Pension and Profit Sharing

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Pension and Profit Sharing

6.  Pension and Profit Sharing

United States employees, hired prior to July 1, 1993, are covered by a funded, defined benefit pension plan.  The benefits of this pension plan are based on years of service and the average compensation of the highest three consecutive years during the last ten years of employment.  In December 1995, the Company's Board of Directors approved an amendment to the United States pension plan that terminated all future benefit accruals as of February 1, 1996, without terminating the pension plan.

The Company’s funding policy with respect to its qualified plan is to contribute at least the minimum amount required by applicable laws and regulations. In 2011, the Company contributed $240,000 to the plan and expects to contribute approximately $230,000 during 2012.

The plan asset weighted average allocation at December 31, 2011 and December 31, 2010, by asset category, were as follows:

Asset Category	2011	2010
Equity Securities	68%	68%
Fixed Income Securities	29%	30%
Other Securities / Investments	3%	2%
Total	100%	100%

The Company’s investment policy for the pension plan is to minimize risk by balancing investments between equity securities and fixed income securities, utilizing a weighted average approach of 65% equity securities, 30% fixed income securities, and 5% cash investments.  Plan funds are invested in long-term obligations with a history of moderate to low risk.

As of each December 31, 2011 and 2010, equity securities in the pension plan included 10,000 shares of the Company's Common Stock, having a market value of $95,000 and $95,200, respectively.

The pension plan asset information included below is presented at fair value. ASC 820 establishes a framework for measuring fair value and requires disclosures about assets and liabilities measured at fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

· Level 1 – Inputs to the valuation methodology based on unadjusted quoted market prices in active markets that are accessible at the measurement date.

· Level 2 – Inputs to the valuation methodology that include quoted market prices that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly.

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

The following table presents the pension plan assets by level within the fair value hierarchy as of December 31, 2011.

	Level 1		Level 2		Level 3		Total
Money Market Fund	$	32,819	$	-	$	-	$	32,819
Acme United Common Stock		95,000		-		-		95,000
Equity Common and Collected Funds		-		757,371		-		757,371
Fixed Income Common and Collected Funds		-		361,544		-		361,544
Total	$	127,819	$	1,118,915	$	-	$	1,246,734

Other disclosures related to the pension plan follow:
	2011			2010
Assumptions used to determine benefit obligation:
Discount rate		3.99%			4.42%
Changes in benefit obligation:
Benefit obligation at beginning of year	$	(2,479,645	)	$	(2,555,196	)
Interest cost		(99,122	)		(122,416	)
Service cost		(19,000	)		(25,000	)
Actuarial gain		22,235			(117,417	)
Benefits and plan expenses paid		316,010			340,384
Benefit obligation at end of year		(2,259,522	)		(2,479,645	)
Changes in plan assets:
Fair value of plan assets at beginning of year		1,315,428			1,246,541
Actual return on plan assets		7,665			144,274
Employer contribution		239,653			264,997
Benefits and plan expenses paid		(316,010	)		(340,384	)
Fair value of plan assets at end of year		1,246,736			1,315,428
Funded status	$	(1,012,786	)	$	(1,164,217	)

	2011			2010
Assumptions used to determine net periodic benefit cost:
Discount rate		4.42%			5.06%
Expected return on plan assets		8.25%			8.25%
Components of net benefit expense:
Interest cost	$	99,122		$	122,416
Service cost		19,000			25,000
Expected return on plan assets		(95,470	)		(95,422	)
Amortization of prior service costs		9,154			9,154
Amortization of actuarial loss		124,536			154,555
Net periodic benefit cost	$	156,342		$	215,703

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 equity securities and fixed income securities are preserved consistent with the widely-accepted capital market principle that assets with higher volatility generate higher returns over the long run.   Our expected 8.25% long-term rate of return on plan assets is determined based on long-term historical performance of plan assets, current asset allocation and projected long-term rates of return.

The following table discloses the change recorded in other comprehensive income related to benefit costs:

	2011			2010
Balance at beginning of the year	$	1,830,465		$	1,925,609
Change in net loss		65,570			68,565
Amortization of actuarial loss		(124,536	)		(154,555	)
Amortization of prior service cost		(9,154	)		(9,154	)
Change recognized in other comprehensive income		(68,120	)		(95,144	)
Total recognized in other comprehensive income	$	1,762,345		$	1,830,465

Amounts recognized in Accumulated Other Comprehensive Income:
Net actuarial loss	$	1,723,016	$	1,781,982
Prior service cost		39,329		48,483
Total	$	1,762,345	$	1,830,465

In 2012, net periodic benefit cost will include approximately $154,000 of net actuarial loss and $9,000 of prior service cost.

The following benefits are expected to be paid:

2012	$	271,000
2013		255,000
2014		247,000
2015		230,000
2016		213,000
Years 2017 - 2021		814,000

The Company also has a qualified, profit sharing plan covering substantially all of its United States employees. Annual Company contributions to this profit sharing plan are determined by the Company’s Compensation Committee.  For the years ended December 31, 2011 and 2010, the Company contributed 50% of employee’s contributions, up to the first 6% of salary contributed by each employee.  Total contribution expense under this profit sharing plan was $95,088 in 2011 and $114,085 in 2010.