Nonpension Postretirement Benefits

We provide certain retiree health care and life insurance benefits covering our U.S. and Canadian salaried and non-union hourly employees hired before January 1, 2004 and a majority of our union hourly employees (excluding employees hired at Shreveport after 2008 and at Toledo after September 30, 2010). Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. The U.S. nonpension postretirement plans cover the hourly and salaried U.S.-based employees of Libbey. The non-U.S. nonpension postretirement plans cover the retirees and active employees of Libbey who are located in Canada. The postretirement benefit plans are not funded.

Effect on Operations

The provision for our nonpension postretirement benefit expense consists of the following:



Year ended December 31, (dollars in thousands)	U.S. Plans							Non-U.S. Plans									Total
Year ended December 31, (dollars in thousands)	2011		2010		2009			2011			2010			2009			2011		2010		2009
Service cost (benefits earned during the period)	$	1,359	$	1,360	$	1,333		$	2		$	1		$	1		$	1,361	$	1,361	$	1,334
Interest cost on projected benefit obligation	3,632		3,617		3,783			122			124			112			3,754		3,741		3,895
Amortization of unrecognized:
Prior service cost (credit)	422		290		(418		)	—			—			—			422		290		(418		)
Loss (gain)	1,107		1,028		764			(17		)	(29		)	(34		)	1,090		999		730
Curtailment credit	—		—		(94		)	—			—			—			—		—		(94		)
Nonpension postretirement benefit expense	$	6,520	$	6,295	$	5,368		$	107		$	96		$	79		$	6,627	$	6,391	$	5,447

Actuarial Assumptions

The discount rate used to determine the accumulated postretirement benefit obligation was:



	U.S. Plans				Non-U.S. Plans
	2011		2010		2011		2010
Discount rate	4.91	%	5.34	%	3.97	%	4.86	%

The discount rate used to determine net postretirement benefit cost was:



	U.S. Plans						Non-U.S. Plans
	2011		2010		2009		2011		2010		2009
Discount rate	5.34	%	5.54	%	6.36	%	4.86	%	5.42	%	5.89	%

The weighted average assumed health care cost trend rates at December 31 were as follows:



	U.S. Plans				Non-U.S. Plans
	2011		2010		2011		2010
Initial health care trend	7.25	%	7.50	%	7.25	%	7.50	%
Ultimate health care trend	5.00	%	5.00	%	5.00	%	5.00	%
Years to reach ultimate trend rate	9		10		9		10

We use various actuarial assumptions, including the discount rate and the expected trend in health care costs, to estimate the costs and benefit obligations for our retiree health plan. The discount rate is determined based on high-quality fixed income investments that match the duration of expected retiree medical benefits at our December 31 measurement date to establish the discount rate. The discount rate at December 31 is used to measure the year-end benefit obligations and the earnings effects for the subsequent year.

The health care cost trend rate represents our expected annual rates of change in the cost of health care benefits. The trend rate noted above represents a forward projection of health care costs as of the measurement date.

Sensitivity to changes in key assumptions is as follows:


•	A 1.0 percent change in the health care trend rate would not have a material impact upon the nonpension postretirement expense.

•A 1.0 percent change in the discount rate would change the nonpension postretirement expense by $0.5 million.

Accumulated Postretirement Benefit Obligation

The components of our nonpension postretirement benefit obligation are as follows:



Year ended December 31, (dollars in thousands)	U.S. Plans						Non-U.S. Plans						Total
Year ended December 31, (dollars in thousands)	2011			2010			2011			2010			2011			2010
Change in accumulated nonpension postretirement benefit obligation:
Benefit obligation, beginning of year	$	70,181		$	66,792		$	2,573		$	2,351		$	72,754		$	69,143
Service Cost	1,359			1,360			2			1			1,361			1,361
Interest cost	3,632			3,617			122			124			3,754			3,741
Plan participants' contributions	1,419			1,365			—			—			1,419			1,365
ERRP to be used to reduce retiree contribution	25			—			—			—			25			—
Plan amendments	—			300			—			—			—			300
Actuarial (gain) loss	(1,555		)	2,068			149			101			(1,406		)	2,169
Exchange rate fluctuations	—			—			(53		)	120			(53		)	120
Benefits paid	(4,520		)	(5,321		)	(117		)	(124		)	(4,637		)	(5,445		)
Benefit obligation, end of year	$	70,541		$	70,181		$	2,676		$	2,573		$	73,217		$	72,754

Funded status and accrued benefit cost	$	(70,541	)	$	(70,181	)	$	(2,676	)	$	(2,573	)	$	(73,217	)	$	(72,754	)

The 2011 net accrued postretirement benefit cost of $73.2 million is represented by a current liability in the amount of $4.7 million and a long-term liability in the amount of $68.5 million on the Consolidated Balance Sheets. The 2010 net accrued postretirement benefit cost of $72.8 million is represented by a current liability in the amount of $5.0 million and a long-term liability in the amount of $67.7 million on the Consolidated Balance Sheets.

The pre-tax amounts recognized in accumulated other comprehensive loss as of December 31, 2011 and 2010, are as follows:



Year ended December 31, (dollars in thousands)	U.S. Plans				Non-U.S. Plans						Total
Year ended December 31, (dollars in thousands)	2011		2010		2011			2010			2011		2010
Net acturial loss (gain)	$	17,254	$	20,574	$	(284	)	$	(456	)	$	16,970	$	20,118
Prior service cost	2,190		2,612		—			—			2,190		2,612
Total cost (credit)	$	19,444	$	23,186	$	(284	)	$	(456	)	$	19,160	$	22,730

The pre-tax amounts in accumulated other comprehensive loss of December 31, 2011, that are expected to be recognized as a credit to net periodic benefit cost during 2012 are as follows:



Year ended December 31, (dollars in thousands)	U.S. Plans		Non-U.S. Plans			Total
Net acturial loss (gain)	$	916	$	(1	)	$	915
Prior service cost	422		—			422
Total cost (credit)	$	1,338	$	(1	)	$	1,337

Nonpension postretirement benefit payments net of estimated future Medicare Part D subsidy payments and future retiree contributions, are anticipated to be paid as follows:



Fiscal Year (dollars in thousands)	U.S. Plans		Non-U.S. Plans		Total
2012	$	4,517	$	204	$	4,721
2013	$	4,864	$	207	$	5,071
2014	$	5,261	$	211	$	5,472
2015	$	5,524	$	209	$	5,733
2016	$	5,762	$	207	$	5,969
2017-2021	$	28,279	$	958	$	29,237

In March 2010, the Patient Protection and Affordable Care Act and the Health Care Education and Affordability Reconciliation Act (the Acts) were signed into law. The Acts contain provisions which could impact our accounting for retiree medical benefits in future periods. However, the extent of that impact, if any, cannot be determined until additional interpretations of the Acts become available. Based on the analysis to date, the impact of provisions in the Acts which are reasonably determinable is not expected to have a material impact on our postretirement benefit plans. We will continue to assess the provisions of the Acts and may consider plan amendments and design changes in future periods to better align these plans with the provisions of the Acts.