Employee Benefit Plans

The Company has a 401(k) retirement savings plan (the “Mohawk Plan”) open to substantially all of its employees within the Mohawk segment, Dal-Tile segment and U.S. based employees of the Unilin segment, who have completed 90 days of eligible service. The Company contributes $.50 for every $1.00 of employee contributions up to a maximum of 6% of the employee’s salary based upon each individual participants election. Employee and employer contributions to the Mohawk Plan were $35,986 and $15,046 in 2012, $34,595 and $14,541 in 2011 and $33,071 and $13,062 in 2010, respectively.

The Company also has various pension plans covering employees in Belgium, France, and The Netherlands (the “Non-U.S. Plans”) that it acquired with the acquisition of Unilin. Benefits under the Non-U.S. Plans depend on compensation and years of service. The Non-U.S. Plans are funded in accordance with local regulations. The Company uses December 31 as the measurement date for its Non-U.S. Plans.

Components of the net periodic benefit cost of the Non-U.S. Plans are as follows:



	2012			2011		2010
Service cost of benefits earned	$	1,870		1,708		1,506
Interest cost on projected benefit obligation	1,367			1,400		1,219
Expected return on plan assets	(1,192		)	(1,232	)	(1,025	)
Amortization of actuarial gain	(10		)	(26	)	4
Net pension expense	$	2,035		1,850		1,704

Assumptions used to determine net periodic pension expense for the Non-U.S. Plans:



	2012	2011
Discount rate	4.50%	4.75%
Expected rate of return on plan assets	2.50%-3.50%	4.00%-5.00%
Rate of compensation increase	2.00%-4.00%	0.00%-3.00%
Underlying inflation rate	2.00%	2.00%

The obligations, plan assets and funding status of the Non-U.S. Plans were as follows:



	2012			2011
Change in benefit obligation:
Projected benefit obligation at end of prior year	$	29,231		26,977
Cumulative foreign exchange effect	669			(876	)
Service cost	1,870			1,708
Interest cost	1,367			1,400
Plan participants contributions	827			763
Actuarial loss	5,179			455
Benefits paid	(1,552		)	(1,196	)
Effect of curtailment and settlement	(40		)	—
Projected benefit obligation at end of year	$	37,551		29,231
Change in plan assets:
Fair value of plan assets at end of prior year	$	26,109		24,108
Cumulative foreign exchange effect	515			(594	)
Actual return on plan assets	4,771			1,203
Employer contributions	1,888			1,825
Benefits paid	(1,552		)	(1,196	)
Plan participant contributions	827			763
Fair value of plan assets at end of year	$	32,558		26,109
Funded status of the plans:
Ending funded status	$	(4,993	)	(3,122	)
Net amount recognized in consolidated balance sheets:
Accrued benefit liability (non-current liability)	$	(4,993	)	(3,122	)
Accumulated other comprehensive income	928			(663	)
Net amount recognized	$	(4,065	)	(3,785	)

The Company’s net amount recognized in other comprehensive income related to actuarial gains (losses) was $(1,591), $(452) and $380 for the years ended December 31, 2012, 2011 and 2010, respectively.

Assumptions used to determine the projected benefit obligation for the Non-U.S. Plans were as follows:



	2012	2011
Discount rate	3.25%	4.50%
Rate of compensation increase	2.00%-4.00%	0.00%-3.00%
Underlying inflation rate	2.00%	2.00%

The discount rate assumptions used to account for pension obligations reflect the rates at which the Company believes these obligations will be effectively settled. In developing the discount rate, the Company evaluated input from its actuaries, including estimated timing of obligation payments and yield on investments. The rate of compensation increase for the Non-U.S. Plans is based upon the Company’s annual reviews.



	Non-U.S. Plans
	December 31, 2012		December 31, 2011
Plans with accumulated benefit obligations in excess of plan assets:
Projected benefit obligation	$	15,067	16,492
Accumulated benefit obligation	12,396		15,496
Fair value of plan assets	11,702		14,703
Plans with plan assets in excess of accumulated benefit obligations:
Projected benefit obligation	$	22,484	12,739
Accumulated benefit obligation	20,640		10,687
Fair value of plan assets	20,856		11,406

Estimated future benefit payments for the Non-U.S. Plans are as follows:



2013		976
2014		984
2015		1,071
2016		1,102
2017		1,606
Thereafter		10,241

The Company expects to make cash contributions of $1,930 to the Non-U.S. Plans in 2013.

The fair value of the Non-U.S. Plans' investments were estimated using market observable data. Within the hierarchy of fair value measurements, these investments represent Level 2 fair values. The fair value and percentage of each asset category of the total investments held by the plans as of December 31, 2012 and 2011 were as follows:

The Company’s approach to developing its expected long-term rate of return on pension plan assets combines an analysis of historical investment performance by asset class, the Company’s investment guidelines and current and expected economic fundamentals.

Non-U.S. Plans:

Insurance contracts (100%)