Dow Chemical 2014 Annual Report Download - page 136

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the Company's U.S. pension plans and the SOA's tables, the Company adopted updated generational mortality tables for
purposes of measuring U.S. pension and other postretirement obligations at year-end. The mortality assumption change
increased pension and other postretirement benefit obligations by $479 million at December 31, 2014.
The accumulated benefit obligation for all defined benefit pension plans was $26.5 billion at December 31, 2014 and
$23.8 billion at December 31, 2013.
Pension Plans with Accumulated Benefit Obligations in Excess
of Plan Assets at December 31
In millions 2014 2013
Projected benefit obligations $ 25,539 $ 22,565
Accumulated benefit obligations $ 24,281 $ 21,554
Fair value of plan assets $ 16,932 $ 16,247
In addition to the U.S. qualified defined benefit pension plan, U.S. employees may participate in defined contribution plans
(Employee Savings Plans or 401(k) 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 $243 million in 2014,
$231 million in 2013 and $186 million in 2012.
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. In general, 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.
On January 1, 2014, the Company implemented an Employer Group Waiver Plan (“EGWP”) for its Medicare-eligible, retiree
medical plan participants. The Medicare Part D Retiree Drug Subsidy program (“RDS”) was eliminated on January 1, 2014.
The EGWP does not significantly alter the benefits provided to retiree medical plan participants. Federal subsidies to be earned
under the EGWP are expected to exceed those earned under the RDS and will be partially offset by increased costs related to
the administration of the EGWP. The formation of the EGWP and the resulting change in assumption generated an actuarial
gain of $250 million at December 31, 2013, included in "Accumulated other comprehensive loss" in the consolidated balance
sheets. The Company also recognized a reduction in the postretirement benefit obligation of $250 million at
December 31, 2013. The net periodic benefit cost decreased by $25 million in 2014 due to the EGWP.
The Company funds most of the cost of these health care and life insurance benefits as incurred. In 2014, Dow did not make
any contributions to its other postretirement benefit plan trusts. The trusts did not hold assets at December 31, 2014. Dow does
not expect to contribute assets to its other postretirement benefits plan trusts in 2015.
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
2014 2013 2012 2014 2013 2012
Discount rate 3.68% 4.37% 3.67% 4.37% 3.67% 4.66%
Expected long-term rate of return on plan assets —% —% —% —% —% 1.00%
Initial health care cost trend rate 7.06% 7.45% 7.84% 7.45% 7.84% 8.28%
Ultimate health care cost trend rate 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Year ultimate trend rate to be reached 2020 2020 2019 2020 2020 2019