Honeywell 2012 Annual Report Download - page 112

Note 23—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 76 percent of our projected benefit obligation. All non-union
hourly and salaried employees joining Honeywell for the first time after December 31, 2012, are not
eligible to participate in Honeywell’s U.S. defined benefit pension plans. 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 24 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 prescription drug, hospital, professional and other medical services. 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. 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. Less than 5 percent of Honeywell’s
U.S. employees are eligible for a retiree medical subsidy from the Company; and this subsidy is limited
to a fixed-dollar amount. In addition, more than half of Honeywell’s current retirees either have no
Company subsidy or have a fixed-dollar subsidy amount. This significantly 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.
In 2011, in connection with new collective bargaining agreements reached with several of its union
groups, Honeywell amended its U.S. retiree medical plans eliminating the subsidy for those union
employees resulted in curtailment gains totaling $167 million. The curtailment gains represented the
recognition in net periodic postretirement benefit cost of prior service credits attributable to the future
years of service of the union groups for which future accrual of benefits was eliminated.
In 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. Also in 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 2010 which represented the recognition in net periodic
postretirement benefit cost of prior service credits attributable to the future years of service of the union
group for which future accrual of benefits was eliminated.
The following tables summarize the balance sheet impact, including the benefit obligations, assets
and funded status associated with our significant pension and other postretirement benefit plans at
December 31, 2012 and 2011.
103
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)