Retirement-Related Benefits

6 Months Ended

Jun. 30, 2011

Retirement-Related Benefits

Retirement-Related Benefits

10. Retirement-Related Benefits: The company offers defined benefit pension plans, defined contribution pension plans, as well as nonpension postretirement plans primarily consisting of retiree medical benefits.  The following tables provide the total retirement-related benefit plans’ impact on income before income taxes:

For the three months ended June 30:					Yr. to Yr. Percent
(Dollars in millions)	2011		2010		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	370	$	234	58.4	%
Nonpension postretirement plans — cost	88		86		2.0
Total	$	458	$	319	43.2	%

For the six months ended June 30:					Yr. to Yr. Percent
(Dollars in millions)	2011		2010		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	802	$	555	44.5	%
Nonpension postretirement plans — cost	173		173		0.3
Total	$	975	$	728	34.0	%

The following tables provide the components of the cost/(income) for the company’s pension plans:

Cost/(Income) of Pension Plans

(Dollars in millions)	U.S. Plans						Non-U.S. Plans
For the three months ended June 30:	2011			2010			2011			2010
Service cost	$	—		$	—		$	126		$	123
Interest cost	609			648			471			444
Expected return on plan assets	(1,007		)	(1,001		)	(643		)	(592		)
Amortization of prior service cost/(credits)	3			3			(40		)	(42		)
Recognized actuarial losses	198			116			242			171
Curtailments and settlements	—			—			1			0
Multi-employer plan/other costs	—			—			40			20
Total net periodic pension (income)/cost of defined benefit plans	(197		)	(234		)	195			125
Cost of defined contribution plans	216			212			156			131
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	19		$	(22	)	$	351		$	255

(Dollars in millions)	U.S. Plans						Non-U.S. Plans
For the six months ended June 30:	2011			2010			2011			2010
Service cost	$	—		$	—		$	256		$	251
Interest cost	1,228			1,301			925			913
Expected return on plan assets	(2,022		)	(2,009		)	(1,263		)	(1,218		)
Amortization of prior service cost/(credits)	5			5			(80		)	(84		)
Recognized actuarial losses	409			235			487			349
Curtailments and settlements	—			—			1			27
Multi-employer plan/other costs	—			—			74			52
Total net periodic pension (income)/cost of defined benefit plans	(379		)	(468		)	399			290
Cost of defined contribution plans	481			478			302			255
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	101		$	10		$	700		$	545

In 2011, the company expects to contribute to its non-U.S. defined benefit plans approximately $800 million, which is the legally mandated minimum contribution. Total net contributions to the non-U.S. plans in the first half of 2011 were $448 million.

The following tables provide the components of the cost for the company’s nonpension postretirement plans:

Cost of Nonpension Postretirement Plans

(Dollars in millions)	U.S. Plan					Non-U.S. Plans
For the three months ended June 30:	2011		2010			2011			2010
Service cost	$	9	$	8		$	3		$	2
Interest cost	59		65			17			15
Expected return on plan assets	—		—			(3		)	(2		)
Amortization of prior service credits	—		(4		)	(1		)	(1		)
Recognized actuarial losses	—		—			4			3
Total nonpension postretirement plan cost recognized in the Consolidated Statement of Earnings	$	68	$	70		$	20		$	16

(Dollars in millions)	U.S. Plan					Non-U.S. Plans
For the six months ended June 30:	2011		2010			2011			2010
Service cost	$	17	$	17		$	5		$	4
Interest cost	118		131			34			29
Expected return on plan assets	—		—			(5		)	(5		)
Amortization of prior service credits	—		(7		)	(2		)	(3		)
Recognized actuarial losses	—		—			7			6
Total nonpension postretirement plan cost recognized in the Consolidated Statement of Earnings	$	134	$	141		$	39		$	32

The company received a $8.7 million subsidy in the second quarter of 2011 and a $18.0 million subsidy for the first half of 2011 in connection with the Medicare Prescription Drug Improvement and Modernization Act of 2003. A portion of this amount is used by the company to reduce its obligation and expense related to the plan, and the remainder is contributed to the plan to reduce contributions required by the participants. For further information related to the Medicare Prescription Drug Act, see page 125 in the company’s 2010 Annual Report.