73 THE TIMKEN COMPANY Note 13 –Postretirement Benefit Plans (continued) PlaN assETs: Level 2  – Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical  or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable  for the asset or liability. Level 3  – Unobservable inputs for the asset or liability. Level 1  – Unadjusted quoted prices in active markets for identical assets or liabilities. The following table presents the fair value hierarchy for those investments of the Company’s VEBA trust assets measured at fair value  on a recurring basis as of December 31, 2011: FINANCIAls ANd FOOTNOTEs Total level 1 level 2 level 3 Assets: Cash and cash equivalents $ 85.9 $ 85.9 $  – $  – Common collective funds – fixed income  85.0  –  85.0  – Total Assets $ 170.9 $ 85.9 $ 85.0 $ – Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between  market participants at the measurement date (exit price). The FASB provides accounting rules that classify the inputs used to measure  fair value into the following hierarchy: The Company recognizes its overall responsibility to ensure that the assets of its defined postretirement benefit plan are managed  effectively and prudently and in compliance with its policy guidelines and all applicable laws. Preservation of capital is important;  however, the Company also recognizes that appropriate levels of risk are necessary to allow its investment managers to achieve  satisfactory long-term results consistent with the objectives and the fiduciary character of the postretirement funds. Asset allocations  are established in a manner consistent with projected plan liabilities, benefit payments and expected rates of return for various asset  classes. The expected rate of return for the investment portfolio is based on expected rates of return for various asset classes, as well  as historical asset class and fund performance. The Company’s target allocation for the VEBA trust assets, as well as the actual VEBA trust asset allocation as of December 31, 2011  and 2010, was as follows: The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Medicare Act) was signed into law on December  8, 2003. The Medicare Act provides for prescription drug benefits under Medicare Part D and contains a subsidy to plan sponsors who  provide “actuarially equivalent” prescription plans. The Company’s actuary determined that the prescription drug benefit provided by the  Company’s postretirement plan is considered to be actuarially equivalent to the benefit provided under the Medicare Act. In accordance  with ASC 715, “Compensation – Retirement Benefits,” all measures of the accumulated postretirement benefit obligation or net periodic  postretirement benefit cost in the financial statements or accompanying notes reflect the effects of the Medicare Act on the plan for the  entire fiscal year. The 2011 expected subsidy was $3.2 million, of which $0.9 million was received prior to December 31, 2011. current Target  allocation Percentage of VEba  assets at December 31, asset category  2011 2010 Equity securities  45% to 55% 0% 0% Debt securities  45% to 55% 100% 100% Total 100% 100% 100%