Note 3: Employee benefit plans

Defined Contribution Employee Benefit Plans:

401(k) plans: The Company maintains domestic 401(k) plans that allow employees to choose among various investment alternatives, including Modine stock. The Company's matching contribution is discretionary. The Company matched 50 percent of the employees' contribution up to 5 percent of employee contributions during fiscal 2012, fiscal 2011 and fiscal 2010. Company contributions have an initial three-year vesting period.

Defined contribution plan: The Company maintains a domestic defined contribution plan that was established on January 1, 2004 and initially covered all eligible salaried employees hired after January 1, 2004. Effective April 1, 2006, all salaried employees previously covered under the Modine Salaried Employee Pension Plan were eligible to participate in this plan. Modine makes annual discretionary contributions based on a percentage of compensation, which is determined by management. Employees can choose among various investment alternatives, including Modine stock.

Deferred compensation plan: The Company maintains a non-qualified deferred compensation plan for eligible employees. The plan allows qualified employees to choose among various investment alternatives. The Company's matching contributions are participant-directed, similar to the 401(k) plans.

Modine's expense recorded for the defined contribution employee benefit plans during fiscal 2012, 2011 and 2010 was $4,393, $4,327, and $4,662, respectively.

In addition, various Modine foreign subsidiaries have in place government-required defined contribution plans under which Modine contributes a percentage of employee earnings into accounts, consistent with local laws.

Statutory Termination Plans:

Certain of Modine's foreign subsidiaries have statutory termination indemnity plans covering all of their eligible employees. The benefits under these plans are based upon years of service and final average compensation levels or a monthly retirement benefit amount. These programs are all substantially unfunded in accordance with local laws, but are often covered by national obligatory umbrella insurance programs that protect employees from losses in the event that an employer defaults on its obligations.

Defined Benefit Employee Benefit Plans:

Pension plans: Modine has a non-contributory defined benefit pension plan that covers most of its domestic employees hired on or before December 31, 2003. The benefits provided are based primarily on years of service and average compensation for the salaried and some hourly employees. Benefits for other hourly employees are based on a monthly retirement benefit amount. Domestic salaried employees hired after December 31, 2003 are not covered under any defined benefit plan. Certain of Modine's foreign subsidiaries also have legacy defined benefit plans covering a small number of active employees.

The Company elected to contribute $11,500 and $17,927 to its U.S. pension plans during fiscal 2012 and 2011, respectively, which is included in other noncurrent assets and liabilities in the Consolidated Statements of Cash Flows.

In March 2011, the Company announced that effective January 1, 2012, the Modine Manufacturing Company Pension Plan for Non-Union Hourly Factory and Salaried Employees (Non-Union Hourly Factory component) was modified so that no increases in annual earnings and no service performed after December 31, 2011 will be included in calculating the average annual earnings and years of credit service under the pension plan formula. Modine recorded a pension curtailment charge of $1,616 in fiscal 2011 to reflect these modifications.

During fiscal 2011 and fiscal 2010, the Company recorded settlement charges of $30 and $780, respectively, related to settlement payments made from the Modine Manufacturing Company Supplemental Executive Retirement Plan.

Postretirement plans: Modine and certain of its domestic subsidiaries provide selected healthcare and life-insurance benefits for retired employees. Designated employees may become eligible for those benefits when they retire. These plans are unfunded. Modine periodically amends the plans, changing the contribution rate of retirees and the amounts and forms of coverage. An annual limit on Modine's liability was established for most plans between fiscal 1994 and fiscal 1996 after original recognition of the liability in fiscal 1993. It caps future costs at 200 percent of Modine's then-current cost. These changes reduced the accrued obligation, and the reduction is being amortized as a component of the benefit cost.

During fiscal 2012, the Company recorded a postretirement curtailment gain of $304 related to the closure of the Camdenton, Missouri manufacturing facility.

During fiscal 2011 and fiscal 2010, the Company recorded a postretirement curtailment gain of $2,075 and $1,217, respectively, related to the closure of the Harrodsburg, Kentucky manufacturing facility.

Measurement Date: Modine uses March 31 as the measurement date for its pension and postretirement plans.

The change in benefit obligations and plan assets as well as the funded status of Modine's pension and postretirement plans were as follows:

	Pensions Plans						Postretirement Plans
Years ended March 31	2012			2011			2012			2011

Change in benefit obligation:
Benefit obligation at beginning of year	$	245,967		$	241,244		$	6,585		$	8,827
Service cost		1,400			1,919			42			46
Interest cost		13,860			13,737			347			337
Actuarial loss (gain)		35,651			2,923			517			(2,192	)
Benefits paid		(13,743	)		(14,789	)		(497	)		(749	)
Settlement/curtailment adjustment		-			-			208			275
Medicare subsidy		-			-			44			41
Currency translation adjustment		(1,314	)		933			-			-
Benefit obligation at end of year	$	281,821		$	245,967		$	7,246		$	6,585

Change in plan assets:
Fair value of plan assets at beginning of year	$	182,050		$	155,168		$	-		$	-
Actual return on plan assets		5,546			21,727			-			-
Benefits paid		(13,743	)		(14,789	)		(497	)		(749	)
Employer contributions		12,780			19,944			453			708
Medicare subsidy		-			-			44			41
Fair value of plan assets at end of year	$	186,633		$	182,050		$	-		$	-
Funded status at end of year	$	(95,188	)	$	(63,917	)	$	(7,246	)	$	(6,585	)

Amounts recognized in the consolidated balance sheet consist of:
Current liability	$	(1,097	)	$	(991	)	$	(820	)	$	(618	)
Noncurrent liability		(94,091	)		(62,926	)		(6,426	)		(5,967	)
	$	(95,188	)	$	(63,917	)	$	(7,246	)	$	(6,585	)
Amounts recognized in accumulated other comprehensive loss (income) consist of:
Net actuarial loss	$	154,428		$	115,731		$	(448	)	$	(1,197	)
Prior service credit		-			-			(2,944	)		(4,910	)
	$	154,428		$	115,731		$	(3,392	)	$	(6,107	)

The accumulated benefit obligation for all defined benefit pension plans was $280,254 and $244,504 as of March 31, 2012 and 2011, respectively.

Pension plans with accumulated benefit obligations in excess of plan assets consist of the following:

Years ended March 31	2012		2011

Projected benefit obligation	$	281,821	$	245,967
Accumulated benefit obligation		280,254		244,504
Fair value of the plan assets		186,633		182,050

Costs for Modine's pension and postretirement benefit plans include the following components:

	Pension Plans									Postretirement Plans
Years ended March 31	2012			2011			2010			2012			2011			2010

Components of net periodic benefit costs:
Service cost	$	1,400		$	1,919		$	2,014		$	42		$	46		$	75
Interest cost		13,860			13,737			14,530			347			337			527
Expected return on plan assets		(15,599	)		(15,223	)		(15,118	)		-			-			-
Amortization of:
Unrecognized net loss (gain)		6,967			7,670			2,543			(24	)		(113	)		(33	)
Unrecognized prior service cost (credit)		-			356			373			(1,662	)		(1,780	)		(2,374	)
Adjustment for settlement/curtailment		-			1,646			633			(304	)		(2,075	)		(1,217	)
Net periodic benefit cost (income)	$	6,628		$	10,105		$	4,975		$	(1,601	)	$	(3,585	)	$	(3,022	)

Other changes in plan assets and benefit obligation recognized in other comprehensive income:
Net actuarial (gain) loss	$	45,664		$	(3,764	)	$	19,644		$	725		$	(2,192	)	$	(822	)
Prior service (credits) costs		-			(1,616	)		97			304			2,314			1,253
Reversal of amortization items:
Net actuarial loss (gain)		(6,967	)		(7,670	)		(3,111	)		24			113			33
Prior service costs (credit)		-			(356	)		(373	)		1,662			1,780			2,374
Total recognized in other comprehensive (income) loss	$	38,697		$	(13,406	)	$	16,257		$	2,715		$	2,015		$	2,838

Total recognized in net periodic benefit costs and other comprehensive income	$	45,325		$	(3,301	)	$	21,232		$	1,114		$	(1,570	)	$	(184	)

The estimated net actuarial loss for the pension plans that will be amortized from accumulated other comprehensive (loss) income into net periodic benefit cost over the next fiscal year is $5,025. The estimated prior service credit for the postretirement plans that will be amortized from accumulated other comprehensive (loss) income into net periodic benefit credit over the next fiscal year is $1,488.

The weighted-average assumptions used to determine Modine's benefit obligation under the plans are detailed as follows:

Years ended March 31	2012						2011
	U.S. Plans			Foreign Plans			U.S. Plans			Foreign Plans
Pension plans:
Discount rate		4.86	%		5.00	%		5.83	%		5.75	%
Postretirement plans:
Discount rate		4.35	%		N/A			5.35	%		N/A

The weighted-average assumptions used to determine Modine's costs under the plans are detailed as follows:

Years ended March 31	2012						2011						2010
	U.S. Plans			Foreign Plans			U.S. Plans			Foreign Plans			U.S. Plans			Foreign Plans
Pension plans:
Discount rate		5.83	%		5.75	%		5.93	%		5.00	%		7.73	%		6.10	%
Expected return on plan assets		8.00	%		N/A			8.10	%		N/A			7.90	%		N/A
Postretirement plans:
Discount rate		5.35	%		N/A			5.38	%		N/A			7.35	%		N/A

The discount rate used to determine the present value of the Company's future U.S. pension obligations as of the measurement date uses a methodology that equates the plans' projected benefit obligations to a present value, calculated using a yield curve. The yield curve was constructed from a portfolio of high quality, non-callable corporate debt securities with maturities ranging from six months to thirty years. The discount rate was determined by matching the pension plans' expected cash flows (on a PBO basis) with spot rates developed from the yield curve. The discount rate used to determine the present value of the Company's future foreign pension obligations as of the measurement date is based upon the yield for zero coupon bonds plus a yield margin measured as the difference between euro denominated corporate bonds (AA or higher) in Europe and government bonds.

Plan assets in the U.S. defined benefit plans comprise 100 percent of the Company's world-wide benefit plan assets. Modine's U.S. pension plan weighted-average asset allocations at the measurement dates of March 31, 2012 and 2011 by category, and the target allocation for the years ended March 31, 2012 and 2011 are summarized below:

	Target allocation						Plan assets
	2012			2011			2012			2011

Equity securities		55	%		55	%		56	%		56	%
Debt securities		38	%		38	%		37	%		38	%
Alternative assets		5	%		5	%		5	%		5	%
Cash		2	%		2	%		2	%		1	%
		100	%		100	%		100	%		100	%

Due to market conditions and other factors including timing of benefit payments, actual asset allocation may vary from the target allocation outlined above. The assets are periodically rebalanced to the target allocations. There were no shares of Modine common stock included in the plan assets at the end of fiscal 2012 and 2011.

Modine employs a total return investment approach, whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets while avoiding excessive risk. Pension plan guidelines have been established based upon an evaluation of market conditions, tolerance for risk and cash requirements for benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements and periodic asset/liability studies.

The expected rate of return on U.S. plan assets is based upon historical return experience and forward-looking return expectations for major asset class categories. For fiscal 2012, Modine assumed a rate of return of 8.0 percent for purposes of determining the U.S. pension plan expense. For fiscal year 2013 U.S. pension plan expense, Modine has assumed a rate of 8.0 percent, net of administrative expenses.

With respect to the postretirement plans, for measurement purposes, the assumed healthcare cost trend rates were as follows:

Years ended March 31	2012			2011

Healthcare costs trend rate assumed for next year (pre-65)		7.5	%		8.0	%
Healthcare costs trend rate assumed for next year (post-65)		7.5	%		8.0	%
Ultimate trend rate		5.0	%		5.0	%
Year the rate reaches the ultimate trend rate		2017			2017

Assumed healthcare cost trend rates affect the amounts reported for the postretirement plans. A one percentage point change in assumed healthcare cost trend rates would have the following effects:

	One percentage point
Year ended March 31, 20112	Increase		Decrease

Effect on total of service and interest cost	$	8	$	(8	)
Effect on postretirement benefit obligation		171		(158	)

The funding policy for domestic qualified pension plans is to contribute annually at a minimum, the amount necessary on an actuarial basis to provide for benefits in accordance with applicable law and regulation. Modine anticipates that it will make contributions of $22,350 to these plans during fiscal 2013.

The estimated benefit payments, which reflect future service, as appropriate, for the next ten fiscal years are as follows:

Years ended March 31
	Pension
2013	$	13,724
2014		14,179
2015		14,778
2016		15,528
2017		16,185
2018-2022		90,381