10. EMPLOYEE BENEFIT PLANS

The Company has funded single-employer defined benefit pension plans that cover substantially all non-bargaining unit employees and certain bargaining unit employees. In addition, the Company has plans that provide certain retiree health care and life insurance benefits to substantially all salaried and to certain hourly employees. Employees are generally eligible for such benefits upon retirement and completion of a specified number of years of credited service. The Company does not pre-fund these health care and life insurance benefits and has the right to modify or terminate certain of these plans in the future. Certain groups of retirees pay a portion of the benefit costs.

Plan Administration, Investments and Asset Allocations: The Company has an Investment Committee that meets regularly with investment advisors to establish investment policies, direct investments and select investment options. The Investment Committee is also responsible for appointing investment managers. The Company's investment policy permits investments in marketable equity securities, such as domestic and foreign stocks, domestic and foreign bonds, venture capital, real estate investments, and cash equivalents. The Company's investment policy does not permit direct investment in certain types of assets, such as options or commodities, or the use of certain strategies, such as short selling or the purchase of securities on margin.

The Company's investment strategy for its pension plan assets is to achieve a diversified mix of investments that provides for attractive long-term growth with an acceptable level of risk, but also to provide sufficient liquidity to fund ongoing benefit payments. The Company has engaged a number of investment managers to implement various investment strategies to achieve the desired asset class mix, liquidity and risk diversification objectives. The Company's weighted-average asset allocations at December 31, 2011 and 2010, and 2011 year-end target allocation, by asset category, were as follows:

	Target		2011		2010

Domestic equity securities	53	%	59	%	62	%
International equity securities	15	%	14	%	11	%
Debt securities	22	%	17	%	16	%
Real estate	10	%	6	%	4	%
Other and cash	-	-	4	%	7	%
Total	100	%	100	%	100	%

The Company's investments in equity securities primarily include domestic large-cap and mid-cap companies, but also includes an allocation to small-cap and international equity securities. Equity investments do not include any direct holdings of the Company's stock but may include such holdings to the extent that the stock is included as part of certain mutual fund holdings. Debt securities include investment-grade and high-yield corporate bonds from diversified industries, mortgage-backed securities, and U.S. Treasuries. Other types of investments include funds that invest in commercial real estate assets, and to a lesser extent, private equity investments in technology companies.

The expected return on plan assets is principally based on the Company's historical returns combined with the Company's long-term future expectations regarding asset class returns, the mix of plan assets, and inflation assumptions. One-, three-, and five-year pension asset returns (losses) were (4.2) percent, 8.8 percent, and (0.3) percent, respectively, and the long-term average return (since plan inception in 1989) has been approximately 8.0 percent. Over the long-term, the actual returns have generally exceeded the benchmark returns used by the Company to evaluate performance of its fund managers. Due to volatile market performance in recent years, the Company has reduced its long-term rate of return assumption from 8.5 percent in 2009 to 8.25 percent in 2010 and believes that the change is appropriate given the Company's investment portfolio's historical performance and the Company's target asset allocation.

The Company's pension plan assets are held in a master trust and stated at estimated fair value, which is based on the fair values of the underlying investments. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

FASB ASC Topic 820, Fair Value Measurements and Disclosures, as amended, establishes a fair value hierarchy, which requires the pension plans to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy places the highest priority on unadjusted quoted market prices in active markets for identical assets or liabilities (level 1 measurements) and assigns the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs within the hierarchy are defined as follows:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Significant other observable inputs other than level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect the pension plans' own assumptions about the assumptions that market participants would use in pricing an asset or liability.

If the technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy, the lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.

Equity Securities: Domestic and international common stocks are valued by obtaining quoted prices on recognized and highly liquid exchanges.

Fixed Income Securities: Corporate bonds and U.S. government treasury and agency securities are valued based upon the closing price reported in the market in which the security is traded. U.S. government agency and corporate asset-backed securities may utilize models, such as a matrix pricing model, that incorporates other observable inputs such as cash flow, security structure, or market information, when broker/dealer quotes are not available.

Real Estate, Private Equity, and Insurance Contract Interests: The fair value of real estate fund investments, private equity, and insurance contract interests are determined by the issuer based on the unit values of the funds. Unit values are determined by dividing the fund's net assets by the number of units outstanding at the valuation date. Fair value for underlying investments in real estate is determined through independent property appraisals. Fair value of underlying investments in private equity assets is determined based on information provided by the general partner taking into consideration the purchase price of the underlying securities, developments concerning the investee company subsequent to the acquisition of the investment, financial data and projections of the investee company provided to the general partner, and such other factors as the general partner deems relevant. Insurance contract interests consist of investments in group annuity contracts, which are valued based on the present value of expected future payments.

The fair values of the Company's pension plan assets at December 31, 2011 and 2010, by asset category, are as follows (in millions):

	Fair Value Measurements as of
	December 31, 2011
	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category
Cash	$	10	$	10	$	--	$	--
Equity securities:
U.S. large-cap		102		102		--		--
U.S. mid- and small-cap		32		32		--		--
International large-cap		28		28		--		--
International mid-cap		23		23		--		--
Fixed income securities:
U.S. Treasuries		1		--		1		--
Investment grade U.S. corporate bonds		3		--		3		--
High-yield U.S. corporate bonds		10		--		10		--
Mortgage-backed securities		31		--		31		--
Other types of investments:
Real estate partnerships interests		14		--		--		14
Private equity partnership interests (a)		2		--		--		2
Insurance contracts		1		--		--		1
Total	$	257	$	195	$	45	$	17

	Fair Value Measurements as of
	December 31, 2010
	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category
Cash	$	17	$	17	$	--	$	--
Equity securities:
U.S. large-cap		136		136		--		--
U.S. mid- and small-cap		40		40		--		--
International large-cap		31		31		--		--
Fixed income securities:
U.S. Treasuries		1		--		1		--
Investment grade U.S. corporate bonds		3		--		3		--
High-yield U.S. corporate bonds		8		--		8		--
Mortgage-backed securities		33		--		33		--
Other types of investments:
Real estate partnerships interests		13		--		--		13
Private equity partnership interests (a)		2		--		--		2
Insurance contracts		1		--		--		1
Total	$	285	$	224	$	45	$	16

(a)	This category represents private equity funds that invest principally in U.S. technology companies.

The table below presents a reconciliation of all pension plan investments measured at fair value on a recurring basis using significant unobservable inputs (level 3) for the years ended December 31, 2011 and 2010 (in millions):

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)

	Real Estate			Private Equity			Insurance		Total

Beginning balance, January 1, 2010	$	23		$	3		$	1	$	27
Actual return on plan assets:
Assets held at the reporting date		3			--			--		3
Assets sold during the period		(1	)		--			--		(1	)
Purchases, sales and settlements		(12	)		(1	)		--		(13	)
Ending balance, December 31, 2010		13			2			1		16
Actual return on plan assets:
Assets held at the reporting date		2			--			--		2
Assets sold during the period		--			--			--		--
Purchases, sales and settlements		(1	)		--			--		(1	)
Ending balance, December 31, 2011	$	14		$	2			1	$	17

Contributions are determined annually for each plan by the Company's pension administrative committee, based upon the actuarially determined minimum required contribution under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, the Pension Protection Act of 2006 (the “Act”), and the maximum deductible contribution allowed for tax purposes. The Company did not make any contributions during 2009 to its defined benefit pension plans. In 2011 and 2010, the Company contributed approximately $5 million and $6 million, respectively in each year. The Company's funding policy is to contribute cash to its pension plans so that it meets at least the minimum contribution requirements.

For the plans covering employees who are members of collective bargaining units, the benefit formulas are determined according to the collective bargaining agreements, either using career average pay as the base or a flat dollar amount per year of service. The benefit formulas for the remaining defined benefit plans are based on final average pay or a cash balance formula.

Effective January 1, 2012, the Company froze benefit accruals under its traditional defined benefit plans for non-bargaining unit employees hired before January 1, 2008 and instituted a cash balance defined benefit pension plan. Employees hired after January 1, 2008 also participate in a cash balance defined benefit pension plan. Retirement benefits under the cash balance pension plan are based on a fixed percentage of employee eligible compensation, plus interest. The plan interest credit rate will vary from year-to-year based on the ten-year U.S. Treasury rate.

Benefit Plan Assets and Obligations: The measurement date for the Company's benefit plan disclosures is December 31st of each year. The status of the funded defined benefit pension plan and the unfunded accumulated post-retirement benefit plans at December 31, 2011 and 2010 are shown below (in millions):

	Pension Benefits						Other Post-retirement Benefits
	2011			2010			2011			2010

Change in Benefit Obligation
Benefit obligation at beginning of year	$	355		$	322		$	65		$	54
Service cost		9			8			1			1
Interest cost		20			19			4			3
Plan participants' contributions		--			--			2			3
Actuarial (gain) loss		36			24			(6	)		10
Benefits paid		(18	)		(18	)		(6	)		(6	)
Amendments		(36	)		--			--			--
Benefit obligation at end of year	$	366		$	355		$	60		$	65
Change in Plan Assets
Fair value of plan assets at beginning of year		285			260			--			--
Actual return on plan assets		(15	)		37			--			--
Employer contributions		5			6			--			--
Benefits paid		(18	)		(18	)		--			--
Fair value of plan assets at end of year	$	257		$	285		$	--		$	--

Funded Status and Recognized Liability	$	(109	)	$	(70	)	$	(60	)	$	(65	)

The accumulated benefit obligation for the Company's qualified pension plans was $363 million and $326 million as of December 31, 2011 and 2010, respectively. Amounts recognized on the consolidated balance sheets and in accumulated other comprehensive loss at December 31, 2011 and 2010 were as follows (in millions):

	Pension Benefits						Other Post-retirement Benefits
	2011			2010			2011			2010

Non-current assets	$	1		$	3		$	--		$	--
Current liabilities		--			--			(3	)		(4	)
Non-current liabilities		(110	)		(73	)		(57	)		(61	)
Total	$	(109	)	$	(70	)	$	(60	)	$	(65	)

Net loss (net of taxes)	$	110		$	70		$	(1	)	$	6
Unrecognized prior service (credit) cost (net of taxes)		(20	)		3			--			--
Total	$	90		$	73		$	(1	)	$	6

The information for qualified pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2011 and 2010 is shown below (in millions):

	2011		2010

Projected benefit obligation	$	358	$	349
Accumulated benefit obligation	$	355	$	319
Fair value of plan assets	$	248	$	275

The estimated prior service credit for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2012 is $3 million. The estimated net loss that will be recognized in net periodic pension cost for the defined benefit pension plans in 2012 is $15 million. The estimated net loss and prior service cost for the other defined benefit postretirement plans that will be amortized from accumulated other comprehensive loss into net periodic pension cost in 2012 is negligible.

Unrecognized gains and losses of the post-retirement benefit plans are amortized over five years. Although current health costs are expected to increase, the Company attempts to mitigate these increases by maintaining caps on certain of its benefit plans, using lower cost health care plan options where possible, requiring that certain groups of employees pay a portion of their benefit costs, self-insuring for certain insurance plans, encouraging wellness programs for employees, and implementing measures to mitigate future benefit cost increases.

Components of the net periodic benefit cost and other amounts recognized in other comprehensive loss for the defined benefit pension plans and the post-retirement health care and life insurance benefit plans during 2011, 2010, and 2009, are shown below (in millions):

	Pension Benefits									Other Post-retirement Benefits
	2011			2010			2009			2011			2010			2009
Components of Net Periodic Benefit Cost
Service cost	$	9		$	8		$	8		$	1		$	1		$	1
Interest cost		20			19			19			4			3			3
Expected return on plan assets		(23	)		(21	)		(20	)		--			--			--
Amortization of net loss		9			8			12			2			--			--
Amortization of prior service cost		1			1			1			--			--			--
Net periodic benefit cost		16			15			20			7			4			4

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (net of tax)
Net loss (gain)		45			5			(10	)		(4	)		6			1
Amortization of unrecognized (loss) gain		(5	)		(5	)		(7	)		(1	)		(2	)		--
Prior service (credit) cost		(22	)		--			1			--			--			--
Amortization of prior service cost		(1	)		(1	)		(1	)		--			--			--
Total recognized in other comprehensive income		17			(1	)		(17	)		(5	)		4			1
Total recognized in net periodic benefit cost and
other comprehensive income	$	33		$	14		$	3		$	2		$	8		$	5

The weighted average assumptions used to determine benefit information during 2011, 2010, and 2009, were as follows:

	Pension Benefits									Other Post-retirement Benefits
	2011			2010			2009			2011			2010			2009
Weighted Average Assumptions:
Discount rate		4.80	%		5.75	%		6.25	%		4.90	%		5.75	%		6.25	%
Expected return on plan assets		8.25	%		8.25	%		8.50	%
Rate of compensation increase		4.00	%		4.00	%		4.00	%		4.00	%		4.00	%		4.00	%
Initial health care cost trend rate											9.00	%		10.00	%		9.00	%
Ultimate rate											5.00	%		5.00	%		5.00	%
Year ultimate rate is reached											201	6		201	6		201	4

If the assumed health care cost trend rate were increased or decreased by one percentage point, the accumulated post-retirement benefit obligation, as of December 31, 2011, 2010, and 2009 and the net periodic post-retirement benefit cost for 2011, 2010 and 2009, would have increased or decreased as follows (in millions):

	Other Post-retirement Benefits
	One Percentage Point
	Increase						Decrease
	2011		2010		2009		2011			2010			2009

Effect on total of service and interest cost components	$	1	$	1	$	--	$	(1	)	$	--		$	--
Effect on post-retirement benefit obligation	$	7	$	8	$	5	$	(6	)	$	(6	)	$	(4	)

Non-qualified Benefit Plans: The Company has non-qualified supplemental pension plans covering certain employees and retirees, which provide for incremental pension payments from the Company's general funds so that total pension benefits would be substantially equal to amounts that would have been payable from the Company's qualified pension plans if it were not for limitations imposed by income tax regulations. The obligation relating to these plans, totaled $16 million at December 31, 2011. A 3.9 percent discount rate was used to determine the 2011 obligation. The expense associated with the non-qualified plans was $2 million in 2011, $9 million in 2010, and $3 million in 2009. As of December 31, 2011, the amount recognized in accumulated other comprehensive income for unrecognized loss, net of tax, was approximately $5 million, and the amount recognized as unrecognized prior service credit, net of tax, was $4 million. The estimated net loss and prior service credit, net of tax, that will be recognized in net periodic pension cost in 2012 is negligible.

Estimated Benefit Payments: The estimated future benefit payments for the next ten years are as follows (in millions):

	Pension			Non-qualified			Post-retirement
Year	Benefits			Plan Benefits			Benefits

2012		$	19		$	4		$	3
2013			20			1			3
2014			21			1			3
2015			21			1			3
2016			22			5			4
2017-2021			118			2			18

Current liabilities of approximately $7 million, related to non-qualified plan and postretirement benefits, are classified as accrued and other liabilities in the consolidated balance sheet as of December 31, 2011.

Multiemployer Plans: Matson contributes to 9 multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover its bargaining unit employees. Contributions are generally based on union labor paid or cargo volume.

The risks of participating in multiemployer plans are different from single-employer plans because assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. Additionally, if one employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

The multiemployer pension plans are subject to the plan termination insurance provisions of ERISA and are paying premiums to the Pension Benefit Guaranty Corporation (“PBGC”). The statutes provide that an employer who withdraws from, or significantly reduces its contribution obligation to, a multiemployer plan generally will be required to continue funding its proportional share of the plan's unfunded vested benefits. As of December 31, 2011, Management has no present intention of withdrawing from and does not anticipate termination of any of these plans.

Information regarding Matson's participation in multiemployer pension plans is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employer Identification Number (EIN) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available in 2011 and 2010 is for the plan's year-end at December 31, 2011 and 2010, respectively. The zone status is based on information that Matson received from the plan and is certified by the plan's 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 funded, and plans in the green zone are at least 80 percent funded. The “Status of funding improvement or rehabilitation plan implementation” column indicates plans for which a funding improvement plan or a rehabilitation plan is either pending or has been implemented. The last column lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject.

		Pension Protection Act Zone Status as of December 31,		FIP/RP Status	Contributions of Matson ($ in millions)							Expiration Date of Collective
Pension Fund	EIN/Pension Plan Number	2011	2010	Pending/ Implemented		2011		2010		2009	Surcharge Imposed	Bargaining Agreement
Hawaii Stevedoring Multiemployer Retirement Plan	99-0314293/001	Yellow	Yellow	Implemented	$	2.2	$	2.0	$	2.0	No	6/30/2014
Master, Mates and Pilots	13-6372630/001	Green	Red	None		3.0		2.9		2.6	No	6/15/2012-8/15/2013
Hawaii Terminals Multiemployer Pension Plan	20-0389370/001	Yellow	Yellow	Implemented		5.2		5.2		5.0	No	6/30/2014
OCU Trust Pension	26-1574440/001	Green	Green	None		0.1		0.1		0.1	No	6/30/2010
Other Plans						-		-		-
Total					$	10.5	$	10.2	$	9.7

Masters, Mates and Pilots Pension Plan utilized the special 29-year amortization rules provided by Public Law 111-192, Section 211 to amortize its losses from 2008. As a result, the plan's zone status changed from red in 2010 to green in 2011. Also, Matson is party to 2 collective-bargaining agreements based upon vessels that require contributions to this plan: Contract A, covering 13 vessels, expires on August 15, 2013, and Contract B, covering 1 vessel, expires on June 15, 2012.

Matson was listed in its plans' Forms 5500 as providing more than five percent of the total contributions for the following plans and plan years:

Pension Plan			Year Contributions to Plan Exceeded More than 5 Percent of Total Contributions (as of December 31 of the Plan's Year-End)
Hawaii Stevedoring Multiemployer Pension Plan			2011, 2010 and 2009
Hawaii Terminals Multiemployer Pension Plan			2011, 2010 and 2009
Masters, Mates and Pilots Pension Plan			2010 and 2009*

* As of the date the financial statements were issued, Form 5500 was not available for the plan year ending in 2011.

Matson contributes to 7 multiemployer plans that provide postretirement benefits other than pensions under the terms of collective-bargaining agreements with American Radio Association AFL-CIO; ILWU Local 142; ILWU Local 63, Office Clerical Unit Marine Clerk Association; International Organization of Masters, Mates and Pilots, AFL-CIO; National Marine Engineers' Beneficial Association, AFL-CIO District No. 1 – PCD, MEBA; Marine Firemen's Union; and Sailors' Union of the Pacific. Benefits provided to active and retired employees and their eligible dependents under these plans include medical, dental, vision, hearing, prescription drug, death, accidental death and dismemberment, disability, legal aid, training in maritime electronics, scholarship program, wage insurance and license insurance, although not all of these benefits are provided by each plan. These plans are not subject to the PBGC plan termination and withdrawal liability provisions of ERISA applicable to multiemployer pension plans. Contributions Matson made to these plans were $10.6 million in 2011, $10.5 million in 2010, and $9.9 million in 2009. The contributions increased during the period due to increases in the employer contribution rate.

Defined Contribution Plans: The Company sponsors defined contribution plans that qualify under Section 401(k) of the Internal Revenue Code and provides matching contributions of up to 4 percent of eligible employee compensation. For 2010, the 401(k) matching contributions were suspended for all employees who are participants in the Company's defined benefit plan, but was reinstated starting in 2011. The Company's matching contributions expensed under these plans totaled $2.2 million and $1.4 million for the years ended December 31, 2011 and 2009, respectively. The Company also maintains profit sharing plans, and if a minimum threshold of Company performance is achieved, provides contributions of 1 percent to 3 percent, depending upon Company performance above the minimum threshold. In 2009, the profit sharing plan was suspended, but was reinstated starting in 2011. There was no profit sharing contribution expense recorded in 2011 and 2010 for these plans.