Note 6. Pension and Other Postretirement Benefits

Defined Benefit Plans

We sponsor a number of defined benefit plans, the benefits under some of which have been frozen, covering eligible employees in the U.S. and certain other countries. Benefits payable to an employee are based primarily on years of service and the employee’s compensation during the course of his or her employment with us. While we have not expressed any intent to terminate these plans, we may do so at any time, subject to applicable laws and regulations.

We are also obligated to pay unfunded termination indemnity benefits to certain employees outside of the U.S., which are subject to applicable agreements, local laws and regulations. We have not incurred significant costs related to termination indemnity arrangements, and therefore, no related costs are included in the disclosures below.

The following table sets forth the components of net periodic benefit cost, which are recorded in income from continuing operations, for our defined benefit plans:

	Pension Benefits
	Three Months Ended												Nine Months Ended
	September 28, 2013						September 29, 2012						September 28, 2013						September 29, 2012
(In millions)	U.S.			Int’l			U.S.			Int’l			U.S.			Int’l			U.S.			Int’l
Service cost	$	.1		$	3.2		$	–		$	2.2		$	.3		$	9.3		$	.2		$	6.8
Interest cost	10.3			5.8			10.8			6.0			29.3			17.2			30.2			18.3
Expected return on plan assets	(12.4		)	(5.6		)	(11.3		)	(5.4		)	(35.8		)	(16.7		)	(34.3		)	(16.5		)
Recognized net actuarial loss	4.0			1.5			4.2			.8			13.7			4.6			11.1			2.5
Amortization of prior service cost	.1			.2			.1			.1			.3			.4			.3			.3
Amortization of transition asset	–			–			–			(.1		)	–			(.1		)	–			(.4		)
Recognized gain on curtailment(1)	–			(1.6		)	–			–			–			(1.6		)	–			–
Net periodic benefit cost	$	2.1		$	3.5		$	3.8		$	3.6		$	7.8		$	13.1		$	7.5		$	11.0

(1) Recognized gain on curtailment related to a plan in Taiwan and was recorded in “Other expense, net” in the unaudited Consolidated Statements of Income.

	U.S. Postretirement Health Benefits
	Three Months Ended						Nine Months Ended
(In millions)	September 28, 2013			September 29, 2012			September 28, 2013			September 29, 2012
Interest cost	$	.1		$	.2		$	.2		$	.4
Recognized net actuarial loss	.6			.8			1.9			2.0
Amortization of prior service credit	(.8		)	(1.2		)	(3.2		)	(3.6		)
Net periodic benefit credit	$	(.1	)	$	(.2	)	$	(1.1	)	$	(1.2	)

During the nine months ended September 28, 2013, in connection with the sale of our OCP and DES businesses, we recognized a curtailment gain of $13.5 million associated with our postretirement health and welfare benefit plans, partially offset by curtailment and settlement losses of $10.2 million associated with our pension plans. The net gain of $3.3 million was recorded in “(Loss) income from discontinued operations, net of tax” in the unaudited Consolidated Statements of Income. Refer to Note 2, “Discontinued Operations, Sale of Assets and Assets Held for Sale,” for more information on the sale.

Additionally, in connection with the sale of our OCP and DES businesses and as a result of the higher discount rate that was in effect at the time of the sale, our pension and postretirement health and welfare benefit plan obligations decreased by $91.8 million associated with the remeasurement of these plans. This decrease was recorded in “Long-term retirement benefits and other liabilities” in the unaudited Condensed Consolidated Balance Sheets. As of September 28, 2013, the corresponding benefit was recorded in “Accumulated other comprehensive loss” in the unaudited Condensed Consolidated Balance Sheets.

We make contributions to our defined benefit plans sufficient to meet the minimum funding requirements under applicable laws and regulations, plus additional amounts, if any, we determine to be appropriate. We contributed $37 million and $49 million to our U.S. pension plans during the nine months ended September 28, 2013 and September 29, 2012, respectively. We contributed $1.7 million and $1.8 million to our U.S. postretirement health benefit plan during the nine months ended September 28, 2013 and September 29, 2012, respectively. We contributed approximately $13 million and $16 million to our international pension plans during the nine months ended September 28, 2013 and September 29, 2012, respectively. All of the contributions made in the first nine months of 2013 and 2012 were made to meet minimum funding requirements.

Subsequent to the end of the third quarter of 2013, in October 2013, we made supplemental contributions of approximately $50 million to our domestic and international pension plans utilizing a portion of the net proceeds from the sale of the OCP and DES businesses. Including these contributions, we expect our total contributions to our pension plans for 2013 to be approximately $110 million.

Defined Contribution Plans

We sponsor various defined contribution plans worldwide, with the largest plan being the Avery Dennison Corporation Savings Plan (“Savings Plan”), a 401(k) plan available to our U.S. employees. We recognized expense from continuing operations of $5.2 million and $16.7 million during the three and nine months ended September 28, 2013, respectively, and $4.1 million and $15.4 million during the three and nine months ended September 29, 2012, respectively, related to our employer contributions and employer match of participant contributions to the Savings Plan.