Savings Plans, Pension Plans and Other Postretirement Employee Benefits
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Dec. 31, 2011
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General Discussion of Pension and Other Postretirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension Plans and Other Postretirement Employee Benefits [Text Block] | Savings Plans, Pension Plans and Other Postretirement Employee Benefits Substantially all of our employees are eligible to participate in 401(k) savings plans and are covered by noncontributory defined benefit pension plans. In 2011, 2010 and 2009, we made matching 401(k) contributions on behalf of employees associated with continuing operations of $1.4 million, $1.2 million and $1.3 million, respectively. We also provide benefits under company-sponsored defined benefit retiree health care plans, which cover certain salaried and hourly employees. Most of the retiree health care plans require retiree contributions and contain other cost-sharing features. We recognized the underfunded status of our defined benefit pension plans and other postretirement employee benefit obligations on our Consolidated Balance Sheets at December 31, 2011 and 2010. We recognized the changes in that funded status, in the year in which changes occurred, through our Consolidated Statements of Comprehensive Income. We use a December 31 measurement date for our benefit plans and obligations. The change in benefit obligation, change in plan assets and funded status for company-sponsored benefit plans and obligations are as follows: (Dollars in thousands)
Amounts recognized (pre-tax) in “Accumulated other comprehensive loss” on our Consolidated Balance Sheets consist of: (Dollars in thousands)
The accumulated benefit obligation for all defined benefit pension plans was $412.3 million and $388.9 million at December 31, 2011 and 2010, respectively. On January 1, 2011, we froze our pension plans to any new salaried and hourly non-represented employees hired after that date. In late 2009, we restructured our health care and life insurance plans for the majority of our retirees, with the changes effective January 1, 2010. The level of subsidy was frozen for retirees so that all future increments in health care costs will be borne by the retirees. In addition, the retiree medical plans were redesigned for all retirees. For retirees under age 65, a high deductible medical plan was created and all other existing medical plans were terminated. These retirees were transferred to the new medical plan effective January 1, 2010. For retirees age 65 or over, the medical plan is divided into two components, with the company continuing to self-insure prescription drugs and providing a fully-insured medical supplemental plan through AARP/United Healthcare. Both medical plans require the retiree to contribute the amount in excess of the company subsidy in order to continue coverage. Finally, vision, dental and life insurance coverage for these retirees was terminated. The effect of these retiree plan changes was a reduction in the accumulated postretirement benefit obligation of $76.7 million, which was recognized as of December 31, 2009. The retirees from our Arkansas wood products manufacturing facility are represented by a bargaining group and their retiree medical plan is covered by the collective bargaining agreement. Information as of December 31 for our pension plans, all of which had accumulated benefit obligations in excess of plan assets, was as follows: (Dollars in thousands)
Pre-tax components of net periodic cost (benefit) recognized in our Consolidated Statements of Operations were as follows: (Dollars in thousands)
Other amounts recognized in our Consolidated Statements of Comprehensive Income were as follows: (Dollars in thousands)
The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are $14.8 million and $0.8 million, respectively. The estimated net loss and prior service credit for OPEB obligations that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are $3.9 million and $9.1 million, respectively. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 introduced a drug benefit under Medicare Part D and a federal subsidy to sponsors of retiree health care benefit plans that provide an equivalent benefit. Our actuaries determined that certain benefits provided under our plans are actuarially equivalent to the Medicare Part D standard plan and are eligible for the employer subsidy. During 2011 and 2010, we received subsidy payments totaling $0.7 million and $0.6 million, respectively. Weighted average assumptions used to determine the benefit obligation as of December 31 were:
Weighted average assumptions used to determine the net periodic benefit (cost) for the years ended December 31 were:
The discount rate used in the determination of pension and OPEB benefit obligations in 2011 and 2010 was calculated using hypothetical bond portfolios consisting of “AA” or better rated securities that matches the expected monthly benefit payments under our pension plans and OPEB obligations. The portfolio consisted of approximately 50 to 60 bonds which were well-diversified over corporate industrial, corporate financial, municipal, federal and foreign government issuers. Prior to 2010, the discount rate used in the determination of pension and OPEB benefit obligations and net periodic benefit (cost) was a weighted average benchmark rate based on high-quality fixed income investment interest rates, as well as the amount and timing of expected benefit payments. The expected return on plan assets assumption is based upon an analysis of historical long-term returns for various investment categories, as measured by appropriate indices. These indices are weighted based upon the extent to which plan assets are invested in the particular categories in arriving at our determination of a composite expected return. The assumed health care cost trend rate used to calculate OPEB obligations as of December 31, 2011 was 0% for our salaried and non-represented plans and a certain group of participants over age 65 in our hourly plan; 6.8% for our Arkansas participants covered by a collective bargaining agreement, grading ratably to an assumption of 5.0% in 2070; and 5.2% for a certain group of participants under age 65 in our hourly plan, grading ratably to an assumption of 5.0% in 2070. The assumption of a 0% medical trend rate for several plans and groups of participants was due to the restructuring of our health care plans in late 2009 as previously discussed in this footnote. A one percentage point change in the health care cost trend rates would have the following effects: (Dollars in thousands)
The weighted average asset allocations of the pension benefit plans’ assets at December 31 by asset category are as follows:
We utilize formal investment policy guidelines for our company-sponsored pension plans. These guidelines are periodically reviewed by the board of directors. The board of directors has delegated its authority to management to insure that the investment policy and guidelines are adhered to and the investment objectives are met. The general policy states that plan assets will be invested to seek the greatest return consistent with the fiduciary character of the pension funds and to allow the plans to meet the need for timely pension benefit payments. The specific investment guidelines stipulate that management will maintain adequate liquidity for meeting expected benefit payments by reviewing, on a timely basis, contribution and benefit payment levels and appropriately revise long-term and short-term asset allocations. Management takes reasonable and prudent steps to preserve the value of pension fund assets and to avoid the risk of large losses. Major steps taken to provide this protection include:
The ranges are more heavily weighted toward equities since the liabilities of the pension plans are long-term in nature and equities historically have significantly outperformed other asset classes over long periods of time. Periodic reviews of allocations within these ranges are made to determine what adjustments should be made based on changing economic and market conditions and specific liquidity requirements.
The investment guidelines also provide that the individual investment managers are expected to achieve a reasonable rate of return over a market cycle. Emphasis will be placed on long-term performance versus short-term market aberrations. Factors to be considered in determining reasonable rates of return include performance achieved by a diverse cross section of other investment managers, performance of commonly used benchmarks (e.g., S&P 500 Index, Shearson Lehman Government/Corporate Intermediate Index, Morgan Stanley World Index, Merrill Lynch Investment Grade Convertibles Index, Russell Value Index), actuarial assumptions for return on plan investments and specific performance guidelines given to individual investment managers. Fair Value Measurements at December 31, 2011: (Dollars in thousands)
Fair Value Measurements at December 31, 2010: (Dollars in thousands)
The following table sets forth a summary of changes in the fair value of the plans’ Level 3 assets for the years ended December 31: (Dollars in thousands)
Refer to Note 12 for discussion of the framework for measuring fair value. Following is a description of the valuation methodologies used for assets measured at fair value:
At December 31, 2011, ten active investment managers managed substantially all of the pension funds, each of whom had responsibility for managing a specific portion of these assets. Plan assets were diversified among the various asset classes within the allocation ranges established by our investment policy. As a result of the steep downturn in the stock market in late 2008 and early 2009, our company-sponsored pension plans were underfunded at December 31, 2011 and 2010. In April 2009, an Internal Revenue Service pronouncement provided significant funding relief to single-employer defined benefit plans sponsors. Consequently, we were not required to make contributions during 2009 to our defined benefit plans. We were also not required to make contributions during 2010 as a result of carry-forward credits that we earned from discretionary contributions made in prior periods. In 2011, we made contributions of $5.0 million to our qualified salaried pension plan and $4.4 million to our non-represented pension plan, with $5.8 million being discretionary funding. Our minimum funding requirement for 2012 is $9.7 million. We plan to fund approximately $22.0 million for our qualified pension plans by taking a loan against our company owned life insurance plan, or COLI, from the cash surrender value that has accumulated in that plan over the years. We estimate payments of approximately $1.7 million to our non-qualified pension plan. Payments made for OPEB obligations represent benefit costs incurred during the year by eligible participants. Estimated future benefit payments, which reflect expected future service are as follows for the years indicated: (Dollars in thousands)
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