DuPont 2009 Annual Report Download - page 41

Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued
The company expects to meet its contractual obligations through its normal sources of liquidity and believes it has the
financial resources to satisfy these contractual obligations.
Long-Term Employee Benefits
The company has various obligations to its employees and retirees. The company maintains retirement-related
programs in many countries that have a long-term impact on the company’s earnings and cash flows. These plans are
typically defined benefit pension plans, as well as medical, dental and life insurance benefits for pensioners and
survivors and disability and life insurance protection for employees (other long-term employee benefits).
Approximately 80 percent of the company’s worldwide benefit obligation for pensions and essentially all of the
company’s worldwide other long-term employee benefit obligations are attributable to the U.S. benefit plans. Pension
coverage for employees of the company’s non-U.S. consolidated subsidiaries is provided, to the extent deemed
appropriate, through separate plans. The company regularly explores alternative solutions to meet its global pension
obligations in the most cost effective manner possible as demographics, life expectancy and country-specific pension
funding rules change. Where permitted by applicable law, the company reserves the right to change, modify or
discontinue its plans that provide pension, medical, dental, life insurance and disability benefits.
Benefits under defined benefit pension plans are based primarily on years of service and employees’ pay near
retirement. Pension benefits are paid primarily from trust funds established to comply with applicable laws and
regulations. Unless required by law, the company does not make contributions that are in excess of tax deductible
limits. The actuarial assumptions and procedures utilized are reviewed periodically by the plans’ actuaries to provide
reasonable assurance that there will be adequate funds for the payment of benefits. No contributions are required to be
made to the principal U.S. pension plan in 2010 and no contributions are currently anticipated. Contributions beyond
2010 are not determinable since the amount of any contribution is heavily dependent on the future economic
environment and investment returns on pension trust assets. U.S. pension benefits that exceed federal limitations are
covered by separate unfunded plans and these benefits are paid to pensioners and survivors from operating cash
flows.
Funding for each pension plan is governed by the rules of the sovereign country in which it operates. Thus, there is not
necessarily a direct correlation between pension funding and pension expense. In general, however, improvements in
plans funded status tends to moderate subsequent funding needs. The company contributed $306 million in 2009 and
anticipates that it will make approximately $270 million in contributions in 2010 to pension plans other than the principal
U.S. pension plan.
In August 2006, the company announced major changes to the pension and defined contribution benefits that cover
the majority of its U.S. employees. Effective January 1, 2007, for such employees hired on that date or thereafter, and
effective January 1, 2008, for such active employees on the rolls as of December 31, 2006, the company contributes
100 percent of the first 6 percent of the employee’s contribution election. Additionally, for such employees, the
company contributes 3 percent of each eligible employee’s compensation regardless of the employee’s contribution
election. The definition of eligible compensation has also been expanded to be similar to the definition of eligible
compensation used in determining pension benefits. Such full service employees on the rolls as of December 31, 2006
will also accrue additional benefits in the pension plan, but the annual rate of pension accrual is about one-third of the
previous rate. In addition, company-paid postretirement survivor benefits for such employees do not continue to grow
after December 31, 2007. Such employees hired in the U.S. after December 31, 2006 do not participate in the pension
and post-retirement medical, dental and life insurance plans.
The company’s other long-term employee benefits are unfunded and the cost of the approved claims is paid from
operating cash flows. Pre-tax cash requirements to cover actual net claims costs and related administrative expenses
were $323 million, $326 million and $315 million for 2009, 2008 and 2007, respectively. This amount is expected to be
about $341 million in 2010. Changes in cash requirements reflect the net impact of higher per capita health care costs,
demographic changes and changes in participant premiums, co-pays and deductibles.
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