Avon 2010 Annual Report Download - page 96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our decision with regard to asset mix is reviewed periodically. Asset mix guidelines include target allocations and permissible ranges for each
asset category. Assets are monitored on an ongoing basis and rebalanced as required to maintain an asset mix within the permissible ranges.
The guidelines will change from time to time, based on an ongoing evaluation of the plan’s tolerance of investment risk.
Cash flows
We expect to make contributions in the range of $90 to $100 to our U.S. pension and postretirement plans and in the range of $40 to $45
to our international pension and postretirement plans during 2011.
Total benefit payments expected to be paid from the plans are as follows:
Pension Benefits
U.S.
Plans
Non-U.S.
Plans Total
Postretirement
Benefits
2011 $ 61.4 $ 36.0 $ 97.4 $16.0
2012 80.9 37.6 118.5 11.2
2013 62.3 38.5 100.8 9.8
2014 60.3 40.5 100.8 9.6
2015 54.4 42.0 96.4 9.6
2016 – 2020 266.7 234.7 501.4 45.0
Postretirement Benefits
For 2010, the assumed rate of future increases in the per capita cost of health care benefits (the health care cost trend rate) was 8.0% for all
claims and will gradually decrease each year thereafter to 5.1% in 2017 and beyond for our U.S. plan. A one-percentage point change in
the assumed health care cost trend rates for all postretirement plans would have the following effects:
1 Percentage
Point Increase
1 Percentage
Point Decrease
Effect on total of service and interest cost components $ .2 $(.2)
Effect on postretirement benefit obligation 2.5 (2.2)
Postemployment Benefits
We provide postemployment benefits, which include salary continuation, severance benefits, disability benefits, continuation of health
care benefits and life insurance coverage to eligible former employees after employment but before retirement. The accrued cost for
postemployment benefits was $67.1 at December 31, 2010 and $67.2 at December 31, 2009, and was included in employee benefit
plans liability.
Supplemental Retirement Programs
We offer a non-qualified deferred compensation plan, the Avon Products, Inc. Deferred Compensation Plan (the “DCP”), for certain key
employees. The DCP is an unfunded, unsecured plan for which obligations are paid to participants out of our general assets. The DCP allows
for the deferral of up to 50% of a participant’s base salary, the deferral of up to 100% of incentive compensation bonuses, and the deferral
of contributions that would have been made to the Avon Personal Savings Account Plan (the “PSA”) but that are in excess of U.S. Internal
Revenue Code limits on contributions to the PSA. Participants may elect to have their deferred compensation invested in one or more of
three investment alternatives. Expense associated with the DCP was $3.7 for 2010, $6.6 for 2009 and $4.6 for 2008. The accrued liability
for the DCP was $85.6 at December 31, 2010 and $90.8 at December 31, 2009 and was included in other liabilities.
We maintain supplemental retirement programs consisting of the Supplemental Executive Retirement Plan of Avon Products, Inc. (“SERP”)
and the Benefit Restoration Pension Plan of Avon Products, Inc. under which non-qualified supplemental pension benefits are paid to higher
paid employees in addition to amounts received under our qualified retirement plan, which is subject to IRS limitations on covered
compensation. The annual cost of these programs has been included in the determination of the net periodic benefit cost shown previously
and amounted to $5.7 in 2010, $7.4 in 2009 and $7.9 in 2008. The benefit obligation under these programs was $62.6 at December 31,
2010, and $69.8 at December 31, 2009 and was included in employee benefit plans.