Employee Benefit Plans

6 Months Ended

Jun. 30, 2011

Employee Benefit Plans

Employee Benefit Plans

6. Employee Benefit Plans

In the periods presented, employees of Con-way and its subsidiaries in the U.S. were covered under several retirement benefit plans, including defined benefit pension plans, defined contribution retirement plans, a postretirement medical plan and a long-term disability plan. See Note 11, "Employee Benefit Plans," of Item 8, "Financial Statements and Supplementary Data," in Con-way's 2010 Annual Report on Form 10-K for additional information concerning its employee benefit plans. See "Cost-Reduction Actions" below for a discussion of employee benefits changes that were effective in April 2009.

Defined Benefit Pension Plans

As a result of plan amendments in previous years, no additional benefits accrue under these plans and already-accrued benefits will not be adjusted for future increases in compensation. The following table summarizes the components of net periodic benefit expense (income) for Con-way's domestic defined benefit pension plans:

	Qualified Pension Plans
	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2011			2010			2011			2010
Interest cost on benefit obligation	$	17,685		$	17,204		$	35,655		$	34,568
Expected return on plan assets		(21,426	)		(18,138	)		(42,968	)		(37,519	)
Amortization of net loss		2,534			2,307			5,273			4,535
Net periodic benefit expense (income)	$	(1,207	)	$	1,373		$	(2,040	)	$	1,584
	Non-Qualified Pension Plans
	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)		2011			2010			2011			2010
Interest cost on benefit obligation	$	957		$	966		$	1,894		$	1,940
Amortization of net loss		182			115			339			226
Net periodic benefit expense	$	1,139		$	1,081		$	2,233		$	2,166

Con-way expects to make required contributions of $22.0 million and discretionary contributions of $40.6 million to its Qualified Pension Plans in 2011, including $9.7 million contributed through July 2011. Con-way's estimate of its 2011 contribution is subject to change based on variations in interest rates, asset returns, Pension Protection Act requirements and other factors.

Defined Contribution Retirement Plans

Con-way's defined contribution retirement plans consist mostly of the primary defined contribution retirement plan (the "Primary DC Plan").

Con-way's expense under the Primary DC Plan was $8.8 million and $17.7 million in the second quarter and first six months of 2011, respectively, compared to $10.3 million and $19.2 million in the same periods of 2010. At June 30, 2011 and December 31, 2010, Con-way had recognized accrued liabilities of $10.8 million and $10.4 million, respectively, for its contributions related to the Primary DC Plan.

In the first six months of 2011 and 2010, Con-way used 461,151 shares and 511,319 shares, respectively, of repurchased common stock (also referred to as treasury stock), to fund $17.3 million and $17.9 million, respectively, of contributions to the Primary DC Plan. Effective in July 2011, Con-way's contributions to the Primary DC Plan will be in the form of cash, rather than in treasury stock.

Postretirement Medical Plan

The following table summarizes the components of net periodic benefit expense for the postretirement medical plan:

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2011			2010			2011			2010
Service cost	$	316		$	305		$	721		$	703
Interest cost on benefit obligation		1,125			1,195			2,246			2,416
Amortization of prior service credit		(303	)		(300	)		(606	)		(601	)
Net periodic benefit expense	$	1,138		$	1,200		$	2,361		$	2,518

Long-term Disability Plan

Con-way's expense associated with the long-term disability plan was $3.7 million and $6.3 million in the second quarter and first six months of 2011, respectively, compared to $4.0 million and $7.1 million in the same respective periods of 2010. In Con-way's consolidated balance sheets, the long-term and current portions of the long-term disability plan obligation are reported in employee benefits and accrued liabilities, respectively. At June 30, 2011, the long-term and current portions of the obligation were $21.8 million and $11.4 million, respectively, and at December 31, 2010, were $22.1 million and $11.4 million, respectively.

Cost-Reduction Actions

In response to economic conditions, in March 2009 Con-way announced several measures to reduce costs and conserve cash, as detailed below. The measures announced in March 2009 consisted of the suspension or curtailment of employee benefits and a reduction in salaries and wages.

Salaries and Wages

Effective in March 2009, the salaries and wages of certain employees were reduced by 5%, including corporate and shared-services employees and those at the Con-way Freight and Road Systems business units. Effective in January 2010, Con-way restored one-half of the salary and wage reductions. Con-way restored the remaining one-half of salary and wage reductions effective in January 2011.

Compensated Absences

Effective in April 2009, a compensated-absences benefit was suspended at Con-way Freight. During the period of suspension, no compensated-absences benefits were earned for current-year service; however, employees could use previously vested benefits. Also, effective in March 2009, Menlo Worldwide Logistics reduced its compensated-absences benefit by 25%. Effective in April 2010, Con-way Freight and Menlo Worldwide Logistics reinstated their compensated-absences benefits.

Defined Contribution Plan

Effective in April 2009, employer contributions to Con-way's Primary DC Plan were suspended or limited. The "matching" and "transition" contributions were suspended and the "basic" contribution was limited to no more than 3% of an employee's eligible compensation. In July 2011, Con-way announced that it has elected to prospectively reinstate the "basic" and "transition" contributions to their prior levels in the fourth quarter of 2011. The reinstated contributions, which are based on employees' years of service, will consist of a "basic" contribution that ranges from 3% to 5% of eligible compensation and a "transition" contribution that ranges from 1% to 3% of eligible compensation.