DuPont 2010 Annual Report Download - page 41

Part II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued
Long-Term Employee Benefits
The company has various obligations to its employees and retirees. The company maintains retirement-related
programs in many countries that have a long-term impact on the company’s earnings and cash flows. These plans are
typically defined benefit pension plans, as well as medical, dental and life insurance benefits for pensioners and
survivors and disability and life insurance protection for employees (other long-term employee benefits).
Approximately 80 percent of the company’s worldwide benefit obligation for pensions and essentially all of the
company’s worldwide other long-term employee benefit obligations are attributable to the U.S. benefit plans. Pension
coverage for employees of the company’s non-U.S. consolidated subsidiaries is provided, to the extent deemed
appropriate, through separate plans. The company regularly explores alternative solutions to meet its global pension
obligations in the most cost effective manner possible as demographics, life expectancy and country-specific pension
funding rules change. Where permitted by applicable law, the company reserves the right to change, modify or
discontinue its plans that provide pension, medical, dental, life insurance and disability benefits.
In 2006, the company announced major changes to the pension and defined contribution benefits that cover the
majority of its U.S. employees. Such employees hired in the U.S. after December 31, 2006 are not eligible to participate
in the pension and post-retirement medical, dental and life insurance plans but receive benefits in the defined
contribution plans.
Benefits under defined benefit pension plans are based primarily on years of service and employees’ pay near
retirement. Pension benefits are paid primarily from trust funds established to comply with applicable laws and
regulations. Unless required by law, the company does not make contributions that are in excess of tax deductible
limits. The actuarial assumptions and procedures utilized are reviewed periodically by the plans’ actuaries to provide
reasonable assurance that there will be adequate funds for the payment of benefits. The company made a voluntary
contribution of $500 million in 2010 to its principal U.S. pension plan. No contributions are required or currently
anticipated to be made to the principal U.S. pension plan in 2011. Contributions beyond 2011 are not determinable
since the amount of any contribution is heavily dependent on the future economic environment and investment returns
on pension trust assets. U.S. pension benefits that exceed federal limitations are covered by separate unfunded plans
and these benefits are paid to pensioners and survivors from operating cash flows.
Funding for each pension plan is governed by the rules of the sovereign country in which it operates. Thus, there is not
necessarily a direct correlation between pension funding and pension expense. In general, however, improvements in
plans funded status tends to moderate subsequent funding needs. The company contributed $782 million to its
pension plans in 2010 and anticipates that it will make approximately $305 million in contributions in 2011 to pension
plans other than the principal U.S. pension plan.
The company’s other long-term employee benefits are unfunded and the cost of the approved claims is paid from
operating cash flows. Pre-tax cash requirements to cover actual net claims costs and related administrative expenses
were $321 million, $323 million and $326 million for 2010, 2009 and 2008, respectively. This amount is expected to be
about $320 million in 2011. Changes in cash requirements reflect the net impact of higher per capita health care costs,
demographic changes and changes in participant premiums, co-pays and deductibles.
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