Honeywell 2010 Annual Report Download - page 98

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
Note 22. Pension and Other Postretirement Benefits
We sponsor both funded and unfunded U.S. and non-U.S. defined benefit pension plans covering the majority of our employees and retirees. Pension
benefits for substantially all U.S. employees are provided through non-contributory, qualified and non-qualified defined benefit pension plans. U.S. defined
benefit pension plans comprise 77 percent of our projected benefit obligation. Non-U.S. employees, who are not U.S. citizens, are covered by various
retirement benefit arrangements, some of which are considered to be defined benefit pension plans for accounting purposes. Non-U.S. defined benefit pension
plans comprise 23 percent of our projected benefit obligation.
We also sponsor postretirement benefit plans that provide health care benefits and life insurance coverage to eligible retirees. Our retiree medical plans
mainly cover U.S. employees who retire with pension eligibility for hospital, professional and other medical services. All non-union hourly and salaried
employees joining Honeywell after January 1, 2000 are not eligible to participate in our retiree medical and life insurance plans. Most of the U.S. retiree
medical plans require deductibles and copayments, and virtually all are integrated with Medicare. Retiree contributions are generally required based on
coverage type, plan and Medicare eligibility. Honeywell has limited its subsidy of its retiree medical plans to a fixed-dollar amount for all future retirees and
for more than half of its current retirees. This cap of retiree medical benefits under our plans limits our exposure to the impact of future health care cost
increases. The retiree medical and life insurance plans are not funded. Claims and expenses are paid from our operating cash flow.
During the third quarter of 2010, Honeywell amended its U.S. retiree medical plan to no longer offer certain post-age-65 retirees Honeywell group
coverage and facilitate their purchase of an individual plan in the Medicare marketplace. This plan amendment reduced the accumulated postretirement
benefit obligation by $137 million which will be recognized as part of net periodic postretirement benefit cost over the average future service period to full
eligibility of the remaining active union employees still eligible for a retiree medical subsidy.
On February 1, 2010, in connection with a new collective bargaining agreement reached with one of its union groups, Honeywell amended its U.S.
retiree medical plan eliminating the subsidy for those union employees who retire after February 1, 2013. This plan amendment reduced the accumulated
postretirement benefit obligation by $39 million which will be recognized as part of net periodic postretirement benefit cost over the average future service
period to full eligibility of the remaining active union employees still eligible for a retiree medical subsidy. This plan amendment also resulted in a curtailment
gain of $37 million in the year ended December 31, 2010 which was included as part of net periodic postretirement benefit cost. The curtailment gain
represents the recognition of previously unrecognized prior service credits attributable to the future years of service of the union group for which future
accrual of benefits has been eliminated.
In May 2009, Honeywell amended the U.S. retiree medical plan eliminating the subsidy for active non-union employees who retire after September 1,
2009. Employees already retired or who retired on or before September 1, 2009 were not affected by this change. This plan amendment reduced the
accumulated postretirement benefit obligation by $180 million representing the elimination of benefits attributable to years of service already rendered by
active non-union employees who are not eligible to retire and those eligible non-union employees who were assumed not to retire prior to September 1, 2009.
This reduction in the accumulated postretirement benefit obligation will be recognized as part of net periodic postretirement benefit cost over the average
future service period to full eligibility of the remaining active union employees still eligible for a retiree medical subsidy. This plan amendment also resulted
in a curtailment gain of $98 million in the second quarter of 2009 which was included as part of net periodic postretirement benefit cost. The curtailment gain
represented the recognition of previously unrecognized prior service credits attributable to the future years of service of the employee group for which future
accrual of benefits was eliminated.
95