Dow Chemical 2015 Annual Report Download - page 133

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wholly owned subsidiary of Olin in a tax-efficient Reverse Morris Trust transaction (collectively, the “Transaction”). In
connection with the Transaction, the Company transferred certain defined benefit obligations of $618 million. No other
postretirement benefit obligations were transferred in connection with the Transaction. The Company expects to transfer
approximately $179 million of pension plan assets to Olin in 2016. The expected pension plan assets transferred to Olin will be
adjusted for the actual return on plan assets and benefits paid to participants from the Closing Date to the date of transfer.
In 2016, an estimated net loss of $585 million and prior service credit of $24 million for the defined benefit pension plans will
be amortized from AOCL to net periodic benefit cost. In 2016, an estimated net gain of $7 million and prior service credit of
$3 million for other postretirement benefit plans will be amortized from AOCL to net periodic benefit cost.
Estimated Future Benefit Payments
The estimated future benefit payments, reflecting expected future service, as appropriate, are presented in the following table:
Estimated Future Benefit Payments at December 31, 2015
In millions
Defined Benefit
Pension Plans
Other
Postretirement
Benefits
2016 $ 1,277 $ 149
2017 1,281 144
2018 1,311 139
2019 1,351 135
2020 1,385 130
2021 through 2025 7,361 560
Total $ 13,966 $ 1,257
Plan Assets
Plan assets consist primarily of equity and fixed income securities of U.S. and foreign issuers, and include alternative
investments such as real estate, private equity and absolute return strategies. At December 31, 2015, plan assets totaled
$18.8 billion and included no Company common stock. At December 31, 2014, plan assets totaled $19.6 billion and included
no Company common stock.
Investment Strategy and Risk Management for Plan Assets
The Company’s investment strategy for the plan assets is to manage the assets in relation to the liability in order to pay
retirement benefits to plan participants over the life of the plans. This is accomplished by identifying and managing the
exposure to various market risks, diversifying investments across various asset classes and earning an acceptable long-term rate
of return consistent with an acceptable amount of risk, while considering the liquidity needs of the plans.
The plans are permitted to use derivative instruments for investment purposes, as well as for hedging the underlying asset and
liability exposure and rebalancing the asset allocation. The plans use value at risk, stress testing, scenario analysis and Monte
Carlo simulations to monitor and manage both the risk within the portfolios and the surplus risk of the plans.
Equity securities primarily include investments in large- and small-cap companies located in both developed and emerging
markets around the world. Fixed income securities include investment and non-investment grade corporate bonds of companies
diversified across industries, U.S. treasuries, non-U.S. developed market securities, U.S. agency mortgage-backed securities,
emerging market securities and fixed income related funds. Alternative investments primarily include investments in real estate,
private equity limited partnerships and absolute return strategies. Other significant investment types include various insurance
contracts; and interest rate, equity, commodity and foreign exchange derivative investments and hedges.
Strategic Weighted-Average Target Allocation of Plan
Assets for All Significant Plans
Asset Category Target Allocation
Equity securities 35%
Fixed income securities 34%
Alternative investments 30%
Other investments 1%
Total 100%