Employee Postretirement Benefits

Pension Plans

Substantially all regular employees in North America and the United Kingdom are covered by defined benefit pension plans (the “Principal Plans”) and/or defined contribution retirement plans. Certain other subsidiaries have defined benefit pension plans or, in certain countries, termination pay plans covering substantially all regular employees. The funding policy for the Principal Plans is to contribute assets at least equal in amount to regulatory minimum requirements. Nonqualified U.S. plans providing pension benefits in excess of limitations imposed by the U.S. income tax code are not funded. Funding for the remaining defined benefit plans outside the U.S. is based on legal requirements, tax considerations, investment opportunities, and customary business practices in these countries.

Other Postretirement Benefit Plans

Substantially all U.S. retirees and employees are covered by unfunded health care and life insurance benefit plans. Certain benefits are based on years of service and/or age at retirement. The plans are principally noncontributory for employees who were eligible to retire before 1993 and contributory for most employees who retire after 1992, except that we provide no subsidized benefits to most employees hired after 2003.

In the U.S., health care benefit costs are capped and indexed by 3 percent annually for certain employees retiring on or before April 1, 2004. The future cost for retiree health care benefits is limited to a defined fixed cost based on the years of service for certain employees retiring after April 1, 2004. The annual increase in the consolidated weighted-average health care cost trend rate is expected to be 7.1 percent in 2012 and to decline to 5.1 percent in 2018 and thereafter.

Summarized financial information about postretirement plans, excluding defined contribution retirement plans, is presented below:



	Pension Benefits						Other Benefits
	Year Ended December 31
	2011			2010			2011			2010
	(Millions of dollars)
Change in Benefit Obligation
Benefit obligation at beginning of year	$	5,658		$	5,491		$	796		$	795
Service cost	57			56			14			14
Interest cost	307			309			41			44
Actuarial loss (gain)	374			201			33			(10		)
Currency and other	(103		)	(19		)	(22		)	17
Benefit payments from plans	(359		)	(356		)	—			—
Direct benefit payments	(14		)	(24		)	(74		)	(64		)
Benefit obligation at end of year	5,920			5,658			788			796
Change in Plan Assets
Fair value of plan assets at beginning of year	4,600			4,244			—			—
Actual gain on plan assets	309			473			—			—
Employer contributions	679			245			—			—
Currency and other	(15		)	(6		)	—			—
Benefit payments	(359		)	(356		)	—			—
Fair value of plan assets at end of year	5,214			4,600			—			—
Funded Status	$	(706	)	$	(1,058	)	$	(788	)	$	(796	)
Amounts Recognized in the Balance Sheet
Noncurrent asset—Prepaid benefit cost	$	20		$	21		$	—		$	—
Current liability—Accrued benefit cost	(13		)	(11		)	(59		)	(64		)
Noncurrent liability—Accrued benefit cost	(713		)	(1,068		)	(729		)	(732		)
Net amount recognized	$	(706	)	$	(1,058	)	$	(788	)	$	(796	)

Information for the Principal Plans and All Other Pension Plans



	Principal Plans				All Other Pension Plans				Total
	Year Ended December 31
	2011		2010		2011		2010		2011		2010
	(Millions of dollars)
Projected benefit obligation (“PBO”)	$	5,421	$	5,149	$	499	$	509	$	5,920	$	5,658
Accumulated benefit obligation (“ABO”)	5,395		5,041		419		434		5,814		5,475
Fair value of plan assets	4,840		4,192		374		408		5,214		4,600

The PBO and fair value of plan assets for the Principal Plans include $4,021 million and $3,478 million, respectively, related to the U.S. qualified and nonqualified pension plans as of December 31, 2011. The PBO and fair value of plan assets for the Principal Plans include $3,744 million and $2,984 million, respectively, related to the U.S. qualified and nonqualified pension plans as of December 31, 2010.

Information for Pension Plans with an ABO in Excess of Plan Assets



	December 31
	2011		2010
	(Millions of dollars)
PBO	$	5,708	$	5,187
ABO	5,664		5,076
Fair value of plan assets	5,016		4,135

Components of Net Periodic Benefit Cost



	Pension Benefits									Other Benefits
	Year Ended December 31
	2011			2010			2009			2011		2010		2009
	(Millions of dollars)
Service cost	$	57		$	56		$	68		$	14	$	14	$	14
Interest cost	307			309			310			41		44		47
Expected return on plan assets^(a)	(345		)	(336		)	(269		)	—		—		—
Amortization of prior service cost and transition amount	3			2			3			1		3		2
Recognized net actuarial loss	94			99			111			—		1		—
Other	3			3			28			—		—		—
Net periodic benefit cost	$	119		$	133		$	251		$	56	$	62	$	63


(a)	The expected return on plan assets is determined by multiplying the fair value of plan assets at the remeasurement date, typically the prior year-end (adjusted for estimated current year cash benefit payments and contributions), by the expected long-term rate of return.

Weighted-Average Assumptions Used to Determine Net Cost for Years Ended December 31



	Pension Benefits						Other Benefits
	2011		2010		2009		2011		2010		2009

Discount rate	5.51	%	5.85	%	6.40	%	5.44	%	5.79	%	6.50	%
Expected long-term return on plan assets	7.14	%	7.96	%	8.17	%	—		—		—
Rate of compensation increase	4.05	%	4.09	%	3.94	%	—		—		—

Weighted-Average Assumptions Used to Determine Benefit Obligations at December 31



	Pension Benefits				Other Benefits
	2011		2010		2011		2010

Discount rate	4.87	%	5.51	%	4.70	%	5.44	%
Rate of compensation increase	2.91	%	4.05	%	—		—

Expected Long-Term Rate of Return and Investment Strategies for the Principal Plans

Strategic asset allocation decisions are made considering several risk factors, including plan participants’ retirement benefit security, the estimated payments of the associated liabilities, the plan funded status, and Kimberly-Clark’s financial condition. The resulting strategic asset allocation is a diversified blend of equity and fixed income investments. Equity investments are typically diversified across geography and market capitalization. Fixed income investments are diversified across multiple sectors including government issues and corporate debt instruments with a portfolio duration that is consistent with the estimated payment of the associated liability. Actual asset allocation is regularly reviewed and periodically rebalanced to the strategic allocation when considered appropriate.

The expected long-term rate of return is evaluated on an annual basis. In setting this assumption, we consider a number of factors including projected future returns by asset class and historical long-term market performance relative to the current asset allocation. The weighted-average expected long-term rate of return on pension fund assets used to calculate pension expense for the Principal Plans was 7.35 percent in 2011 compared with 8.19 percent in 2010 and will be 6.68 percent in 2012.

Plan Assets

Pension plan asset allocations for our Principal Plans are as follows:



Asset Category	Target Allocation 2012		Percentage of Plan Assets at December 31
Asset Category	Target Allocation 2012		2011		2010

Equity securities	40	%	42	%	62	%
Fixed income securities	60		58		38
Total	100	%	100	%	100	%

Set forth below are the pension plan assets of the Principal Plans measured at fair value, together with the inputs used to develop those fair value measurements.



	Fair Value Measurements at December 31, 2011
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)
	(Millions of dollars)
Cash and Cash Equivalents
Held directly	$	24	$	24	$	—
Held through mutual and pooled funds	180		50		130
Fixed Income
Held directly:
U.S. government and municipals	187		93		94
U.S. corporate debt	993		—		993
U.S. securitized fixed income	13		—		13
Held through mutual and pooled funds:
U.S. government and municipals	472		—		472
U.S. corporate debt	185		—		185
International bonds	765		—		765
Multi-sector	2		2		—
Equity
Held directly:
International equity	189		189		—
Held through mutual and pooled funds:
U.S. equity	680		3		677
Non-U.S. equity	869		1		868
Global equity	252		—		252
U.S. equity collars	29		—		29
Total Plan Assets	$	4,840	$	362	$	4,478



	Fair Value Measurements at December 31, 2010
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)
	(Millions of dollars)
Cash and Cash Equivalents
Held directly	$	34		$	34	$	—
Held through mutual and pooled funds	99			41		58
Fixed Income
Held directly:
U.S. government and municipals	174			123		51
U.S. corporate debt	334			—		334
U.S. securitized fixed income	18			—		18
Held through mutual and pooled funds:
U.S. government and municipals	52			—		52
U.S. corporate debt	199			—		199
International bonds	619			—		619
Multi-sector	57			1		56
Equity
Held directly:
U.S. equity	615			615		—
International equity	206			206		—
Held through mutual and pooled funds:
U.S. equity	878			3		875
Non-U.S. equity	746			1		745
Global equity	217			—		217
U.S. equity collars	(56		)	—		(56		)
Total Plan Assets	$	4,192		$	1,024	$	3,168

During 2011 and 2010, the plan assets did not include a significant amount of Kimberly-Clark common stock.

Various derivative instruments are utilized in the management of K-C’s defined benefit plan assets. These derivative instruments are used to manage risk or achieve a target asset allocation. For the U.S. pension plan, equity volatility is managed by entering into exchange-traded puts and over-the-counter calls to create equity collars with a zero net premium at initiation. The equity collar strategy is designed to reduce potential equity losses while limiting gains, resulting in lower equity volatility for the plan. As of December 31, 2011, equity collars are in place on approximately 33 percent of the U.S. plan’s $1.4 billion equity allocation.

Inputs and valuation techniques used to measure the fair value of plan assets vary according to the type of security being valued. Substantially all of the equity securities held directly by the plans are actively traded and fair values are determined based on quoted market prices. Fair values of U.S. Treasury securities are determined based on trading activity in the marketplace.

Fair values of U.S. corporate debt, U.S. securitized fixed income and international bonds are typically determined by reference to the values of similar securities traded in the marketplace and current interest rate levels. Multiple pricing services are typically employed to assist in determining these valuations.

Fair values of equity securities and fixed income securities held through units of pooled funds are based on net asset value (NAV) of the units of the pooled fund determined by the fund manager. Pooled funds are similar in nature to retail mutual funds, but are typically more efficient for institutional investors than retail mutual funds. As pooled funds are typically only accessible by institutional investors, the NAV is not readily observable by non-institutional investors.

Equity securities held directly by the pension trusts and those held through units in pooled funds are monitored as to issuer and industry. Except for U.S. Treasuries, concentrations of fixed income securities are similarly monitored for concentrations by issuer and industry. As of December 31, 2011, there were no significant concentrations of equity or debt securities in any single issuer or industry.

As of December 31, 2011 and 2010, there were less than $1 million of assets in the Principal Plans with a level 3 fair value determination (significant unobservable inputs). In addition, during 2011 and 2010, there were no significant transfers of assets in the Principal Plans among level 1, 2 or 3 fair value determinations.

Cash Flows

We expect to contribute between $50 million and $100 million to our pension plans in 2012.

Estimated Future Benefit Payments

Over the next ten years, we expect that the following gross benefit payments will occur:



	Pension Benefits		Other Benefits
	(Millions of dollars)
2012	$	362	$	60
2013	356		59
2014	356		60
2015	361		61
2016	365		62
2017-2021	1,957		320

Health Care Cost Trends

Assumed health care cost trend rates affect the amounts reported for postretirement health care benefit plans. A one-percentage-point change in assumed health care trend rates would have the following effects on 2011 data:



	One-Percentage-Point
	Increase		Decrease
	(Millions of dollars)
Effect on total of service and interest cost components	$	2	$	2
Effect on postretirement benefit obligation	23		23

Defined Contribution Pension Plans

In 2009, we took action with respect to our U.S. Incentive Investment Plan (a 401(k) plan), Retirement Contribution Plan and Retirement Contribution Excess Benefit Program to discontinue all contributions and future accruals, as applicable, with respect to these plans for future plan years (other than for certain employees subject to collective bargaining agreements). Effective January 1, 2010, we adopted a new 401(k) profit sharing plan, and amended our supplemental plan, to provide for a matching contribution of a U.S. employee’s contributions and accruals, as applicable to the plans, subject to predetermined limits, as well as a discretionary profit sharing contribution, in which contributions will be based on our profit performance. Except for certain employees subject to collective bargaining agreements, U.S. participants’ investment balances in our existing 401(k) plan and Retirement Contribution Plan were transferred to the new 401(k) plan. We also have defined contribution pension plans for certain employees outside the U.S.

Costs charged to expense for our defined contribution pension plans were as follows:



	2011		2010		2009
	(Millions of dollars)
U.S.	$	77	$	75	$	73
Outside the U.S.	36		23		19
Total	$	113	$	98	$	92