14. Benefit Plans

Pension and Other Postretirement Benefits

Jostens has noncontributory defined benefit pension plans that cover nearly all employees hired by Jostens and Visant prior to December 31, 2005. The benefits provided under the plans are based on years of service, age eligibility and employee compensation. The benefits for Jostens' qualified pension plans have been funded through pension trusts, the objective being to accumulate sufficient funds to provide for future benefits. In addition to qualified pension plans, Jostens has unfunded, non-qualified pension plans covering certain employees, which provide for benefits in addition to those provided by the qualified plans.

Effective December 31, 2005, the pension plans were closed to newly hired nonunion employees. Pension benefits for current salaried nonunion employees were modified to provide a percentage of career average earnings, rather than final average earnings for service after January 1, 2006 except for certain grandfathered employees who met specified age and service requirements as of December 31, 2005. Effective July 1, 2008 and January 1, 2008, the pension plans covering Jostens' employees covered under respective collective bargaining agreements were closed.

Jostens also provides certain medical benefits for eligible retirees, including their spouses and dependents. Generally, the postretirement benefits require contributions from retirees. Effective January 1, 2006, the retiree medical plan was closed other than for certain union employees and certain employees grandfathered into the plan on the basis of their age and tenure with Jostens as of December 31, 2005. Prescription drug coverage for Medicare eligible retirees was also eliminated from the program as of January 1, 2006 in connection with coverage under Medicare Part D. Visant is obligated for certain post-retirement benefits under the employment agreement with its Chief Executive Officer.

Eligible employees from Lehigh participate in a noncontributory defined benefit pension plan, which was merged with a Jostens plan effective December 31, 2004. The plan provides benefits based on years of service and final average compensation. Effective December 31, 2006, the pension plan was closed to hourly nonunion employees hired after December 31, 2006 (currently there are no active hourly employees in such plan), and benefit accruals were frozen for all salaried and office administrative nonunion employees.

In addition, Lehigh maintains an unfunded supplemental retirement plan (SERP) for certain key executives of Lehigh. This SERP no longer has any active participants accruing benefits under it. Lehigh and Arcade also contribute to multi-employer pension plans for certain employees covered by collective bargaining agreements. Contribution amounts are determined by the respective collective bargaining agreement subject to escalation, and the Company does not administer or control the funds in any way.

The following tables set forth the components of the changes in benefit obligations and fair value of plan assets during fiscal 2011 and 2010 as well as the funded status and amounts recognized in the balance sheets as of December 31, 2011 and January 1, 2011, for all defined benefit plans combined and retiree welfare plans. The information presented for the 2011 plan year and 2010 plan year is based on a measurement date of December 31, 2011 and January 1, 2011, respectively. Furthermore, the Jostens plans represent 87% of the aggregate benefit obligation and 91% of the aggregate plan assets as of the end of fiscal 2011, with benefits for Lehigh representing 13% of the liability and 9% of the assets for the same period.


	Pension benefits						Postretirement benefits
In thousands	2011			2010			2011			2010
*Change in benefit obligation*
Benefit obligation, beginning of period	$	318,509		$	298,844		$	1,756		$	1,872
Service cost		4,932			4,996			6			7
Interest cost		17,830			17,454			101			104
Plan amendments		—			(594	)		—			—
Actuarial gain (loss)		17,748			13,791			(20	)		95
Benefit payments and administrative expenses		(16,706	)		(15,982	)		(832	)		(795	)
Plan participants' contributions		—			—			487			473
Other adjustments: curtailment		(47	)		—			—			—

Benefit obligation, end of period	$	342,266		$	318,509		$	1,498		$	1,756

*Change in plan assets*
Fair value of plan assets, beginning of period	$	269,809		$	247,501		$	—		$	—
Actual return on plan assets		(6,609	)		36,063			—			—
Company contributions		2,456			2,227			345			322
Benefit payments and administrative expenses		(16,706	)		(15,982	)		(832	)		(795	)
Plan participants' contributions		—			—			487			473

Fair value of plan assets, end of period	$	248,950		$	269,809		$	—		$	—

*Funded status—End of Period*
Funded status, over-funded plans	$	4,906		$	5,712		$	—		$	—
Funded status, under-funded plans		(98,222	)		(54,412	)		(1,498	)		(1,756	)

Net funded status	$	(93,316	)	$	(48,700	)	$	(1,498	)	$	(1,756	)

*Amounts recognized in the balance sheets*
Non-current assets	$	4,906		$	5,712		$	—		$	—
Current liabilities		(2,337	)		(2,238	)		(211	)		(257	)
Non-current liabilities		(95,885	)		(52,174	)		(1,287	)		(1,499	)

Net pension amounts recognized on Consolidated balance sheets	$	(93,316	)	$	(48,700	)	$	(1,498	)	$	(1,756	)

*Amounts in Accumulated Other Comprehensive Loss (Income)*
Net loss	$	107,681		$	61,014		$	398		$	447
Prior service credits		(2,183	)		(2,983	)		(1,643	)		(1,920	)

Other comprehensive income—total	$	105,498		$	58,031		$	(1,245	)	$	(1,473	)

*Amortization expense expected to be recognized during next fiscal year*
Net loss	$	6,113		$	2,334		$	26		$	30
Prior service credits		(844	)		(834	)		(277	)		(277	)

Total amortizations	$	5,269		$	1,500		$	(251	)	$	(247	)

During 2011, the discount rate assumption changed from 5.75% to 5.39% for the pension plans and from 5.75% to 4.47% for the postretirement plans, which resulted in an increase in liability. Asset returns in 2011 were below the assumed return and salary increases were lower than expected. The plans' experience resulted in a net loss for 2011.

The accumulated benefit obligation ("ABO") for all defined benefit pension plans was $337.1 million and $310.7 million at the end of 2011 and 2010, respectively. The ABO differs from the projected benefit obligation shown in the table in that it includes no assumption about future compensation levels.

Non-qualified retirement benefits, included in the tables above, with obligations in excess of plan assets were as follows:


In thousands	2011		2010
Projected benefit obligation	$	30,843	$	29,718
Accumulated benefit obligation	$	29,903	$	28,178
Fair value of plan assets	$	—	$	—

In total, the qualified pension plans have a projected benefit obligation in excess of the fair value of plan assets as of year-end 2011.

Net periodic benefit income of the pension and other postretirement benefit plans included the following components:


	Pension benefits
In thousands	2011			2010
Service cost	$	4,932		$	4,996
Interest cost		17,830			17,454
Expected return on plan assets		(24,692	)		(25,473	)
Amortization of prior year service cost		(834	)		(744	)
Amortization of net actuarial loss		2,334			37
Other adjustment: curtailment		34			—

Net periodic benefit income	$	(396	)	$	(3,730	)


	Postretirement benefits
In thousands	2011			2010
Service cost	$	6		$	7
Interest cost		101			104
Amortization of prior year service cost		(277	)		(277	)
Amortization of net actuarial loss		29			18

Net periodic benefit income	$	(141	)	$	(148	)

Assumptions

Weighted-average assumptions used to determine end-of-year benefit obligations are as follows:


	Pension benefits						Postretirement benefits
	2011			2010			2011			2010
Discount rate:
Jostens		5.39	%		5.75	%		4.47	%		5.75	%
Lehigh		5.39	%		5.75	%		N/A			N/A
Rate of compensation increase:
Jostens		3.45	%		5.50	%		N/A			N/A
Lehigh		N/A			2.50	%		N/A			N/A

Weighted-average assumptions used to determine net periodic benefit cost for the year are as follows:


	Pension benefits						Postretirement benefits
	2011			2010			2011			2010
Discount rate:
Jostens		5.75	%		6.00	%		5.75	%		6.00	%
Lehigh		5.75	%		6.00	%		N/A			N/A
Expected long-term rate of return on plan assets:
Jostens		9.00	%		9.00%/9.25	%		N/A			N/A
Lehigh		9.00	%		9.25	%		N/A			N/A
Rate of compensation increase:
Jostens		5.50	%		5.50	%		N/A			N/A
Lehigh		N/A			N/A			N/A			N/A

The Company employs a building block approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-term historical relationships between equities and fixed income are preserved congruent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return is established with a proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed to check for reasonability and appropriateness.

Assumed health care cost trend rates are as follows:


	Postretirement benefits
	2011			2010
Health care cost trend rate assumed for next year		8.00	%		8.00	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.00	%		5.00	%
Year that the rate reaches the ultimate trend rate		2015			2014

Assumed health care cost trend rates have some effect on the amounts reported for health care plans. For 2011, a one percentage point change in the assumed health care cost trend rates would have had the following effects:


In thousands	Impact of 1% Increase		Impact of 1% Decrease
Effect on total of service and interest cost components	$	5	$	(5	)
Effect on postretirement benefit obligation	$	82	$	(74	)

Plan Assets

The weighted-average asset allocations for the pension plans as of the measurement dates of December 31, 2011 and January 1, 2011, by asset category, are as follows:


Asset Category	2011			2010
Equity securities		69.6	%		70.2	%
Debt securities		20.4	%		29.8	%
Other		10.0	%		0.0	%

Total		100	%		100	%

Since 2007, the Company's pension plans have been managed by SEI, a portfolio manager. A total return investment approach is employed under which a mix of equities, fixed income and other investments are used to maximize the long-term return of plan assets for a prudent level of risk. The investment portfolio contains a diversified blend of investments within each category. Furthermore, equity investments are diversified across U.S. and non-U.S. securities.

The fair values of the defined benefit assets at December 31, 2011, by asset class are as follows:


In thousands	Fair Value December 31, 2011		Fair Value Measurements Using
In thousands	Fair Value December 31, 2011		Quoted Prices in Active Market for Identical Assets Level 1(11)		Significant Other Observable Input Level 2(11)		Significant Unobservable Inputs Level 3(11)
Equity Securities
Large Cap Disciplined(1)	$	90,237	$	90,237	$	—	$	—
Small/ Mid Cap(2)		24,850		24,850		—		—
Intl/ World Equity(3)		58,280		58,280		—		—
Debt Securities
High Yield Bond Fund(5)		38,212		38,212		—		—
Emerging Markets Debt(6)		12,517		12,517		—		—
Alternatives
Structured Credit(7)		24,854		—		—		24,854

Total	$	248,950	$	224,096	$	—	$	24,854

The fair values of the defined benefit assets at January 1, 2011, by asset class are as follows:


In thousands	Fair Value January 1, 2011			Fair Value Measurements Using
In thousands	Fair Value January 1, 2011			Quoted Prices in Active Market for Identical Assets Level 1(11)			Significant Other Observable Input Level 2(11)		Significant Unobservable Inputs Level 3(11)
Equity Securities
Large Cap Disciplined(1)	$	96,005		$	96,005		$	—	$	—
Small/ Mid Cap(2)		26,573			26,573			—		—
Intl/ World Equity(3)		64,515			64,515			—		—
Collective Fund(8)		2,273			2,273			—		—
Debt Securities
Long Duration Fund(4)		67			67			—		—
High Yield Bond Fund(5)		21,572			21,572			—		—
Emerging Markets Debt(6)		13,384			13,384			—		—
Enhanced Libor(9)		45,454			45,454			—		—
Core Fixed Income(10)		7			7			—		—
Cash		(41	)		(41	)		—		—

Total	$	269,809		$	269,809		$	—	$	—

(1)	The fund invests in equity securities of large companies and in portfolio strategies designed to correlate to a portfolio composed of large-cap equity securities. The value is based on quoted prices in active markets.

(2)	The fund invests in equity securities of small-to-mid cap companies. The value is based on quoted prices in active markets.

(3)	The fund invests primarily in common stock and other equity securities located outside the United States. The value is based on quoted prices in active markets.

(4)	The fund invests in other fixed-income securities, including U.S. agency, corporate and structured securities. The value is based on quoted prices in active markets.

(5)

The fund invests at least 80% of its net assets in high-yield fixed-income securities. The fund will invest primarily in fixed-income securities below investment grade, including corporate bonds and debentures, convertible and preferred securities and zero-coupon obligation. The value is based on quoted prices in active markets.

(6)

The fund invests at least 80% of its net assets in fixed-income securities and emerging market issuers. The fund will invest primarily in U.S. dollar-denominated debt securities of government, government-related and corporate issuers in emerging-market countries, as well as entities organized to restructure the outstanding debt of such issuers. The value is based on quoted prices in active markets.

(7)	The fund is an alternative investment and invests primarily in collateralized debt obligations ("CDOs") and other structured credit vehicles.

(8)	The fund was an escrow account that invested in a money market position that became available after the fund financials as of March 31, 2011 were complete.

(9)

The fund invests primarily in a diversified portfolio of investment-grade and non-investment grade fixed income securities, which may be fixed-, variable- or floating-rate obligations with no restrictions on maturity. The average portfolio duration of the fund will typically vary between zero and two years.

(10)	The fund invests in fixed-income funds which seek to provide current income consistent with the preservation of capital.

(11)	Refer to Note 7, Fair Value Measurements, for definitions of the three levels of fair value measurements.

The following number represents a rollforward of the hedge funds of funds and the structured credit fund:


In thousands	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Hedge Funds of Funds and Structured Credit Fund
Beginning balance as of January 2, 2010	$	23,380
Actual return on plan assets		(656	)
Purchase, sales and settlements		(22,724	)
Transfers in/out of Level 3		—

Ending balance as of January 1, 2011	$	—

Actual return on plan assets		153
Purchase, sales and settlements		24,700
Transfers in/out of Level 3		—

Ending balance as of December 31, 2011	$	24,853

Contributions

The Pension Protection Act changed the minimum funding requirements for defined benefit pension plans beginning in 2008. Under the new funding requirements, there were no contributions required to be made under the plans for 2011. Due to the funded status and credit balances of the qualified plans, there are no projected contributions for 2012. The Company anticipates beginning to need to make pension cash contributions after 2012. The funded status of the Company's plans are dependent upon many factors, including returns on invested assets, the level of certain market interest rates used in determining the value of the Company's obligations and changes to regulatory requirements, each of which can affect assumptions and have an impact on the Company's cash funding requirements under its plans. Visant's pension income associated with the pension plans will decrease and the pension expense and cash contributions associated with pension plans will increase in future periods. The total contributions expected to be paid in 2012 include $2.4 million to the nonqualified pension plans and $0.2 million to the postretirement benefit plans. The actual amount of contributions is dependent upon the actual return on plan assets and actual disbursements from the postretirement benefit and nonqualified pension plans.

Benefit Payments

Estimated benefit payments under the pension and postretirement benefit plans are as follows:


In thousands	Pension benefits		Postretirement benefits
2012	$	17,783	$	215
2013		18,802		198
2014		19,574		199
2015		20,203		186
2016		21,011		173
2017 through 2021		119,753		576

Total estimated payments	$	217,126	$	1,547

401(k) Plans

The Company has 401(k) savings plans, which cover substantially all salaried and hourly employees who have met the plans' eligibility requirements. Under certain of the plans, the Company provides a matching contribution on amounts contributed by employees, limited to a specific amount of compensation that varies among the plans. In some instances, the Company has provided discretionary profit sharing contributions in the past and may do so in the future. The aggregate matching and other contributions were $5.7 million for 2011, $6.0 million for 2010 and $6.1 million for 2009.

On October 1, 2007, the Visant 401(k) Retirement Savings Plan was amended to allow for the participation of individuals employed by Memory Book Acquisition LLC. On January 3, 2009, the Company merged the Visual Systems, Inc. Profit Sharing & 401(k) Plan into the Visant 401(k) Retirement Savings Plan. In addition, on January 3, 2009, the Company merged the Neff Company 401(k) Plan & Trust into the Lehigh Press Investment Opportunity Plan and renamed the Plan the Lehigh & Neff 401(k) Retirement Savings Plan.

On April 14, 2008, following the acquisition of Phoenix Color, the Phoenix Color Corp. Employees' Stock Bonus and Ownership Plan, established as a profit sharing plan for employees of Phoenix Color and its subsidiaries, was merged into the Phoenix Color Corp. Employees' Savings and Investment Plan, which is a 401(k) savings plan maintained for the employees of Phoenix Color and its subsidiaries.

On January 1, 2011, Rock Creek employees became eligible for the Lehigh & Neff 401(k) Retirement Savings Plan.

On January 1, 2012, Color Optics employees became eligible for the Lehigh & Neff 401(k) Retirement Savings Plan, and the plan was renamed the LN Co 401(k) Retirement Savings Plan.