5. 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. 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 44 percent of consolidated pension plan assets, and 32 percent 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. In September 2008, we changed the cost sharing arrangement under this program such that increases in health care costs are the responsibility of plan participants. In August 2013, we reduced the life insurance benefit for retirees and eliminated the benefit for active employees.

The Company also provides certain postretirement life insurance benefits to retired employees in Canada. As of December 31, 2013, the accrued postretirement liability was $60.2 million in the U.S. and $0.9 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 2013 and 2012, 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 for the U.S. plans as of December 31, 2013 was calculated using the IRS 2014 mortality table. The benefit obligation as of December 31, 2012, as well as pension expense for 2013, was calculated using the IRS 2013 mortality table. 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 higher than expected contributions to pension plans in future years.

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 percent 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 percent 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 unfavorable investment returns in 2008.

The following table sets forth the plan benefit obligations:

	As of December 31, 2013				As of December 31, 2012
(in thousands)	Pension plans		Other postretirement benefits		Pension plans		Other postretirement benefits

Benefit obligation, beginning of year	$218,538		$84,368		$405,880		$79,009
Service cost	3,662		875		3,486		1,071
Interest cost	8,852		3,080		12,180		3,691
Plan participants' contributions	331		-		344		-
Actuarial loss/(gain)	(17,461	)	(13,396	)	49,582		6,343
Benefits paid	(5,999	)	(5,773	)	(14,909	)	(5,778	)
Settlements and curtailments	(2,950	)	-		(249,709	)	-
Plan Amendments and Other	613		(7,974	)	571		-
Foreign currency changes	(1,252	)	(72	)	11,113		32
Benefit obligation, end of year	$204,334		$61,108		$218,538		$84,368

Accumulated benefit obligation	$190,561		$-		$202,917		$-

Weighted average assumptions used to
determine benefit obligations, end of year:
Discount rate - U.S. plan	5.22	%	4.68	%	4.28	%	3.93	%
Discount rate - non-U.S. plans	4.50	%	4.75	%	4.09	%	4.00	%
Compensation increase - U.S. plan	-		-		-		3.00	%
Compensation increase - non-U.S. plans	3.39	%	3.00	%	3.26	%	3.00	%

The following sets forth information about plan assets:


	As of December 31, 2013				As of December 31, 2012
(in thousands)	Pension plans		Other postretirement benefits		Pension plans		Other postretirement benefits

Fair value of plan assets, beginning of year	$173,434		$-		$304,658		$-
Actual return on plan assets, net of expenses	(2,292	)	-		19,493		-
Employer contributions	6,777		4,438		110,172		4,961
Plan participants' contributions	331		1,335		344		817
Benefits paid	(5,999	)	(5,773	)	(14,909	)	(5,778	)
Settlements	(1,650	)	-		(249,709	)	-
Foreign currency changes	(2,211	)	-		3,385		-
Fair value of plan assets, end of year	$168,390		$-		$173,434		$-

The funded status of the plans was as follows:

	As of December 31, 2013						As of December 31, 2012
(in thousands)	Pension plans			Other postretirement benefits			Pension plans			Other postretirement benefits

Fair value of plan assets		$168,390			$-			$173,434			$-
Benefit obligation		204,334			61,108			218,538			84,368
Funded status		(35,944	)		($61,108	)		($45,104	)		($84,368	)

Accrued benefit cost, end of year		(35,944	)		($61,108	)		($45,104	)		($84,368	)

Amounts recognized in the statement of financial position consist of the following:
Noncurrent asset		$7,358			$-			7,034			$-
Current liability		(2,321	)		(5,056	)		(2,318	)		(5,547	)
Noncurrent liability		(40,981	)		(56,052	)		(49,820	)		(78,821	)
Net amount recognized		($35,944	)		($61,108	)		($45,104	)		($84,368	)

Amounts recognized in accumulated other comprehensive income consist of:
Net actuarial loss		$73,908			$41,175			$84,784			$57,966
Prior service cost/(credit)		866			(44,364	)		405			(40,329	)
Transition obligation		-						70			-
Net amount recognized		$74,774			($3,189	)		$85,259			$17,637

The composition of the net periodic benefit plan cost for the years ended December 31, 2013, 2012 and 2011, was as follows:

	Pension plans						Other postretirement benefits
(in thousands)	2013		2012		2011		2013		2012		2011

Components of net periodic benefit cost:
Service cost	$3,662		$3,486		$3,117		$875		$1,071		$931
Interest cost	8,852		12,180		19,958		3,080		3,691		3,869
Other adjustments	-		-		-		-		-		945
Expected return on assets	(8,677	)	(11,799	)	(15,858	)	-		-		-
Amortization of prior service cost/(credit)	35		35		37		(3,940	)	(3,666	)	(3,666	)
Amortization of transition obligation	70		79		83		-		-		-
Amortization of net actuarial loss	3,117		4,223		5,672		3,395		3,215		3,022
Settlement	502		119,986		327		-		-		-
Curtailment (gain)/loss	(1,143	)	-		-		-		-		-
Special / contractual termination benefits	-		-		233		-		-		-
Net periodic benefit cost	$6,418		$128,190		$13,569		$3,410		$4,311		$5,101

Weighted average assumptions used to determine net cost:
Discount rate - U.S. plan	4.28	%	4.82	%	5.59	%	3.93	%	4.86	%	5.55	%
Discount rate - non-U.S. plan	4.09	%	4.48	%	5.29	%	4.00	%	4.20	%	-
Expected return on plan assets - U.S. plan	4.61	%	4.82	%	5.80	%	-		-		-
Expected return on plan assets - non-U.S. plans	5.53	%	6.26	%	6.80	%	-		-		-
Rate of compensation increase - U.S. plan	-		-		-		3.00	%	3.00	%	3.00	%
Rate of compensation increase - non-U.S. plans	3.26	%	3.19	%	3.47	%	3.00	%	3.00	%	-
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 2013 were as follows:


			Other
	Pension		postretirement
(in thousands)	plan		benefits

Settlements/curtailments	($46	)	$-
Asset/liabilty loss (gain)	(6,492	)	(21,370	)
Amortization of actuarial (loss)	(3,117	)	(3,395	)
Amortization of prior service (cost)/credit	(35	)	3,940
Amortization of transition (obligation)	(70	)	-
Currency impact	(726	)	(285	)
Total recognized in other comprehensive income	($10,486	)	($21,110	)

Total recognized in net periodic benefit cost and other comprehensive income	($4,068	)	($17,700	)

The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2014 are as follows:

		Total
	Total	postretirement
(in thousands)	pension	benefits
Actuarial loss	$2,456	$2,908
Prior service cost/(benefit)	55	(4,488	)
Total	$2,511	($1,580	)

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.

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, 2013 and 2012, using the fair-value hierarchy, which has three levels based on the reliability of inputs used, as described in Note 15:

	Total fair	Quoted prices	Significant other		Significant
	value at	in active markets	observable inputs		unobservable inputs
(in thousands)	December 31, 2013	(Level 1)	(Level 2)		(Level 3)
Common stocks	$33,685	$33,685		$ -		$ -
Debt securities	122,699	-	122,699		-
Insurance contracts	2,875	-	-		2,875
Limited partnerships	7,034	-	-		7,034
Hedge funds	392	-	-		392
Cash and short-term investments	1,705	1,705	-		-
Total plan assets	$168,390	$35,390	$122,699		$10,301

	Total fair		Quoted prices		Significant other		Significant
	value at		in active markets		observable inputs		unobservable inputs
(in thousands)	December 31, 2012		(Level 1)		(Level 2)		(Level 3)
Common stocks		$46,625		$46,625		$-	$-
Debt securities		114,136		-		114,136	-
Insurance contracts		2,542		-		-	2,542
Limited partnerships		7,556		-		-	7,556
Hedge funds		536		-		-	536
Cash and short-term investments		2,039		2,039		-	-
Total plan assets		$173,434		$48,664		$114,136	$10,634

The following tables present a reconciliation of Level 3 assets held during the years ended December 31, 2013 and 2012:

(in thousands)	December 31, 2012		Net realized gains/(losses)		Net unrealized gains/(losses)		Net purchases, issuances and settlements			Net transfers (out of) Level 3		December 31, 2013
Insurance contracts		$2,542		$-		$41		$292			$-		$2,875
Limited partnerships		7,556		94		533		(1,149	)		-		7,034
Hedge funds		536		-		15		(159	)		-		392
Total		$10,634		$94		$589		($1,016	)		$-		$10,301

(in thousands)	December 31, 2011		Net realized gains/(losses)		Net unrealized gains/(losses)		Net purchases, issuances and settlements			Net transfers (out of) Level 3		December 31, 2012
Insurance contracts		$2,361		$-		$39		$142			$-		$2,542
Limited partnerships		8,676		-		521		(1,641	)		-		7,556
Hedge funds		557		-		32		(53	)		-		536
Total		$11,594		$-		$592		($1,552	)		$-		$10,634

The asset allocation for the Company's U.S. and non-U.S. pension plans for 2013 and 2012, and the target allocation for 2014, 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	2014	2013	2012	2014	2013	2012

Equity securities	-	5%	5%	36%	36%	50%
Debt securities	100%	88%	88%	56%	57%	43%
Real estate	-	5%	4%	5%	4%	3%
Other (1)	-	2%	3%	3%	3%	4%
	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 2013 and 2012, the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with projected benefit obligation and an accumulated benefit obligation in excess of plan assets were as follows:

	Plans with projected benefit obligation
	in excess of plan assets
(in thousands)	2013	2012
Projected benefit obligation	$123,749	$183,765
Accumulated benefit obligation	120,287	169,396
Fair value of plan assets	80,447	131,626


	Plans with accumulated benefit obligation
	in excess of plan assets
(in thousands)	2013	2012
Projected benefit obligation	$123,749	$136,329
Accumulated benefit obligation	120,287	132,396
Fair value of plan assets	80,447	86,835

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	$4,068	$5,773

Expected benefit payments
2014	$5,910	$5,056
2015	6,148	4,826
2016	6,585	4,639
2017	7,054	4,476
2018	7,663	4,325
2019-2022	47,269	20,088