Accrued Workers’ Compensation

The Company is liable under the Federal Mine Safety and Health Act of 1969, as subsequently amended, to provide for pneumoconiosis (occupational disease) benefits to eligible employees, former employees, and dependents. The Company is also liable under various states' statutes for occupational disease benefits. The Company currently provides for federal and state claims principally through a self-insurance program. The occupational disease benefit obligation represents the present value of the actuarially computed present and future liabilities for such benefits over the employees' applicable years of service.

In addition, the Company is liable for workers' compensation benefits for traumatic injuries that are accrued as injuries are incurred. Traumatic claims are either covered through self-insured programs or through state-sponsored workers' compensation programs.

Workers' compensation expense consists of the following components:



	Year Ended December 31
	2012			2011			2010
	(In thousands)
Self-insured occupational disease benefits:
Service cost	$	1,993		$	2,059		$	727
Interest cost	2,400			1,799			675
Net amortization	(453		)	(493		)	(1,860		)
Curtailments	3,022			—			—
Total occupational disease	6,962			3,365			(458		)
Traumatic injury claims and assessments	26,565			16,979			9,263
Total workers’ compensation expense	$	33,527		$	20,344		$	8,805

The reconciliation of changes in the benefit obligation of the occupational disease liability is as follows:



	December 31
	2012			2011
	(In thousands)
Beginning of year obligation	$	54,184		$	17,412
Service cost	1,993			2,059
Interest cost	2,400			1,799
Actuarial loss (gain)	(5,373		)	7,081
Benefit and administrative payments	(1,873		)	(1,097		)
Curtailments	7,100			—
Acquisition of ICG	—			26,930
Net obligation at end of year	$	58,431		$	54,184

At December 31, 2012 and 2011, accumulated losses of $4.7 million and $5.5 million, respectively, were not yet recognized in occupational disease cost and were recorded in accumulated other comprehensive income. The expected accumulated loss that will be amortized from accumulated other comprehensive income into occupational disease cost in 2013 is $0.9 million.

The following table provides the assumptions used to determine the projected occupational disease obligation:



	Year Ended December 31
	2012		2011		2010
Weighted average assumptions:
Discount rate	4.54	%	5.10	%	5.96	%
Cost escalation rate	3.00	%	3.00	%	3.00	%

Summarized below is information about the amounts recognized in the accompanying consolidated balance sheets for workers' compensation benefits:



	December 31
	2012		2011
	(In thousands)
Occupational disease costs	$	58,431	$	54,184
Traumatic and other workers' compensation claims	33,569		29,430
Total obligations	92,000		83,614
Less amount included in accrued expenses	10,371		11,666
Noncurrent obligations	$	81,629	$	71,948

As of December 31, 2012, the Company had $61.1 million in surety bonds and letters of credit outstanding to secure workers' compensation obligations.