DuPont 2015 Annual Report Download - page 46

Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
45
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 benefits 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.
The majority of employees hired in the U.S. on or after January 1, 2007 are not eligible to participate in the pension and post-
retirement medical, dental and life insurance plans, but receive benefits in the defined contribution plans.
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 were made to the principal U.S. pension plan in 2015 and the company expects to contribute
$230 million to this plan in 2016.
Funding for each pension plan other than the principal U.S. 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 $164 million to its
pension plans other than the principal U.S. pension plan in 2015.
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. The company's remaining pension plans with no plan assets are paid from operating
cash flows. The company made benefit payments of $144 million to its unfunded plans in 2015.
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 $237 million,
$233 million and $207 million for 2015, 2014 and 2013, respectively. Changes in cash requirements reflect the net impact of higher
per capita health care costs, demographic changes, plan amendments and changes in participant premiums, co-pays and deductibles.
In 2016, the company expects to contribute about the same as 2015 for pension plans other than the principal U.S. pension plan,
its remaining plans with no plan assets and its other long-term employee benefit plans.
The company's income can be significantly affected by pension and defined contribution benefits as well as other long-term
employee benefits. The following table summarizes the extent to which the company's income over each of the last 3 years was
affected by pre-tax charges related to long-term employee benefits:
(Dollars in millions) 2015 2014 2013
Long-term employee benefit plan charges 1$ 616 $ 715 $ 1,153
1. The long-term employee benefit plan charges include discontinued operations of $(245), $96 and $113 for 2015, 2014 and 2013, respectively.
The above charges for pension and other long-term employee benefits are determined as of the beginning of each year. The decrease
in long-term employee benefit expense in 2015 is due to a curtailment gain partially offset by a decrease in discount rate. The
decrease in long-term employee benefit expense in 2014 is primarily related to higher discount rates and better than expected
pension asset returns. See "Long-term Employee Benefits" under the Critical Accounting Estimates section beginning on page 40
of this report for additional information on determining annual expense.