GRAINGER W W INC | 2013 | FY | 3

Reconciliations of the beginning and ending balances of the postretirement benefit obligation, which is calculated using a December 31 measurement date, the fair value of plan assets and the funded status of the benefit obligation follow (in thousands of dollars):
 
2013

2012
Benefit obligation at beginning of year
$
246,087

 
$
328,912

Service cost
10,589

 
20,058

Interest cost
8,938

 
12,810

Plan participants' contributions
2,289

 
2,150

Plan amendment
—

 
(84,004
)
Actuarial (gains)
(38,476
)
 
(28,234
)
Benefits paid
(6,021
)
 
(6,047
)
Medicare Part D Subsidy received
82

 
442

Benefit obligation at end of year
223,488

 
246,087

 


 


Plan assets available for benefits at beginning of year
117,939

 
103,519

Actual returns on plan assets
25,278

 
13,355

Employer's contributions
5,029

 
4,962

Plan participants' contributions
2,289

 
2,150

Benefits paid
(6,021
)
 
(6,047
)
Plan assets available for benefits at end of year
144,514

 
117,939

 


 


Noncurrent postretirement benefit obligation
$
78,974

 
$
128,148

us-gaap:ScheduleOfAccumulatedAndProjectedBenefitObligationsTableTextBlock

The plan's assets are stated at fair value which represents the net asset value of shares held by the plan in the registered investment companies at the quoted market prices (Level 1 input) as of December 31 (in thousands of dollars):

 
2013

2012
  Registered investment companies
 
 
 
    Fidelity Spartan U.S. Equity Index Fund
$
67,160

 
$
51,169

    Vanguard 500 Index Fund
67,931

 
51,336

    Vanguard Total International Stock
25,034

 
21,739

Total Assets
$
160,125

 
$
124,244

us-gaap:ScheduleOfAllocationOfPlanAssetsTableTextBlock

The components of AOCE related to the postretirement benefit costs that will be amortized into net periodic postretirement benefit costs in 2014 are estimated as follows (in thousands of dollars):
 
2014
Amortization of prior service credit
$
(7,253
)
Amortization of transition asset
(143
)
Amortization of unrecognized losses
1,154

Estimated amount to be amortized from AOCE into net periodic postretirement benefit costs
$
(6,242
)

us-gaap:ScheduleOfAmountsInAccumulatedOtherComprehensiveIncomeLossToBeRecognizedOverNextFiscalYearTableTextBlock

The amounts recognized in AOCE consisted of the following components (in thousands of dollars):
 
As of December 31,
 
2013

2012
Prior service credit
$
74,556

 
$
81,968

Transition asset
143

 
286

Unrecognized losses
(18,006
)
 
(78,407
)
Deferred tax (liability)
(21,806
)
 
(1,618
)
Net gains
$
34,887

 
$
2,229

us-gaap:ScheduleOfAmountsRecognizedInOtherComprehensiveIncomeLossTableTextBlock

The following assumptions were used to determine net periodic benefit costs at January 1:
 
For the Years Ended December 31,
 
2013

2012

2011
Discount rate
4.00
%
 
4.50
%
 
5.60
%
Expected long-term rate of return on plan assets, net of tax
6.00
%
 
6.00
%
 
6.00
%
Initial healthcare cost trend rate
8.00
%
 
8.50
%
 
9.00
%
Ultimate healthcare cost trend rate
5.00
%
 
5.00
%
 
5.00
%
Year ultimate healthcare cost trend rate reached
2019

 
2019

 
2019


The following assumptions were used to determine benefit obligations at December 31:
 
2013

2012

2011
Discount rate
4.90
%
 
4.00
%
 
4.50
%
Expected long-term rate of return on plan assets, net of tax
5.70
%
 
6.00
%
 
6.00
%
Initial healthcare cost trend rate
7.50
%
 
8.00
%
 
8.50
%
Ultimate healthcare cost trend rate
4.50
%
 
5.00
%
 
5.00
%
Year ultimate healthcare cost trend rate reached
2026

 
2019

 
2019

us-gaap:ScheduleOfAssumptionsUsedTableTextBlock

A 1 percentage point change in assumed healthcare cost trend rates would have the following effects on 2013 results (in thousands of dollars):
 
1 Percentage Point
 
Increase
 
 (Decrease)
Effect on total service and interest cost
$
2,205

 
$
(1,777
)
Effect on postretirement benefit obligation
29,776

 
(24,196
)

us-gaap:ScheduleOfEffectOfOnePercentagePointChangeInAssumedHealthCareCostTrendRatesTableTextBlock

The Company forecasts the following benefit payments (which include a projection for expected future employee service) for the next ten years (in thousands of dollars):

Year
 
Estimated Gross Benefit Payments
2014
 
$
5,299

2015
 
6,075

2016
 
6,952

2017
 
8,001

2018
 
9,159

2019-2023
 
$
65,751

us-gaap:ScheduleOfExpectedBenefitPaymentsTableTextBlock

The net periodic benefits costs charged to operating expenses, which were valued with a measurement date of January 1 for each year, consisted of the following components (in thousands of dollars):
 
For the Years Ended December 31,
 
2013

2012

2011
Service cost
$
10,589

 
$
20,058

 
$
15,762

Interest cost
8,938

 
12,810

 
13,352

Expected return on assets
(7,076
)
 
(6,210
)
 
(5,790
)
Amortization of prior service credit
(7,412
)
 
(495
)
 
(495
)
Amortization of transition asset
(143
)
 
(143
)
 
(143
)
Amortization of unrecognized losses
3,724

 
4,827

 
3,269

Net periodic benefits costs
$
8,620

 
$
30,847

 
$
25,955

us-gaap:ScheduleOfNetBenefitCostsTableTextBlock