Pension and Other Post-Retirement Benefits

12 Months Ended

Dec. 31, 2011

Pension and Other Post-Retirement Benefits [Abstract]

Pension and Other Post-Retirement

NOTE 10.    Pension and Other Post-Retirement Benefits

GATX maintains both funded and unfunded noncontributory defined benefit pension plans covering its domestic employees and the employees of certain of its subsidiaries. GATX also has a funded noncontributory defined benefit pension plan related to a former business in the United Kingdom (“U.K.”), which has no active employees. Benefits payable under the pension plans are based on years of service and/or final average salary. GATX’s funding policies for the pension plans are based on actuarially determined cost methods allowable under IRS regulations and statutory requirements in the U.K.

In addition to the pension plans, GATX has other post-retirement plans providing health care, life insurance and other benefits for certain retired domestic employees who meet established criteria. Most domestic employees are eligible for health care and life insurance benefits if they retire from GATX with immediate benefits under the GATX pension plan. The other post-retirement plans are either contributory or noncontributory, depending on various factors.

GATX uses a December 31 measurement date for all of its plans. The following tables set forth pension obligations and plan assets and other post-retirement obligations as of December 31 (in millions):

	2011 Pension Benefits			2010 Pension Benefits			2011 Retiree Health and Life			2010 Retiree Health and Life
Change in Benefit Obligation
Benefit obligation at beginning of year	$	413.2		$	402.9		$	46.6		$	48.5
Service cost		5.4			5.3			0.2			0.2
Interest cost		20.7			22.1			2.2			2.4
Plan amendments		—			(0.2	)		—			—
Actuarial loss (gain)		13.5			16.0			—			(0.1	)
Benefits paid		(27.5	)		(31.7	)		(4.2	)		(4.4	)
Effect of foreign exchange rate changes		(0.3	)		(1.2	)		—			—
Benefit obligation at end of year	$	425.0		$	413.2		$	44.8		$	46.6
Change in Fair Value of Plan Assets
Plan assets at beginning of year	$	392.7		$	354.4		$	—		$	—
Actual return on plan assets		10.2			52.9			—			—
Effect of exchange rate changes		(0.1	)		(1.2	)		—			—
Company contributions		2.2			18.3			4.2			4.4
Benefits paid		(27.5	)		(31.7	)		(4.2	)		(4.4	)
Plan assets at end of year	$	377.5		$	392.7		$	—		$	—
Funded Status at end of year	$	(47.5	)	$	(20.5	)	$	(44.8	)	$	(46.6	)
Amount Recognized
Other liabilities	$	(47.5	)	$	(20.5	)	$	(44.8	)	$	(46.6	)
Accumulative other comprehensive loss:
Net actuarial loss		193.5			164.4			1.8			1.6
Prior service credit		(5.1	)		(6.1	)		—			—
Accumulated other comprehensive loss		188.4			158.3			1.8			1.6
Total recognized	$	140.9		$	137.8		$	(43.0	)	$	(45.0	)
After-tax amount recognized in accumulated other comprehensive loss	$	117.6		$	98.9		$	1.1		$	1.0

The aggregate accumulated benefit obligation for the defined benefit pension plans was $408.9 million and $385.4 million at December 31, 2011 and 2010, respectively.

Information for pension plans with a projected benefit obligation in excess of plan assets as of December 31 (in millions):

	2011		2010
Projected benefit obligations	$	425.0	$	60.2
Fair value of plan assets		377.5		34.4

Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows as of December 31 (in millions):

	2011		2010
Accumulated benefit obligations	$	408.9	$	54.6
Fair value of plan assets		377.5		34.4

The components of net periodic (benefit) cost for the year ended December 31 were (in millions):

	2011 Pension Benefits			2010 Pension Benefits			2009 Pension Benefits			2011 Retiree Health and Life			2010 Retiree Health and Life			2009 Retiree Health and Life
Service cost	$	5.4		$	5.3		$	4.8		$	0.2		$	0.2		$	0.2
Interest cost		20.7			22.1			23.7			2.2			2.4			2.9
Expected return on plan assets		(33.2	)		(33.5	)		(31.2	)		—			—			—
Amortization of:
Unrecognized prior service credit		(1.0	)		(1.0	)		(1.0	)		(0.1	)		(0.1	)		(0.1	)
Unrecognized net actuarial loss (gain)		7.2			6.0			2.7			(0.3	)		(0.3	)		(0.4	)
Net periodic (benefit) cost	$	(0.9	)	$	(1.1	)	$	(1.0	)	$	2.0		$	2.2		$	2.6

GATX amortizes the unrecognized prior service credit using a straight-line method over the average remaining service period of employees expected to receive benefits under the plan. The unrecognized net actuarial loss (gain), subject to certain averaging conventions, is amortized over the average remaining service period of active employees. As of December 31, 2011, GATX expects within the next twelve months to recognize the following amounts included in accumulated other comprehensive loss as components of net periodic (benefit) cost: $9.9 million of the defined benefit pension plans’ net actuarial loss, $(1.0) million of the defined benefit pension plans’ prior service credit, $(0.2) million of the other post-retirement benefit plans’ net actuarial gain and $(0.1) million of the other post-retirement benefit plans’ prior service credit.

GATX used the following assumptions to measure the benefit obligation, compute the expected long-term return on assets and to measure the periodic cost for GATX’s defined benefit pension plans and other post-retirement benefit plans for the years ended December 31:

	2011			2010
Domestic defined benefit pension plans
Benefit Obligation at December 31:
Discount rate — salaried funded and unfunded plans		4.80	%		5.25	%
Discount rate — hourly funded plans		4.85	%		5.25	%
Rate of compensation increases — salaried funded and unfunded plan		3.00	%		4.50	%
Rate of compensation increases — hourly funded plan		N/A			N/A
Net Periodic Cost (Benefit) for the years ended December 31:
Discount rate — salaried funded and unfunded plans		5.25	%		5.70	%
Discount rate — hourly funded plans		5.25	%		5.70	%
Expected return on plan assets — salaried funded plan		8.65	%		8.75	%
Expected return on plan assets — hourly funded plan		7.80	%		7.90	%
Rate of compensation increases — salaried funded and unfunded plan		4.50	%		4.50	%
Rate of compensation increases — hourly funded plan		N/A			N/A
Foreign defined benefit pension plan
Benefit Obligation at December 31:
Discount rate		4.65	%		5.40	%
Rate of pension-in-payment increases		2.90	%		3.40	%
Net Periodic Cost (Benefit) for the years ended December 31:
Discount rate		5.40	%		5.70	%
Expected return on plan assets		6.12	%		6.56	%
Rate of pension-in-payment increases		3.40	%		3.50	%
Other post-retirement benefit plans
Benefit Obligation at December 31:
Discount rate — salaried Health		4.50	%		4.95	%
Discount rate — hourly Health		4.60	%		4.95	%
Rate of compensation increases		N/A			N/A
Discount rate — salaried Life Insurance		4.75	%		4.95	%
Discount rate — hourly Life Insurance		4.45	%		4.95	%
Rate of compensation increases		N/A			N/A
Net Periodic Cost (Benefit) for the years ended December 31:
Discount rate		4.95	%		5.45	%
Rate of compensation increases		N/A			N/A

The discount rate is used by GATX to calculate the present value of expected future pension and post-retirement cash flows as of the measurement date. The discount rate is based on yields for high-quality, long-term bonds, with durations similar to that of the projected benefit obligation. The expected return on plan assets is based on current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. GATX routinely reviews its historical returns along with current market conditions to ensure its expected return assumption is reasonable and appropriate.

	2011			2010
Assumed Health Care Cost Trend Rates at December 31
Health care cost trend assumed for next year
Medical claims		7.50	%		8.00	%
Prescription drugs claims		7.50	%		8.50	%
Rate to which the cost trend is expected to decline (the ultimate trend rate)
Medical claims		5.00	%		5.00	%
Prescription drugs claims		5.00	%		5.00	%
Year that rate reaches the ultimate trend rate
Medical claims		2018			2018
Prescription drugs claims		2018			2018

The health care cost trend, which is comprised of medical and prescription drugs claims has a significant effect on the other post-retirement benefit cost and obligation. A one-percentage-point change in the trend rate would have the following effects (in millions):

	One-Percentage-Point Increase		One-Percentage-Point Decrease
Effect on total of service and interest cost	$	0.1	$	(0.1	)
Effect on post-retirement benefit obligation		2.2		(1.9	)

GATX’s investment policies require that asset allocations of domestic and foreign funded pension plans be maintained at certain targets. GATX’s weighted-average asset allocations of its domestic funded pension plans at December 31, 2011 and 2010, and current target asset allocation for 2012, by asset category, are as follows:

				Plan Assets at December 31
	Target			2011			2010
Asset Category
Equity securities		65.8	%		64.1	%		67.6	%
Debt securities		29.2	%		30.1	%		27.6	%
Real estate		5.0	%		5.2	%		3.9	%
Cash		—			0.6	%		0.9	%
		100.0	%		100.0	%		100.0	%

GATX’s weighted-average asset allocations of its foreign funded pension plan at December 31, 2011 and 2010, and current target asset allocation for 2012, by asset category, are as follows:

				Plan Assets at December 31
	Target			2011			2010
Asset Category
Equity securities		36.8	%		36.1	%		37.1	%
Debt securities		63.2	%		63.9	%		62.9	%
		100.0	%		100.0	%		100.0	%

The following tables set forth the fair value of GATX’s pension plan assets as of December 31 (in millions):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total December 31, 2011
Assets
Short-term investment funds	$	4.3	$	—	$	—	$	4.3
Common stock		8.9		—		—		8.9
Common stock collective funds		—		222.5		—		222.5
Fixed income collective trust funds		—		125.3		—		125.3
Real estate investment funds		—		—		17.9		17.9

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total December 31, 2010
Assets
Short-term investment funds	$	4.0	$	—	$	—	$	4.0
Common stock		10.7		—		—		10.7
Common stock collective funds		—		243.8		—		243.8
Fixed income collective trust funds		—		120.3		—		120.3
Real estate investment funds		—		—		13.9		13.9

The following is a description of the valuation techniques and inputs used for each major class of assets measured at fair value as of December 31, 2011 and 2010:

Short-term investment funds: Valued based on the closing net asset values (NAV) quoted by the funds. The NAV represents the unitized fair values of the underlying securities held by the trusts, which are traded in an active market. Short-term investment funds are highly liquid investments in obligations of the U.S. Government, its agencies or instrumentalities, and related money market instruments. There are no unfunded commitments, restrictions on redemption frequency or advance notice periods required for redemption.

Common Stock: Traded on an active exchange and valued at the last reported sales price on the last business day of the plan year.

Common stock and fixed income collective trust funds: Valued based on the closing NAV prices quoted by the funds. The NAV represents the unitized fair values of the underlying securities held by the trusts, which are traded in an active market. There are no unfunded commitments, restrictions on redemption frequency or advance notice periods required for redemption for any of the collective trusts. The collective trust funds are similar to mutual funds, with an investment manager and written investment objective, but are not open to the public. The Plan’s collective trust funds each have an investment objective of long-term total return through capital appreciation and current income.

Real estate investment funds: Invested in U.S. commercial real estate. Valued based on the NAV provided by the administrators of the funds, which represents the unitized fair values of the underlying real estate held by the funds. Fair values were determined by independent appraisal. Redemptions from the real estate funds are available upon either 45 or 60 days’ notice prior to the end of a quarter. Redemptions may be limited and/or delayed by a lack of liquidity in the funds. The real estate investment funds are diversified by location and property type with an investment objective of long-term return through property appreciation, current income, and timely sales.

The table below lists the summary of changes in the fair value of the Plan’s Level 3 assets for the years ended December 31 (in millions):

	2011		2010
Beginning balance	$	13.9	$	12.7
Income		0.6		0.8
Realized losses		—		(0.7	)
Unrealized change in fair value of investments		1.5		1.1
Purchases		1.9		—
Ending balance	$	17.9	$	13.9

The primary investing objective of the pension plans is to represent the exclusive interests of plan participants for the purpose of providing benefits to participants and their beneficiaries. To achieve this goal, GATX’s philosophy is to invest in a diversified portfolio of equities, debt and real estate investments to maximize return and to keep risk at a reasonable level over a long-term investment horizon. Equity investments are diversified across U.S. and non-U.S. stocks as well as growth, value and small to large capitalizations. Debt securities are predominately invested in long-term, investment-grade corporate bonds. Real estate investments include investments in funds that are diversified by location and property type.

On a timely basis, but not less than twice a year, GATX formally reviews pension plan investments to ensure adherence to investment guidelines and the Company’s stated investment approach. This review also evaluates reasonableness of investment decisions and risk positions. The performance of investments is compared to indices and peers to determine if performance has been acceptable.

GATX expects to contribute $2.2 million to its pension plans (domestic and foreign) and $4.5 million to its other post-retirement benefit plans in 2012. Additional contributions to the domestic funded pension plans will be dependent on several factors including investment returns on plan assets and actuarial experience.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in millions):

	Qualified Plans		Nonqualified Plans		Other Benefits
2012	$	26.0	$	4.3	$	4.5
2013		25.6		4.3		4.3
2014		25.7		4.4		4.2
2015		26.1		4.4		4.0
2016		26.4		4.7		3.8
Years 2017-2021		133.1		25.7		15.5
	$	262.9	$	47.8	$	36.3

The following are estimated Medicare Part D Subsidies expected to be received as a result of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (in millions):

2012	$	0.6
2013		0.6
2014		0.6
2015		0.6
2016		0.5
Years 2017-2021		2.8
	$	5.7

In addition to its defined benefit plans, GATX maintains two 401(k) retirement plans that are available to substantially all salaried and certain other employee groups. GATX may contribute to the plans as specified by their respective terms, and as determined by the Board of Directors. Contributions to such plans were $1.4 million, zero and $1.5 million for 2011, 2010, and 2009, respectively.

Multiemployer Plans

The shipboard personnel at ASC participate in various multiemployer benefit plans that provide pension, health care, post-retirement and other benefits to active and retired employees. Unlike single employer plans, GATX does not recognize plan assets or obligations for multiemployer plans on its balance sheet. Rather, GATX recognizes as marine operating expenses the amounts of its contributions to the plans. The amounts contributed are based on the number of crew hours worked, which is dependent on the number of vessels deployed and aggregate operating days in a particular year. The risks of participating in these multiemployer plans are different from single employer plans in the following aspects:

• Assets contributed by one employer may be used to provide benefits to employees of other participating employers;

• If a participating employer fails to make its required contributions, any unfunded obligations of the plan may be borne by the remaining participating employers; and

• If an employer chooses to stop participating in a multiemployer plan, the withdrawing company may be required to make additional contributions.

GATX’s contributions to multiemployer benefit plans for the years indicated were as follows:

Multiemployer Plans	EIN and Pension Plan Number		Pension Protection Act Zone Status		GATX Contributions									Collective Bargaining Agreement Expiration Date(b)
					2011			2010			2009
American Maritime Officers Pension Plan		13-1969709-001		Critical-Red	$	2.1	(a)	$	2.2	(a)	$	1.5	(a)		January15, 2017
Other multiemployer post-retirement plans						6.4			6.2			3.7
Total					$	8.5		$	8.4		$	5.2

(a) Represents more than 5% of the total contributions to the plan during each year and no surcharge has been imposed for any year.

(b) ASC completed negotiations for a new collective bargaining agreement in January, 2012. The previous collective bargaining agreement expired in August, 2011.

The American Maritime Officers Pension Plan was determined to be in critical status (i.e. “red zone” as defined by the Pension Protection Act of 2006) for the plan year beginning October 1, 2011 because it has funding or liquidity problems, or both. This is the third year the Plan has been in critical status, which was not calculated using any extended amortization provision. A rehabilitation plan, as defined by the Employee Retirement Security Act of 1974, was instituted under which certain adjustable benefits were reduced or eliminated and GATX is required to contribute at a negotiated rate per day worked by each employee.