3M 2012 Annual Report Download - page 84
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NOTE 10. Pension and Postretirement Benefit Plans
3M has company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the
United States. In total, 3M has over 70 plans in 25 countries. Pension benefits associated with these plans generally are
based on each participant’s years of service, compensation, and age at retirement or termination. The U.S. defined-
benefit pension plan was closed to new participants effective January 1, 2009. The Company also provides certain
postretirement health care and life insurance benefits for substantially all of its U.S. employees who reach retirement age
while employed by the Company. Most international employees and retirees are covered by government health care
programs. The cost of company-provided postretirement health care plans for international employees is not material and
is combined with U.S. amounts in the tables that follow.
The Company also sponsors employee savings plans under Section 401(k) of the Internal Revenue Code. These plans
are offered to substantially all regular U.S. employees. Effective January 1, 2010, substantially all Company contributions
to the plans are made in cash. During 2008 the Board of Directors approved various changes to the employee savings
plans. For substantially all employees hired prior to January 1, 2009, employee 401(k) contributions of up to 6% of eligible
compensation are matched at rates of 60% or 75%, depending on the plan the employee participated in. Employees hired
on or after January 1, 2009 receive a cash match of 100% for employee 401(k) contributions of up to 6% of eligible
compensation and also receive an employer retirement income account cash contribution of 3% of the participant’s total
eligible compensation. All contributions are invested in a number of investment funds pursuant to their elections. U.S.
expenses related to employer contributions to these plans were $124 million, and $109 million and $97 million for 2012,
2011 and 2010, respectively. Various international countries also participate in defined contribution plans. International
expenses related to employer contributions to these plans were $58 million, $54 million and $36 million for 2012, 2011
and 2010, respectively.
The Company’s defined benefit pension funding policy is to deposit with independent trustees amounts allowable by law.
Trust funds and deposits with insurance companies are maintained to provide pension benefits to plan participants and
their beneficiaries. There are no plan assets in the non-qualified plan due to its nature. For its U.S. postretirement health
care and life insurance benefit plans, the Company has set aside amounts at least equal to annual benefit payments with
an independent trustee.
In August 2006, the Pension Protection Act (PPA) was signed into law in the U.S. The PPA transition rules increased the
funding target for defined benefit pension plans to 100% of the target liability by 2011. 3M’s U.S. qualified defined benefit
plan does not have a mandatory cash contribution because the Company has a significant credit balance from previous
discretionary contributions that can be applied to any PPA funding requirements.
In the fourth quarter of 2010, the Company made further changes to its U.S. postretirement benefit plans. As a result of
these changes, the Company will transition all current and future retirees to the savings account benefits-based plan
announced in 2008. These changes become effective beginning January 1, 2013, for all Medicare eligible retirees and
their Medicare eligible dependents and January 1, 2015, for all non-Medicare eligible retirees and their eligible
dependents.
In the second quarter of 2010, 3M’s Brazilian subsidiary received approval from the government in Brazil to freeze its
defined benefit pension plan. Effective March 31, 2010, participants in this subsidiary’s pension plan no longer accrue
additional pension benefits. As a result, the Company recorded a $22 million curtailment gain in the second quarter of
2010.
In December 2011, the Company began offering a voluntary early retirement incentive program to certain eligible
participants of its U.S. pension plans who meet age and years of pension service requirements. The eligible participants
who accepted the offer and retired on February 1, 2012 received an enhanced pension benefit. Pension benefits were
enhanced by adding one additional year of pension service and one additional year of age for certain benefit calculations.
616 participants accepted the offer and retired on February 1, 2012. As a result, the Company incurred a $26 million
charge related to these special termination benefits in the first quarter of 2012.
Effective July 1, 2012, 3M Canada closed its pension plans for salaried employees to new participants. The change did
not trigger a plan remeasurement and therefore there is no immediate impact to the liability and expense.
3M was informed during the first quarter of 2009 that the general partners of WG Trading Company, in which 3M’s benefit
plans hold limited partnership interests, are the subject of a criminal investigation as well as civil proceedings by the SEC
and CFTC (Commodity Futures Trading Commission). In March 2011, over the objections of 3M and six other limited
partners of WG Trading Company, the district court judge ruled in favor of the court appointed receiver’s proposed