Dow Chemical 2009 Annual Report Download - page 162

Table of Contents
The accumulated benefit obligation for all defined benefit pension plans was $18.9 billion at December 31, 2009 and $14.9 billion at December 31,
2008.
Pension Plans with Accumulated Benefit Obligations in Excess of Plan
Assets at December 31
In millions 2009 2008
Projected benefit obligations $ 18,113 $ 13,514
Accumulated benefit obligations $ 17,277 $ 13,027
Fair value of plan assets $ 12,679 $ 9,536
In addition to the U.S. qualified plan, U.S. employees are eligible to participate in defined contribution plans (Employee Savings Plans) by contributing a
portion of their compensation, which is partially matched by the Company. Defined contribution plans also cover employees in some subsidiaries in other
countries, including Australia, Brazil, Canada, Italy, Spain and the United Kingdom. Expense recognized for all defined contribution plans was
$156 million in 2009, $49 million in 2008 and $125 million in 2007.
Other Postretirement Benefits
The Company provides certain health care and life insurance benefits to retired employees. The Company’s plans outside of the United States are not
significant; therefore, this discussion relates to the U.S. plans only. The plans provide health care benefits, including hospital, physicians’ services, drug and
major medical expense coverage, and life insurance benefits. For employees hired before January 1, 1993, the plans provide benefits supplemental to Medicare
when retirees are eligible for these benefits. The Company and the retiree share the cost of these benefits, with the Company portion increasing as the retiree has
increased years of credited service, although there is a cap on the Company portion. The Company has the ability to change these benefits at any time.
Employees hired after January 1, 2008 are not covered under the plans.
The Company funds most of the cost of these health care and life insurance benefits as incurred. In 2009, Dow did not make any contributions to its
other postretirement benefit plan trusts. Likewise, Dow does not expect to contribute assets to its other postretirement benefits plan trusts in 2010.
The weighted-average assumptions used to determine other postretirement benefit obligations and net periodic benefit costs for the U.S. plans are provided
below:
U.S. Plan Assumptions for Other
Postretirement Benefits
Benefit Obligations
at December 31
Net Periodic Costs
for the Year
2009 2008 2009 2008
Discount rate 5.69% 6.91% 7.11% 6.57%
Expected long-term rate of return on plan assets - - 5.15% 6.75%
Initial health care cost trend rate 9.13% 9.72% 9.71% 10.30%
Ultimate health care cost trend rate 5.00% 6.00% 6.00% 6.00%
Year ultimate trend rate to be reached 2019 2018 2018 2014
Increasing the assumed medical cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligation at
December 31, 2009 by $3 million and the net periodic postretirement benefit cost for the year by $1 million. Decreasing the assumed medical cost trend rate by
one percentage point in each year would increase the accumulated postretirement benefit obligation at December 31, 2009 by $23 million and decrease the net
periodic postretirement benefit cost for the year by $1 million.
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