Benefit Plans and Other Postretirement Benefits

12 Months Ended

Dec. 31, 2011

Benefit Plans and Other Postretirement Benefits

Benefit Plans and Other Postretirement Benefits

Note 9—Benefit Plans and Other Postretirement Benefits

The Company and certain of its domestic subsidiaries have two defined benefit pension plans (the “U.S. Plans”), which cover certain U.S. employees and which represent the majority of the plan assets and benefit obligations of the aggregate defined benefit plans of the Company. The U.S. Plans’ benefits are generally based on years of service and compensation and are generally noncontributory.  Certain U.S. employees not covered by the U.S. Plans are covered by defined contribution plans.  Certain foreign subsidiaries have defined benefit plans covering their employees (the “International Plans”). The largest international pension plan, in accordance with local regulations, is unfunded and had a projected benefit obligation of approximately $48,000 and $51,000 at December 31, 2011 and 2010, respectively. Total required contributions to be made during 2012 for the unfunded International Plans amount to approximately $3,200. This amount, which is classified as other accrued expenses, and the obligations discussed above, are included in the accompanying Consolidated Balance Sheets and in the tables below.

The following is a summary of the Company’s defined benefit plans’ funded status as of the most recent actuarial valuations; for each year presented below, projected benefits exceed assets.

	December 31,
	2011			2010
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	457,321		$	429,800
Service cost	7,832			7,542
Interest cost	22,684			23,100
Plan participants’ contributions	—			26
Plan amendments	—			5,452
Actuarial loss	27,642			17,675
Foreign exchange translation	(2,450		)	(3,947		)
Benefits paid	(24,420		)	(22,327		)
Projected benefit obligation at end of year	488,609			457,321
Change in plan assets:
Fair value of plan assets at beginning of year	296,530			268,177
Actual return on plan assets	(2,001		)	29,878
Employer contributions	22,844			17,267
Plan participants’ contributions	—			26
Foreign exchange translation	(2,131		)	636
Benefits paid	(20,188		)	(19,454		)
Fair value of plan assets at end of year	295,054			296,530
Funded status	$	(193,555	)	$	(160,791	)

The accumulated benefit obligation for the Company’s defined benefit pension plan was $469,547 and $435,618 at December 31, 2011 and 2010, respectively.

	Year Ended December 31,
	2011			2010			2009
Components of net pension expense:
Service cost	$	7,073		$	5,907		$	7,043
Interest cost	22,684			23,100			23,276
Expected return on plan assets	(25,226		)	(28,016		)	(25,026		)
Net amortization of actuarial losses	14,528			17,051			11,238
Net pension expense	$	19,059		$	18,042		$	16,531

	Weighted-average assumptions used to determine benefit obligations at December 31,
	Pension Benefits				Other Benefits
	2011		2010		2011		2010
Discount rate:
U.S. plans	4.45	%	5.20	%	4.25	%	4.85	%
International plans	4.97	%	5.26	%	n/a		n/a
Rate of compensation increase:
U.S. plans	3.00	%	3.00	%	n/a		n/a
International plans	2.83	%	2.97	%	n/a		n/a

	Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31,
	Pension Benefits						Other Benefits
	2011		2010		2009		2011		2010		2009
Discount rate:
U.S. plans	5.20	%	5.75	%	6.25	%	4.85	%	5.40	%	6.25	%
International plans	5.26	%	5.46	%	6.20	%	n/a		n/a		n/a
Expected long-term return on assets:
U.S. plans	8.25	%	8.25	%	8.25	%	n/a		n/a		n/a
International plans	6.30	%	6.63	%	6.74	%	n/a		n/a		n/a
Rate of compensation increase:
U.S. plans	3.00	%	3.00	%	3.00	%	n/a		n/a		n/a
International plans	2.97	%	2.96	%	2.43	%	n/a		n/a		n/a

The pension expense for the U.S. Plans and the International Plans (the “Plans”) approximated $19,100, $18,000 and $16,500 in 2011, 2010 and 2009, respectively, and is calculated based upon a number of actuarial assumptions established on January 1 of the applicable year, detailed in the table above, including a weighted-average discount rate, rate of increase in future compensation levels and an expected long-term rate of return on the respective Plans’ assets.

The discount rate used by the Company for valuing pension liabilities is based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations.  The Company’s U.S. Plans comprised the majority of the accrued benefit obligation, pension assets and pension expense. The discount rate for the U.S. Plans was 4.45% at December 31, 2011 and 5.20% at December 31, 2010. Although future changes to the discount rate are unknown, had the discount rate increased or decreased by 50 basis points, the accrued benefit obligation would have decreased or increased by approximately $21,000.

The Company’s investment strategy for the Plans’ assets is to achieve a rate of return on plan assets equal to or greater than the average for the respective investment classification through prudent allocation and periodic rebalancing between fixed income and equity instruments. The current investment policy includes a strategy to maintain an adequate level of diversification, subject to portfolio risks.  The target allocations for the U.S. Plans, which represent the majority of the Plans’ assets, are 60% equity and 40% fixed income.  Short-term strategic ranges for investments are established within these long term target percentages.  The Company invests in a diversified investment portfolio through various investment managers and evaluates its plan assets for the existence of concentration risks.  As of December 31, 2011, there were no significant concentrations of risks in the Company’s defined benefit plan assets.  The Company does not invest pension assets nor instructs investment managers to invest pension assets in Amphenol securities.  The Plans may indirectly hold the Company’s securities as a result of external investment management in certain comingled funds.  Such holdings would not be material relative to the Plans’ total assets.

In developing the expected long-term rate of return assumption for the U.S. Plans, the Company evaluated input from its external actuaries and investment consultants as well as long-term inflation assumptions. Projected returns by such consultants are based on broad equity and bond indices.  The Company also considered its historical twenty-year compounded return of approximately 9%, which has been in excess of these broad equity and bond benchmark indices. As described above, the expected long-term rate of return on the U.S. Plans’ assets is based on an asset allocation assumption of 60% with equity managers, with an expected long-term rate of return of approximately 9% and 40% with fixed income managers, with an expected long-term rate of return of approximately 7%.  As of December 31, 2011, the asset allocation was 62% with equity managers and 37% with fixed income managers and 1% in cash.  As of December 31, 2010, the asset allocation was 59% with equity managers and 36% with fixed income managers and 5% in cash.  The Company believes that the long-term asset allocation on average will approximate 60% with equity managers and 40% with fixed income managers. The Company regularly reviews the actual asset allocation and periodically rebalances investments to its targeted allocation when considered appropriate. Based on this methodology, the Company’s expected long-term rate of return assumption to determine the accrued benefit obligation of the U.S. Plans at both December 31, 2011 and 2010 is approximately 8.25%.

The Company’s plan assets are reported at fair value and classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  The process requires judgment and may have effect on the placement of the plan assets within the fair value measurement hierarchy. The fair values of the Company’s pension plans’ assets at December 31, 2011 and 2010 by asset category are as follows (refer to Note 4 for definitions of Level 1, 2 and 3 inputs):

	Fair Value Measurements at December 31, 2011
Asset Category	Total		Quoted Prices in Active Markets for IdenticalAssets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities:
U.S. securities	$	103,229	$	80,651	$	22,578	$	—
International securities	77,250		40,329		36,921		—
	180,479		120,980		59,499		—
Fixed income securities:
U.S. securities	72,888		54,398		18,490		—
International securities	38,602		—		38,602		—
	111,490		54,398		57,092		—
Cash and cash equivalents	3,085		3,085		—		—
Total	$	295,054	$	178,463	$	116,591	$	—

	Fair Value Measurements at December 31, 2010
Asset Category	Total		Quoted Prices in Active Markets for IdenticalAssets (Level 1)		Significant Observable Inputs  (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities:
U.S. securities	$	84,675	$	77,107	$	7,568	$	—
International securities	91,754		50,983		40,771		—
	176,429		128,090		48,339		—
Fixed income securities:
U.S. securities	75,165		56,707		18,458		—
International securities	31,531		—		31,531		—
	106,696		56,707		49,989		—
Cash and cash equivalents	13,405		13,405		—		—
Total	$	296,530	$	198,202	$	98,328	$	—

Equity securities consist primarily of publicly traded U.S. and Non-U.S. equities.  Publicly traded securities are valued at the last trade or closing price reported in the active market in which the individual securities are traded.  Certain equity securities held in commingled funds are valued at unitized net asset value (“NAV”) based on the fair value of the underlying net assets owned by the funds.

Fixed income securities consist primarily of government securities and corporate bonds.  They are valued at the closing price in the active market or using quotes obtained from brokers/dealers or pricing services.  Certain fixed income securities held within commingled funds are valued using NAV as determined by the custodian of the funds based on the fair value of the underlying net assets of the funds.

The Company also has an unfunded Supplemental Employee Retirement Plan (“SERP”), which provides for the payment of the portion of annual pension which cannot be paid from the retirement plan as a result of regulatory limitations on average compensation for purposes of the benefit computation. The obligation related to the SERP is included in the accompanying Consolidated Balance Sheets and in the tables above.

As of December 31, 2011, the amounts before tax for unrecognized net loss, net prior service cost and net transition asset in accumulated other comprehensive income related to the Plans above are $219,022, $11,874 and $543 respectively. The estimated net loss, prior service cost and net transition asset for the Plans above that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are expected to be $17,552, $2,167 and $109, respectively.

The Company made cash contributions to the Plans of $22,800 and $17,300 in 2011 and 2010, respectively, and estimates that, based on current actuarial calculations, it will make a cash contribution to the Plans in 2012 of approximately $26,000, most of which is to the U.S. Plans.  Cash contributions in subsequent years will depend on a number of factors, including the investment performance of the Plan assets.

Benefit payments related to the Plans above, including those amounts to be paid out of Company assets and reflecting future expected service as appropriate, are expected to be as follows:

2012	$	21,668
2013	22,435
2014	23,424
2015	24,569
2016	25,738
2017-2021	144,261

The Company offers various defined contribution plans for U.S. and foreign employees. Participation in these plans is based on certain eligibility requirements.  The Company matches the majority of employee contributions to the U.S. defined contribution plans with cash contributions up to a maximum of 5% of eligible compensation.  The Company provided matching contributions of approximately $2,500 and $2,200 in 2011 and 2010, respectively.

The Company maintains self-insurance programs for that portion of its health care and workers compensation costs not covered by insurance. The Company also provides certain health care and life insurance benefits to certain eligible retirees through post-retirement benefit (“OPEB”) programs. The Company’s share of the cost of such plans for most participants is fixed, and any increase in the cost of such plans will be the responsibility of the retirees. The Company funds the benefit costs for such plans on a pay-as-you-go basis.  Since the Company’s obligation for postretirement medical plans is fixed and since the benefit obligation and the net postretirement benefit expense are not material in relation to the Company’s financial condition or results of operations, the Company believes any change in medical costs from that estimated will not have a significant impact on the Company. The discount rate used in determining the benefit obligation was 4.25% and 4.85% at December 31, 2011 and 2010, respectively. Summary information on the Company’s OPEB programs is as follows:

	December 31,
	2011			2010
Change in benefit obligation:
Benefit obligation at beginning of year	$	19,095		$	14,832
Service cost	198			165
Interest cost	843			786
Paid benefits and expenses	(1,139		)	(2,003		)
Actuarial (gain) loss	(2,299		)	5,315
Benefit obligation at end of year	$	16,698		$	19,095

The accumulated benefit obligation for the Company’s OPEB plan was equal to its projected benefit obligation at December 31, 2011 and 2010.

	Year ended December 31,
	2011		2010		2009
Components of net post-retirement benefit cost:
Service cost	$	198	$	165	$	160
Interest cost	843		786		836
Amortization of transition obligation	62		62		62
Net amortization of actuarial losses	1,291		882		773
Net postretirement benefit cost	$	2,394	$	1,895	$	1,831

As of December 31, 2011, the amounts for unrecognized net loss, net prior service cost and net transition obligation in accumulated other comprehensive income related to OPEB programs are $9,747, nil, and $62, respectively. The estimated net loss, prior service cost and net transition obligation for the OPEB programs that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are expected to be $974, nil and $62, respectively.

Benefit payments for the OPEB plan, including those amounts to be paid out of Company assets and reflecting future expected service as appropriate are expected to be approximately $1,300 per year for the next ten years.