PENSION AND OTHER POSTRETIREMENT BENEFITS

12 Months Ended

Dec. 31, 2013

Pension and Other Postretirement Benefit Expense [Abstract]

PENSION AND OTHER POSTRETIREMENT BENEFITS

PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company has two domestic defined benefit pension plans and two plans providing for other postretirement benefits, including medical and life insurance coverage. One of the pension plans and one of the other postretirement benefit plans cover eligible U.S. nonunion employees while the other pension plan and other postretirement benefits plan cover eligible U.S. union employees. The Company uses a December 31 measurement date for both of these plans.

Both the pension plans and the other postretirement benefit plans were modified during the year ended December 31, 2011. Participants who had 70 or greater points (age plus completed years of service) could elect to stay in the pension and accrue additional benefits or receive the Company's 401K match which was reinstated as of January 1, 2012. Those with less than 70 points were removed from the pension plan and will not accrue any additional benefits after December 31, 2011. However, these individuals will receive the Company's 401K matching contributions. The Company's other postretirement benefit plans are in the process of being eliminated. As a result of these modifications to the postretirement benefit plans, the Company recorded a $5.4 million curtailment benefit during the year ended December 31, 2011.

17. PENSION AND OTHER POSTRETIREMENT BENEFITS (continued)

The year-end status of these plans was as follows (in thousands):

	Pension Benefits						Other Benefits
	2013			2012			2013			2012
Change in projected benefit obligation:
Projected benefit obligation at December 31	$	278,416		$	232,442		$	11,146		$	11,885
Service cost	8,009			7,209			37			50
Interest cost	12,066			11,819			325			457
Participant contributions	—			15			275			—
Actuarial (gain) loss	(31,585		)	31,551			(583		)	(292		)
Benefits paid	(5,192		)	(4,620		)	(1,137		)	433
Liability gain due to curtailment	—			—						(1,387		)
Projected benefit obligation at December 31	$	261,714		$	278,416		$	10,063		$	11,146
Accumulated benefit obligation at December 31	$	256,002		$	271,116		$	—		$	—
Change in plan assets:
Fair value of plan assets at December 31	$	193,389		$	159,231		$	—		$	—
Actual return on plan assets	35,460			21,888			—			—
Employer contributions	20,645			16,875			862			954
Participant contributions	—			15			275			433
Benefits paid	(5,192		)	(4,620		)	(1,137		)	(1,387		)
Fair value of plan assets at December 31	$	244,302		$	193,389		$	—		$	—
Funded status	$	(17,412	)	$	(85,027	)	$	(10,063	)	$	(11,146	)

Assumptions used in computing the benefit obligation as of December 31, 2013 and 2012 were as follows:

	Pension Benefits				Other Benefits
	2013		2012		2013	2012
Discount rate	5.10 - 5.18%		4.30 - 4.40%		2.97 - 5.05%	2.25 - 4.25%
Expected return on plan assets	7.10	%	7.10	%	N/A	N/A
Rate of compensation increase	2.50	%	2.50	%	N/A	N/A

17. PENSION AND OTHER POSTRETIREMENT BENEFITS (continued)

The following table presents the fair value of the Company's pension plan investments as of December 31, 2013 and 2012 (in thousands).

	Level 1		Level 2	Level 3	Total
Equity Securities
U.S. equity securities	$	128,766	—	—	$	128,766
Non-U.S. equity securities	25,461		—	—	25,461
Debt Securities
Fixed income funds and cash investment funds	90,075		—	—	90,075
December 31, 2013	$	244,302	—	—	$	244,302
Equity Securities
U.S. equity securities	$	99,840	—	—	$	99,840
Non-U.S. equity securities	18,565		—	—	18,565
Debt Securities
Fixed income funds and cash investment funds	74,984		—	—	74,984
December 31, 2012	$	193,389	—	—	$	193,389

See Note 22 of the consolidated financial statements for the description of the levels of the fair value hierarchy.

	Pension Benefits						Other Benefits
	2013			2012			2013			2012
	(in thousands)
Amounts recognized in the consolidated balance sheets consist of:
Current liabilities	$	(12,260	)	$	(20,645	)	$	(1,155	)	$	(1,141	)
Noncurrent liabilities	(5,152		)	(64,382		)	(8,908		)	(10,005		)
Net amount recognized	$	(17,412	)	$	(85,027	)	$	(10,063	)	$	(11,146	)
Amounts recognized in accumulated other comprehensive income before taxes:
Net actuarial loss	$	18,239		$	79,996		$	1,913		$	3,263
Prior service cost (credit)	11			25			(5,040		)	(8,418		)
Net amount recognized	$	18,250		$	80,021		$	(3,127	)	$	(5,155	)

The following table sets forth other changes in the benefit obligation recognized in other comprehensive income for the Company's pension and other postretirement benefits plans (in thousands):

	Pension Benefits						Other Benefits
	2013			2012			2013			2012
Net actuarial (gain) loss	$	(53,134	)	$	22,187		$	(583	)	$	(292	)
Amortization of:
Prior service (credit) cost	(14		)	(14		)	3,378			3,375
Actuarial (gain)	(8,623		)	(4,108		)	(767		)	(983		)
Total recognized in OCI	$	(61,771	)	$	18,065		$	2,028		$	2,100

17. PENSION AND OTHER POSTRETIREMENT BENEFITS (continued)

The estimated net actuarial gain, and prior service credit, for the defined benefit pension plans included in accumulated other comprehensive income and expected to be recognized in net periodic pension cost during the fiscal year ended December 31, 2014 are $2,007,000 and $11,000, respectively.

The following table sets forth the components of the net periodic benefit cost for the Company's pension and other postretirement benefit plans (in thousands):

	Pension Benefits									Other Benefits
	2013			2012			2011			2013			2012			2011
Service cost	$	8,009		$	7,209		$	10,634		$	37		$	50		$	476
Interest cost	12,066			11,819			11,211			325			457			1,114
Expected return on plan assets	(13,912		)	(12,523		)	(13,008		)	—			—			—
Amortization of prior service (cost) credit	14			14			32			(3,378		)	(3,375		)	(1,754		)
Recognized actuarial loss	8,623			4,108			1,996			767			983			882
Curtailment (benefit) expense	—			—			69			—			—			(5,514		)
Net periodic benefit cost	$	14,800		$	10,627		$	10,934		$	(2,249	)	$	(1,885	)	$	(4,796	)

For the year ended December 31, 2013, $9.0 million of pension expense was recorded in cost of sales and $5.8 million was recorded in selling general, and administrative expenses.

Assumptions used to determine net periodic benefit cost for the years ended December 31, 2013, 2012, and 2011 were as follows:

	Pension Benefits						Other Benefits
	2013		2012		2011		2013	2012	2011
Discount rate	4.30 - 4.40%		5.10 - 5.15%		4.95-5.75%		2.25 - 4.25%	3.40 - 5.05%	3.50 - 4.65%
Expected return on plan assets	7.10	%	7.10	%	8.20	%	N/A	N/A	N/A
Rate of compensation increase	2.50	%	2.50	%	2.50	%	N/A	N/A	N/A

The expected long-term rate of return on assets is based on management's expectations of long-term average rates of return to be earned on the investment portfolio. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plan assets are invested.

For purposes of measuring the benefit obligation associated with the Company's other postretirement benefit plans as of December 31, 2013, as well as the assumed rate for 2014, a between 8.00% to 8.50% annual rate of increase in the per capita cost of covered health care benefits was assumed and a 7.25% annual rate of increase in the per capita cost of covered prescription drug benefits was assumed. The rates were then assumed to decrease to an ultimate rate of 5% for 2022 and thereafter. For purposes of measuring the net periodic benefit cost for 2013 associated with the Company's other postretirement benefits plans, an 8.00% annual rate of increase in the per capita cost of covered medical benefits was assumed (both medical and prescription drug). The rate was then assumed to decrease to an ultimate rate of 5% for 2019 for both the medical plan and prescription drug plan and thereafter. Increasing the assumed health care cost trend rate by 1.0% would increase the benefit obligation as of December 31, 2013 by $295,000 and increase the aggregate of the service and interest cost components of net periodic benefit cost for 2013 by $13,000. Decreasing the assumed health care cost trend rate by 1.0% would decrease the benefit obligation as of December 31, 2013 by $280,000 and decrease the aggregate of the service and interest cost components of net periodic benefit cost for 2013 by $12,000.

17. PENSION AND OTHER POSTRETIREMENT BENEFITS (continued)

The Company's pension plans' weighted-average asset allocations as of December 31, 2013 and 2012, by asset category were as follows:

	Plan Assets at December 31,
	2013		2012
Asset Category:
Temporary investment funds	4	%	3	%
Equity investment funds	63		61
Fixed income funds	33		36
Total	100	%	100	%

The Company's pension plans' investment policy includes an asset mix based on the Company's risk posture. The investment policy states a target allocation of 60% equity funds and 40% fixed income funds. Inclusion of the fixed income funds is to provide growth through income and these funds should primarily invest in fixed income instruments of the U.S. Treasury and government agencies and investment-grade corporate bonds. The equity fund investments can consist of a broadly diversified domestic equity fund, an actively managed domestic equity fund and an actively managed international equity fund. The purpose of these funds is to provide the opportunity for capital appreciation, income, and the ability to diversify investments outside the U.S. equity market. Mutual funds are used as the plans' investment vehicle since they have clearly stated investment objectives and guidelines, offer a high degree of investment flexibility, offer competitive long-term results, and are cost effective for small asset balances.

The Company expects to contribute $12.3 million to its pension plans and approximately $1.2 million to its other postretirement benefit plans in 2014. Estimated future benefit payments under the pension and other postretirement plans are as follows:

	Pension Benefits		Other Benefits
	(in thousands)
2014	$	6,925	$	1,154
2015	8,145		1,222
2016	9,438		1,088
2017	10,837		995
2018	12,261		855
2019 - 2023	84,388		3,513

The Company also sponsors a 401(k) retirement savings plan for all U.S. employees. Under this plan, participants may defer a portion of their earnings up to the annual contribution limits established by the Internal Revenue Service. For associates who do not participate in the Company's pension plans, the plan allows for the Company to make a fixed matching contribution of 50.0% of participant contributions up to the first 6.0% of compensation for both nonunion and union employees; however, matching contributions were suspended in 2011. The fixed match was reinstated beginning January 1, 2012. For participants who are union or nonunion employees and no longer participate in a Knoll pension plan, the plan also provides for a discretionary employer contribution based on the Company's profits, as determined by the Company's board of directors. In addition, the plan also provides for an additional employer contribution for individuals who are nearing retirement age and no longer participate in a Knoll pension plan. The plan also provides that the Company may make discretionary contributions of common stock to participant accounts on behalf of all actively employed U.S. participants. Company contributions generally vest ratably over a five-year period. A Knoll common stock fund consisting of 1,000,000 shares of common stock into which participants may invest the compensation they elect to defer was established on December 14, 2004. Participant contributions into the Knoll common stock fund are generally limited to no more than 10% of their total account balance in the plan. Participant contributions in the Knoll common stock fund may be transferred into other investment alternatives or distributed in the form of shares of Knoll common stock if so invested at the time of distribution.

17. PENSION AND OTHER POSTRETIREMENT BENEFITS (continued)

The Company's total expense under the 401(k) plan for U.S. employees was $2.0 million for 2013 and $3.0 million for 2012. In 2011, the Company did not match any 401(k) contributions.

Employees of the Canadian, Belgium and United Kingdom operations participate in defined contribution pension plans sponsored by the Company. The Company's expense related to these plans for 2013, 2012, and 2011 was $1.2 million, $1.3 million, and $1.2 million, respectively.