Pension and Other Post-Retirement Benefits

12 Months Ended

Dec. 31, 2012

Compensation and Retirement Disclosure [Abstract]

Pension and Other Post-Retirement Benefits

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):

	2012			2011			2012			2011
							Retiree Health and Life			Retiree Health and Life
	Pension Benefits			Pension Benefits
Change in Benefit Obligation
Benefit obligation at beginning of year	$	425.0		$	413.2		$	44.8		$	46.6
Service cost	5.7			5.4			0.2			0.2
Interest cost	19.7			20.7			2.0			2.2
Actuarial loss	49.2			13.5			4.9			—
Benefits paid	(27.4		)	(27.5		)	(3.8		)	(4.2		)
Effect of foreign exchange rate changes	1.6			(0.3		)	—			—
Benefit obligation at end of year	$	473.8		$	425.0		$	48.1		$	44.8
Change in Fair Value of Plan Assets
Plan assets at beginning of year	377.5			392.7			—			—
Actual return on plan assets	55.3			10.2			—			—
Effect of exchange rate changes	1.6			(0.1		)	—			—
Company contributions	2.1			2.2			3.8			4.2
Benefits paid	(27.4		)	(27.5		)	(3.8		)	(4.2		)
Plan assets at end of year	$	409.1		$	377.5		$	—		$	—
Funded Status at end of year	$	(64.7	)	$	(47.5	)	$	(48.1	)	$	(44.8	)
Amount Recognized
Other liabilities	$	(64.7	)	$	(47.5	)	$	(48.1	)	$	(44.8	)
Accumulative other comprehensive loss:
Net actuarial loss	207.4			193.5			6.8			1.8
Prior service credit (cost)	(4.1		)	(5.1		)	0.2			—
Accumulated other comprehensive loss	203.3			188.4			7.0			1.8
Total recognized	$	138.6		$	140.9		$	(41.1	)	$	(43.0	)
After-tax amount recognized in accumulated other comprehensive loss	$	126.8		$	117.6		$	4.3		$	1.1

The aggregate accumulated benefit obligation for the defined benefit pension plans was $453.7 million and $408.9 million at December 31, 2012 and 2011, respectively.

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

	2012		2011
Projected benefit obligations	$	473.8	$	425.0
Fair value of plan assets	409.1		377.5

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

	2012		2011
Accumulated benefit obligations	$	453.7	$	408.9
Fair value of plan assets	409.1		377.5

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

										2012 Retiree Health and Life			2011 Retiree Health and Life			2010 Retiree Health and Life
	2012 Pension Benefits			2011 Pension Benefits			2010 Pension Benefits
Service cost	$	5.7		$	5.4		$	5.3		$	0.2		$	0.2		$	0.2
Interest cost	19.7			20.7			22.1			2.0			2.2			2.4
Expected return on plan assets	(29.6		)	(33.2		)	(33.5		)	—			—			—
Amortization of:
Unrecognized prior service credit	(1.0		)	(1.0		)	(1.0		)	(0.1		)	(0.1		)	(0.1		)
Unrecognized net actuarial loss (gain)	9.9			7.2			6.0			(0.1		)	(0.3		)	(0.3		)
Net periodic (benefit) cost	$	4.7		$	(0.9	)	$	(1.1	)	$	2.0		$	2.0		$	2.2

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, 2012, GATX expects within the next twelve months to recognize the following amounts included in accumulated other comprehensive loss (gain) as components of net periodic cost (in millions):

	2013
	Pension Benefits			Retiree Health and Life
Unrecognized net actuarial loss (gain)	$	14.0		$	(0.2	)
Unrecognized prior service credit	(1.0		)	(0.1		)

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

	2012		2011
Domestic defined benefit pension plans
Benefit Obligation at December 31:
Discount rate — salaried funded and unfunded plans	3.95	%	4.80	%
Discount rate — hourly funded plan	4.05	%	4.85	%
Rate of compensation increases — salaried funded and unfunded plans	3.00	%	3.00	%
Rate of compensation increases — hourly funded plans	N/A		N/A
Net Periodic Cost (Benefit) for the years ended December 31:
Discount rate — salaried funded and unfunded plans	4.80	%	5.25	%
Discount rate — hourly funded plan	4.85	%	5.25	%
Expected return on plan assets — salaried funded plan	8.05	%	8.65	%
Expected return on plan assets — hourly funded plan	7.10	%	7.80	%
Rate of compensation increases — salaried funded and unfunded plans	3.00	%	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	4.25	%	4.65	%
Rate of pension-in-payment increases	3.00	%	2.90	%
Net Periodic Cost (Benefit) for the years ended December 31:
Discount rate	4.65	%	5.40	%
Expected return on plan assets	5.77	%	6.12	%
Rate of pension-in-payment increases	2.90	%	3.40	%
Other post-retirement benefit plans
Benefit Obligation at December 31:
Discount rate - salaried health	3.65	%	4.50	%
Discount rate - hourly health	3.60	%	4.60	%
Discount rate - salaried life insurance	3.90	%	4.75	%
Discount rate - hourly life insurance	3.45	%	4.45	%
Rate of compensation increases	N/A		N/A
Net Periodic Cost (Benefit) for the years ended December 31:
Discount rate - salaried health	4.50	%	4.95	%
Discount rate - hourly health	4.60	%	4.95	%
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

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.

	2012		2011
Assumed Health Care Cost Trend Rates at December 31
Health care cost trend assumed for next year
Medical claims	7.00	%	7.50	%
Prescription drugs claims	6.50	%	7.50	%
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	2019		2018
Prescription drugs claims	2017		2018

The health care cost trend, which is comprised of medical and prescription drug 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	2.5		(2.2		)

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, 2012 and 2011, and current target asset allocation for 2012, by asset category, are as follows:

			Plan Assets at December 31
	Target		2012		2011
Asset Category
Equity securities	66.0	%	65.3	%	64.1	%
Debt securities	29.0	%	28.9	%	30.1	%
Real estate	5.0	%	5.8	%	5.2	%
Cash	—		—		0.6	%
	100.0	%	100.0	%	100.0	%

GATX’s weighted-average asset allocations of its foreign funded pension plan at December 31, 2012 and 2011, and current target asset allocation for 2013, by asset category, are as follows:

			Plan Assets at December 31
	Target		2012		2011
Asset Category
Equity securities	36.8	%	36.2	%	36.1	%
Debt securities	63.2	%	63.8	%	63.9	%
	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,
							2012
Assets
Short-term investment funds	$	1.0	$	—	$	—	$	1.0
Common stock	10.3		—		—		10.3
Common stock collective funds	—		245.0		—		245.0
Fixed income collective trust funds	—		131.2		—		131.2
Real estate collective trust funds	—		21.6		—		21.6
Total	$	11.3	$	397.8	$	—	$	409.1

	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	$	2.9	$	—	$	—	$	2.9
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 collective trust funds	—		17.9		—		17.9
Total	$	11.8	$	365.7	$	—	$	377.5

The following is a description of the valuation techniques and inputs used as of December 31, 2012 and 2011:

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 in an active market 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 common stock funds each have an investment objective of long-term total return through capital appreciation and current income. The fixed income funds are each designed to deliver safety and stability by preserving principal and accumulated earnings.

Real estate collective trust funds: Valued based on the NAV provided by the administrators of the funds, which represents the unitized fair values of the underlying U.S. commercial real estate held by the funds. Fair values were determined by independent appraisal of the real estate properties. 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 funds are diversified by location and property type with an investment objective of long-term return through property appreciation, current income, and timely sales. In 2012, the Company determined that the inputs used to measure the real estate funds at fair value are Level 2 inputs. The fair value disclosures for 2011 have been revised to conform to the 2012 presentation.

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.

In 2013, GATX expects to contribute approximately $7.0 million to its pension and other post-retirement benefit plans. 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):

	Funded Plans		Unfunded Plans		Retiree Health and Life
2013	$	29.2	$	2.0	$	4.4
2014	29.0		1.9		4.3
2015	29.0		1.8		4.0
2016	29.3		2.0		3.9
2017	31.1		2.0		3.6
Years 2018-2022	148.3		11.9		15.0
	$	295.9	$	21.6	$	35.2

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):

2013	$	0.5
2014	0.5
2015	0.5
2016	0.5
2017	0.4
Years 2018-2022	2.2
	$	4.6

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 $1.6 million, $1.4 million and zero for 2012, 2011, and 2010, 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 (in millions):

Multiemployer Plans	EIN and Pension Plan Number	Pension Protection Act Zone Status (b)	GATX Contributions						Collective Bargaining Agreement Expiration Date
			2012		2011		2010
American Maritime Officers Pension Plan (a)	13-1969709-001	Endangered-Yellow	$	1.5	$	2.1	$	2.2	January 15, 2017
Other multiemployer post-retirement plans			6.6		6.4		6.2
Total			$	8.1	$	8.5	$	8.4

__________________

(a)GATX's contributions represented more than 5% of the total contributions to the plan during each year and no surcharge was imposed for any year.

(b)The American Maritime Officers Pension Plan was determined to be in endangered status (i.e. “yellow zone” as defined by the Pension Protection Act of 2006) for the plan year beginning October 1, 2012, because it has funding or liquidity problems, or both. 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.