EMPLOYEE BENEFITS

12 Months Ended

Dec. 31, 2011

EMPLOYEE BENEFITS

EMPLOYEE BENEFITS

9. EMPLOYEE BENEFITS

Pension and Other Post Retirement Benefits

        Pension—The principal pension plan is the Mead Johnson & Company Retirement Plan in the United States (U.S. Pension Plan) which represents approximately 80% of the Company's total pension assets and obligations. The benefits of this plan are frozen and benefits are no longer accrued for service.

        Other post retirement benefits—The Company also provides comprehensive medical and group life benefits for substantially all U.S. and Canadian retirees who elect to participate in its comprehensive medical and group life plans. The retiree medical plan is contributory. Contributions are adjusted periodically and vary by date of retirement. The retiree life insurance plan is non-contributory.

        Changes in benefit obligations, plan assets, funded status and amounts recognized in the balance sheet were as follows:

	Pension Benefits						Other Benefits
(In millions)	2011			2010			2011			2010
Beginning benefit obligations	$	312.4		$	309.5		$	24.4		$	20.7
Service cost—benefits earned during the year		3.5			2.9			0.9			1.0
Interest cost on projected benefit obligations		17.0			17.8			1.3			1.1
Actuarial assumptions losses		90.7			5.2			3.9			1.8
Plan amendments and other		—			—			—			(0.1	)
Settlements		(17.4	)		(21.4	)		—			—
Benefits paid		(2.2	)		(1.1	)		(0.2	)		(0.1	)
Exchange rate changes		(1.3	)		(0.5	)		(0.1	)		—
Benefit obligations at end of year	$	402.7		$	312.4		$	30.2		$	24.4
Beginning fair value of plan assets	$	269.4		$	209.1		$	—		$	—
Actual return on plan assets		22.0			27.7			—			—
Employer contributions		9.5			55.4			0.2			0.1
Settlements		(17.4	)		(21.4	)		—			—
Benefits paid		(2.2	)		(1.1	)		(0.2	)		(0.1	)
Exchange rate changes		(0.6	)		(0.3	)		—			—
Fair value of plan assets at end of year	$	280.7		$	269.4		$	—		$	—
Underfunded status at end of year	$	(122.0	)	$	(43.0	)	$	(30.2	)	$	(24.4	)
Amounts in the consolidated balance sheets include:
Other assets	$	5.0		$	4.3		$	—		$	—
Pension, post retirement and post employment liabilities		(127.0	)		(47.3	)		(30.2	)		(24.4	)
Balance in the consolidated balance sheet at end of year	$	(122.0	)	$	(43.0	)	$	(30.2	)	$	(24.4	)
Amounts in accumulated other comprehensive loss include:
Net actuarial loss	$	208.6		$	134.9		$	16.6		$	14.4
Prior service (benefit)		—			—			(0.6	)		(0.9	)
Transition obligation		0.3			0.4			—			—
Balance in accumulated other comprehensive loss at end of year	$	208.9		$	135.3		$	16.0		$	13.5
Accumulated benefit obligation	$	362.8		$	271.6		$	30.2		$	24.4

        The Company's defined benefit pension and post retirement benefit plans with an accumulated benefit obligation in excess of plan assets were as follows:

	Years Ended December 31,
(In millions)	2011		2010
Projected benefit obligation	$	399.0	$	298.6
Accumulated benefit obligation		369.9		267.9
Fair value of plan assets		241.6		227.4

        The net periodic benefit cost of the Company's defined benefit pension and post retirement benefit plans includes:

	Pension Benefits									Other Benefits
	Years Ended December 31,									Years Ended December 31,
(In millions)	2011			2010			2009			2011			2010			2009
Service cost—benefits earned during the period	$	3.5		$	2.9		$	2.4		$	0.9		$	1.0		$	0.7
Interest cost on projected benefit obligations		17.0			17.8			16.9			1.3			1.1			1.0
Expected return on plan assets		(18.2	)		(16.1	)		(15.9	)		—			—			—
Amortization of prior service (benefit)		—			—			—			(0.2	)		(0.2	)		(0.1	)
Amortization of net actuarial loss		3.3			3.0			1.4			1.7			1.2			0.8
Amortization of transition cost		0.1			—			—			—			—			—
Sub-total	$	5.7		$	7.6		$	4.8		$	3.7		$	3.1		$	2.4
Settlements		9.7			10.6			10.6			—			—			—
Total net periodic benefit cost	$	15.4		$	18.2		$	15.4		$	3.7		$	3.1		$	2.4

        The estimated net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2012 are:

(In millions)	Pension Benefits		Other Benefits
Amortization of net actuarial loss	$	5.3	$	1.9
Amortization of prior service (benefit)		—		(0.2	)
Amortization of transition cost		0.1		—
	$	5.4	$	1.7

Actuarial assumptions

        Weighted-average assumptions used to determine benefit obligations are established as of the balance sheet date and were as follows:

	Pension Benefits				Other Benefits
	December 31,				December 31,
	2011		2010		2011		2010
Discount rate		4.00%		5.59%		4.28%		5.28%
Rate of compensation increase		4.03%		4.02%		3.95%		3.94%

        The discount rate was determined based on the yield to maturity of high-quality corporate bonds and considering the duration of the pension plan obligations. The Citigroup Pension Discount Curve is used in developing the discount rate for the U.S. Pension Plan.

        Weighted-average assumptions used to determine net periodic benefit cost are established at the beginning of the plan year and were as follows:

	Pension Benefits						Other Benefits
	Years Ended December 31,						Years Ended December 31,
	2011		2010		2009		2011		2010		2009
Discount rate		5.59%		5.88%		7.08%		5.28%		5.53%		7.28%
Expected long term return on plan assets		6.91%		7.38%		8.34%		—		—		—
Rate of compensation increase		4.02%		3.67%		3.72%		3.94%		3.53%		3.58%

        The yield on high-quality corporate bonds that matches the duration of the benefit obligations was used in determining the discount rate. The Citigroup Pension Discount Curve is used in developing the discount rate for the U.S. plans. The expected long-term return on plan assets was determined based on the target asset allocation, expected rate of return by each asset class, and estimated future inflation.

        For the U.S. Pension Plan, the expected long-term return on plan assets assumption to be used to determine net periodic benefit cost for the year ending December 31, 2012 is 6.25%. The expected long-term return on plan assets was determined based on the Company's target asset allocation, expected rate of return by each asset class, and estimated future inflation.

        Gains and losses have resulted from changes in actuarial assumptions, such as changes in the discount rate, and from differences between assumed and actual experience, such as differences between actual and assumed returns on plan assets. These gains and losses are adjusted for the difference between the fair value and the market-related value of the plan assets and are amortized to the extent they exceed 10% of the higher of the market-related value or the projected benefit obligation for each respective plan. The majority of the remaining actuarial losses are amortized over the life expectancy of the plans' participants for the frozen U.S. plans and expected remaining service periods for the other plans.

        Assumed health care cost trend rates were as follows:

	December 31,
	2011		2010		2009
Health care cost trend rate assumed for next year		7.4%		7.9%		8.9%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.0%		5.0%		4.5%
Year that the rate reaches the ultimate trend rate		2017		2017		2018

        Assumed health care cost trend rates affect the amounts reported for the retiree medical plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

(In millions)	1-Percentage-Point Increase		1-Percentage-Point Decrease
Effect on total of service and interest cost	$	—	$	—
Increase/(decrease) in post retirement benefit obligation		—		0.4

Plan assets

        The Company's investment strategy for the U.S. Pension Plan assets consists of a mix of equities and fixed income in order to achieve returns over a market cycle which reduces contribution and expense at an acceptable level of risk. The target asset allocation of 40% public equity and 60% fixed income is maintained and cash flow (i.e., cash contributions, benefit payments) is used to rebalance back to the targets as necessary. Investments are well diversified within each of the two major asset categories. All of the U.S. equity investments are actively managed. Investment strategies for international pension plans are typically similar, although the asset allocations are usually more conservative.

        The fair values of the Company's pension plan assets by asset category were as follows:

	December 31, 2011						December 31, 2010
(In millions)	Total		Level 1		Level 2		Total		Level 1		Level 2
Cash and cash equivalents	$	14.0	$	14.0	$	—	$	41.0	$	40.0	$	1.0
Equity securities:
U.S. large-cap		11.0		—		11.0		16.0		—		16.0
U.S. mid-cap growth		3.2		—		3.2		4.8		—		4.8
U.S. small-cap growth		1.7		—		1.7		2.7		—		2.7
Emerging markets		2.3		—		2.3		4.6		—		4.6
Real estate investment trusts		12.7		—		12.7		16.6		—		16.6
International large-cap value		26.1		—		26.1		24.9		—		24.9
Hedge fund		14.0		—		14.0		—		—		—
Fixed income securities:
Government bonds		53.3		—		53.3		124.9		8.8		116.1
Corporate bonds		142.4		—		142.4		33.9		—		33.9
Total	$	280.7	$	14.0	$	266.7	$	269.4	$	48.8	$	220.6

        Level 1 cash and cash equivalents, which excluded money market funds, are recorded at closing prices in active markets. Level 2 money market, equity, and fixed income funds are recorded at the net asset values per share, which were determined based on quoted market prices of the underlying assets contained within the funds. The Level 2 hedge fund is recorded at the net asset value per share, which was derived from the underlying funds' net asset values per share; this diversified hedge fund may be redeemed quarterly with 60 days notice.

Contributions

        In 2012, the funding policy for the pension plans is to contribute amounts to provide for current service and to fund past service liability. MJN contributed $9.5 million, $55.4 million and $27.1 million to the pension plans in 2011, 2010 and 2009, respectively. The Company is not required to make any contributions to its pension plans in 2012, however the Company may elect to make a discretionary contribution of approximately $20 million. There will be no cash funding for other post retirement benefits in 2012.

Estimated Future Benefit Payments

        The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

(In millions)	Pension Benefits		Other Benefits
2012	$	25.1	$	0.5
2013		28.2		0.8
2014		30.2		1.2
2015		30.5		1.5
2016		31.5		1.8
Years 2017 - 2021		146.5		11.5

Defined Contribution Benefits

        Employees who meet certain eligibility requirements may participate in various defined contribution plans. Total cost recognized for all defined contribution benefit plans were $19.3 million, $19.2 million and $16.4 million for the years ended December 31, 2011, 2010, and 2009, respectively.