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 certain 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). Effective January 1, 2013, we ceased annual company contribution credits to the cash balance accounts in our Libbey U.S. Salaried Pension Plan and SERP. 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 September 30,	U.S. Plans						Non-U.S. Plans						Total
(dollars in thousands)	2013			2012			2013			2012			2013			2012
Service cost	$	1,184		$	1,543		$	729		$	118		$	1,913		$	1,661
Interest cost	3,582			3,702			1,271			1,327			4,853			5,029
Expected return on plan assets	(5,571		)	(4,939		)	(547		)	(596		)	(6,118		)	(5,535		)
Amortization of unrecognized:
Prior service cost	293			494			65			70			358			564
Loss	2,095			1,302			223			149			2,318			1,451
Settlement charge	424			—			336			93			760			93
Curtailment charge (credit)	—			(125		)	—			—			—			(125		)
Pension expense	$	2,007		$	1,977		$	2,077		$	1,161		$	4,084		$	3,138

Nine months ended September 30,	U.S. Plans						Non-U.S. Plans						Total
(dollars in thousands)	2013			2012			2013			2012			2013			2012
Service cost	$	3,554		$	4,468		$	2,137		$	1,108		$	5,691		$	5,576
Interest cost	10,564			11,548			3,722			3,761			14,286			15,309
Expected return on plan assets	(16,775		)	(13,885		)	(1,524		)	(1,786		)	(18,299		)	(15,671		)
Amortization of unrecognized:
Prior service cost	879			1,537			187			198			1,066			1,735
Loss	6,445			4,822			676			408			7,121			5,230
Settlement charge	1,139			457			336			93			1,475			550
Curtailment charge (credit)	—			(125		)	—			—			—			(125		)
Pension expense	$	5,806		$	8,822		$	5,534		$	3,782		$	11,340		$	12,604

During the three and nine months ended September 30, 2013, we incurred pension settlement charges totaling $0.8 million and $1.5 million, respectively. The pension settlement charges were triggered by excess lump sum distributions that required us to record unrecognized gains and losses in our pension plan accounts. We have contributed $1.2 million and $4.0 million of cash into our pension plans for the three and nine months ended September 30, 2013, respectively. Pension contributions for the remainder of 2013 are estimated to be $1.8 million.

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. Effective January 1, 2013, we ended our existing healthcare benefit for salaried retirees age 65 and older and are now providing a Retiree Health Reimbursement Arrangement (RHRA) that supports retirees in purchasing a Medicare plan that meets their needs. Also effective January 1, 2013, we reduced the maximum life insurance benefit for salaried retirees to $10,000. 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 September 30,	U.S. Plans				Non-U.S. Plans					Total
(dollars in thousands)	2013		2012		2013		2012			2013		2012
Service cost	$	298	$	368	$	—	$	—		$	298	$	368
Interest cost	655		857		29		28			684		885
Amortization of unrecognized:
Prior service cost	35		105		—		—			35		105
Loss / (gain)	214		229		—		—			214		229
Non-pension postretirement benefit expense	$	1,202	$	1,559	$	29	$	28		$	1,231	$	1,587

Nine months ended September 30,	U.S. Plans				Non-U.S. Plans					Total
(dollars in thousands)	2013		2012		2013		2012			2013		2012
Service cost	$	893	$	1,103	$	1	$	1		$	894	$	1,104
Interest cost	1,966		2,570		83		80			2,049		2,650
Amortization of unrecognized:
Prior service cost	105		316		—		—			105		316
Loss / (gain)	643		687		—		(1		)	643		686
Non-pension postretirement benefit expense	$	3,607	$	4,676	$	84	$	80		$	3,691	$	4,756

Our 2013 estimate of non-pension cash payments is $4.7 million, and we have paid $0.9 million and $3.1 million for the three and nine months ended September 30, 2013, respectively.