McKesson 2012 Annual Report Download - page 90

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
86
The following table represents a reconciliation of Level 3 plan assets held during the years ended
March 31, 2012 and 2011:
(In millions)
Real Estate
Funds
Hedge
Funds Other Total
Balance at March 31, 2010 $ 19 $ 5 $ 2 $ 26
Purchases, sales and settlements (14) — — (14)
Transfer in and/or out of Level 3 — — (2) (2)
Balance at March 31, 2011 $ 5 $ 5 $ — $ 10
Unrealized gain on plan assets still held 1 —— 1
Purchases, sales and settlements 11 (5) — 6
Balance at March 31, 2012 $ 17 $ —$ — $ 17
Concentration of Credit Risk: We evaluated our pension plans’ asset portfolios for the existence of significant
concentrations of credit risk as of March 31, 2012. Types of concentrations that were evaluated include investment
funds that represented 10% or more of the pension plans’ net assets. As of March 31, 2012 and 2011, 10% and 11%
of our plan assets are comprised of Bartram International Fund, which predominantly holds actively traded stock.
Multiemployer Plans
We also contribute to a number of multiemployer pension plans under the terms of collective-bargaining
agreements that cover union-represented employees. The risks of participating in these multiemployer plans are
different from single-employer pension plans in the following aspects: (i) assets contributed to the multiemployer
plan by one employer may be used to provide benefits to employees of other participating employers; (ii) if a
participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers; and (iii) if the Company chooses to stop participating in some of its
multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status
of the plan, referred to as a withdrawal liability. Actions taken by other participating employers may lead to adverse
changes in the financial condition of a multiemployer benefit plan and our withdrawal liability and contributions
may increase. Contributions to the plans and amounts accrued were not material for the years ended March 31,
2012, 2011, and 2010.
Defined Contribution Plans
We have a contributory profit sharing investment plan (“PSIP”) for U.S. employees not covered by collective
bargaining arrangements. Effective January 1, 2011, eligible employees may contribute to the PSIP up to 75% of
their monthly eligible compensation for pre-tax contributions and up to 75% of compensation for catch-up
contributions not to exceed IRS limits. The Company makes matching contributions in an amount equal to 100% of
the employee’s first 3% of pay contributed and 50% for the next 2% of pay contributed. The Company also may
make an additional annual matching contribution for each plan year to enable participants to receive a full match
based on their annual contribution.
The Company’s leveraged employee stock ownership plan (“ESOP”) had purchased an aggregate of 24 million
shares of the Company’s common stock since its inception. These purchases were financed by 10 to 20 year loans
from or guaranteed by us. At March 31, 2010, there were no outstanding ESOP loans nor the related receivables
from the ESOP as the ESOP fully repaid the loans during 2010. The loans were repaid by the ESOP from interest
earnings on cash balances and common dividends on unallocated shares and Company cash contributions. The
ESOP loan maturities and rates were identical to the terms of related Company borrowings. Stock was made
available from the ESOP based on debt service payments on ESOP borrowings. In the first quarter of 2011, all of
the 24 million common shares had been allocated to plan participants. In 2012, 2011 and 2009, the Company made
contributions primarily in cash or with the issuance of treasury shares. Future PSIP contributions will be funded
with cash or treasury shares.