Employee Benefit Plans

12 Months Ended

Dec. 31, 2011

Employee Benefit Plans [Abstract]

Employee Benefit Plans

17. Employee Benefit Plans

The Company maintains a qualified defined benefit pension plan (the “Plan”) that covers substantially all employees. Effective for all employees who joined the Company on or after January 1, 2001, a new component or formula was applied under the Plan referred to as the “cash balance formula”. The Company began using the cash balance formula to calculate future pension benefits for services rendered on or after January 1, 2009 for all employees hired before January 1, 2001. These amounts are in addition to amounts earned by those employees through December 31, 2008 under the traditional final average pay formula.

The Company also maintains non-qualified pension plans to accrue retirement benefits in excess of Internal Revenue Code limitations.

The Company provides certain health care and life insurance benefits for eligible retired employees. The Company’s contribution for health care benefits will depend upon the retiree’s date of retirement and years of service. In addition, the plan has a defined dollar cap for certain retirees which limits average Company contributions. The Hartford has prefunded a portion of the health care obligations through a trust fund where such prefunding can be accomplished on a tax effective basis. Effective January 1, 2002, Company-subsidized retiree medical, retiree dental and retiree life insurance benefits were eliminated for employees with original hire dates with the Company on or after January 1, 2002.

Assumptions

Pursuant to accounting principles related to the Company’s pension and other postretirement obligations to employees under its various benefit plans, the Company is required to make a significant number of assumptions in order to calculate the related liabilities and expenses each period. The two economic assumptions that have the most impact on pension and other postretirement expense are the discount rate and the expected long-term rate of return on plan assets. In determining the discount rate assumption, the Company utilizes a discounted cash flow analysis of the Company’s pension and other postretirement obligations and currently available market and industry data. The yield curve utilized in the cash flow analysis is comprised of bonds rated Aa or higher with maturities primarily between zero and thirty years. Based on all available information, it was determined that 4.75% and 4.50% were the appropriate discount rates as of December 31, 2011 to calculate the Company’s pension and other postretirement obligations, respectively. Accordingly, the 4.75% and 4.50% discount rates will also be used to determine the Company’s 2012 pension and other postretirement expense, respectively.

The Company determines the expected long-term rate of return assumption based on an analysis of the Plan portfolio’s historical compound rates of return since 1979 (the earliest date for which comparable portfolio data is available) and over 5 year and 10 year periods. The Company selected these periods, as well as shorter durations, to assess the portfolio’s volatility, duration and total returns as they relate to pension obligation characteristics, which are influenced by the Company’s workforce demographics. In addition, the Company also applies long-term market return assumptions to an investment mix that generally anticipates 60% fixed income securities, 20% equity securities and 20% alternative assets to derive an expected long-term rate of return. Based upon these analyses, management maintained the long-term rate of return assumption at 7.30% as of December 31, 2011. This assumption will be used to determine the Company’s 2012 expense.

Weighted average assumptions used in calculating the benefit obligations and the net amount recognized for the years ended December 31, 2011 and 2010 were as follows:

	Pension Benefits						Other Postretirement Benefits
	2011			2010			2011			2010
Discount rate		4.75	%		5.50	%		4.50	%		5.25	%
Rate of increase in compensation levels		3.75	%		4.00	%		N/A			N/A

Weighted average assumptions used in calculating the net periodic benefit cost for the Company’s pension plans were as follows:

	For the years ended December 31,
	2011			2010			2009
Discount rate		5.50	%		6.00	%		6.25	%
Expected long-term rate of return on plan assets		7.30	%		7.30	%		7.30	%
Rate of increase in compensation levels		4.00	%		4.00	%		4.25	%

Weighted average assumptions used in calculating the net periodic benefit cost for the Company’s other postretirement plans were as follows:

	For the years ended December 31,
	2011			2010			2009
Discount rate		5.25	%		5.75	%		6.25	%
Expected long-term rate of return on plan assets		7.30	%		7.30	%		7.30	%

Assumed health care cost trend rates were as follows:

	As of December 31,
	2011			2010			2009
Pre-65 health care cost trend rate		8.95	%		9.70	%		9.05	%
Post-65 health care cost trend rate		7.75	%		8.25	%		7.60	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.00	%		5.00	%		5.00	%
Year that the rate reaches the ultimate trend rate		2019			2018			2018

A one-percentage point change in assumed health care cost trend rates would have an insignificant effect on the amounts reported for other postretirement plans.

Obligations and Funded Status

The following tables set forth a reconciliation of beginning and ending balances of the benefit obligation and fair value of plan assets, as well as the funded status of The Hartford’s defined benefit pension and postretirement health care and life insurance benefit plans for the years ended December 31, 2011 and 2010. International plans represent an immaterial percentage of total pension assets, liabilities and expense and, for reporting purposes, are combined with domestic plans.

During 2010 the amount of lump sum benefit payments exceeded the amount of service and interest cost in the Company’s non-qualified pension plan resulting in a settlement. The settlement below represents lump sum payments made from the non-qualified pension plan in 2010.

In addition to the discount rate change, the Company’s benefit obligation also increased due to the use of an updated mortality table.

							Other Postretirement
	Pension Benefits						Benefits
Change in Benefit Obligation	2011			2010			2011			2010
Benefit obligation — beginning of year	$	4,795		$	4,283		$	408		$	401
Service cost (excluding expenses)		102			102			5			7
Interest cost		259			252			20			22
Plan participants’ contributions		—			—			18			15
Actuarial loss (gain)		43			86			(15	)		(7	)
Settlements		—			(43	)		—			—
Change in assumptions		497			348			37			17
Benefits paid		(230	)		(234	)		(52	)		(49	)
Retiree drug subsidy		—			—			3			2
Foreign exchange adjustment		(1	)		1						—
Benefit obligation — end of year	$	5,465		$	4,795		$	424		$	408

							Other Postretirement
	Pension Benefits						Benefits
Change in Plan Assets	2011			2010			2011			2010
Fair value of plan assets — beginning of year	$	3,922		$	3,526		$	190		$	175
Actual return on plan assets		613			434			13			15
Employer contributions		201			201			—			—
Benefits paid		(210	)		(228	)		—			—
Expenses paid		(12	)		(12	)		—			—
Foreign exchange adjustment		(1	)		1			—			—
Fair value of plan assets — end of year	$	4,513		$	3,922		$	203		$	190
Funded status — end of year	$	(952	)	$	(873	)	$	(221	)	$	(218	)

The fair value of assets for pension benefits, and hence the funded status, presented in the table above exclude assets of $109 and $107 held in rabbi trusts and designated for the non-qualified pension plans as of December 31, 2011 and 2010, respectively. The assets do not qualify as plan assets; however, the assets are available to pay benefits for certain retired, terminated and active participants. Such assets are available to the Company’s general creditors in the event of insolvency. The assets consist of equity and fixed income investments. To the extent the fair value of these rabbi trusts were included in the table above, pension plan assets would have been $4,622 and $4,029 as of December 31, 2011 and 2010, respectively, and the funded status of pension benefits would have been $(843) and $(766) as of December 31, 2011 and 2010, respectively.

The accumulated benefit obligation for all defined benefit pension plans was $5,413 and $4,753 as of December 31, 2011 and 2010, respectively.

The following table provides information for The Hartford’s defined benefit pension plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2011 and 2010.

	December 31,
	2011		2010
Projected benefit obligation	$	5,441	$	4,771
Accumulated benefit obligation		5,394		4,733
Fair value of plan assets		4,492		3,901

Amounts recognized in the Consolidated Balance Sheets consist of:

	Pension Benefits				Other Postretirement Benefits
	2011		2010		2011		2010
Other Assets
Noncurrent assets	$	—	$	—	$	—	$	—
Other Liabilities
Current liabilities		21		19		34		34
Noncurrent liabilities		931		854		187		184
Total	$	952	$	873	$	221	$	218

Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income (Loss)

In the Company’s non-qualified pension plan the amount of lump sum benefit payments exceeded the amount of service and interest cost for the year ended December 31, 2010. As a result, the Company recorded settlement expense of $20 to recognize the actuarial loss associated with the pro-rata portion of the obligation that has been settled.

Total net periodic benefit cost for the years ended December 31, 2011, 2010 and 2009 include the following components:

	Pension Benefits									Other Postretirement Benefits
	2011			2010			2009			2011			2010			2009
Service cost	$	102		$	102		$	105		$	5		$	7		$	6
Interest cost		259			252			243			20			22			24
Expected return on plan assets		(298	)		(286	)		(276	)		(14	)		(13	)		(11	)
Amortization of prior service credit		(9	)		(9	)		(9	)		(1	)		(1	)		(1	)
Amortization of actuarial loss		159			107			74			—			—			—
Settlements		—			20			—			—			—			—
Net periodic benefit cost	$	213		$	186		$	137		$	10		$	15		$	18

Amounts recognized in other comprehensive income (loss) for the years ended December 31, 2011 and 2010 were as follows:

	Pension Benefits						Other Postretirement Benefits
	2011			2010			2011		2010
Amortization of actuarial loss	$	(159	)	$	(107	)	$	—	$	—
Settlement loss		—			(20	)		—		—
Amortization of prior service credit		9			9			1		1
Net loss arising during the year		237			298			24		7
Total	$	87		$	180		$	25	$	8

Amounts in accumulated other comprehensive income (loss) on a before tax basis that have not yet been recognized as components of net periodic benefit cost consist of:

	Pension Benefits						Other Postretirement Benefits
	2011			2010			2011		2010
Net loss	$	1,930		$	1,852		$	39	$	17
Prior service credit		(21	)		(30	)		1		—
Transition obligation		—			—			2		—
Total	$	1,909		$	1,822		$	42	$	17

The estimated net loss and prior service credit for the defined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost during 2012 are $216 and $(9), respectively. The estimated net loss for the other postretirement benefit plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost during 2012 is $(1). The estimated prior service credit for the other postretirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2012 is an insignificant amount.

Plan Assets

Investment Strategy and Target Allocation

The overall investment strategy of the Plan is to maximize total investment returns to provide sufficient funding for present and anticipated future benefit obligations within the constraints of a prudent level of portfolio risk and diversification. With respect to asset management, the oversight responsibility of the Plan rests with The Hartford’s Pension Fund Trust and Investment Committee composed of individuals whose responsibilities include establishing overall objectives and the setting of investment policy; selecting appropriate investment options and ranges; reviewing the asset allocation mix and asset allocation targets on a regular basis; and monitoring performance to determine whether or not the rate of return objectives are being met and that policy and guidelines are being followed. The Company believes that the asset allocation decision will be the single most important factor determining the long-term performance of the Plan.

The Company’s pension plan and other postretirement benefit plans’ target allocation by asset category is presented in the table below.

	Target Asset Allocation
	Pension Plans			Other Postretirement Plans
Equity securities		10% – 32	%		15% – 35	%
Fixed income securities		50% – 70	%		55% – 85	%
Alternative assets		10% – 25	%		—

Divergent market performance among different asset classes may, from time to time, cause the asset allocation to deviate from the desired asset allocation ranges. The asset allocation mix is reviewed on a periodic basis. If it is determined that an asset allocation mix rebalancing is required, future portfolio additions and withdrawals will be used, as necessary, to bring the allocation within tactical ranges.

The Company’s pension plan and other postretirement benefit plans’ weighted average asset allocation at December 31, 2011 and 2010 is presented in the table below.

	Percentage of Pension Plans Assets						Percentage of Other Postretirement Plans
	At Fair Value as of December 31,						Assets at Fair Value as of December 31,
	2011			2010			2011			2010
Equity securities		20	%		22	%		22	%		22	%
Fixed income securities		62	%		61	%		78	%		78	%
Alternative Assets		18	%		17	%		—			—
Total		100	%		100	%		100	%		100	%

The Plan assets are invested primarily in separate portfolios managed by HIMCO, a wholly-owned subsidiary of the Company. These portfolios encompass multiple asset classes reflecting the current needs of the Plan, the investment preferences and risk tolerance of the Plan and the desired degree of diversification. These asset classes include publicly traded equities, bonds and alternative investments and are made up of individual investments in cash and cash equivalents, equity securities, debt securities, asset-backed securities and hedge funds. Hedge fund investments represent a diversified portfolio of partnership investments in absolute-return investment strategies.

In addition, the Company uses U.S. Treasury bond futures contracts and U.S. Treasury STRIPS in a duration overlay program to adjust the duration of Plan assets to better match the duration of the benefit obligation.

Investment Valuation

For further discussion on the valuation of investments, see Note 4.

Pension Plan Assets

The fair values of the Company’s pension plan assets at December 31, 2011, by asset category are as follows:

	Pension Plan Assets at Fair Value as of December 31, 2011
Asset Category	Level 1		Level 2		Level 3		Total
Short-term investments:	$	119	$	549	$	—	$	668
Fixed Income Securities:
Corporate		—		741		3		744
RMBS		—		334		11		345
U.S. Treasuries		59		819		—		878
Foreign government		—		53		3		56
CMBS		—		117		—		117
Other fixed income [1]		—		70		4		74
Equity Securities:
Large-cap domestic		—		570		—		570
Mid-cap domestic		52		—		—		52
Small-cap domestic		38		—		—		38
International		217		—		—		217
Other equities		—		1		—		1
Other investments:
Hedge funds		—		—		759		759
Total pension plan assets at fair value [2]	$	485	$	3,254	$	780	$	4,519

[1]	Includes ABS and municipal bonds.
[2]	Excludes approximately $43 of investment payables net of investment receivables that are not carried at fair value. Also excludes approximately $37 of interest receivable carried at fair value.

The fair values of the Company’s pension plan assets at December 31, 2010, by asset category are as follows:

	Pension Plan Assets at Fair Value as of December 31, 2010
Asset Category	Level 1		Level 2		Level 3		Total
Short-term investments: [1]	$	75	$	406	$	—	$	481
Fixed Income Securities:
Corporate		—		882		3		885
RMBS		—		450		9		459
U.S. Treasuries		7		330		—		337
Foreign government		—		61		2		63
CMBS		—		174		1		175
Other fixed income [2]		—		56		7		63
Equity Securities:
Large-cap domestic		—		496		—		496
Mid-cap domestic		62		—		—		62
Small-cap domestic		47		—		—		47
International		248		—		—		248
Other investments:
Hedge funds		—		—		635		635
Total pension plan assets at fair value [3]	$	439	$	2,855	$	657	$	3,951

[1]	Includes $30 of initial margin requirements related to the Plan’s duration overlay program.
[2]	Includes ABS and municipal bonds.
[3]	Excludes approximately $61 of investment payables net of investment receivables that are not carried at fair value. Also excludes approximately $32 of interest receivable carried at fair value.

The tables below provide a fair value level 3 roll forward for the twelve months ended December 31, 2011 and 2010 for the Pension Plan Assets for which significant unobservable inputs (Level 3) are used in the fair value measurement on a recurring basis. The Plan classifies the fair value of financial instruments within Level 3 if there are no observable markets for the instruments or, in the absence of active markets, if one or more of the significant inputs used to determine fair value are based on the Plan’s own assumptions. Therefore, the gains and losses in the tables below include changes in fair value due partly to observable and unobservable factors.

Pension Plan Asset Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
							Foreign			Other fixed			Hedge
Assets	Corporate			RMBS			government			income			funds			Totals
Fair Value as of January 1, 2011	$	3		$	9		$	2		$	8		$	635		$	657
Actual return on plan assets
Relating to assets still held at the reporting date		1			—			—			2			21			24
Purchases		2			10			3			1			223			239
Sales		(1	)		(9	)		(2	)		(4	)		(120	)		(136	)
Transfers into Level 3		1			1			6			2			—			10
Transfers out of Level 3		(3	)		—			(6	)		(5	)		—			(14	)
Fair Value as of December 31, 2011	$	3		$	11		$	3		$	4		$	759		$	780

The transfers in and out of level 3 were due to a change in the pricing source.

Pension Plan Asset Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
										Other fixed
							Foreign			income and			Hedge
Assets	Corporate			RMBS			government			CMBS			funds			Totals
Fair Value as of January 1, 2010	$	12		$	24		$	2		$	8		$	501		$	547
Actual return on plan assets
Relating to assets still held at the reporting date		(1	)		—			—			1			29			29
Relating to assets sold during the period		1			—			—			—			4			5
Purchases		6			62			2			9			200			279
Sales		(12	)		(77	)		—			(5	)		(99	)		(193	)
Transfers into Level 3		2			—			—			2			—			4
Transfers out of Level 3		(5	)		—			(2	)		(7	)		—			(14	)
Fair Value as of December 31, 2010	$	3		$	9		$	2		$	8		$	635		$	657

There was no Company common stock included in the Plan’s assets as of December 31, 2011 and 2010.

Other Postretirement Plan Assets

The fair value of the Company’s other postretirement plan assets at December 31, 2011, by asset category are as follows:

	Other Postretirement Plan Assets
	at Fair Value as of December 31, 2011
Asset Category	Level 1		Level 2		Level 3		Total
Short-term investments	$	—	$	9	$	—	$	9
Fixed Income Securities:
Corporate		—		53		—		53
RMBS		—		48		—		48
U.S. Treasuries		—		28		—		28
Foreign government		—		2		—		2
CMBS		—		18		—		18
Other fixed income		—		4		—		4
Equity Securities:
Large-cap		—		43		—		43
Total other postretirement plan assets at fair value [1]	$	—	$	205	$	—	$	205

[1] Excludes approximately $3 of investment payables net of investment receivables that are not carried at fair value. Also excludes approximately $1 of interest receivable carried at fair value.

The fair value of the Company’s other postretirement plan assets at December 31, 2010, by asset category are as follows:

	Other Postretirement Plan Assets
	at Fair Value as of December 31, 2010
Asset Category	Level 1		Level 2		Level 3		Total
Short-term investments	$	—	$	10	$	—	$	10
Fixed Income Securities:
Corporate		—		57		—		57
RMBS		—		44		—		44
U.S. Treasuries		—		19		—		19
CMBS		—		17		—		17
Other fixed income		—		6		—		6
Equity Securities:
Large-cap		—		43		—		43
Total other postretirement plan assets at fair value [1]	$	—	$	196	$	—	$	196

[1] Excludes approximately $7 of investment payables net of investment receivables that are not carried at fair value. Also excludes approximately $1 of interest receivable carried at fair value.

There was no Company common stock included in the other postretirement benefit plan assets as of December 31, 2011 and 2010.

Concentration of Risk

In order to minimize risk, the Plan maintains a listing of permissible and prohibited investments. In addition, the Plan has certain concentration limits and investment quality requirements imposed on permissible investment options. Permissible investments include U.S. equity, international equity, alternative asset and fixed income investments including derivative instruments. Derivative instruments include future contracts, options, swaps, currency forwards, caps or floors and will be used to control risk or enhance return but will not be used for leverage purposes.

Securities specifically prohibited from purchase include, but are not limited to: shares or fixed income instruments issued by The Hartford, short sales of any type within long-only portfolios, non-derivative securities involving the use of margin, leveraged floaters and inverse floaters, including money market obligations, natural resource real properties such as oil, gas or timber and precious metals.

Other than U.S. government and certain U.S. government agencies backed by the full faith and credit of the U.S. government, the Plan does not have any material exposure to any concentration risk of a single issuer.

Cash Flows

The following table illustrates the Company’s prior contributions.

Employer Contributions	Pension Benefits		Other Postretirement Benefits
2011	$	201	$	—
2010	$	201		—

In 2011, the Company, at its discretion, made $200 in contributions to the U.S. qualified defined benefit pension plan. The Company presently anticipates contributing approximately $200 to its U.S. qualified defined benefit pension plan in 2012 based upon certain economic and business assumptions. These assumptions include, but are not limited to, equity market performance, changes in interest rates and the Company’s other capital requirements. For 2012, the Company does not have a required minimum funding contribution for the Plan and the funding requirements for all of the pension plans are expected to be immaterial.

Employer contributions in 2011 and 2010 were made in cash and did not include contributions of the Company’s common stock.

Benefit Payments

The following table sets forth amounts of benefits expected to be paid over the next ten years from the Company’s pension and other postretirement plans as of December 31, 2011:

	Pension Benefits		Other Postretirement Benefits
2012	$	272	$	38
2013		291		40
2014		309		40
2015		325		40
2016		341		39
2017-2021		1,888		183
Total	$	3,426	$	380

In addition, the following table sets forth amounts of other postretirement benefits expected to be received under the Medicare Part D Subsidy over the next ten years as of December 31, 2011:

2012	$	4
2013		4
2014		5
2015		4
2016		5
2017-2021		31
Total	$	53

Investment and Savings Plan

Substantially all U.S. employees are eligible to participate in The Hartford’s Investment and Savings Plan under which designated contributions may be invested in common stock of The Hartford or certain other investments. These contributions are matched, up to 3% of base salary, by the Company. In 2011, employees who had earnings of less than $110,000 in the preceding year received a contribution of 1.5% of base salary and employees who had earnings of $110,000 or more in the preceding year received a contribution of 0.5% of base salary. The cost to The Hartford for this plan was approximately $59, $62, and $64 for 2011, 2010, and 2009, respectively. Additionally, The Hartford has established defined contribution pension plans for certain employees of the Company’s international subsidiaries. Under this plan, the Company contributes 5% of base salary to the participant accounts. The cost to The Hartford in 2011, 2010, and 2009 for this plan was $1, $1 and $2, respectively.