Pension and Non-pension Postretirement Benefits

We have pension plans covering the majority of our employees. Benefits generally are based on compensation and service 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 primarily unfunded.

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)	2014			2013			2014			2013			2014			2013
Service cost	$	916		$	1,184		$	567		$	729		$	1,483		$	1,913
Interest cost	3,845			3,582			1,396			1,271			5,241			4,853
Expected return on plan assets	(5,597		)	(5,571		)	(616		)	(547		)	(6,213		)	(6,118		)
Amortization of unrecognized:
Prior service cost	265			293			55			65			320			358
Loss	1,014			2,095			253			223			1,267			2,318
Settlement charge	—			424			—			336			—			760
Pension expense	$	443		$	2,007		$	1,655		$	2,077		$	2,098		$	4,084

Nine months ended September 30,	U.S. Plans						Non-U.S. Plans						Total
(dollars in thousands)	2014			2013			2014			2013			2014			2013
Service cost	$	2,748		$	3,554		$	1,724		$	2,137		$	4,472		$	5,691
Interest cost	11,534			10,564			4,242			3,722			15,776			14,286
Expected return on plan assets	(16,790		)	(16,775		)	(1,872		)	(1,524		)	(18,662		)	(18,299		)
Amortization of unrecognized:
Prior service cost	794			879			170			187			964			1,066
Loss	3,043			6,445			770			676			3,813			7,121
Settlement charge	—			1,139			—			336			—			1,475
Pension expense	$	1,329		$	5,806		$	5,034		$	5,534		$	6,363		$	11,340

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, which required us to record unrecognized gains and losses in our pension plan accounts. We have contributed $1.2 million and $3.1 million of cash into our pension plans for the three and nine months ended September 30, 2014, respectively. Pension contributions for the remainder of 2014 are estimated to be $3.2 million.

We provide certain retiree health care and life insurance benefits covering our U.S and Canadian salaried 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 instead provide 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 unfunded.

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)	2014		2013		2014		2013		2014		2013
Service cost	$	252	$	298	$	—	$	—	$	252	$	298
Interest cost	710		655		26		29		736		684
Amortization of unrecognized:
Prior service cost	35		35		—		—		35		35
Loss / (gain)	66		214		—		—		66		214
Non-pension postretirement benefit expense	$	1,063	$	1,202	$	26	$	29	$	1,089	$	1,231

Nine months ended September 30,	U.S. Plans				Non-U.S. Plans				Total
(dollars in thousands)	2014		2013		2014		2013		2014		2013
Service cost	$	755	$	893	$	1	$	1	$	756	$	894
Interest cost	2,130		1,966		82		83		2,212		2,049
Amortization of unrecognized:
Prior service cost	105		105		—		—		105		105
Loss / (gain)	200		643		—		—		200		643
Non-pension postretirement benefit expense	$	3,190	$	3,607	$	83	$	84	$	3,273	$	3,691

Our 2014 estimate of non-pension cash payments is $4.8 million, and we have paid $1.8 million and $3.9 million for the three and nine months ended September 30, 2014, respectively.