Postretirement benefit plans

Components of net periodic employee benefit cost are as follows:



	U.S. Defined Benefit						U.S. Retiree Health Care						Non-U.S. Defined Benefit
For Three Months Ended September 30	2013			2012			2013			2012			2013			2012
Service cost	$	6		$	6		$	1		$	1		$	9		$	10
Interest cost	12			11			5			6			15			19
Expected return on plan assets	(11		)	(12		)	(6		)	(6		)	(17		)	(20		)
Amortization of prior service cost (credit)	—			—			1			1			(1		)	(1		)
Recognized net actuarial loss	5			4			3			4			7			10
Net periodic benefit cost	12			9			4			6			13			18

Settlement loss	5			—			—			—			4			193
Curtailment gain	—			—			—			—			(2		)	—
Special termination benefit gain	—			—			—			—			—			(337		)
Total, including other postretirement losses (gains)	$	17		$	9		$	4		$	6		$	15		$	(126	)



	U.S. Defined Benefit						U.S. Retiree Health Care						Non-U.S. Defined Benefit
For Nine Months Ended September 30	2013			2012			2013			2012			2013			2012
Service cost	$	20		$	18		$	4		$	4		$	29		$	29
Interest cost	33			33			15			18			46			58
Expected return on plan assets	(36		)	(37		)	(18		)	(18		)	(50		)	(59		)
Amortization of prior service cost (credit)	—			1			3			3			(3		)	(3		)
Recognized net actuarial loss	16			12			9			10			24			34
Net periodic benefit cost	33			27			13			17			46			59

Settlement loss	18			—			—			—			4			193
Curtailment gain	—			—			—			(1		)	(5		)	—
Special termination benefit gain	—			(2		)	—			—			—			(337		)
Total, including other postretirement losses (gains)	$	51		$	25		$	13		$	16		$	45		$	(85	)

In the nine months ended September 30, 2013, we remeasured our U.S. and Japan defined benefit plans, as a result of increased retirement activities. These remeasurements resulted in net actuarial gains on a pre-tax basis in Other comprehensive income of $14 million and $79 million for the three and nine months ended September 30, 2013, respectively. Of these gains, $7 million related to the U.S. plans and $7 million was for the Japan plan in the three-month period; $24 million related to the U.S. plans and $55 million was for the Japan plan in the nine-month period. From these remeasurements, we recognized settlement losses on the U.S. and Japan plans, as well as curtailment gains on the Japan plan. These are detailed in the above table. The effects of these remeasurements, and the effects of foreign currency exchange rate fluctuations, are reflected in Overfunded retirement plans and Underfunded retirement plans on our Consolidated balance sheets.

Transfer of Japan substitutional pension

In Japan, we maintained employee pension fund plans (EPFs) pursuant to the Japanese Welfare Pension Insurance Law (JWPIL). An EPF consists of two portions: a substitutional portion based on JWPIL-determined minimum old-age pension benefits similar to Social Security benefits in the United States; and a corporate portion established at the discretion of each employer. Employers and employees are exempt from contributing to the Japanese Pension Insurance (JPI) if the substitutional portion is funded by an EPF.

The JWPIL was amended to permit each EPF to separate the substitutional portion and transfer those obligations and related assets to the government of Japan. After such a transfer, the employer is required to contribute periodically to JPI, and the government of Japan is responsible for future benefit payments relating to the substitutional portion.

During the third quarter of 2012, our EPF received final approval for such a separation and transferred the obligations and assets of its substitutional portion to the government of Japan. On a pre-tax basis, this resulted in a net gain of $144 million recorded in Restructuring charges/other on our Consolidated statements of income and included in Other. This net gain of $144 million consisted of two parts - a gain of $337 million, representing the difference between the fair values of the obligations settled ($533 million) and the assets transferred from the pension trust to the government of Japan ($196 million), offset by a settlement loss of $193 million related to the recognition of previously unrecognized actuarial losses included in AOCI.