DuPont 2012 Annual Report Download - page 35

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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 76 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.
The majority of employees hired in the U.S. on or after January 1, 2007 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 contribution of $500 million in 2010 to its principal U.S.
pension plan and no contributions were made in 2011. In January 2012, the company contributed $500 million to its principal U.S. pension plan and
anticipates no contributions will be made in 2013. The company expects to make contributions to its principal U.S. pension plan beyond 2013; however, the
amount of any contributions 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 $848 million to its pension plans in 2012 and anticipates that it will make approximately $340 million in contributions in 2013 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 $261 million, $312 million and $321 million for 2012, 2011 and
2010, respectively. This amount is expected to be about $260 million in 2013. Changes in cash requirements reflect the net impact of higher per capita health
care costs, demographic changes, plan amendments and changes in participant premiums, co-pays and deductibles.
During the third quarter 2012, the company amended its U.S. parent company retiree medical and dental plans for Medicare-eligible pensioners and survivors.
Beginning in 2013, the company is replacing the coverage for Medicare-eligible plan participants in the company sponsored plans with a new company-funded
Health Reimbursement Arrangement (HRA). Medicare-eligible plan participants will enroll in individual health plans in the open market and the company will
reimburse their health care expenses with an HRA based on the provisions of the amended plans. As a result of this change, the company's other long-term
employee benefit expense was reduced by approximately $46 million in 2012. For 2013, the plan amendment is expected to result in a reduction in other long-
term employee benefit expense by about $120 million. Additional information related to these changes in the plans noted above is included in Note 18 to the
Consolidated Financial Statements.
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