United Technologies 2012 Annual Report Download - page 87

Notes to Consolidated Financial Statements 2012 ANNUAL REPORT 85
Assumed health care cost trend rates have a significant
effect on the amounts reported for the health care plans. A one-
percentage-point change in assumed health care cost trend rates
would have the following effects:
2012 One-Percentage-Point
(DOLLARS IN MILLIONS) Increase Decrease
Effect on total service and interest cost $ 2 $ (2)
Effect on postretirement benefit obligation 71 (60)
ESTIMATED FUTURE BENEFIT PAYMENTS
Benefit payments, including net amounts to be paid from corporate
assets and reflecting expected future service, as appropriate, are
expected to be paid as follows: $100 million in 2013, $98 million in
2014, $95 million in 2015, $89 million in 2016, $83 million in 2017,
and $357 million from 2018 through 2022.
Multiemployer Benefit Plans. We contribute to various
domestic and foreign multiemployer defined benefit pension plans.
The risks of participating in these multiemployer plans are different
from single-employer plans in that assets contributed are pooled
and may be used to provide benefits to employees of other partic-
ipating employers. If a participating employer stops contributing to
the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers. Lastly, if we choose to stop par-
ticipating in some of our multiemployer plans, we may be required
to pay those plans a withdrawal liability based on the underfunded
status of the plan.
Our participation in these plans for the annual periods
ended December 31 is outlined in the table below. Unless other-
wise noted, the most recent Pension Protection Act (PPA) zone
status available in 2012 and 2011 is for the plan’s year-end at
June 30, 2011, and June 30, 2010, respectively. The zone status is
based on information that we received from the plan and is certified
by the plan’s actuary. Our significant plan is in the green zone
which represents at least 80 percent funded and does not require a
financial improvement plan (FIP) or a rehabilitation plan (RP).
(DOLLARS IN MILLIONS)
Pension
Protection Act
Zone Status
FIP/
RP Status Contributions
Pension Fund
EIN/Pension
Plan Number 2012 2011
Pending/
Implemented 2012 2011 2010
Surcharge
Imposed
Expiration Date of
Collective-Bargaining
Agreement
National Elevator Industry Pension Plan 23-2694291 Green Green No $63 $ 56 $ 55 No July 8, 2017
Other funds 36 38 35
$99 $94 $90
For the plan years ended June 30, 2011 and 2010,
respectively, we were listed in the National Elevator Industry Pen-
sion Plan’s Forms 5500 as providing more than 5% of the total
contributions for the plan. At the date these financial statements
were issued, Forms 5500 were not available for the plan year end-
ing June 30, 2012.
In addition, we participate in several multiemployer
arrangements that provide postretirement benefits other than pen-
sions, with the National Elevator Industry Health Benefit Plan being
the most significant. These arrangements generally provide medical
and life benefits for eligible active employees and retirees and their
dependents. Contributions to multiemployer plans that provide
postretirement benefits other than pensions were $11 million, $10
million and $10 million for 2012, 2011 and 2010, respectively.
Stock-based Compensation. We have long-term incentive
plans authorizing various types of market and performance based
incentive awards that may be granted to officers and employees. Our
Long Term Incentive Plan (LTIP) was initially approved on April 13,
2005 and amended in 2011 to increase the maximum number of
shares available for award under the LTIP to 119 million shares. All
equity-based compensation awards are made exclusively through the
LTIP. As of December 31, 2012, approximately 44 million shares
remain available for awards under the LTIP. The LTIP does not con-
tain an aggregate annual award limit. We expect that the shares
awarded on an annual basis will range from 1% to 1.5% of shares
outstanding. The LTIP will expire after all shares have been awarded
or April 30, 2017, whichever is sooner.
Under all long-term incentive plans, the exercise price of
awards is set on the grant date and may not be less than the fair
market value per share on that date. Generally, stock appreciation
rights and stock options have a term of ten years and a minimum
three-year vesting period. In the event of retirement, awards held
for more than one year become vested and exercisable. LTIP
awards with performance-based vesting generally have a minimum
three-year vesting period and vest based on performance against
pre-established metrics. In the event of retirement, vesting for
awards held more than one year does not accelerate, but such
awards remain eligible to vest as scheduled based on actual per-
formance relative to target metrics. We have historically
repurchased shares of our common stock in an amount at least
equal to the number of shares issued under our equity compensa-
tion arrangements and will continue to evaluate this policy in con-
junction with our overall share repurchase program.
We measure the cost of all share-based payments, includ-
ing stock options, at fair value on the grant date and recognize this
cost in the statement of operations. For the years ended
December 31, 2012, 2011 and 2010, $210 million, $221 million
and $148 million, respectively, of compensation cost was recog-