$	512,913		$	—		$	—

Amounts recognized in accumulated other comprehensive (gain) / loss as of October 26, 2012 consists of:


	Pension Plans						Other Postretirement
In thousands	U.S.			Non U.S.			Benefit Plans
Net actuarial loss (gain)	$	458,653		$	269,641		$	(11,968	)

Prior service cost		2,590			—			1,384

Deferred tax		(121,451	)		(43,303	)		3,890

Total accumulated other comprehensive loss (income)	$	339,792		$	226,338		$	(6,694	)

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


In thousands	Pension Plans				Other Postretirement
	U.S.		Non U.S.		Benefit Plans
Actuarial (gain) / loss	$	19,656	$	19,786	$	(922	)

Prior service cost		610		—		167

	$	20,266	$	19,786	$	(755	)

The defined benefit plans had the following target asset allocation and weighted-average asset allocations as of October 26, 2012 and October 28, 2011.


	U.S. Pension Plan									Non-U.S. Pension Plans*
	Target									Target
Asset Category	Allocation			2012			2011			Allocation			2012			2011
Equity securities		25	%		22	%		30	%		13	%		9	%		22	%
Debt securities		75	%		76	%		70	%		79	%		83	%		19	%
Other		—			2	%		—			8	%		8	%		59	%

Total		100	%		100	%		100	%		100	%		100	%		100	%

*	The current target asset allocation for the Non-U.S. Pension Plans is 32% return seeking and 68% liability hedging, with the return seeking assets distributed among the equity, fixed income, other asset categories

U.S. Plan Assets

The plan’s assets are invested to maintain funded ratios over the long-term while managing the risk that funded ratios fall meaningfully below 100%. While this objective is based on a long-term investment horizon, it is desirable that interim fluctuations in funded status should be limited by increasing correlation between assets and liabilities.

The desired investment return objective is a long-term average annual real rate of return on assets that is approximately 3.75% greater than the assumed inflation rate. The target rate of return is based upon an analysis of historical returns supplemented with an economic and structural review for each asset class. There is no assurance that these objectives will be met.

Non-U.S. Plan Assets

The objectives of the non-U.S. plans are as follows: the acquisition of suitable assets of appropriate liquidity which will generate income and capital growth and, together with new contributions from members and the employer, will meet the cost of the current and future benefits which the plan provides; to limit the risk of the assets failing to meet the liabilities over the long term and; to minimize the long term costs of the plan by maximizing the return on the assets.

The following tables summarize the fair value of our pension plan assets by category at October 26, 2012 and October 28, 2011 within the fair value hierarchy as defined by ASC 820:


In Thousands	October 26, 2012
	Level 1		Level 2			Level 3		Total Assets at Fair Value
U.S. Pension Plans
Equity securities:
U.S. equities	$	158,095	$	—		$	—	$	158,095
Non-U.S. equities		62,918		—			—		62,918
Fixed income securities:
U.S. government bonds		—		347,981			—		347,981
Non-U.S. government bonds		—		7,450			—		7,450
U.S. corporate bonds		—		360,638			3,340		363,978
Non-U.S. corporate bonds		—		64,819			—		64,819
Other
Cash and cash equivalents		22,412		—			—		22,412
Other		—		(147	)		—		(147	)

Total U.S. Pension Plans assets	$	243,425	$	780,741		$	3,340	$	1,027,506


Non-U.S. Pension Plans
Equity securities:
U.S. equities	$	2,806	$	—		$	—	$	2,806
Non-U.S. equities		6,705		—			—		6,705
Fixed income securities:
Non-U.S. government bonds		—		219,183			—		219,183
U.S corporate bonds		—		—			216		216
Non-U.S. corporate bonds		—		2,495			181,821		184,316
Other		—		—			—		—
Other									—
Cash and Cash Equivalents		6,542		—			—		6,542
Hedge Fund		—		—			3,598		3,598
Insurance Linked Fund		—		—			8,885		8,885
Multi-Asset Fund		—		—			149,831		149,831
Other		—		(284	)		—		(284	)

Total Non-U.S. Pension Plans assets	$	16,053	$	221,394		$	344,351	$	581,798


Other Postretirement Benefits Plans
Equity securities:
U.S. equities	$	3,096	$	—		$	—	$	3,096
Non-U.S. equities		682		—			—		682
Fixed income securities:
U.S. corporate bonds		—		2,397			—		2,397
Other									—
Cash and cash equivalents		140		—			—		140

Total Other Postretirement Benefit Plans	$	3,918	$	2,397		$	—	$	6,315


In Thousands	October 28, 2011
	Level 1		Level 2		Level 3		Total Assets at Fair Value
U.S . Pension Plans
Equity securities:
U. S. equities	$	171,575	$	—	$	—	$	171,575
Non-U.S. equities		70,069		—		—		70,069

Fixed income securities:
U.S. government bonds		—		272,722		—		272,722
Non-U.S. government bonds		—		15,569		—		15,569
U.S. corporate bonds		—		247,664		—		247,664
Non-U.S. corporate bonds		—		33,495		—		33,495
Other								—
Cash and cash equivalents		19,629		—		—		19,629
Hedge fund		—		—		1,283		1,283
Other		—		1,843		—		1,843

Total U.S. Pension Plans assets	$	261,273	$	571,293	$	1,283	$	833,849


Non-U.S . Pension Plans
Equity securities:
U.S. equities	$	28,745	$	84	$	—	$	28,829
Non-U.S. equities		22,193		—		65,743		87,936
								—
Fixed income securities:								—
U.S. government bonds		—		699		—		699
Non-U.S. government bonds		—		19,379		—		19,379
U.S corporate bonds		—		16,103		—		16,103
Non-U.S. corporate bonds		—		93,095		222,420		315,515
Other		—		2,156		—		2,156
Other								—
Cash and cash equivalents		42,068		—		—		42,068

Total Non-U.S. Pension Plans assets	$	93,006	$	131,516	$	288,163	$	512,685


Other Postretirement Benefits Plans
Equity securities:
U.S. equities	$	2,429	$	—	$	—	$	2,429
Non-U.S. equities		689		—		—		689
								—
Fixed income securities:								—
U.S. government bonds		—		1,193		—		1,193
U.S. corporate bonds		—		977		—		977
Other								—
Cash and cash equivalents		82		—		—		82

Total Other Postretirement Benefit Plans	$	3,200	$	2,170	$	—	$	5,370

Below are roll-forwards of assets measured at fair value using Level 3 inputs for the year ended October 26, 2012 and October 28, 2011:


In Thousands
	Equities			Fixed Income			Other
U.S. Pension Plans
Balance as of October 29, 2010	$	21,291		$	393		$	46,146

Unrealized gains (losses)		(5,483	)		1,096			1,185
Realized gains (losses)		8,116			(831	)		—
Sales		(23,924	)		(658	)		(46,048	)
Purchases		—			—			—
Transfers in and/or (out) of level 3		—			—			—

Balance as of October 28, 2011	$	—		$	—		$	1,283

Unrealized gains		—			—			841
Realized losses		—			—			(840	)
Sales		—			—			(1,284	)
Purchases		—			3,340			—
Transfers in and/or (out) of level 3		—			—			—

Balance as of October 26, 2012	$	—		$	3,340		$	—


Non-U.S. Pension Plans
Balance as of October 29, 2010	$	143,284		$	122,037		$	—

Unrealized gains (losses)		(8,532	)		31,185			—
Realized gains		13,234			47			—
Sales		(82,243	)		(765	)		—
Purchases		—			76,485			—
Transfers in and/or (out) of level 3		—			(6,569	)		—

Balance as of October 28, 2011	$	65,743		$	222,420		$	—

Unrealized gains (losses)		(15,552	)		(12,945	)		60,979
Realized gains		14,401			40,969			214
Sales		(59,191	)		(200,796	)		(3,952	)
Purchases		—			132,147			99,672
Transfers in and/or (out) of level 3		(5,401	)		242			5,401

Balance as of October 26, 2012	$	—		$	182,037		$	162,314

The following pension and other postretirement benefit payments (which include expected future service) are expected to be paid in each of the following years:


	Pension Plan Payments				Other Postretirement Benefit Plan Payments
In thousands	U.S.		Non-U.S.		Prior to Medicare Part D		After Medicare Part D		Impact of Medicare Part D

2013	$	56,966	$	27,681	$	3,924	$	3,806	$	118
2014		61,254		28,433		4,864		4,752		112
2015		63,588		29,216		4,297		4,191		106
2016		65,941		30,008		3,644		3,546		98
2017		68,581		30,796		3,560		3,470		90
2018 - 2022		375,300		166,889		12,654		12,339		315

On December 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 became law. This Act introduced a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. We currently sponsor two retiree health care plans that provide prescription drug benefits to our U.S. retirees.

The projected benefit obligations, accumulated benefits obligations, and fair value of plan assets for underfunded and overfunded plans have been combined for disclosure purposes. The projected benefit obligations, accumulated benefit obligations, and fair value of assets for pension plans with an accumulated benefit obligation in excess of plan assets are as follows:


	U.S. Pension Plans				Non U.S. Pension Plans
In thousands	2012		2011		2012		2011

Projected benefit obligation	$	1,250,684	$	1,108,386	$	655,010	$	27,417
Accumulated benefit obligation		1,250,684		1,059,049		604,675		23,895
Fair value of plan assets		1,027,506		833,849		539,669		14,929

For 2013, we expect to contribute approximately $180 million to $190 million to our employee pension plans.