Postretirement Benefits

A. Pension and postretirement benefit costs

In February 2012, we announced the closure of the Electro-Motive Diesel facility located in London, Ontario. As a result of the closure, we recognized a $37 million other postretirement benefits curtailment gain. This excludes a $21 million loss of a third-party receivable for other postretirement benefits that was eliminated due to the closure. In addition, a $10 million special termination benefit expense was recognized related to statutory pension benefits required to be paid to certain affected employees. As a result, a net gain of $6 million related to the facility closure was recognized in Other operating (income) expenses in the Consolidated Statement of Results of Operations for the nine months ended September 30, 2012.

In August 2012, we announced changes to our U.S. hourly pension plan, which impacted certain hourly employees. For the impacted employees, pension benefit accruals were frozen on January 1, 2013 or will freeze on January 1, 2016, at which time employees will become eligible for various provisions of company sponsored 401(k) plans including a matching contribution and an annual employer contribution. The plan changes resulted in a curtailment and required a remeasurement as of August 31, 2012. The curtailment and the remeasurement resulted in a net increase in our Liability for postemployment benefits of $243 million and a net loss of $153 million, net of tax, recognized in Accumulated other comprehensive income (loss). The increase in the liability was primarily due to a decline in the discount rate. Also, the curtailment resulted in expense of $7 million which was recognized in Other operating (income) expenses in the Consolidated Statement of Results of Operations for the three and nine months ended September 30, 2012.



(Millions of dollars)	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
	September 30,						September 30,						September 30,
	2013			2012			2013			2012			2013			2012
For the three months ended:
Components of net periodic benefit cost:
Service cost	$	49		$	46		$	31		$	26		$	24		$	23
Interest cost	147			152			43			44			48			55
Expected return on plan assets	(208		)	(204		)	(59		)	(53		)	(14		)	(15		)
Amortization of:
Transition obligation (asset)	—			—			—			—			1			1
Prior service cost (credit) ¹	4			5			—			1			(18		)	(18		)
Net actuarial loss (gain) ¹	136			126			33			24			27			25
Net periodic benefit cost	128			125			48			42			68			71
Adjustment for subsidiary pension plan ²	31			—			—			—			—			—
Curtailments, settlements and special termination benefits ³	—			7			—			6			—			—
Total cost included in operating profit	$	159		$	132		$	48		$	48		$	68		$	71

For the nine months ended:
Components of net periodic benefit cost:
Service cost	$	147		$	138		$	93		$	82		$	79		$	69
Interest cost	436			460			128			135			146			166
Expected return on plan assets	(624		)	(610		)	(176		)	(160		)	(42		)	(47		)
Amortization of:
Transition obligation (asset)	—			—			—			—			2			2
Prior service cost (credit) ¹	13			15			1			1			(55		)	(51		)
Net actuarial loss (gain) ¹	409			374			99			72			81			75
Net periodic benefit cost	381			377			145			130			211			214
Adjustment for subsidiary pension plan ²	31			—			—			—			—			—
Curtailments, settlements and special termination benefits ³	—			7			3			28			—			(40		)
Total cost included in operating profit	$	412		$	384		$	148		$	158		$	211		$	174

Weighted-average assumptions used to determine net cost:
Discount rate	3.7		%	4.3		%	3.7		%	4.3		%	3.7		%	4.3		%
Expected return on plan assets	7.8		%	8.0		%	6.7		%	7.1		%	7.8		%	8.0		%
Rate of compensation increase	4.5		%	4.5		%	3.9		%	3.9		%	4.4		%	4.4		%

Prior service cost (credit) and net actuarial loss (gain) for both pension and other postretirement benefits are generally amortized using the straight-line method over the average remaining service period to the full retirement eligibility date of employees expected to receive benefits from the plan. For pension plans in which all or almost all of the plan's participants are inactive and other postretirement benefit plans in which all or almost all of the plan's participants are fully eligible for benefits under the plan, prior service cost (credit) and net actuarial loss (gain) are amortized using the straight-line method over the remaining life expectancy of those participants.


²	Charge to recognize a previously unrecorded liability related to a subsidiary's pension plans.


³	Curtailments, settlements and special termination benefits were recognized in Other operating (income) expenses in the Consolidated Statement of Results of Operations.

We made $118 million and $398 million of contributions to our pension plans during the three and nine months ended September 30, 2013, respectively. We currently anticipate full-year 2013 contributions of approximately $500 million, all of which are required. We made $195 million and $488 million of contributions to our pension plans during the three and nine months ended September 30, 2012, respectively.

B. Defined contribution benefit costs

Total company costs related to our defined contribution plans were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(Millions of dollars)	2013		2012		2013		2012
U.S. Plans	$	74	$	62	$	218	$	196
Non-U.S. Plans	16		15		47		46
	$	90	$	77	$	265	$	242