Pension and Other Postretirement Benefits

9 Months Ended

Sep. 30, 2012

General Discussion of Pension and Other Postretirement Benefits [Abstract]

Pension and Other Postretirement Benefits

Pension and Other Postretirement Benefits

The Company provides noncontributory pension and various healthcare and life insurance benefits to most employees and retirees. The pension plan is not fully funded. The Company has contributed $170.2 to the master pension trust for the nine months ended September 30, 2012, which satisfies the Company’s required pension contribution for 2012.

Net periodic benefit cost (income) for pension and other postretirement benefits were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Pension Benefits
Service cost	$	0.8		$	0.8		$	2.4		$	2.4
Interest cost	40.1			45.1			120.2			135.5
Expected return on assets	(47.4		)	(51.7		)	(141.0		)	(155.6		)
Amortization of prior service cost	1.1			1.2			3.0			3.2
Amortization of (gain) loss	6.1			4.7			18.3			14.1
Net periodic benefit cost (income)	$	0.7		$	0.1		$	2.9		$	(0.4	)
Other Postretirement Benefits
Service cost	$	1.2		$	1.1		$	3.4		$	3.2
Interest cost	7.9			9.4			23.7			28.6
Settlement gain related to Middletown Retiree Settlement	—			—			—			(14.0		)
Amortization of prior service cost (credit)	(19.4		)	(19.2		)	(58.0		)	(57.5		)
Reversal of prior amortization related to Butler Retiree Settlement	—			—			—			14.2
Amortization of (gain) loss	—			(0.3		)	—			(0.8		)
Net periodic benefit cost (income)	$	(10.3	)	$	(9.0	)	$	(30.9	)	$	(26.3	)

In 2009, the Company reached a final settlement (the “Middletown Retiree Settlement”) of a class action filed on behalf of certain retirees from the Company’s Middletown Works relating to the Company’s other postretirement benefit (“OPEB”) obligations to such retirees. For accounting purposes, a settlement of the Company’s OPEB obligations related to the Middletown Retiree Settlement was deemed to have occurred in the first quarter of 2011 when the Company made the final payment of $65.0 to a Voluntary Employee Benefit Association (“VEBA”) trust created under the terms of that settlement. In the first quarter of 2011, the Company recognized the settlement accounting at the date of the final payment and recorded a non-cash gain of $14.0 in the statement of operations. The amount recognized was prorated based on the portion of the total liability as of March 2008 that was settled pursuant to the Middletown Retiree Settlement.

In January 2011, the Company reached a final settlement agreement (the “Butler Retiree Settlement”) of a class action filed on behalf of certain retirees from the Company’s Butler Works relating to the Company’s OPEB obligations to such retirees (the “Class Members”). Pursuant to the Butler Retiree Settlement, AK Steel agreed to continue to provide company-paid health and life insurance to Class Members through December 31, 2014, and to make combined lump sum payments totaling $91.0 to a VEBA trust and to plaintiffs’ counsel. AK Steel agreed to make three cash contributions to the VEBA trust as follows: $21.4 on August 1, 2011, and $31.7 on July 31, 2012, both which have been paid; and $27.6 on July 31, 2013. The balance of the lump sum payments was paid to plaintiffs’ attorneys on August 1, 2011, to cover plaintiffs’ obligations with respect to attorneys’ fees. Effective January 1, 2015, AK Steel will transfer to the VEBA trust all OPEB obligations owed to the Class Members under the Company’s applicable health and welfare plans and will have no further liability for any claims incurred by the Class Members after December 31, 2014, relating to their OPEB obligations. The VEBA trust will be utilized to fund all such future OPEB obligations to the Class Members. Trustees of the VEBA trust will determine the scope of the benefits to be provided to the Class Members. The effect of the settlement on the Company’s total OPEB liability (prior to any funding of the VEBA trust created under the terms of the settlement) was an increase in that liability of approximately $29.6 in the first quarter of 2011. With respect to this increase, a one-time, pre-tax charge of $14.2 was recorded in the first quarter of 2011 to reverse previous amortization of the prior plan amendment. The remaining portion was recognized in other comprehensive income and is being amortized into earnings over approximately five years. The Company’s OPEB liability will be reduced after each of the annual contributions to the VEBA trust under the terms of the Butler Retiree Settlement. In addition, the OPEB liability will be reduced by the ongoing benefit payment amounts through December 31, 2014. For accounting purposes, a settlement of the Company's OPEB obligations will be deemed to have occurred when the Company makes the final benefit payments in 2014.

Certain reclassifications of prior-year amounts have been made to conform to the current year presentation. Amounts for pension and OPEB expense (income) have been separately disclosed on the Condensed Consolidated Statements of Operations. These amounts had been included as part of costs of products sold and selling and administrative expenses in the prior year. The Company has also disclosed these amounts separately on the Condensed Consolidated Statements of Cash Flows.