Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2011

The changes in benefit obligation, the changes in fair value of plan assets, and the funded status of our Pension Plans and other postretirement benefit plans

The changes in benefit obligation, the changes in fair value of plan assets, and the funded status of our pension plans and other postretirement benefit plans as of and for the years ended December 31, 2011 and 2010 were as follows (in millions):



	Pension Plans						Other Postretirement Benefit Plans
	2011			2010			2011			2010
Change in benefit obligation:
Benefit obligation at beginning of year	$	1,626		$	1,454		$	426		$	466
Service cost	104			88			11			10
Interest cost	85			83			22			26
Acquisitions	—			—			4			—
Participant contributions	—			—			12			12
Plan amendments	4			—			—			(31		)
Special termination benefits	—			4			—			—
Medicare subsidy for prescription drugs	—			—			3			1
Benefits paid	(117		)	(109		)	(30		)	(31		)
Actuarial (gain) loss	179			106			(9		)	(28		)
Foreign currency exchange rate changes	—			—			(1		)	1
Benefit obligation at end of year	$	1,881		$	1,626		$	438		$	426

Change in plan assets:
Fair value of plan assets at beginning of year	$	1,362		$	1,251		$	—		$	—
Actual return on plan assets	(2		)	149			—			—
Valero contributions	244			71			15			18
Participant contributions	—			—			12			12
Medicare subsidy for prescription drugs	—			—			3			1
Benefits paid	(117		)	(109		)	(30		)	(31		)
Fair value of plan assets at end of year	$	1,487		$	1,362		$	—		$	—

Reconciliation of funded status:
Fair value of plan assets at end of year	$	1,487		$	1,362		$	—		$	—
Less benefit obligation at end of year	1,881			1,626			438			426
Funded status at end of year	$	(394	)	$	(264	)	$	(438	)	$	(426	)

Benefit obligations in excess of fair value of plan assets

The accumulated benefit obligations for certain of our pension plans exceed the fair values of the assets of those plans. For those plans, the table below presents the total projected benefit obligation, accumulated benefit obligation, and fair value of the plan assets (in millions).



	December 31,
	2011		2010
Projected benefit obligation	$	244	$	231
Accumulated benefit obligation	189		192
Fair value of plan assets	40		44

Expected benefit payments

Benefit payments that we expect to pay, including amounts related to expected future services, and the anticipated Medicare subsidies that we expect to receive are as follows for the years ending December 31 (in millions):



	Pension Benefits		Other Postretirement Benefits		Medicare Subsidy
2012	$	84	$	23	$	(2	)
2013	99		24		n/a
2014	101		26		n/a
2015	107		28		n/a
2016	117		29		n/a
2017-2021	766		159		n/a

Components of net periodic benefit costs

The components of net periodic benefit cost were as follows for the years ended December 31, 2011, 2010, and 2009 (in millions):



	Pension Plans									Other Postretirement Benefit Plans
	2011			2010			2009			2011			2010			2009
Components of net periodic benefit cost:
Service cost	$	104		$	88		$	104		$	11		$	10		$	12
Interest cost	85			83			79			22			26			25
Expected return on plan assets	(112		)	(112		)	(108		)	—			—			—
Amortization of:
Prior service cost (credit)	2			3			3			(23		)	(20		)	(19		)
Net loss	12			2			10			2			4			6
Net periodic benefit cost before special charges	91			64			88			12			20			24
Special charges	4			8			7			4			—			1
Net periodic benefit cost	$	95		$	72		$	95		$	16		$	20		$	25

Amounts recognized in other comprehensive income

Pre-tax amounts recognized in other comprehensive income for the years ended December 31, 2011, 2010, and 2009 were as follows (in millions):



	Pension Plans									Other Postretirement Benefit Plans
	2011			2010			2009			2011			2010			2009
Net loss (gain) arising during the year:
Net actuarial loss (gain)	$	294		$	68		$	(273	)	$	(9	)	$	(28	)	$	(27	)
Prior service credit	4			—			—			—			(31		)	(51		)

Net gain (loss) reclassified into income:
Net actuarial loss	(12		)	(2		)	(10		)	(2		)	(4		)	(6		)
Prior service (cost) credit	(2		)	(3		)	(3		)	23			20			19
Curtailment and settlement	(4		)	(4		)	(1		)	—			—			—
Total changes in other comprehensive (income) loss	$	280		$	59		$	(287	)	$	12		$	(43	)	$	(65	)

Amounts in accumulated other comprehensive income not yet recognized

The pre-tax amounts in accumulated other comprehensive income as of December 31, 2011 and 2010 that have not yet been recognized as components of net periodic benefit cost were as follows (in millions):



	Pension Plans				Other Postretirement Benefit Plans
	2011		2010		2011			2010
Prior service cost (credit)	$	16	$	14	$	(103	)	$	(126	)
Net actuarial loss	681		403		50			61
Total	$	697	$	417	$	(53	)	$	(65	)

Amounts in accumulated other comprehensive income to be recognized in the next fiscal year

The following pre-tax amounts included in accumulated other comprehensive income as of December 31, 2011 are expected to be recognized as components of net periodic benefit cost during the year ending December 31, 2012 (in millions):



	Pension Plans		Other Postretirement Benefit Plans
Amortization of prior service cost (credit)	$	3	$	(23	)
Amortization of net actuarial loss	33		1
Total	$	36	$	(22	)

Weighted-average assumptions used to determine the benefit obligations and net periodic benefit cost

The weighted-average assumptions used to determine the benefit obligations as of December 31, 2011 and 2010 were as follows:



	Pension Plans				Other Postretirement Benefit Plans
	2011		2010		2011		2010
Discount rate	5.08	%	5.40	%	4.97	%	5.22	%
Rate of compensation increase	3.68	%	3.56	%	—	%	—	%

The weighted-average assumptions used to determine the net periodic benefit cost for the years ended December 31, 2011, 2010, and 2009 were as follows:



	Pension Plans						Other Postretirement Benefit Plans
	2011		2010		2009		2011		2010		2009
Discount rate	5.40	%	5.80	%	5.40	%	5.22	%	5.68	%	5.39	%
Expected long-term rate of return on plan assets	7.69	%	7.71	%	7.72	%	—	%	—	%	—	%
Rate of compensation increase	3.56	%	4.18	%	4.18	%	—	%	—	%	—	%

Assumed health care cost trend rates

The assumed health care cost trend rates as of December 31, 2011 and 2010 were as follows:



	2011		2010
Health care cost trend rate assumed for the next year	7.43	%	7.46	%
Rate to which the cost trend rate was assumed to decline (the ultimate trend rate)	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	2018		2018

Effect of one percentage-point change in assumed health care cost trend rates

A one percentage-point change in assumed health care cost trend rates would have the following effects on other postretirement benefits (in millions):



	1% Increase		1% Decrease
Effect on total of service and interest cost components	$	1	$	(1	)
Effect on accumulated postretirement benefit obligation	18		(16		)

Fair value of pension plan assets by level of fair value hierarchy

The tables below present the fair values of the assets of our pension plans (in millions) as of December 31, 2011 and 2010 by level of the fair value hierarchy. Assets categorized in Level 1 of the hierarchy are measured at fair value using a market approach based on quotations from national securities exchanges. Assets categorized in Level 2 of the hierarchy are measured at net asset value as a practical expedient for fair value. As previously noted, we do not fund or fully fund U.S. nonqualified and certain international pension plans that are not subject to funding requirements, and we do not fund our other postretirement benefit plans. Plan assets for certain U.S. nonqualified pension plans are disclosed in Note 20 and are not included in the plan assets reflected below because they are not protected from our creditors and therefore cannot be reflected as a reduction from our obligations under the pension plans.



	Fair Value Measurements Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total as of December 31, 2011
Equity securities:
Valero Energy Corporation common stock	$	5	$	—	$	—	$	5
Other U.S. companies (a)	375		—		—		375
International companies	120		—		—		120
Preferred stock	2		—		—		2
Mutual funds:
International growth	102		—		—		102
Index funds (b)	63		—		—		63
Corporate debt instruments	246		—		—		246
Government securities:
U.S. Treasury securities	67		—		—		67
Mortgage-backed securities	3		—		—		3
Other government securities	81		—		—		81
Common collective trusts	—		247		—		247
Insurance contracts	—		17		—		17
Interest and dividends receivable	5		—		—		5
Cash and cash equivalents	154		—		—		154
Total	$	1,223	$	264	$	—	$	1,487

______________________

See notes on page 99.



	Fair Value Measurements Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total as of December 31, 2010
Equity securities:
Valero Energy Corporation common stock	$	5	$	—	$	—	$	5
Other U.S. companies (a)	369		—		—		369
International companies	107		—		—		107
Preferred stock	1		—		—		1
Mutual funds:
International growth	117		—		—		117
Index funds (b)	64		—		—		64
Corporate debt instruments	274		—		—		274
Government securities:
U.S. Treasury securities	30		—		—		30
Mortgage-backed securities	3		—		—		3
Other government securities	93		—		—		93
Common collective trusts	—		231		—		231
Insurance contracts	—		18		—		18
Interest and dividends receivable	5		—		—		5
Cash and cash equivalents	45		—		—		45
Total	$	1,113	$	249	$	—	$	1,362

Contributions to defined contribution plans

Our contributions to these defined contribution plans were as follows (in millions):



	Year Ended December 31,
	2011		2010		2009
Valero Energy Corporation Thrift Plan	$	35	$	36	$	37
Valero Savings Plan	8		6		5
Premcor Retirement Savings Plan	5		5		6
Ultramar Ltd. Savings Plan	10		9		8
Valero Refining Company – Aruba N.V. Thrift Plan	1		1		1