Retirement-Related Benefits:

6 Months Ended

Jun. 30, 2012

Retirement-Related Benefits:

Retirement-Related Benefits:

8. 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 table provides the total retirement-related benefit plans’ impact on income before income taxes:

					Yr. to Yr.
(Dollars in millions)					Percent
For the three months ended June 30:	2012		2011		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	459	$	370	24.0	%
Nonpension postretirement plans — cost	89		88		2.1
Total	$	548	$	458	19.8	%

					Yr. to Yr.
(Dollars in millions)					Percent
For the six months ended June 30:	2012		2011		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	991	$	802	23.6	%
Nonpension postretirement plans — cost	174		173		0.2
Total	$	1,164	$	975	19.4	%

The following table provides 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:	2012			2011			2012			2011
Service cost	$	—		$	—		$	111		$	126
Interest cost	548			609			444			471
Expected return on plan assets	(1,011		)	(1,007		)	(573		)	(643		)
Amortization of prior service costs/(credits)	3			3			(38		)	(40		)
Recognized actuarial losses	330			198			256			242
Curtailments and settlements	—			—			0			1
Multi-employer plans/other costs	—			—			23			40
Total net periodic pension (income)/cost of defined benefit plans	(131		)	(197		)	222			195
Cost of defined contribution plans	212			216			156			156
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	81		$	19		$	378		$	351

(Dollars in millions)	U.S. Plans						Non-U.S. Plans
For the six months ended June 30:	2012			2011			2012			2011
Service cost	$	—		$	—		$	224		$	256
Interest cost	1,098			1,228			894			925
Expected return on plan assets	(2,022		)	(2,022		)	(1,153		)	(1,263		)
Amortization of prior service cost/(credits)	5			5			(77		)	(80		)
Recognized actuarial losses	665			409			515			487
Curtailments and settlements	—			—			1			1
Multi-employer plan/other costs	—			—			46			74
Total net periodic pension (income)/cost of defined benefit plans	(254		)	(379		)	449			399
Cost of defined contribution plans	477			481			319			302
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	223		$	101		$	768		$	700

In 2012, the company expects to contribute to its non-U.S. defined benefit plans approximately $700 million, which is the legally mandated minimum contribution. Total net contributions to the non-U.S. plans in the first six months of 2012 were $347 million.

The following table provides 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:	2012		2011		2012			2011
Service cost	$	9	$	9	$	2		$	3
Interest cost	51		59		16			17
Expected return on plan assets	—		—		(2		)	(3		)
Amortization of prior service costs/(credits)	—		—		(1		)	(1		)
Recognized actuarial losses	10		—		4			4
Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings	$	70	$	68	$	19		$	20

(Dollars in millions)	U.S. Plan				Non-U.S. Plans
For the six months ended June 30:	2012		2011		2012			2011
Service cost	$	18	$	17	$	5		$	5
Interest cost	100		118		33			34
Expected return on plan assets	—		—		(5		)	(5		)
Amortization of prior service credits	—		—		(2		)	(2		)
Recognized actuarial losses	16		—		9			7
Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings	$	134	$	134	$	39		$	39

The company received a $4.3 million subsidy in the second quarter of 2012 and a $20.8 million subsidy for the first half of 2012 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 134 in the company’s 2011 Annual Report.

In the second quarter, the U.S. Congress passed the Surface Transportation Extension Act, also referred to as the Moving Ahead for Progress in the 21st Century Act, which included pension funding stabilization provisions. The company has evaluated the provisions of the new law and expects no material impacts.