Retirement-Related Benefits:

3 Months Ended

Mar. 31, 2013

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 March 31:	2013		2012		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	674	$	532	26.7	%
Nonpension postretirement plans — cost	80		84		(5.1	)
Total	$	754	$	616	22.4	%

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 March 31:	2013			2012			2013			2012
Service cost	$	—		$	—		$	131		$	112
Interest cost	496			550			382			450
Expected return on plan assets	(995		)	(1,011		)	(554		)	(580		)
Amortization of prior service costs/(credits)	2			2			(31		)	(39		)
Recognized actuarial losses	451			336			404			259
Curtailments and settlements	—			—			0			1
Multi-employer plans/other costs	—			—			30			23
Total net periodic pension (income)/cost of defined benefit plans	(46		)	(122		)	363			227
Cost of defined contribution plans	206			264			151			163
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	160		$	142		$	514		$	390

In 2013, the company expects to contribute to its non-U.S. defined benefit and multi-employer plans approximately $700 million, which will be mainly contributed to the defined benefit pension plans in Japan, the UK and Switzerland. This amount represents the legally mandated minimum contribution. Total net contributions to the non-U.S. plans in the first three months of 2013 were $147 million.

The following table provides the components of the cost/(income) 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 March 31:	2013			2012		2013			2012
Service cost	$	9		$	9	$	3		$	2
Interest cost	42			49		16			17
Expected return on plan assets	(0		)	—		(2		)	(3		)
Amortization of prior service costs/(credits)	—			—		(1		)	(1		)
Recognized actuarial losses	8			6		6			4
Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings	$	58		$	64	$	22		$	20

The company received a $6.1 million subsidy in the first quarter of 2013 and a $16.5 million subsidy for the first quarter of 2012 in connection with the Medicare Prescription Drug Improvement and Modernization Act of 2003. A portion of this subsidy 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 133 in the company’s 2012 Annual Report.