Pension and Non-pension Postretirement Benefits

3 Months Ended

Mar. 31, 2012

Pension and Non-pension Postretirement Benefits [Abstract]

Pension and Non-pension Postretirement Benefits

Pension and Non-pension Postretirement Benefits

We have pension plans covering the majority of our employees. Benefits generally are based on compensation for salaried employees and job grade and length of service for hourly employees. Our policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements. In addition, we have an unfunded supplemental employee retirement plan (SERP) that covers salaried U.S.-based employees of Libbey hired before January 1, 2006. The U.S. pension plans cover the salaried U.S.-based employees of Libbey hired before January 1, 2006 and most hourly U.S.-based employees (excluding employees hired at Shreveport after 2008 and at Toledo after September 30, 2010). The non-U.S. pension plans cover the employees of our wholly owned subsidiaries in the Netherlands and Mexico. The plan in Mexico is not funded.

The components of our net pension expense, including the SERP, are as follows:

Three months ended March 31,	U.S. Plans						Non-U.S. Plans						Total
(dollars in thousands)	2012			2011			2012			2011			2012			2011
Service cost	$	1,555		$	1,432		$	442		$	428		$	1,997		$	1,860
Interest cost	4,019			4,088			1,256			1,260			5,275			5,348
Expected return on plan assets	(4,485		)	(4,313		)	(607		)	(565		)	(5,092		)	(4,878		)
Amortization of unrecognized:
Prior service cost	521			541			66			82			587			623
Loss	1,801			1,218			135			126			1,936			1,344
Settlement charge	420			—			—			—			420			—
Pension expense	$	3,831		$	2,966		$	1,292		$	1,331		$	5,123		$	4,297

In the first quarter of 2012, we incurred pension settlement charges of $0.4 million. The pension settlement charges were triggered by an excess lump sum distribution, which required us to record unrecognized gains and losses in our pension plan accounts.

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. non-pension postretirement plans cover the hourly and salaried U.S.-based employees of Libbey (excluding those mentioned above). The non-U.S. non-pension postretirement plans cover the retirees and active employees of Libbey who are located in Canada. The postretirement benefit plans are not funded.

The provision for our non-pension postretirement benefit expense consists of the following:

Three months ended March 31,	U.S. Plans				Non-U.S. Plans					Total
(dollars in thousands)	2012		2011		2012		2011			2012		2011
Service cost	$	368	$	373	$	—	$	—		$	368	$	373
Interest cost	857		925		26		29			883		954
Amortization of unrecognized:
Prior service gain	105		105		—		—			105		105
Loss / (gain)	229		290		—		(4		)	229		286
Non-pension postretirement benefit expense	$	1,559	$	1,693	$	26	$	25		$	1,585	$	1,718

In 2012, we expect to utilize approximately $36.2 million in cash to fund our pension plans and pay for non-pension postretirement benefits. Of that amount, $9.3 million of cash was utilized in the three months ended March 31, 2012.

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 that could impact our accounting for retiree medical benefits in future periods. Based on the analysis to date, the impact of provisions in the Acts that 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.