EMC 2011 Annual Report Download - page 77

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following is a rollforward of our gross consolidated liability for unrecognized income tax benefits for the three years ended December 31:
2011 2010 2009
Unrecognized tax benefits, beginning of year $ 230.3 $ 197.1 $ 218.5
Tax positions related to current year:
Additions 42.0 47.6 52.1
Reductions (1.8) — —
Tax positions related to prior years:
Additions 14.0 23.7 4.6
Reductions (71.0) (20.2) (66.7)
Settlements (3.3) (5.0) (2.9)
Lapses in statutes of limitations (13.4) (12.9) (8.5)
Unrecognized tax benefits, end of year $ 196.8 $ 230.3 $ 197.1
As of December 31, 2011, 2010 and 2009, $192.3 million, $221.8 million and $195.1 million, respectively, of the unrecognized tax benefits, if
recognized, would have been recorded as a reduction to income tax expense. The remainder would be an adjustment to shareholders' equity.
We have substantially concluded all U.S. federal income tax matters for years through 2008. We also have income tax audits in process in numerous
state, local and international jurisdictions. In our international jurisdictions that comprise a significant portion of our operations, the years that may be
examined vary, with the earliest year being 2002. Based on the timing and outcome of examinations of EMC, the result of the expiration of statutes of
limitations for specific jurisdictions or the timing and result of ruling requests from taxing authorities, it is reasonably possible that up to $14.8 million of
unrecognized tax positions may be recognized within one year.
The $71.0 million reduction during 2011 for tax positions related to prior years is principally due to the resolution of certain transfer pricing matters,
inclusive of the completion of audits in certain foreign jurisdications and the completion of the 2007 and 2008 U.S. federal income tax audits. The $66.7
million reduction during 2009 for tax positions related to prior years is principally due to the resolution of certain transfer pricing matters and the completion
of the 2005 and 2006 U.S. federal income tax audits.
We recognize interest expense and penalties related to income tax matters in income tax expense. For 2011 and 2010, $1.2 million and $1.1 million,
respectively, in interest expense was recognized, whereas for 2009, $4.3 million in interest expense was reversed. In addition to the unrecognized tax benefits
noted above, the balance of the accrued interest and penalties were $31.6 million, $30.5 million and $29.9 million as of December 31, 2011, 2010 and 2009,
respectively.
M. Retirement Plan Benefits
401(k) Plan
EMC's Information Infrastructure business has established a deferred compensation program for certain employees that is qualified under
Section 401(k) of the Code. EMC will match pre-tax employee contributions up to 6% of eligible compensation during each pay period (subject to a $750
maximum match each quarter). Matching contributions are immediately 100% vested. Our contributions amounted to $73.2 million, $34.3 million and $27.1
million in 2011, 2010 and 2009, respectively.
Employees may elect to invest their contributions in a variety of funds, including an EMC stock fund. The deferred compensation program limits an
employee's maximum investment allocation in the EMC stock fund to 30% of their total contribution. Our matching contribution mirrors the investment
allocation of the employee's contribution.
Defined Benefit Pension Plan
We have noncontributory defined benefit pension plans which were assumed as part of the Data General acquisition, which cover substantially all
former Data General employees located in the U.S. In addition, certain of the former Data General foreign subsidiaries also have retirement plans covering
substantially all of their employees. All of these plans were frozen in 1999 resulting in employees no longer accruing pension benefits for future services.
Certain of our foreign subsidiaries also have a defined benefit pension plan.
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