NOTE 12 Savings, Pension and Other Postretirement Employee Benefit Plans

Certain of our employees are eligible to participate in defined contribution savings and defined benefit postretirement plans. These include 401(k) savings plans, defined benefit pension plans including company-sponsored and multiemployer plans, and Other Postretirement Employee Benefit, or OPEB, plans, each of which is discussed below.

401(k) Savings Plans

Substantially all of our employees are eligible to participate in 401(k) savings plans, which include a company match component. In 2013, 2012 and 2011, we made matching 401(k) contributions on behalf of employees of $16.8 million, $14.9 million and $8.1 million, respectively.

Company-Sponsored Defined Benefit Pension Plans

A majority of our salaried employees and a portion of our hourly employees are covered by company-sponsored noncontributory defined benefit pension plans.

During the second quarter of 2013, we recorded a curtailment loss of $0.8 million in net periodic cost, and a corresponding change in Other Comprehensive Income, net of tax, due to the freezing of pension benefits for certain employees at our Lewiston, Idaho pulp and paperboard facility, effective June 30, 2013. In the fourth quarter of 2012, we recorded a curtailment loss of $0.5 million in net periodic cost, and a corresponding change in Other Comprehensive Income, net of tax, as a result of certain hourly employees at our Cypress Bend, Arkansas pulp and paperboard facility electing to cease accruing further pension benefits effective December 31, 2012. In exchange, beginning January 1, 2013 and lasting for a certain number of years, these employees began receiving an enhanced employer contribution to one of our existing 401(k) savings plan in which they participate. In the fourth quarter of 2011, we recorded a curtailment loss of $2.8 million in net periodic cost, and a corresponding change in Other Comprehensive Income, net of tax, as a result of the sale of our sawmill. In addition, we recorded a $0.4 million decrease in our pension liability with a corresponding decrease in Accumulated Other Comprehensive Loss.

Company-Sponsored OPEB Plans

We also provide benefits under company-sponsored defined benefit retiree health care and life insurance plans, which cover certain salaried and hourly employees. Most of the retiree health care plans require retiree contributions and contain other cost-sharing features. The retiree life insurance plans are primarily noncontributory.

Funded Status of Company-Sponsored Plans

As required by current standards governing the accounting for defined benefit pension and other postretirement plans, we recognized the funded status of our company-sponsored plans on our Consolidated Balance Sheets at December 31, 2013 and 2012. The funded status is measured as the difference between plan assets at fair value (with limited exceptions) and the benefit obligation. For a pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement employee benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated postretirement employee benefit obligation.

We use a December 31 measurement date for our benefit plans.

The changes in benefit obligation, plan assets and funded status for company-sponsored benefit plans as of December 31 are as follows:



	Pension Benefit Plans						Other Postretirement Employee Benefit Plans
(In thousands)	2013			2012			2013			2012
Benefit obligation at beginning of year	$	333,257		$	307,658		$	134,618		$	136,710
Service cost	1,738			2,485			552			693
Interest cost	13,375			14,693			4,730			5,815
Plan changes	—			—			5,106			(5,278		)
Actuarial (gains) losses	(36,859		)	30,612			(30,322		)	3,151
Medicare Part D subsidies received	—			—			308			569
Benefits paid	(18,123		)	(22,191		)	(7,665		)	(7,042		)
Benefit obligation at end of year	293,388			333,257			107,327			134,618
Fair value of plan assets at beginning of year	254,556			218,557			19			18
Actual return on plan assets	34,779			37,308			1			1
Employer contribution	15,386			20,882			—			—
Benefits paid	(18,123		)	(22,191		)	—			—
Fair value of plan assets at end of year	286,598			254,556			20			19
Funded status at end of year	$	(6,790	)	$	(78,701	)	$	(107,307	)	$	(134,599	)

Amounts recognized in the Consolidated Balance Sheets:



	Pension Benefit Plans						Other Postretirement Employee Benefit Plans
(In thousands)	2013			2012			2013			2012
Noncurrent asset	4,488			—			—			—
Current liabilities	$	(364	)	$	(281	)	$	(8,414	)	$	(8,856	)
Noncurrent liabilities	(10,914		)	(78,420		)	(98,893		)	(125,743		)
Net amount recognized	$	(6,790	)	$	(78,701	)	$	(107,307	)	$	(134,599	)

Amounts recognized (pre-tax) in Accumulated Other Comprehensive Loss as of December 31 consist of:



	Pension Benefit Plans				Other Postretirement Employee Benefit Plans
(In thousands)	2013		2012		2013			2012
Net loss (gain)	$	109,218	$	177,343	$	(5,915	)	$	24,408
Prior service cost (credit)	308		1,414		(896		)	(6,504		)
Net amount recognized	$	109,526	$	178,757	$	(6,811	)	$	17,904

Information as of December 31 for certain pension plans included above with accumulated benefit obligations in excess of plan assets were as follows:



(In thousands)	2013		2012
Projected benefit obligation	$	293,388	$	333,257
Accumulated benefit obligation	293,388		333,257
Fair value of plan assets	286,598		254,556

Pre-tax components of Net Periodic Cost and other amounts recognized in Other Comprehensive Income (Loss) for the years ended December 31 were as follows:

Net Periodic Cost (Benefit):



	Pension Benefit Plans									Other Postretirement Employee Benefit Plans
(In thousands)	2013			2012			2011			2013			2012			2011
Service cost	$	1,738		$	2,485		$	7,725		$	552		$	693		$	702
Interest cost	13,375			14,693			15,092			4,730			5,815			6,857
Expected return on plan assets	(18,352		)	(19,685		)	(19,532		)	—			—			—
Amortization of prior service cost (credit)	337			634			1,193			(502		)	(2,680		)	(1,795		)
Amortization of actuarial loss	14,840			12,085			8,382			—			—			—
Curtailments	769			477			2,776			—			—			—
Net periodic cost	$	12,707		$	10,689		$	15,636		$	4,780		$	3,828		$	5,764

Other amounts recognized in Other Comprehensive Income (Loss):



	Pension Benefit Plans									Other Postretirement Employee Benefit Plans
(In thousands)	2013			2012			2011			2013			2012			2011
Net (gain) loss	$	(53,285	)	$	12,989		$	43,207		$	(30,323	)	$	3,150		$	(5,435	)
Curtailments	(769		)	(477		)	(2,776		)	—			—			—
Prior service cost (credit)	—			—			—			5,106			(5,278		)	—
Amortization of prior service (cost) credit	(337		)	(634		)	(1,193		)	502			2,680			1,795
Amortization of actuarial loss	(14,840		)	(12,085		)	(8,382		)	—			—			—
Total recognized in other comprehensive (income) loss	$	(69,231	)	$	(207	)	$	30,856		$	(24,715	)	$	552		$	(3,640	)
Total recognized in net periodic cost and other comprehensive (income) loss	$	(56,524	)	$	10,482		$	46,492		$	(19,935	)	$	4,380		$	2,124

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 cost (benefit) over the next fiscal year are $10.0 million and $0.2 million, respectively. The estimated prior service credit for the OPEB plans that will be amortized from accumulated other comprehensive loss into net periodic cost (benefit) over the next fiscal year is $0.5 million.

During 2013, $14.2 million of net periodic pension and OPEB costs were charged to cost of sales, and $3.3 million was charged to selling, general and administrative expenses in the accompanying Consolidated Statements of Operations.

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 2013 and 2012, we received subsidy payments totaling $0.3 million and $0.6 million for each respective year.

Weighted average assumptions used to determine the benefit obligation as of December 31 were:



	Pension Benefit Plans						Other Postretirement Employee Benefit Plans
	2013		2012		2011		2013		2012		2011
Discount rate	5.20	%	4.15	%	4.90	%	5.05	%	4.05	%	4.95	%

Weighted average assumptions used to determine the net periodic cost (benefit) for the years ended December 31 were:



	Pension Benefit Plans						Other Postretirement Employee Benefit Plans
	2013		2012		2011		2013		2012		2011
Discount rate	4.15	%	4.90	%	5.70	%	4.05	%	4.95	%	5.60	%
Expected return on plan assets	7.50		8.00		8.00		—		—		—
Rate of salaried compensation increase	—		—		4.00		—		—		—

The discount rate used in the determination of pension benefit obligations and pension expense was determined based on a review of long-term high-grade bonds as well as management’s expectations. The discount rate used to calculate OPEB obligations was determined using the same methodology we used for our pension plans.

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 and expense was 7.7% in 2013, grading to a range of 4.30% to 4.64% over approximately 70 years. This assumption has a significant effect on the amounts reported. A one percentage point change in the health care cost trend rates would have the following effects:



(In thousands)	1% Increase		1% Decrease
Effect on total of service and interest cost components	$	521	$	(438	)
Effect on postretirement employee benefit obligation	9,304		(7,997		)

The investments of our defined benefit pension plans are held in a Master Trust. The assets of our OPEB plans are held within an Internal Revenue Code section 401(h) account for the payment of retiree medical benefits within the Master Trust.

The Master Trust has a securities lending agreement. The agreement authorizes the lending agent to loan securities owned by the Master Trust to an approved list of borrowers. Under the agreement, the lending agent is responsible for negotiating each loan for an unspecified term while retaining the power to terminate the loan at any time. At the time each loan is made, the lending agent requires collateral equal to, but not less than, 102% of the market value of the loaned securities and accrued interest. The Master Trust directs the agent as to the type of investment pool in which to invest the borrower’s collateral based on established policy with specific limits; accordingly, the right to receive the collateral and obligation to return it are disclosed as a component of Master Trust investments. While the securities are loaned, the Master Trust retains all rights of ownership, except it waives its right to vote such securities. Securities loaned subject to this securities lending agreement totaled $0.3 million at December 31, 2013. These securities are principally corporate common stocks.

Current accounting rules governing fair value measurement establish a framework for measuring fair value, which provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described below:



Level 1		Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plans have the ability to access.

Level 2		Inputs to the valuation methodology include:
		▪ Quoted prices for similar assets or liabilities in active markets; ▪ Quoted prices for identical or similar assets or liabilities in inactive markets; ▪ Inputs other than quoted prices that are observable for the asset or liability; and ▪ Inputs that are derived principally from or corroborated by observable market data by correlation or other means
		If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3		Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Securities in the Master Trust are stated at fair value. Fair value is based upon quotations obtained from national securities exchanges, if available. Where securities do not have a quoted market price, the recorded amount represents estimated fair value. Many factors are considered in arriving at that fair market value. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used during 2013.


▪	Corporate common stock and mutual funds: Investments are valued at quoted market prices.


▪	Common and collective trusts: The investment in common and collective trusts is based on the fair value of the underlying assets and is expressed in units.


▪	Corporate debt securities: In general, corporate bonds are valued based on yields currently available on comparable securities of issuers with similar credit ratings.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while management believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following tables set forth by level, within the fair value hierarchy, the investments at fair value for our company-sponsored pension benefit plans:



	December 31, 2013
(In thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,314	$	—	$	—	$	4,314
Common and collective trusts:
International small cap	—		15,845		—		15,845
Global/International equity	—		21,198		—		21,198
International equity emerging markets	—		17,809		—		17,809
Common stocks:
Industrials	9,307		—		—		9,307
Energy	2,663		—		—		2,663
Consumer	8,002		—		—		8,002
Healthcare	6,013		—		—		6,013
Finance	11,566		—		—		11,566
Utilities	1,711		—		—		1,711
Information technology	8,785		—		—		8,785
Foreign	6,175		—		—		6,175
Mutual funds:
Foreign large blend	18,492		—		—		18,492
Long-term bond fund	137,031		—		—		137,031
Mid-cap growth fund	18,009		—		—		18,009
Subtotal	$	232,068	$	54,852	$	—	$	286,920
Payable held under securities lending agreement							(322		)
Total investments at fair value							$	286,598



	December 31, 2012
(In thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	3,786	$	—	$	—	$	3,786
Common and collective trusts:
International small cap	—		12,725		—		12,725
Global/International equity	—		16,656		—		16,656
Domestic equity – small/mid cap	—		17,339		—		17,339
International equity emerging markets	—		17,672		—		17,672
Common stocks:
Industrials	9,475		—		—		9,475
Energy	1,966		—		—		1,966
Consumer	8,270		—		—		8,270
Healthcare	7,386		—		—		7,386
Finance	13,000		—		—		13,000
Utilities	2,305		—		—		2,305
Information technology	6,828		—		—		6,828
Foreign	6,078		—		—		6,078
Mutual funds:
Foreign large blend	18,907		—		—		18,907
Long-term bond fund	114,557		—		—		114,557
Corporate debt securities	—		1,073		—		1,073
Subtotal	$	192,558	$	65,465	$	—	$	258,023
Payable held under securities lending agreement							(3,467		)
Total investments at fair value							$	254,556

Our OPEB plan had approximately $20,000 held in cash and equivalents at December 31, 2013, which were categorized as level 1.

We have formal investment policy guidelines for our company-sponsored plans. These guidelines were set by our benefits committee, which is comprised of members of our management and has been assigned its fiduciary authority over management of the plan assets by our Board of Directors. The committee’s duties include periodically reviewing and modifying those investment policy guidelines as necessary and insuring that the policy is adhered to and the investment objectives are met.

The investment policy includes specific guidelines for specific categories of fixed income and convertible securities. Assets are managed by professional investment managers who are expected to achieve a reasonable rate of return over a market cycle. Long-term performance is a fundamental tenet of the policy.

The general policy states that plan assets would 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 is to maintain adequate liquidity for meeting expected benefit payments by reviewing, on a timely basis, contribution and benefit payment levels and appropriately revising 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 included:


▪	Assets are diversified among various asset classes, such as domestic equities, international equities, fixed income and cash. The long-term asset allocation ranges are as follows:



Domestic equities			19%-31%
International equities, including emerging markets			16%-34%
Corporate bonds			40%-60%
Liquid reserves			0%-1%

Periodically, 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.


▪	Assets were managed by professional investment managers and could be invested in separately managed accounts or commingled funds.


▪	Assets were not invested in securities rated below BBB- by S&P or Baa3 by Moody’s.

The investment guidelines also required that the individual investment managers were expected to achieve a reasonable rate of return over a market cycle. Emphasis was placed on long-term performance versus short-term market aberrations. Factors considered in determining reasonable rates of return included performance achieved by a diverse cross section of other investment managers, performance of commonly used benchmarks (e.g., Russell 3000 Index, MSCI World ex-U.S. Index, Barclays Capital Long Credit Index), actuarial assumptions for return on plan investments and specific performance guidelines given to individual investment managers.

At December 31, 2013, 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 approved by the benefits committee.

We are required to make contributions to our qualified pension plans. In 2013 we contributed $15.1 million to these pension plans. We also contributed $0.3 million to our non-qualified pension plan in 2013. Our cash contributions in 2014 are estimated to be approximately $15 million. These contributions are comprised of $8 million in actuarially determined minimum contributions and $7 million of payments required to be made under a previous agreement with the Pension Benefit Guarantee Corporation stemming from the 2011 sale of the Lewiston, Idaho Sawmill. We do not anticipate funding our OPEB plans in 2013 except to pay benefit costs as incurred during the year by plan participants.

Estimated future benefit payments, which reflect expected future service and expected Medicare prescription subsidy receipts, are as follows for the years indicated:



(In thousands)	Pension Benefit Plans		Other Postretirement Employee Benefit Plans		Expected Medicare Subsidy
2014	$	17,837	$	8,744	$	310
2015	18,361		8,947		313
2016	18,942		9,268		315
2017	19,486		9,190		313
2018	19,932		9,229		309
2019-2023	103,091		39,664		1,436

Multiemployer Defined Benefit Pension Plans

Hourly employees at two of our manufacturing facilities participate in multiemployer defined benefit pension plans: the PACE Industry Union Management Pension Fund, or PIUMPF, which is managed by United Steelworkers, or USW, Benefits; and the International Association of Machinist & Aerospace Workers National Pension Fund, or IAM. We make contributions to these plans, as well as make contributions to a trust fund established to provide retiree medical benefits for a portion of these employees, which is also managed by USW Benefits. The risks of participating in these multiemployer plans are different from single-employer plans in the following respects:


▪	Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.


▪	If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

▪

Under applicable federal law, any employer contributing to a multiemployer pension plan that completely ceases participating in the plan while it is underfunded is subject to an assessment of such employer's allocable share of the aggregate unfunded vested benefits of the plan. In certain circumstances, an employer can also be assessed a withdrawal liability for a partial withdrawal from a multiemployer pension plan. Based on information as of December 31, 2012 provided by PIUMPF and reviewed by our actuarial consultant, we estimate the aggregate pre-tax liability that we would have incurred if we had completely withdrawn from PIUMPF in 2013 would have been in excess of $72 million. However, the exact amount of potential exposure could be higher or lower than the estimate, depending on, among other things, the nature and timing of any triggering events and the funded status of PIUMPF at that time. A withdrawal liability is recorded for accounting purposes when withdrawal is probable and the amount of the withdrawal obligation is reasonably estimable.

Our participation in these plans for the annual period ended December 31, 2013, is outlined in the table below. The “EIN" and "Plan Number” columns provide the Employee Identification Number, or EIN, and the three-digit plan number. The most recent Pension Protection Act, or PPA, zone status available in 2013 and 2012 is for a plan’s year-end as of December 31, 2012, and December 31, 2011, respectively. The zone status is based on information we received from the plans and is certified by each plans’ actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent but more than 65 percent funded, and plans in the green zone are at least 80 percent funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan, or FIP, or a rehabilitation plan, or RP, is either pending or has been implemented as required by the PPA as a measure to correct its underfunded status. The last column lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject.

In 2013, the contribution rates for the IAM plan increased to $4.00 an hour, up from $3.25 an hour in 2012 and $3.00 an hour in 2011, affecting the comparability of the contributions year over year. Similarly, in November of 2011, the USW plan’s contribution rates increased from $2.4285 an hour to $2.6714 an hour. The USW plan's rate increase was implemented as part of the RP in lieu of the legally required surcharge, paid by the employers, to assist the fund’s financial status. As such, the USW contribution rate changes affect comparability of the contributions year over year. We were listed in the USW Plan’s Form 5500 report as providing more than five percent of the total contributions for the years 2012 and 2011. At the date of issuance of our consolidated financial statements, Form 5500 reports for these plans were not available for the 2013 plan year.



Pension Fund	EIN	Plan Number	PPA Zone Status			FIP/RP Status Pending/ Implemented	Contributions (in thousands)						Surcharge Imposed	Expiration Date of Collective Bargaining Agreement
Pension Fund	EIN	Plan Number	2013	2012		FIP/RP Status Pending/ Implemented	2013		2012		2011		Surcharge Imposed	Expiration Date of Collective Bargaining Agreement
IAM	51-6031295	002	Green	Green		N/A	$	343	$	288	$	269	No	5/31/2016
USW	11-6166763	001	Red	Red		Implemented	5,718		5,673		5,648		No	8/31/2014
					Total Contributions:		$	6,061	$	5,961	$	5,917