Benefit Plans

Certain of our U.S. and international subsidiaries sponsor defined benefit pension plans. In addition, we provide minimal death benefits for certain U.S. retirees and pay a portion of healthcare costs for retired U.S. salaried employees and their dependents. Benefits for participants are coordinated with Medicare and the plan mandates Medicare risk (“HMO”) coverage wherever possible and caps the total contribution for non-HMO coverage. We also sponsor a defined contribution plan for certain salaried and hourly U.S. employees. Our 401(k) plan contributions were $3.7 million for 2012, $3.5 million for 2011 and $3.4 million for 2010.

Pension and Other Retirement Benefits

The components of net periodic benefit cost and other amounts recognized in other comprehensive income were as follows:



	Pension benefits									Other retirement benefits
($ in millions)	2012			2011			2010			2012			2011			2010
Net periodic benefit cost:
Service cost	$	8.5		$	8.9		$	8.6		$	1.3		$	1.2		$	1.1
Interest cost	15.5			16.0			15.7			1.0			1.0			0.8
Expected return on assets	(16.4		)	(16.0		)	(14.7		)	—			—			—
Amortization of prior service (credit) cost	(1.4		)	(1.5		)	(1.1		)	0.1			0.1			0.1
Amortization of transition obligation	0.1			0.1			0.1			—			—			—
Amortization of actuarial loss (gain)	8.5			6.0			5.6			—			—			(0.1		)
Curtailment	—			(0.2		)	—			—			—			—
Settlement effects	—			0.8			—			—			—			—
Net periodic benefit cost	$	14.8		$	14.1		$	14.2		$	2.4		$	2.3		$	1.9

Other changes in plan assets and benefit obligations recognized in other comprehensive income, pre-tax:
Net loss (gain) arising during period	$	17.3		$	46.7		$	9.1		$	2.1		$	1.3		$	(1.5	)
Prior service credit arising during period	—			—			(5.2		)	—			—			—
Amortization of prior service credit (cost)	1.4			1.5			1.1			(0.1		)	(0.1		)	(0.1		)
Amortization of transition obligation	(0.1		)	(0.1		)	(0.1		)	—			—			—
Amortization of actuarial (loss) gain	(8.5		)	(6.0		)	(5.6		)	—			—			0.1
Curtailment	—			0.2			—			—			0.4			—
Settlement effects	—			(0.8		)	—			—			—			—
Total recognized in other comprehensive income	$	10.1		$	41.5		$	(0.7	)	$	2.0		$	1.6		$	(1.5	)
Total recognized in net periodic benefit cost and other comprehensive income	$	24.9		$	55.6		$	13.5		$	4.4		$	3.9		$	0.4

Net periodic benefit cost by geographic location is as follows:



	Pension benefits						Other retirement benefits
	2012		2011		2010		2012		2011		2010
U.S. plans	$	12.0	$	11.4	$	11.7	$	2.4	$	2.3	$	1.9
International plans	2.8		2.7		2.5		—		—		—
Net periodic benefit cost	$	14.8	$	14.1	$	14.2	$	2.4	$	2.3	$	1.9

In 2011, as a result of the closure of a plant in the United States, we recorded a $0.2 million net curtailment gain in restructuring and other items related to our U.S. qualified and postretirement medical plans. In addition, during 2011, due to the retirement of our former President and Chief Operating Officer, we recorded an $0.8 million settlement loss related to one of our non-qualified defined benefit pension plans. Refer to Note 3, Restructuring and Other Items, for additional details regarding these items.

The following table presents the changes in the projected benefit obligation and the fair value of plan assets, as well as the funded status of the plans:



	Pension benefits						Other retirement benefits
($ in millions)	2012			2011			2012			2011
Change in benefit obligation:
Benefit obligation, January 1	$	(319.9	)	$	(283.5	)	$	(21.7	)	$	(18.1	)
Service cost	(8.5		)	(8.9		)	(1.3		)	(1.2		)
Interest cost	(15.5		)	(16.0		)	(1.0		)	(1.0		)
Participants' contributions	—			—			(0.5		)	(0.3		)
Actuarial (loss) gain	(32.4		)	(27.3		)	(2.1		)	(1.4		)
Amendments/transfers in	(0.3		)	(0.4		)	—			—
Benefits/expenses paid	15.3			16.4			0.6			0.7
Curtailment	—			(0.8		)	—			(0.4		)
Foreign currency translation	(1.9		)	0.6			—			—
Benefit obligation, December 31	$	(363.2	)	$	(319.9	)	$	(26.0	)	$	(21.7	)

Change in plan assets:
Fair value of assets, January 1	$	213.3		$	212.3		$	—		$	—
Actual return on assets	32.3			(2.8		)	—			—
Employer contribution	19.8			20.4			0.1			0.4
Participants' contribution	—			—			0.5			0.3
Benefits/expenses paid	(15.3		)	(16.4		)	(0.6		)	(0.7		)
Foreign currency translation	0.9			(0.2		)	—			—
Fair value of assets, December 31	$	251.0		$	213.3		$	—		$	—

Funded status at end of year	$	(112.2	)	$	(106.6	)	$	(26.0	)	$	(21.7	)

International pension plan assets, at fair value, included in the preceding table were $22.9 million and $19.6 million at December 31, 2012 and 2011, respectively.

Amounts recognized in the balance sheet were as follows:



	Pension benefits						Other retirement benefits
($ in millions)	2012			2011			2012			2011
Current liabilities	$	(1.6	)	$	(1.2	)	$	(1.2	)	$	(1.1	)
Noncurrent liabilities	(110.6		)	(105.4		)	(24.8		)	(20.6		)
	$	(112.2	)	$	(106.6	)	$	(26.0	)	$	(21.7	)

The amounts in accumulated other comprehensive loss, pre-tax, consisted of:



	Pension benefits						Other retirement benefits
($ in millions)	2012			2011			2012		2011
Net actuarial loss (gain)	$	140.0		$	131.3		$	2.3	$	0.2
Transition obligation	0.4			0.4			—		—
Prior service (credit) cost	(8.8		)	(10.2		)	—		0.1
Total	$	131.6		$	121.5		$	2.3	$	0.3

The actuarial net loss, transition obligation and prior service credit for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net pension expense over the next fiscal year are $8.9 million, $0.1 million and $(1.3) million, respectively.

The accumulated benefit obligation for all defined benefit pension plans was $358.4 million and $316.7 million at December 31, 2012 and 2011, respectively, including $51.8 million and $42.6 million, respectively, for international pension plans.

All of the defined benefit pension plans have projected benefit obligations and accumulated benefit obligations in excess of plan assets as of December 31, 2012 and 2011.

Benefit payments expected to be paid under our defined benefit pension plans in the next ten years are as follows:



($ in millions)	Domestic Plans		International Plans		Total
2013	$	19.0	$	1.6	$	20.6
2014	20.0		1.5		21.5
2015	20.9		1.6		22.5
2016	22.5		1.9		24.4
2017	25.1		2.4		27.5
2018 to 2022	136.0		55.3		191.3
	$	243.5	$	64.3	$	307.8

In 2013, we expect to contribute $6.5 million to pension plans, of which $2.1 million is for international plans. Included in this amount is a minimum ERISA (Employee Retirement Income Security Act) funding requirement for the U.S. qualified pension plan of $3.5 million. In addition, we expect to contribute $1.2 million to other retirement plans in 2013. We periodically consider additional, voluntary contributions depending on the investment returns generated by pension plan assets, changes in benefit obligation projections and other factors.

Weighted average assumptions used to determine net periodic benefit cost were as follows:



	Pension benefits						Other retirement benefits
	2012		2011		2010		2012		2011		2010
Discount rate	4.78	%	5.55	%	5.92	%	4.50	%	5.25	%	5.25	%
Rate of compensation increase	4.29	%	4.33	%	4.36	%	—		—		—
Long-term rate of return on assets	7.37	%	7.59	%	7.60	%	—		—		—

Weighted average assumptions used to determine the benefit obligations were as follows:



	Pension benefits				Other retirement benefits
	2012		2011		2012		2011
Discount rate	4.07	%	4.87	%	3.50	%	4.50	%
Rate of compensation increase	4.39	%	4.33	%	—		—

The discount rate used to determine the benefit obligations for U.S. pension plans was 4.10% and 4.90% as of December 31, 2012 and 2011, respectively. The weighted average discount rate used to determine the benefit obligations for all international plans was 3.93% and 4.72% as of December 31, 2012 and 2011, respectively. The rate of compensation increase for U.S. plans was 4.50% for 2012 and 2011, while the weighted average rate for all international plans was 2.80% for 2012 and 2.70% for 2011. Other retirement benefits were only available to U.S. employees. The long-term rate of return for U.S. plans, which accounts for 91% of global plan assets, was 7.50% for 2012 and 7.75% for 2011 and 2010.

The assumed healthcare cost trend rate used to determine benefit obligations was 8.00% for all participants in 2012, decreasing to 5.00% by 2019. Increasing the assumed healthcare cost trend rate by one percentage point would result in a $1.4 million increase in the postretirement obligation, whereas a decrease of one percentage point would result in a $1.3 million decrease in the postretirement obligation. The assumed healthcare cost trend rate used to determine net periodic benefit cost was 8.50% for all participants in 2012, decreasing to 5.00% by 2019. The effect of a one percentage point change in the rate would be a $0.2 million increase or decrease in the aggregate service and interest cost components.

The weighted average asset allocations by asset category for our pension plans, at December 31, were as follows:



	2012		2011
Equity securities	65	%	68	%
Debt securities	34	%	31	%
Other	1	%	1	%
	100	%	100	%

Our U.S. pension plan is managed as a balanced portfolio comprised of two components: equity and fixed income debt securities. Equity investments are used to maximize the long-term real growth of fund assets, while fixed income investments are used to generate current income, provide for a more stable periodic return, and to provide some protection against a prolonged decline in the market value of equity investments. Temporary funds may be held as cash. We maintain a long-term strategic asset allocation policy which provides guidelines for ensuring that the fund's investments are managed with the short-term and long-term financial goals of the fund, while allowing the flexibility to react to unexpected changes in capital markets.

The following are our target asset allocations and acceptable allocation ranges:



	Target allocation	Allocation range
Equity securities	65%	60%-70%
Debt securities	35%	30%-40%
Other	—%	0%-5%

Diversification across and within asset classes is the primary means by which we mitigate risk. We maintain guidelines for all asset and sub-asset categories in order to avoid excessive investment concentrations. Fund assets are monitored on a regular basis. If at any time the fund asset allocation is not within the acceptable allocation range, funds will be reallocated. We also review the fund on a regular basis to ensure that the investment returns received are consistent with the short-term and long-term goals of the fund and with comparable market returns. We are prohibited from pledging fund securities and from investing pension fund assets in our own stock, securities on margin or derivative securities.

The following tables present the fair value of our pension plan assets, utilizing the fair value hierarchy discussed in Note 13, Fair Value Measurements:



	Balance at
	December 31,		Basis of Fair Value Measurements
($ in millions)	2012		Level 1		Level 2		Level 3
Equity securities:
Indexed mutual funds	$	111.4	$	111.4	$	—	$	—
International mutual funds	49.6		49.6		—		—
Fixed income securities:
Mutual funds	83.8		83.8		—		—
Insurance contract	1.3		—		1.3		—
Balanced mutual fund	4.9		4.9		—		—
	$	251.0	$	249.7	$	1.3	$	—



	Balance at
	December 31,		Basis of Fair Value Measurements
($ in millions)	2011		Level 1		Level 2		Level 3
Cash	$	0.2	$	0.2	$	—	$	—
Equity securities:
Indexed mutual funds	102.2		102.2		—		—
International mutual funds	40.0		40.0		—		—
Fixed income securities:
Mutual funds	65.6		65.6		—		—
Insurance contract	1.3		—		1.3		—
Balanced mutual fund	4.0		4.0		—		—
	$	213.3	$	212.0	$	1.3	$	—