Pensions and Postretirement Benefits Other than Pensions

6 Months Ended

Jun. 30, 2011

General Discussion of Pension and Other Postretirement Benefits [Abstract]

Pensions and Postretirement Benefits Other than Pensions

Pensions and Postretirement Benefits Other than Pensions

The Company sponsors several U.S. defined benefit and defined contribution pension plans covering substantially all of our U.S. employees. Additionally, the Company has many non-U.S. defined benefit and defined contribution pension plans covering non-U.S. locations. Postretirement benefits other than pensions provide healthcare benefits, and in some instances, life insurance benefits for certain eligible employees.

Pension Plans

The Company has noncontributory defined benefit pension plans covering substantially all U.S. employees. Most of the plans for non-collectively bargained U.S. employees provide benefits on an average pay formula while most plans for collectively bargained U.S. employees provide benefits on a flat benefit formula. Effective January 1, 2010, non-collectively bargained U.S. employees of Trane began to participate in the Company’s pension plan for U.S. non-collectively bargained employees. In addition, the Company maintains pension plans for certain non-U.S. employees in other countries. These plans generally provide benefits based on earnings and years of service. The Company also maintains additional other supplemental benefit plans for officers and other key employees.

The components of the Company’s pension-related costs for the three and six months ended June 30 are as follows:

	Three months ended						Six months ended
In millions	2011			2010			2011			2010
Service cost	$	24.2		$	25.6		$	48.3		$	51.3
Interest cost	47.9			48.3			95.5			97.3
Expected return on plan assets	(56.1		)	(48.8		)	(112.0		)	(98.1		)
Net amortization of:
Prior service costs	1.4			2.0			2.8			4.0
Plan net actuarial losses	13.7			13.9			27.4			28.0
Net periodic pension benefit cost	31.1			41.0			62.0			82.5
Net curtailment and settlement (gains) losses	—			—			5.8			6.2
Net periodic pension benefit cost after net curtailment and settlement (gains)  losses	$	31.1		$	41.0		$	67.8		$	88.7
Amounts recorded in continuing operations	$	28.2		$	36.4		$	62.0		$	79.5
Amounts recorded in discontinued operations	2.9			4.6			5.8			9.2
Total	$	31.1		$	41.0		$	67.8		$	88.7

The Company made employer contributions of $36.8 million and $32.8 million to its defined benefit pension plans during the six months ended June 30, 2011 and 2010, respectively.

The curtailment and settlement losses in 2011 and 2010 are associated with lump sum distributions under supplemental benefit plans for officers and other key employees.

Postretirement Benefits Other Than Pensions

The Company sponsors several postretirement plans that provide for healthcare benefits, and in some instances, life insurance benefits that cover certain eligible employees. These plans are unfunded and have no plan assets, but are instead funded by the Company on a pay-as-you-go basis in the form of direct benefit payments. Generally, postretirement health benefits are contributory with contributions adjusted annually. Life insurance plans for retirees are primarily noncontributory.

In March 2010, the Patient Protection and Affordable Care Act (the Act) and the Healthcare and Education Reform Reconciliation Bill of 2010 (together with the Act, the Healthcare Reform Legislation) was signed into law. The Healthcare Reform Legislation contains provisions which could impact our accounting for retiree medical benefits in future periods. The retiree medical plans currently receive the retiree drug subsidy under Medicare Part D. No later than 2014, a significant portion of the drug coverage will be moved to an Employer Group Waiver Plan while retaining the same benefit provisions. This change allowable under the Healthcare Reform Legislation resulted in an actuarial gain which decreased the December 31, 2010 retiree medical plan liability, as well as the net actuarial losses in other comprehensive income by $41.1 million. There were no other changes to our liabilities as a result of the Healthcare Reform Legislation; however, the Healthcare Reform Legislation will continue to be monitored for provisions which potentially could impact our accounting for retiree medical benefits in future periods.

The components of net periodic postretirement benefit cost for the three and six months ended June 30 are as follows:

	Three months ended						Six months ended
In millions	2011			2010			2011			2010
Service cost	$	2.1		$	2.5		$	4.2		$	4.9
Interest cost	10.8			12.9			21.2			25.8
Net amortization of:
Prior service gains	(0.8		)	(1.0		)	(1.7		)	(1.8		)
Net actuarial losses	0.8			4.1			1.5			8.3
Net periodic postretirement benefit cost	$	12.9		$	18.5		$	25.2		$	37.2
Amounts recorded in continuing operations	$	8.5		$	10.6		$	16.4		$	21.6
Amounts recorded in discontinued operations	4.4			7.9			8.8			15.6
Total	$	12.9		$	18.5		$	25.2		$	37.2