Notes to CoNsolidated FiNaNCial statemeNts The Company sponsors defined contribution retirement and savings plans covering substantially all employees in the United States  and employees at certain non-U.S. locations. The Company has contributed Timken common stock to certain of these plans based on  formulas established in the respective plan agreements. At December 31, 2011, the plans held 7,739,671 shares of the Company’s  common stock with a fair value of $299.6 million. Company contributions to the plans, including performance sharing, were $26.4  million in 2011, $21.1 million in 2010 and $19.3 million in 2009. The Company paid dividends totaling $5.7 million in 2011, $4.6 million in  2010 and $5.1 million in 2009 to plans holding shares of the Company’s common stock. The Company and its subsidiaries sponsor several funded and unfunded postretirement plans that provide health care and life insurance  benefits for eligible retirees and dependents. Depending on retirement date and employee classification, certain health care plans  contain contribution and cost-sharing features such as deductibles and coinsurance. The remaining health care and life insurance plans  are noncontributory. The following tables summarize the net periodic benefit cost information and the related assumptions used to measure the net periodic  benefit cost for the years ended December 31: Note 12 – Retirement Benefit Plans (continued) Employee Savings Plans NOTE 13 – POsTrETIrEMENT BENEFIT PlANs Postretirement benefit Plans 2011  2010  2009 components of net periodic benefit cost Service cost $ 2.5 $ 2.1 $ 2.6 Interest cost 32.9  35.6  39.5 Expected return on plan assets  (4.4) – – Amortization of prior service credit  (0.3) (1.5) (2.2) Amortization of net actuarial loss  2.9  4.0 3.7 Net periodic benefit cost  $ 33.6 $ 40.2 $ 43.6 Postretirement benefits 2011 2010 2009 assumptions Discount rate 5.50% 5.75% 6.3% Rate of return 5.00% 0.00% 0.0% The discount rate assumption is based on current rates of high-quality long-term corporate bonds over the same period that benefit  payments will be required to be made. The expected rate of return on plan assets assumption is based on the weighted-average  expected return on the various asset classes in the plans’ portfolio. The asset class return is developed using historical asset return  performance as well as current market conditions such as inflation, interest rates and equity market performance. For expense purposes in 2011, the Company applied a discount rate of 5.50% to its postretirement benefit plans. For expense purposes  in 2012, the Company will apply a discount rate of 4.85% to its postretirement benefit plans. A 0.25 percentage point reduction in the  discount rate would increase postretirement benefit expense by approximately $0.5 million for 2012. In December 2010, the Company established a Voluntary Employee Benefit Association (VEBA) trust for The Timken Company Bargaining  Unit Welfare Benefit Plan. For expense purposes in 2011, the Company applied an expected rate of return of 5.00% to the VEBA trust  assets. For expense purposes in 2012, the Company will apply an expected rate of return on plan assets of 5.00%. A 0.25 percentage  point reduction in the expected rate of return would increase postretirement benefit expense by approximately $0.5 million for 2012. THE TIMKEN COMPANY 70