4 . Pensions and Other Postretirement Benefit Plans

Pension Plans

The Company has defined benefit pension plans covering certain U.S. and non-U.S. employees. The U.S. qualified defined benefit pension plan has been closed to new participants since October 1998 and, as of February 2009, benefits accrued under this plan were frozen, resulting in a charge of $2.5 million that was recorded in 2008. As a result of the freeze, employees covered by the pension plan will receive, at retirement, benefits already accrued through February 2009, but no new benefits accrue after that date. Benefit accruals under the U.S. Supplemental Executive Retirement Plan ("SERP") were similarly frozen. The U.S. pension plan accounts for 67% of consolidated pension plan assets, and 60% of consolidated pension plan obligations. The eligibility, benefit formulas, and contribution requirements for plans outside of the U.S. vary by location.

Other Postretirement Benefits

In addition to providing pension benefits, the Company provides various medical, dental, and life insurance benefits for certain retired United States employees. U.S. employees hired prior to 2005 may become eligible for these benefits if they reach normal retirement age while working for the Company. Benefits provided under this plan are subject to change. Retirees share in the cost of these benefits. Effective January 2005, any new employees who wish to be covered under this plan will be responsible for the full cost of such benefits, except for life insurance benefits, which continue to be provided. The Company also provides certain postretirement life insurance benefits to retired employees in Canada. As of December 31, 2011, the accrued postretirement liability was $77.9 million in the U.S. and $1.1 million in Canada. The Company accrues the cost of providing postretirement benefits during the active service period of the employees. The Company currently funds the plan as claims are paid.

Accounting guidance requires the recognition of the funded status of each defined benefit and other postretirement benefit plan. Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a liability. Company pension plan data for U.S. and non-U.S. plans has been combined for both 2011 and 2010, except where indicated below.

The Company's pension and postretirement benefit costs and benefit obligations are based on actuarial valuations that are affected by many assumptions, the most significant of which are the assumed discount rate, expected rate of return on pension plan assets, and mortality. Each of the assumptions is reviewed and updated annually, as appropriate. The assumed rates of return for pension plan assets are determined for each major asset category based on historical rates of return for assets in that category and expectations of future rates of return based, in part, on simulated future capital market performance. The assumed discount rate is based on yields from a portfolio of currently available high-quality fixed-income investments with durations matching the expected future payments, based on the demographics of the plan participants and the plan provisions.

The benefit obligation as of December 31, 2011 and 2010, as well as pension expense for those years, was calculated using the RP-2000 Combined Healthy Mortality table projected to 2016 using Scale AA with phase-out to the IRS Static Mortality table.

Gains and losses arise from changes in the assumptions used to measure the benefit obligations, and experience different from what had been assumed, including asset returns different than what had been expected. The Company amortizes gains and losses in excess of a "corridor" over the average future service of the plan's current participants. The corridor is defined as 10% of the greater of the plan's projected benefit obligation or market-related value of plan assets. The market-related value of plan assets is also used to determine the expected return on plan assets component of net periodic cost. The Company's market-related value for its U.S. plan is measured by first determining the absolute difference between the actual and the expected return on the plan assets. The absolute difference in excess of 5% of the expected return is added to the market-related value over two years; the remainder is added to the market-related value immediately.

To the extent the Company's unrecognized net losses and unrecognized prior service costs, including the amount recognized through accumulated other comprehensive income, are not reduced by future favorable plan experience, they will be recognized as a component of the net periodic cost in future years. The Company's unrecognized net loss in its pension plans is primarily attributable to recent declines in interest rates and unfavorable investment returns in 2008.

The Company has classified $3.6 million of its accrued pension liability as a current liability at December 31, 2011. Company contributions into pension investment funds totaled $37.2 million in 2011, and the Company also paid $4.0 million directly to retirees. For U.S. pension funding purposes, the Company uses the plan's IRS-basis current liability as its funding target, which is determined based on mandated assumptions. Weak investment returns and low interest rates could result in equal or greater contributions to the pension plans in future years.

The following table sets forth the plan benefit obligations:

	As of December 31, 2011		As of December 31, 2010
(in thousands)	Pension plans	Other postretirement benefits	Pension plans	Other postretirement benefits

Benefit obligation, beginning of year	$374,115	$72,137	$353,971	$73,208
Service cost	3,117	931	3,572	910
Interest cost	19,958	3,869	19,645	4,054
Plan participants' contributions	387	-	378	607
Actuarial loss/(gain)	39,712	6,977	26,013	2,539
Curtailments	-	-	(1,619)	(1,921)
Benefits paid	(26,598)	(5,823)	(23,797)	(7,260)
Settlements	(891)	-	(5,722)	-
Special / Contractual Termination Benefits	233	-	-
Plan amendments	-	-	346	-
Other	-	945	-
Removal of defined contribution component	-	-	(1,710)	-
Foreign currency changes	(4,153)	(27)	3,038	-
Benefit obligation, end of year	$405,880	$79,009	$374,115	$72,137

Accumulated benefit obligation	$391,457	-	$356,691	-

Weighted average assumptions used to
determine benefit obligations, end of year:
Discount rate - U.S. plan	4.82%	4.85%	5.59%	5.55%
Discount rate - non-U.S. plans	4.48%	-	5.27%	-
Compensation increase - U.S. plan	-	3.00%	-	3.00%
Compensation increase - non-U.S. plans	3.19%	3.00%	3.47%	3.00%

The following sets forth information about plan assets:

	As of December 31, 2011		As of December 31, 2010
(in thousands)	Pension plans	Other postretirement benefits	Pension plans	Other postretirement benefits

Fair value of plan assets, beginning of year	$262,376	$ -	$247,072	$ -
Actual return on plan assets, net of expenses	34,176	-	21,936	-
Employer contributions	37,174	5,823	22,075	6,653
Plan participants' contributions	387	1,319	378	607
Benefits paid	(26,562)	(7,142)	(23,956)	(7,260)
Settlements	(891)	-	(5,722)	-
Removal of defined contribution component	-	-	(1,710)	-
Foreign currency changes	(2,002)	-	2,303	-
Fair value of plan assets, end of year	$304,658	$ -	$262,376	$ -

The funded status of the plans, reconciled to the amount on the Consolidated Balance Sheet, was as follows:

	As of December 31, 2011		As of December 31, 2010
(in thousands)	Pension plans	Other postretirement benefits	Pension plans	Other postretirement benefits

Fair value of plan assets	$304,658	$ -	$262,376	$ -
Benefit obligation	405,880	79,009	374,115	72,137
Funded status	($101,222)	($79,009)	($111,739)	($72,137)

Accrued benefit cost, end of year	($101,222)	($79,009)	($111,739)	($72,137)

Amounts recognized in the statement of financial position consist of the following:
Noncurrent asset	$7,779	$ -	$ 715	$ -
Current liability	(3,576)	(5,949)	(3,764)	(6,223)
Noncurrent liability	(105,425)	(73,060)	(108,690)	(65,914)
Net amount recognized	($101,222)	($79,009)	($111,739)	($72,137)

Amounts recognized in accumulated other comprehensive income consist of:
Net actuarial loss	$164,246	$54,835	$150,062	$50,884
Prior service cost/(credit)	432	(43,995)	480	(47,662)
Transition obligation	138	-	240	-
Net amount recognized	$164,816	$10,840	$150,782	$3,222

The composition of the net periodic benefit plan cost for the years ended December 31, 2011, 2010, and 2009, was as follows:

	Pension plans			Other postretirement benefits
(in thousands)	2011	2010	2009	2011	2010	2009

Components of net periodic benefit cost:
Service cost	$3,117	$3,572	$3,574	$931	$910	$1,126
Interest cost	19,958	19,644	18,448	3,869	4,054	3,820
Other adjustments	-	-	-	945	-	-
Expected return on assets	(15,858)	(15,127)	(20,754)	-	-	-
Amortization of prior service cost/(credit)	37	16	102	(3,666)	(3,666)	(4,327)
Amortization of transition obligation	83	94	88	-	-	-
Amortization of net actuarial loss	5,672	4,738	2,085	3,022	2,923	2,780
Settlement	327	839	368	-	-	-
Curtailment (gain)/loss	-	34	(541)	-	(1,921)	(6,452)
Special / contractual termination benefits	233	-	-	-	-	-
Net periodic benefit cost	$13,569	$13,810	$3,370	$5,101	$2,300	($3,053)

Weighted average assumptions used to determine net cost:
Discount rate - U.S. plan	5.59%	5.80%	6.25%	5.55%	5.70%	6.10%
Discount rate - non -U.S. plan	5.29%	5.84%	5.81%	-	-	-
Expected return on plan assets - U.S. plans	5.80%	6.10%	8.50%	-	-	-
Expected return on plan assets - non-U.S. plans	6.80%	6.91%	6.91%	-	-	-
Rate of compensation increase - U.S. plan	-	-	-	3.00%	3.00%	3.00%
Rate of compensation increase - non-U.S. plans	3.47%	3.42%	3.24%	-	-	-
Health care cost trend rate (U.S. and non-U.S. plans):
Initial rate	-	-	-	-	-	-
Ultimate rate	-	-	-	-	-	-
Years to ultimate	-	-	-	-	-	-

Other changes in plan assets and benefit obligations recognized in other comprehensive income during 2011 were as follows:

		Other
	Pension	postretirement
(in thousands)	plan	benefits

Settlements	$ (327)	$ -
Exchange rate effect	(1,204)	-
Current year actuarial loss	39,713	6,977
Asset loss (gain)	(18,355)	-
Amortization of actuarial (loss)	(5,672)	(3,022)
Amortization of prior service (cost)/credit	(37)	3,666
Amortization of transition (obligation)	(83)	-
Currency impact	-	(3)
Total recognized in other comprehensive income	$14,035	$7,618

Total recognized in net periodic benefit cost and other comprehensive income	$27,604	$12,719

The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2012 are as follows:

		Total
	Total	postretirement
(in thousands)	pension	benefits
Actuarial loss	$7,092	$3,215
Prior service cost/(benefit)	35	(3,666)
Transition obligation	74	-
Total	$7,201	($451)

Investment Strategy

Our investment strategy for pension assets differs for the various countries in which we have defined benefit pension plans. Some of our defined benefit plans do not require funded trusts and, in those arrangements, the Company funds the plans on a "pay as you go" basis. The largest of the funded defined benefit plans is the United States plan, which accounts for 67% of the Company's pension plan assets.

United States plan:

During 2009, we changed our investment strategy for the United States pension plan by adopting a liability-driven investment strategy. Under this arrangement, the Company seeks to invest in assets that track closely to the discount rate that is used to measure the plan liabilities. Accordingly, the plan assets are primarily debt securities. The change in investment strategy is reflective of the Company's 2008 decision to freeze benefit accruals under the plan.

Non United States plans:

For the countries in which the Company has funded pension trusts, the investment strategy is to achieve a competitive, total investment return, achieving diversification between and within asset classes and managing other risks. Investment objectives for each asset class are determined based on specific risks and investment opportunities identified. Actual allocations to each asset class vary from target allocations due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully implement investment allocation positions, and the timing of benefit payments and contributions.

Fair-Value Measurements

The following tables present plan assets as of December 31, 2011 and 2010, using the fair-value hierarchy, which has three levels based on the reliability of inputs used, as described in Note 13:

	Total fair	Quoted prices	Significant other	Significant
	value at	in active	observable	unobservable
	December 31,	markets	inputs	inputs
(in thousands)	2011	(Level 1)	(Level 2)	(Level 3)
Common stocks	$48,993	$48,993	$ -	$ -
Debt securities	243,839	-	243,839	-
Insurance contracts	2,361	-	-	2,361
Limited partnerships	8,676	-	-	8,676
Hedge funds	557	-	-	557
Cash and short-term investments	232	232	-	-
Total plan assets	$304,658	$49,225	$243,839	$11,594

	Total fair	Quoted prices	Significant other	Significant
	value at	in active	observable	unobservable
	December 31,	markets	inputs	inputs
(in thousands)	2010	(Level 1)	(Level 2)	(Level 3)
Common stocks	$44,181	$44,181	$ -	$ -
Debt securities	190,170	-	190,170	-
Insurance contracts	2,050	-	-	2,050
Limited partnerships	9,115	-	-	9,115
Hedge funds	10,699	-	-	10,699
Cash and short-term investments	6,161	6,161	-	-
Total plan assets	$262,376	$50,342	$190,170	$21,864

The following tables present a reconciliation of Level 3 assets held during the years ended December 31, 2011 and 2010:

(in thousands)	December 31, 2010	Net realized (losses)/ gains	Net unrealized gains/(losses)	Net purchases, issuances and settlements	Net transfers (out of) Level 3	December 31, 2011
Insurance contracts	$2,050	$ -	$311	$ -	$ -	$2,361
Limited partnerships	9,115	107	235	-	(781)	8,676
Hedge funds	10,699	(19)	(132)	-	(9,991)	557
Total	$21,864	$88	$414	$0	($10,772)	$11,594

(in thousands)	December 31, 2009	Net realized (losses)/gains	Net unrealized gains/(losses)	Net purchases, issuances and settlements	Net transfers (out of) Level 3	December 31, 2010
Insurance contracts	$1,549	$ (25)	$203	$426	($103)	$2,050
Limited partnerships	9,066	(2)	1,247	-	(1,196)	9,115
Hedge funds	19,594	1,194	928	-	(11,017)	10,699
Total	$30,209	$1,167	$2,378	$426	($12,316)	$21,864

The asset allocation for the Company's U.S. and non-U.S. pension plans for 2011 and 2010, and the target allocation for 2012, by asset category, are as follows:

	United States Plan									Non-U.S. Plans
	Target			Percentage of plan assets						Target			Percentage of plan assets
	Allocation			at plan measurement date						Allocation			at plan measurement date
Asset category	2012			2011			2010			2012			2011			2010

Equity securities		-			-			-			51	%		49	%		51	%
Debt securities		100	%		92	%		86	%		43	%		45	%		46	%
Real estate		-			2	%		3	%		3	%		3	%		-
Cash		-			3	%		3	%		-			-			-
Other (1)		-			3	%		8	%		3	%		3	%		3	%
		100	%		100	%		100	%		100	%		100	%		100	%

(1)

Other includes hedged equity and absolute return strategies, and private equity. The Company has procedures to closely monitor the performance of these investments and compares asset valuations to audited financial statements of the funds.

The targeted plan asset allocation is based on an analysis of the actuarial liabilities, a review of viable asset classes, and an analysis of the expected rate of return, risk, and other investment characteristics of various investment asset classes.

At the end of 2011 and 2010, the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with projected benefit obligation in excess of plan assets and for pension plans with an accumulated benefit obligation in excess of plan assets were as follows:

	Projected and accumulated benefit obligation
	exceeds plan assets
(in thousands)	2011	2010
Projected benefit obligation	$376,595	$341,870
Accumulated benefit obligation	363,228	325,602
Fair value of plan assets	267,594	227,784

Information about expected cash flows for the pension and other benefit obligations are as follows:

(in thousands)	Pension plans	Other postretirement benefits
Expected employer contributions in the next fiscal year	$37,144	$5,949

Expected benefit payments
2012	$23,160	$5,949
2013	24,087	5,765
2014	23,551	5,577
2015	23,656	5,354
2016	24,094	5,174
2017-2021	123,344	24,195