10. PENSION AND OTHER BENEFIT PROGRAMS

Defined Benefit Pension Plans and Postretirement Benefits Other Than Pensions

Certain of the Company's current and former employees are covered by retirement plans. Retirement benefits are primarily a function of years of service and the employee's compensation for a defined period of employment. In 2003, the Company froze the benefits under the salaried pension plan resulting in reductions in future pension obligations. The Company funds pension costs at an actuarially determined amount based on normal cost and the amortization of prior service costs, gains and losses over the remaining service periods. Additionally, the Company previously provided a supplemental non-qualified, unfunded pension plan for certain management members as well as a non-qualified retirement plan for former non-employee directors, which provided benefits based upon years of service as a director and the retainer in effect at the date of a director's retirement. Certain of the Company's employees who meet the applicable eligibility requirements are covered by benefit plans that provide postretirement health care and life insurance benefits to employees.

During fiscal 2011, a curtailment loss of $169 thousand was recognized for the Colonial Union Pension Plan due to a reduction in headcount associated with the contribution of the Gramercy refinery assets to LSR. Additionally, Accumulated Other Comprehensive Income increased $1.9 million as a result of the revaluation of the Colonial Union Pension Plan liability triggered by the curtailment.

The Company adopted the measurement date provisions of amended authoritative guidance from the FASB related to accounting for defined benefit pension plans and other postretirement plans effective October 1, 2008. As a result of this change, pension and postretirement obligations were measured at September 30th in fiscal 2009 through 2011, as compared to a June 30th measurement date in prior years. The Company applied the "one measurement" approach in its adoption. The effect of applying the measurement date provisions to the balance sheet was as follows:


	Before Application		Adjustments			After Application
Assets:
Deferred Income Taxes, Net	$	34,062	$	213		$	34,275
Liabilities and Shareholders Equity:
Deferred Employee Benefits and Other Liabilities		78,459		609			79,068
Retained Earnings		53,823		(629	)		53,194
Accumulated Other Comprehensive Loss		35,745		(233	)		35,512

The following tables present the benefit obligations, changes in plan assets, the funded status of the pension and postretirement benefits plans and the assumptions used (in thousands of dollars):


	Pension Benefits
	Year Ended September 30,
	2011			2010			2009
Change in Benefit Obligation:
Benefit Obligation at Beginning of Measurement Period	$	228,055		$	219,294		$	190,958
Adjustment to fiscal year end measurement date		—			—			3,370
Service Cost		1,060			1,164			1,058
Interest Cost		10,624			11,294			12,911
Curtailments		(386	)		—			—
Amendments		—			(235	)		—
Actuarial (Gain) Loss		9,187			11,174			29,052
Expenses Paid		(1,303	)		(916	)		(1,051	)
Benefits Paid		(14,370	)		(13,720	)		(17,004	)

Benefits Obligation at End of Measurement Period	$	232,867		$	228,055		$	219,294

Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Measurement Period	$	130,072		$	120,415		$	136,015
Adjustment for Fourth Quarter Contributions		—			—			3,324
Adjustment to fiscal year end measurement date		—			—			2,943
Actual Return on Plan Assets		963			10,729			(14,451	)
Employer Contribution		15,829			13,564			10,639
Expenses Paid		(1,303	)		(916	)		(1,051	)
Benefits Paid		(14,370	)		(13,720	)		(17,004	)

Fair Value of Plan Assets at End of Measurement Period	$	131,191		$	130,072		$	120,415

Accrued Pension Cost at September 30	$	(101,676	)	$	(97,983	)	$	(98,879	)

Current Liabilities	$	(778	)	$	(819	)	$	(772	)
Noncurrent Liabilities		(100,898	)		(97,164	)		(98,107	)

	$	(101,676	)	$	(97,983	)	$	(98,879	)

Amounts Recognized in Accumulated Other Comprehensive Loss:
Net Actuarial Loss	$	136,392		$	122,371		$	114,908
Prior Service Cost		189			415			772

Total	$	136,581		$	122,786		$	115,680


	Postretirement Benefits Other Than Pensions
	Year Ended September 30,
	2011			2010			2009
Change in Benefit Obligation:
Benefit Obligation at Beginning of Measurement Period	$	8,681		$	$8,898		$	8,674
Adjustment to fiscal year end measurement date		—			—			142
Service Cost		16			18			11
Interest Cost		400			452			585
Actuarial (Gain) Loss		(36	)		118			406
Benefits Paid		(994	)		(805	)		(920	)

Benefits Obligation at End of Measurement Period	$	8,067		$	8,681		$	8,898

Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Measurement Period	$	—			—			—
Employer Contribution		994		$	805		$	920
Benefits Paid		(994	)		(805	)		(920	)

Fair Value of Plan Assets at End of Measurement Period	$	—		$	—		$	—

Accrued Benefit Cost at September 30	$	(8,067	)	$	(8,681	)	$	(8,898	)

Current Liabilities	$	(729	)	$	(766	)	$	(812	)
Noncurrent Liabilities		(7,338	)		(7,915	)		(8,086	)

	$	(8,067	)	$	(8,681	)	$	(8,898	)

Amounts Recognized in Accumulated Other Comprehensive Loss:
Net Actuarial Loss	$	6,106		$	6,777		$	7,289
Prior Service Cost		(10,939	)		(12,534	)		(14,128	)

Total	$	(4,833	)	$	(5,757	)	$	(6,839	)

The assumptions used and the annual costs related to these plans consist of the following (in thousands of dollars):


	Year Ended September 30,
	2011			2010			2009
Pension Benefits
Weighted-average Assumptions:
Discount Rate
At measurement date		4.61	%		4.82	%		5.33	%
For the year ended		4.85	%		5.33	%		7.63	%
Expected Return on Plan Assets		7.00	%		7.00	%		8.00	%
Components of Net Periodic Benefit Cost of Company-sponsored Plans (in thousands):
Service Cost	$	1,060		$	1,164		$	1,058
Interest Cost		10,624			11,294			12,911
Expected Return on Plan Assets		(10,410	)		(10,300	)		(11,703	)
Curtailments		169			—			—
Amortization of Prior Service Cost		56			122			122
Recognized Actuarial Loss		4,227			3,282			917

Total Pension Cost	$	5,726		$	5,562		$	3,305

Net Actuarial Loss	$	18,634		$	10,744		$	55,206
Prior Service Cost		—			(235	)		—
Amortization of Prior Service Cost		(225	)		(122	)		(123	)
Amortization of Actuarial (Loss)		(4,613	)		(3,282	)		(1,291	)

Total Recognized in Accumulated Other Comprehensive Loss	$	13,796		$	7,105		$	53,792

Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income	$	19,522		$	12,667		$	57,097

The prior service cost and estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $49,000 and $5,099,000, respectively.


	Year Ended September 30,
	2011			2010			2009
Postretirement Benefits Other Than Pensions
Discount Rate Assumptions		4.61	%		4.82	%		5.33	%
Components of Net Periodic Benefit Cost (in thousands):
Service Cost	$	16		$	18		$	11
Interest Cost		400			452			584
Amortization of Prior Service Cost		(1,594	)		(1,594	)		(1,594	)
Recognized Actuarial Loss		635			645			398

Net Periodic Benefit Cost (Credit)	$	(543	)	$	(479	)	$	(601	)

Net Actuarial Loss/(Gain)	$	(36	)	$	118		$	406
Amortization of Prior Service Cost		1,594			1,594			1,993
Amortization of Actuarial Gain/(Loss)		(635	)		(645	)		(507	)

Total Recognized in Accumulated Other Comprehensive Loss	$	923		$	1,067		$	1,892

Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income	$	380		$	588		$	1,291

The prior service cost credit and estimated net loss for postretirement benefits other than pensions that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $1,594,000 and $551,000, respectively.

Aggregated accumulated benefit obligations for all plans were $232.9 million and $228.1 million at September 30, 2011 and 2010, respectively. Accumulated benefit obligations were in excess of plan assets for all plans for both periods.

Pension plan contributions totaled $15.8 million and $13.6 million during fiscal 2011 and 2010; contributions during fiscal 2012 are expected to be approximately $15.9 million.

The assumed health care cost trend rate used in measuring the accumulated benefit obligation for postretirement benefits other than pensions as of September 30, 2011 and 2010 was 8.5%. In 2011, the rate was assumed to decrease gradually to 5% for fiscal 2019 and remain at that level thereafter. In 2010, the rate was assumed to decrease gradually to 5% for fiscal 2018 and remain level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:


	1-Percentage Point Increase		1-Percentage Point Decrease
	(In Thousands of Dollars)
Effect on Total Service and Interest Cost	$	18	$	(16	)
Effect on Postretirement Benefit Obligation		323		(290	)

The plan assets of the defined benefit pension plans are held in a third party master trust, which is administered by the Company's Welfare and Benefits Committee (the "Committee"). The Committee oversees the trust activities and the financial integrity of the pension plans by establishing and managing funds for the immediate and future needs of the plans' operations and programs.

The primary investment objective for the portfolio of assets is to meet or exceed the future obligations of the plans' participants. Financial risks and returns are managed through diversification of plan assets, selection of investment managers and quarterly review of portfolio performance results. Plan asset investments are broadly diversified primarily into marketable securities, such as equity and high quality fixed income securities. Target allocations among various asset categories achieve a target mix that is the strategic allocation for the portfolio. Minimum and maximum criteria are used to set boundaries for each target allocation to ensure the portfolio does not drift from the target mix.

The Company's plan assets actual and target allocation percentages were as follows:


	September 30, 2011						September 30, 2010
Asset Category	Actual			Target			Actual			Target
Intermediate Fixed Income		36	%		32	%		31	%		32	%
Large Cap Equity		21	%		22	%		18	%		22	%
Mid Cap Equity		8	%		10	%		11	%		10	%
Small Cap Equity		3	%		4	%		5	%		4	%
International Equity		10	%		12	%		13	%		12	%
Hedge Fund		12	%		15	%		12	%		15	%
Real Estate Fund		6	%		5	%		4	%		5	%
Cash and Other		4	%		0	%		6	%		0	%

Plan assets at September 30, 2011 are summarized in the following table at the appropriate level of the fair value hierarchy (in thousands of dollars):


Asset Category	Fair Value Measurements at September 30, 2011
	Total		Level 1		Level 2		Level 3
Intermediate Fixed Income	$	47,097	$	14,741	$	32,356	$	—
Large Cap Equity		27,196		27,196		—		—
Mid Cap Equity		11,009		11,009		—		—
Small Cap Equity		4,457		4,457		—		—
International Equity		13,197		13,197		—		—
Hedge Fund		15,684		—		—		15,684
Real Estate Fund		7,122		—		—		7,122
Cash and Other		5,429		3,319		2,110		—

Total	$	131,191	$	73,919	$	34,466	$	22,806

Fair value hierarchy levels are as follows:

•

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•

Level 2—Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;

•

Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. These inputs may be used with internally developed methodologies that are used to generate management's best estimate of fair value.

Changes in Level 3 assets from October 1, 2010 to September 30, 2011 are as follows:


	Hedge Fund		Real Estate Fund		Total
Beginning balance at September 30, 2010	$	15,444	$	6,348	$	21,792
Purchases		—		—		—
Sales		—		—		—
Realized and Unrealized Gain (Loss)		240		774		1,014

Ending balance at September 30, 2011	$	15,684	$	7,122	$	22,806

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


Fiscal Year Ending September 30,	Pension Benefits		Post Retirement Benefits Other Than Pensions
2012	$	15,694	$	746
2013		15,907		729
2014		16,128		717
2015		16,210		709
2016		16,277		686
2017-2021		80,402		3,076

The assumed rate of return is based on the results of historical statistical return studies.

401(k) Plans

Substantially all of the employees may elect to defer a portion of their annual compensation in the Company- sponsored 401(k) tax deferred savings plans. The Company makes matching contributions in some of these plans. The amount charged to expense for these plans was $1.3 million, $1.5 million and $1.4 million for the years ended September 30, 2011, 2010 and 2009, respectively. The Company suspended its matching contribution effective January 1, 2012.

Deferred Compensation

The Company has non-current liabilities for an inactive deferred compensation plan aggregating $7.6 million and $7.8 million at September 30, 2011 and 2010, respectively. Interest expense includes $0.5 million, $0.6 million and $0.6 million in fiscal 2011, 2010 and 2009, respectively, for such plan.