PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
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Pension and Other Postretirement Benefit Plans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS | 18. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS The Corporation maintains fourteen separate and distinct pension and other postretirement defined benefit plans, consisting of seven domestic pensions and other postretirement benefit plans and seven separate foreign pension plans. The Corporation maintains the following legacy domestic plans: a qualified pension plan, a non-qualified pension plan, and a postretirement health-benefits plan (the Curtiss-Wright Plans), and a postretirement health benefits plan for EMD employees. With the acquisition of Williams Controls on December 14, 2012, the Corporation acquired three new domestic plans: a qualified salaried employee pension plan, a qualified hourly employee pension plan, and a postretirement health-benefits plan (the Williams Plans). The foreign plans consist of three defined benefit pension plans in the United Kingdom, two in Mexico, and one plan each in Canada and Switzerland. In 2010, a defined benefit plan in Norway was terminated and replaced with a defined contribution plan. The total projected benefit obligation related to all foreign plans is $83.0 million as of December 31, 2012. Each plan and further information on the Norway plan termination is described below. Domestic Plans The Curtiss-Wright Plans The Corporation maintains a defined benefit pension plan (the “CW Pension Plan”) covering all employees under four benefit formulas: a non-contributory non-union and union formula for all Curtiss-Wright (“CW”) employees and a contributory union and non-union benefit formula for employees at the EMD business unit. The formula for CW non-union employees is composed of a “traditional” benefit based on years of credited service, the five highest consecutive years' compensation during the last ten years of service, and a “cash balance” benefit. CW union employees who have negotiated a benefit under the CW Pension Plan are entitled to a benefit based on years of service multiplied by a monthly pension rate. Employees become participants under the CW Pension Plan after one year of service and are vested after three years of service. The formula for EMD employees covers both union and non-union employees and is designed to satisfy the requirements of relevant collective bargaining agreements. Employee contributions are withheld each pay period and are equal to 1.5% of salary. The benefits for the EMD employees are based on years of service and compensation. On December 31, 2012, the Corporation amended the CW Pension Plan to close the benefit to EMD employees hired after January 1, 2014. Prior to this change, effective February 1, 2010, the Corporation amended the CW Pension Plan to close the traditional benefit to new CW non-union employees. All new employees hired on or after the effective date are eligible for the cash balance benefit. At December 31, 2012 and 2011, the Corporation had a noncurrent pension liability of $195.9 million and $180.8 million, respectively. The Corporation made $40.1 million of contributions to the CW Pension Plan in 2012 and expects to make a contribution of approximately $35.0 million in 2013. This reduction is largely due to relief provided by the Moving Ahead for Progress in the 21st Century Act (MAP-21), which provides pension plan sponsors with short-term funding relief by stabilizing interest rates used to determine required funding contributions to defined benefit plans. The Corporation expects to make cumulative contributions of approximately $220 million from 2013 through 2017. The Corporation also maintains a non-qualified restoration plan (the “CW Restoration Plan”) covering those employees of CW and EMD whose compensation or benefits exceed the IRS limitation for pension benefits. Benefits under the CW Restoration Plan are not funded, and, as such, the Corporation had an accrued pension liability of $34.4 million and $23.4 million as of December 31, 2012 and 2011, respectively. The Corporation's contributions to the CW Restoration Plan are expected to be $2.4 million in 2013. The Corporation provides postretirement health benefits to certain employees (the “CW Retirement Plan”). In 2002, the Corporation restructured the postretirement medical benefits for certain active employees, effectively freezing the plan. The obligation associated with these active employees was transferred to the CW Pension Plan. The plan continues to be maintained for retired employees. The Corporation had an accrued postretirement benefit liability of $0.6 million as of December 31, 2012 and 2011. Benefits under the plan are not funded. The Corporation's contributions to the CW Retirement Plan are not expected to be material in 2013. EMD Plan The Corporation, through an administration agreement with Westinghouse, maintains the Westinghouse Government Services Group Welfare Benefits Plan (the “EMD Retirement Plan”), a retiree health and life insurance plan for substantially all of the Curtiss-Wright EMD employees. The EMD Retirement Plan provides basic health and welfare coverage on a non-contributory basis. Benefits are based on years of service and are subject to certain caps. Effective January 1, 2011, the Corporation modified the benefit design for post-65 retirees by introducing Retiree Reimbursement Accounts (“RRA's) to participants in lieu of the traditional benefit delivery. Participant accounts are funded a set amount annually that can be used to purchase supplemental coverage on the open market, effectively capping the benefit. The Corporation had an accrued postretirement benefit liability at December 31, 2012 and 2011 of $20.7 million and $20.9 million, respectively. Pursuant to the Asset Purchase Agreement, the Corporation has a discounted receivable from Washington Group International to reimburse the Corporation for a portion of these postretirement benefit costs. At December 31, 2012 and 2011, the discounted receivable included in other assets was $2.0 million and $2.4 million, respectively. The Corporation expects to contribute $1.4 million to the EMD Retirement Plan during 2013. The Williams Plans The Corporation acquired two defined benefit pension plans and a postretirement benefit plan with the acquisition of Williams Controls on December 14, 2012. The two defined benefit plans, an hourly employee plan and salaried employee plan, provide a fixed formula benefit to members upon retirement. The postretirement benefit plan provides health care and life insurance benefits for certain of its retired employees. No new employees are being admitted into these plans. As of December 31, 2012, the Corporation had an accrued pension liability of $6.2 million and an accrued postretirement benefit liability of $2.1 million related to these plans. The Corporation expects to contribute $1.2 million into these plans in 2013. Foreign Plans Indal Technologies Hourly Plan (Canada) The Pension Plan for Hourly Employees of Indal Technologies, Inc. (“Indal Plan”) commenced on March 1, 2005 in connection with the acquisition of Indal by the Corporation. This non-contributory defined benefit plan provides monthly benefits to eligible members equal to a member's credited service multiplied by a fixed dollar amount. As of December 31, 2012 and 2011, the Corporation had an accrued pension liability of $1.2 million and $0.9 million, respectively. The Corporation's contributions to the Indal Plan are expected to be $0.7 million in 2013. Metal Improvement Company – Salaried Staff Pension Scheme (U.K.) The Corporation maintains the Salaried Staff Pension scheme (“MIC Plan”) for the benefit of Metal Treatment employees in the U.K. This contributory plan provides defined benefits to eligible members equal to one-sixtieth of final pensionable salary for each year of pensionable service. Members contribute at the rate of 9% of their pensionable salary, and the Corporation funds the balance of the cost to provide benefits. The plan provides for early retirement at reduced benefits and was closed to new entrants as of January 1, 2004. As of December 31, 2012 and 2011, the Corporation had an accrued pension liability of $2.4 million and $3.2 million, respectively. The Corporation's contributions to the MIC Plan are expected to be approximately $0.8 million in 2013. Penny & Giles Pension Plan (U.K.) The Penny & Giles Pension Plan (“P&G Plan”) is a contributory plan that provides for both defined benefit and defined contribution benefits. Defined benefit members are entitled to final salary related benefits equal to one-sixtieth of final pensionable salary for each year of pensionable service. The P&G Plan provides for early retirement at reduced benefits and was closed to new entrants at time of acquisition in 2002. The following disclosures include information for the Penny & Giles defined benefit section only, which represents the majority of the P&G Plan's costs. As of December 31, 2012 and 2011, the Corporation had an accrued pension liability of $1.0 million and $2.0 million, respectively. The Corporation's contributions to the P&G Plan are expected to be approximately $2.1 million in 2013. Mechetronics Limited Retirement Benefits Scheme (U.K.) The Corporation assumed defined benefit obligations as a result of our Mechetronics acquisition on October 1, 2009. The plan is based on final pensionable salary and years of service. As a result of the restructuring of Mechetronics and the consolidation of U.K. operations in 2010, there are no active employees in the pension plan as of December 31, 2010 as the employees became deferred vested participants. As of December 31, 2012 and 2011, the Corporation had an accrued pension liability of $3.0 million. The Corporation's contributions to the plans are expected to be immaterial in 2013. Curtiss Wright Antriebstechnik GmbH (“CWAT”) Pension Plan (Switzerland) CWAT sponsors a defined contribution plan covering 87 employees as of December 31, 2012. Under Swiss Law, there is a guaranteed minimum benefit requirement which must be valued as a defined benefit obligation for U.S. GAAP purposes. As of December 31, 2012 and 2011, the Corporation had an accrued pension liability of $0.3 million. The Corporation's contributions to the plan are expected to be $1.0 million in 2013. VMETRO ASA Pension Plan The Corporation assumed defined benefit obligations as a result of our VMETRO acquisition on October 15, 2008. The group pension plan entitles the employees of the Norwegian companies with future benefits based on years of service, the wage level at time of retirement, and benefits from the national insurance plan. Effective December 31, 2010, the Corporation terminated the existing defined benefit plan and replaced it with a defined contribution plan covering employee service beginning on January 1, 2011. The plan termination resulted in one-time curtailment and settlement gains of approximately $1.6 million in 2010. The Corporation did not have an accrued pension liability as of December 31, 2010. The following table details the components of net periodic pension expense for all Pension Plans:
Net periodic benefit cost, specifically service and interest cost, has increased over the reported periods due to growth in headcount and service accruals related to existing employees under the age and service-based formula in the plan. The recognized actuarial loss has increased over the reported periods, due largely to the decline in the discount rate. The Cost of settlements/curtailments indicated above represents events that are accounted for under guidance on employers' accounting for settlements and curtailments of defined benefit pension plans. The settlement charge in 2011 is resulting from the retirement of employees in Switzerland and Mexico. In 2010, the gain resulted from the termination of the defined benefit plan in Norway, offset by settlement charges due to workforce reductions in Mexico and retirements in Switzerland. The following table details the components of net periodic expense for the Corporation's Postretirement Benefit Plans:
Plan Assumptions
The discount rate for each plan is determined by discounting the plan's expected future benefit payments using a yield curve developed from high quality bonds that are rated Aa or better by Moody's as of the measurement date. The yield curve calculation matches the notional cash inflows of the hypothetical bond portfolio with the expected benefit payments to arrive at one effective rate for each plan. The overall expected return on assets assumption is based on a combination of historical performance of the pension fund and expectations of future performance. Expected future performance is determined by weighting the expected returns for each asset class by the plan's asset allocation. The expected returns are based on long-term capital market assumptions utilizing a ten-year time horizon through consultation with investment advisors. While consideration is given to recent performance and historical returns, the assumption represents a long-term prospective return. The effect on the CW and EMD Retirement Plans of a 1% change in the health care cost trend is as follows:
Pension Plan Assets The overall objective for plan assets is to earn a rate of return over time to meet anticipated benefit payments in accordance with plan provisions. The long-term investment objective of the domestic retirement plans is to achieve a total rate of return, net of fees, which exceeds the actuarial overall expected return on assets assumption used for funding purposes and which provides an appropriate premium over inflation. The intermediate-term objective of the domestic retirement plans, defined as three to five years, is to outperform each of the capital markets in which assets are invested, net of fees. During periods of extreme market volatility, preservation of capital takes a higher precedence than outperforming the capital markets. The Corporation's Finance Committee is responsible for formulating investment policies, developing investment manager guidelines and objectives, and approving and managing qualified advisors and investment managers. The guidelines established define permitted investments within each asset class and apply certain restrictions such as limits on concentrated holdings, and prohibits selling securities short, buying on margin, and the purchase of any securities issued by the Corporation. The Corporation maintains the funds of the CW Pension Plan under a trust that is diversified across investment classes and among investment managers to achieve an optimal balance between risk and return. In accordance with this policy, the Corporation has established target allocations for each asset class and ranges of expected exposure. The Corporation's domestic retirement assets are invested within this allocation structure in three major categories: domestic equity securities, international equity securities, and debt securities. Below are the Corporation's actual and established target allocations for the CW Pension Plan, representing 81% of consolidated assets:
As of December 31, 2012 and 2011, cash funds in the CW Pension Plan represented less than 3% of portfolio assets. The Williams Plans, which represent approximately 2% of domestic retirement assets, are more heavily weighted in fixed income resulting in a weighted expected return on assets assumption of 6.75%. Foreign plan assets represent 16% of consolidated plan assets, with the majority of the assets supporting the U.K. plans. The U.K. foreign plans follow a similar asset allocation strategy, while other foreign plans are more heavily weighted in fixed income resulting in a weighted expected return on assets assumption of 5.66% for all foreign plans. The Corporation may from time to time require the reallocation of assets in order to bring the retirement plans into conformity with these ranges. The Corporation may also authorize alterations or deviations from these ranges where appropriate for achieving the objectives of the retirement plans. Fair Value Measurements The following table presents consolidated plan assets using the fair value hierarchy as of December 31, 2012:
The following table presents consolidated plan assets using the fair value hierarchy as of December 31, 2011:
Valuation Equity securities and exchange-traded equity and bond mutual funds are valued using a market approach based on the quoted market prices of identical instruments. Pooled institutional funds are valued at their net asset values and are calculated by the sponsor of the fund. Fixed income securities are primarily valued using a market approach utilizing various underlying pricing sources and methodologies. Real estate investment trusts are priced at net asset value based on valuations of the underlying real estate holdings using inputs such as discounted cash flows, independent appraisals, and market-based comparable data. Cash balances in the United States are held in a pooled fund and classified as a Level 2 asset. Non-U.S. cash is valued using a market approach based on quoted market prices of identical instruments. The following table presents a reconciliation of Level 3 assets held during the year ended December 31, 2012 and 2011:
Benefit Payments The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid from the plans:
Other Pension and Postretirement Plans The Corporation offers all of its domestic employees the opportunity to participate in a defined contribution plan. Costs incurred by the Corporation in the administration and record keeping of the defined contribution plan are paid for by the Corporation and are not considered material. In addition, the Corporation had foreign pension costs under various defined contribution plans of $4.8 million, $3.7 million, and $2.8 million in 2012, 2011, and 2010, respectively. |