Retirement-Related Benefits

9 Months Ended

Sep. 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:

					Yr. to Yr.
					Percent
For the three months ended September 30:	2011		2010		Change
(Dollars in millions)
Retirement-related plans – cost
Defined benefit and contribution pension plans – cost	$	357	$	246	45.2	%
Nonpension postretirement plans – cost	87		87		0.0
Total	$	444	$	333	33.3	%

					Yr. to Yr.
					Percent
For the nine months ended September 30:	2011		2010		Change
(Dollars in millions)
Retirement-related plans –cost
Defined benefit and contribution pension plans –cost	$	1,159	$	801	44.7	%
Nonpension postretirement plans –cost	261		260		0.2
Total	$	1,419	$	1,061	33.8	%

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 September 30:	2011			2010			2011			2010
Service cost	$	—		$	—		$	128		$	126
Interest cost	614			650			467			456
Expected return on plan assets	(1,011		)	(1,004		)	(641		)	(610		)
Amortization of prior service cost/(credits)	2			2			(41		)	(44		)
Recognized actuarial losses	205			118			240			178
Curtailments and settlements	—			—			0			0
Multi-employer plan/other costs	—			—			21			27
Total net periodic pension (income)/cost of defined benefit plans	(190		)	(234		)	173			132
Cost of defined contribution plans	218			216			156			132
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	28		$	(18	)	$	329		$	264

(Dollars in millions)	U.S. Plans						Non-U.S. Plans
For the nine months ended September 30:	2011			2010			2011			2010
Service cost	$	—		$	—		$	384		$	377
Interest cost	1,842			1,951			1,391			1,369
Expected return on plan assets	(3,032		)	(3,013		)	(1,904		)	(1,827		)
Amortization of prior service cost/(credits)	7			7			(121		)	(128		)
Recognized actuarial losses	614			353			727			527
Curtailments and settlements	—			—			1			27
Multi-employer plan/other costs	—			—			94			79
Total net periodic pension (income)/cost of defined benefit plans	(569		)	(702		)	572			422
Cost of defined contribution plans	698			693			458			387
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	129		$	(8	)	$	1,030		$	809

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 nine months of 2011 were $611 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 September 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
Curtailments/settlements			1						—
Total nonpension postretirement plan cost recognized in the Consolidated Statement of Earnings	$	68	$	71		$	20		$	16

(Dollars in millions)	U.S. Plan					Non-U.S. Plans
For the nine months ended September 30:	2011		2010			2011			2010
Service cost	$	25	$	25		$	8		$	7
Interest cost	177		196			51			44
Expected return on plan assets	—		—			(8		)	(7		)
Amortization of prior service credits	—		(11		)	(3		)	(4		)
Recognized actuarial losses			—			11			9
Curtailments/settlements	—		1			—			—
Total nonpension postretirement plan cost recognized in the Consolidated Statement of Earnings	$	202	$	211		$	59		$	49

The company received a $14.5 million subsidy in the third quarter of 2011 and a $32.5 million subsidy for the first nine months 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.