part iI / item 8 The Company accrues warranty liabilities when it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Warranty provision is included in cost of sales in the Consolidated Statements of Oper- ations. A summary of the warranty liabilities is as follows: Non-union employees hired after December 31, 2005 are no longer eligible for participation in the ELDEC Corporation (“ELDEC”) and Interpoint Corporation (“Interpoint”) money purchase plan. Qual- ifying employees receive an additional 2% Company contribution to their 401(K) plan accounts. Certain of the Company’s non-U.S. defined benefit pension plans were also amended whereby eligi- bility for new participants will cease. Postretirement health care and life insurance benefits are provided for certain employees hired before January 1, 1990, who meet minimum age and service requirements. The Company does not pre-fund these benefits and has the right to modify or terminate the plan. A summary of benefit obligations, fair value of plan assets and funded status is as follows: (in thousands) December 31, 2012 2011 Balance at beginning of period $ 16,379 $19,198 Expense 6,190 6,759 Changes due to acquisitions/divestitures (498) 11 Payments / deductions (11,426) (9,545) Currency translation 73 (44) Balance at end of period $ 10,718 $16,379 (in thousands) December 31, 2012 2011 Environmental $33,825 $49,959 Other 43,046 26,756 $ 76,871 $ 76,715 Note 5 – Other Liabilities Note 6 – Research and Development Note 7 – Pension and Postretirement Benefits Research and development costs are expensed when incurred. These costs were $66.9 million, $64.2 million and $65.9 million in 2012, 2011 and 2010, respectively. In the United States, the Company sponsors a defined benefit pen- sion plan that covers approximately 28% of all U.S. employees. In the fourth quarter of 2012, the Company announced that pension eligible employees will no longer earn future benefits in the domestic defined benefit pension plan effective January 1, 2013. The benefits are based on years of service and compensation on a final average pay basis, except for certain hourly employees where benefits are fixed per year of service. This plan is funded with a trustee in respect of past and current service. Charges to expense are based upon costs computed by an independent actuary. The Company’s funding policy is to contribute annually amounts that are allowable for federal or other income tax purposes. These con- tributions are intended to provide for future benefits earned to date. A number of the Company’s non-U.S. subsidiaries sponsor defined benefit pension plans that cover approximately 14% of all non-U.S. employees. The benefits are typically based upon years of service and compensation. These plans are funded with trustees in respect of past and current service. Charges to expense are based upon costs computed by independent actuaries. The Company’s funding policy is to contribute annually amounts that are allowable for tax purposes or mandated by local statutory requirements. These contributions are intended to provide for future benefits earned to date. Pension Benefits Postretirement Benefits (in thousands) December 31, 2012 2011 2012 2011 Other assets $ 52,304 $ 59,891 $ — $ — Current liabilities (817) (1,169) (1,188) (1,248) Accrued pension and postretirement benefits (222,171) (167,068) (11,432) (11,314) $(170,684) $(108,346) $(12,620) $(12,562) 45 Pension Benefits Postretirement Benefits (in thousands) December 31, 2012 2011 2012 2011 Change in benefit obligation: Beginning of year $786,592 $ 674,136 $ 12,562 $ 13,108 Service cost 13,503 11,710 107 121 Interest cost 37,653 38,163 497 588 Plan participants’ contributions 1,324 1,389 — — Amendments 3 177 — — Actuarial loss 104,539 96,558 670 129 Settlement (466) (123) — — Benefits paid (35,561) (31,911) (1,226) (1,374) Foreign currency exchange impact 15,513 (2,777) 10 (10) Acquisition/divestitures/ curtailment (16,223) — — — Adjustment for expenses/tax contained in service cost (613) (730) Benefit obligation at end of year $ 906,264 $ 786,592 $ 12,620 $ 12,562 Change in plan assets: Fair value of plan assets at beginning of year $ 678,250 $ 661,319 Actual return on plan assets 73,981 3,192 Foreign currency exchange impact 14,877 (2,059) Employer contributions 4,278 47,495 Administrative expenses paid (1,103) (1,056) Plan participants’ contributions 1,324 1,389 Settlement (466) (119) Benefits paid (35,561) (31,911) Fair value of plan assets at end of year $ 735,580 $ 678,250 $ — $ — Funded status $ (170,684) $(108,342) $(12,620) $(12,562) Amounts recognized in the Consolidated Balance Sheets consist of: