Kraft 2012 Annual Report Download - page 65

Note 10. Postemployment Benefit Plans
We provide a range of benefits to our employees and retired employees. These include pension benefits, postretirement
health care benefits, and other postemployment benefits, as follows:
• Pension benefits - We provide pension coverage to certain U.S. and non-U.S. employees through separate plans.
Local statutory requirements govern many of these plans. U.S. salaried and non-union hourly employees hired
prior to 2009 are eligible to participate in our U.S. pension plans. As of December 31, 2019, we will freeze U.S.
pension plans for U.S. salaried and non-union hourly employees who are currently earning pension benefits. We
will calculate the pension benefits using the continuing pay and service through December 31, 2019. The pension
benefits of our unionized workers are in accordance with the applicable collective bargaining agreement covering
their employment.
• Postretirement benefits - Our U.S. and Canadian subsidiaries provide health care and other postretirement
benefits to most retirees. U.S. salaried and non-union hourly employees hired prior to 2004 are eligible to
participate in our U.S. postretirement benefit plans. The postretirement benefits of our unionized workers are in
accordance with the applicable collective bargaining agreement covering their employment.
• Other postemployments benefits - Our other postemployment benefits consist primarily of severance. These
plans cover most salaried and certain hourly employees, and their cost is charged to expense over the working
life of the covered employees.
Our Participation in Mondele¯z International’s Pension and Other Postemployment Benefit Plans and the Spin-Off Impact:
Prior to the Spin-off, Mondele¯z International provided defined benefit pension, postretirement health care, defined
contribution, and multiemployer pension and medical benefits to our eligible employees and retirees. As such, we applied
the multiemployer plan accounting approach and these liabilities were not reflected in our consolidated balance sheets.
We provided pension coverage for certain employees of our Canadian operations through separate plans and certain
pension and postemployment benefits of our Canadian operations, which were included in our financial statements prior to
the Spin-Off. As part of the Spin-Off, the plans were split and we assumed the obligations previously provided by
Mondele¯z International. Accordingly, Mondele¯z International transferred to us the plan assets and liabilities associated with
our active, retired, and other former employees, including liabilities for most of the retired North American Mondele¯z
International employees. We assumed net benefit plan liabilities of $5.5 billion from Mondele¯z International, which was in
addition to the $0.1 billion of net benefit plan liabilities we had previously reported in our historical financial statements, for
a total liability of $5.6 billion on October 1, 2012.
Total Mondele¯z International benefit plan costs allocated to us were $491 million in the first nine months of 2012 prior to
the Spin-Off, $497 million in 2011, and $486 million in 2010. The expense allocations for these benefits were determined
based on a review of personnel by business unit and based on allocations of corporate or other shared functional
personnel. These allocated costs are reflected in our cost of sales and selling, general and administrative expenses.
These costs were funded through intercompany transactions with Mondele¯z International and were reflected within the
parent company investment equity balance. Our allocated expenses in connection with the pension plans were $283
million in 2012, $261 million in 2011, and $248 million in 2010. Our allocated expenses in connection with the
postretirement plans were $142 million in 2012, $160 million in 2011, and $166 million in 2010.
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