(12)PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

We have funded and unfunded defined benefit pension plans that cover certain employees in North America, Europe, Asia and Brazil. The United States plans are frozen for the majority of participants. The formula for United States salaried employees covered under the qualified defined benefit plan was based on years of service and final average salary, while the formula for United States hourly employees covered under the defined benefit plans was based on specific dollar amounts for each year of service. There were multiple formulas for employees covered under the qualified and nonqualified defined benefit plans sponsored by Maytag, including a cash balance formula. In addition, we sponsor an unfunded Supplemental Executive Retirement Plan. This plan is nonqualified and provides certain key employees defined pension benefits that supplement those provided by the company’s other retirement plans.

A defined contribution plan is being provided to all United States employees subsequent to the pension plan freezes and is not classified within the net periodic benefit cost. In January 2012, we began contributing the company match and automatic company contributions (up to 7% of employees’ eligible pay) in company stock. Our contributions during 2011, 2010 and 2009 were $68 million, $65 million and $40 million, respectively. Company matching contributions to our defined contribution plan were suspended from February 2009 to March 2010.

We provide postretirement health care benefits for eligible retired United States employees. Eligible retirees include those who were full-time employees with 10 years of service who attained age 55 while in service with us and those union retirees who met the eligibility requirements of their collective bargaining agreements. In general, the postretirement health care plans are contributory with participants’ contributions adjusted annually and generally include cost-sharing provisions that limit our exposure for recent and future retirees. The plans are unfunded. We reserve the right to modify the benefits in the future. We provide no significant postretirement medical benefits to non-United States employees.

Defined Benefit - Pensions and Postretirement Benefit Plans

Obligations and Funded Status at End of Year



	United States Pension Benefits						Foreign Pension Benefits						Other Postretirement Benefits
Millions of dollars	2011			2010			2011			2010			2011			2010
Funded status
Fair value of plan assets	$	2,573		$	2,288		$	170		$	172		$	—		$	—
Benefit obligations	3,872			3,605			373			389			488			671
Funded status	$	(1,299	)	$	(1,317	)	$	(203	)	$	(217	)	$	(488	)	$	(671	)
Amounts recognized in the statement of financial position
Noncurrent asset	$	—		$	—		$	5		$	5		$	—		$	—
Current liability	(8		)	(7		)	(12		)	(13		)	(58		)	(61		)
Noncurrent liability	(1,291		)	(1,310		)	(196		)	(209		)	(430		)	(610		)
Amount recognized	$	(1,299	)	$	(1,317	)	$	(203	)	$	(217	)	$	(488	)	$	(671	)
Amounts recognized in accumulated other comprehensive income (pre-tax)
Net actuarial loss (gain)	$	1,510		$	1,255		$	65		$	68		$	(1	)	$	2
Prior service (credit) cost	(23		)	(27		)	5			5			(296		)	(224		)
Transition (asset) obligation	—			—			(1		)	(1		)	1			1
Amount recognized	$	1,487		$	1,228		$	69		$	72		$	(296	)	$	(221	)

Change in Benefit Obligation



	United States Pension Benefits						Foreign Pension Benefits						Other Postretirement Benefits
Millions of dollars	2011			2010			2011			2010			2011			2010
Benefit obligation, beginning of year	$	3,605		$	3,637		$	389		$	383		$	671		$	761
Service cost	2			3			7			6			8			9
Interest cost	192			200			20			20			31			38
Plan participants’ contributions	—			—			2			2			10			17
Actuarial loss (gain)	318			57			—			20			(6		)	(40		)
Benefits paid, net of federal subsidy	(245		)	(292		)	(31		)	(45		)	(74		)	(73		)
Plan amendments	—			—			—			2			(148		)	(43		)
New plans	—			—			—			10			—			—
Settlements / Curtailment loss (gain)	—			—			—			(2		)	—			—
Foreign currency exchange rates	—			—			(14		)	(7		)	(4		)	2
Benefit obligation, end of year	$	3,872		$	3,605		$	373		$	389		$	488		$	671
Accumulated benefit obligation, end of year	$	3,859		$	3,594		$	353		$	359		$	—		$	—

During 2011, we modified retiree medical benefits for certain retirees, effective January 1, 2013, to be consistent with those benefits provided by the Whirlpool Corporation Group Benefit Plan. We accounted for these changes as a plan amendment, resulting in a reduction in the postretirement benefit obligation of $148 million with an offset to accumulated other comprehensive loss, net of tax. In response, a similar group of retirees has initiated legal proceedings against Whirlpool asserting the above benefits are vested. We believe the outcome of the legal proceedings against Whirlpool will not have a material adverse effect on our Consolidated Financial Statements.

Change in Plan Assets



	United States Pension Benefits						Foreign Pension Benefits						Other Postretirement Benefits
Millions of dollars	2011			2010			2011			2010			2011			2010
Fair value of plan assets, beginning of year	$	2,288		$	2,273		$	172		$	179		$	—		$	—
Actual return on plan assets	227			266			5			10			—			—
Employer contribution	303			41			25			26			64			57
Plan participants’ contributions	—			—			2			2			10			17
Gross benefits paid	(245		)	(292		)	(31		)	(45		)	(74		)	(74		)
Settlements	—			—			—			(1		)	—			—
Foreign currency exchange rates	—			—			(3		)	1			—			—
Fair value of plan assets, end of year	$	2,573		$	2,288		$	170		$	172		$	—		$	—

Components of Net Periodic Benefit Cost



	United States Pension Benefits									Foreign Pension Benefits									Other Postretirement Benefits
Millions of dollars	2011			2010			2009			2011			2010			2009			2011			2010			2009
Service cost	$	2		$	3		$	11		$	7		$	6		$	6		$	8		$	9		$	11
Interest cost	192			200			206			20			20			20			31			38			48
Expected return on plan assets	(194		)	(190		)	(198		)	(10		)	(11		)	(11		)	—			—			—
Amortization:
Actuarial loss	31			30			35			4			2			3			1			1			1
Prior service cost (credit)	(3		)	(3		)	—			1			1			1			(43		)	(33		)	(32		)
Special termination benefit	—			—			1			—			—			—			—			—			—
Curtailment loss (gain)	—			—			7			—			—			—			(35		)	(62		)	(95		)
Settlement loss (gain)	—			—			4			2			3			(1		)	—			—			—
Net periodic benefit cost	$	28		$	40		$	66		$	24		$	21		$	18		$	(38	)	$	(47	)	$	(67	)

On October 27, 2011 we announced the closure of our manufacturing facilities in Fort Smith, Arkansas and on August 28, 2009, we announced the closure of our manufacturing facility in Evansville, Indiana. Both closures triggered a curtailment in our United States retiree healthcare plan, resulting in curtailment gains of $35 million and $62 million in 2011 and 2010, respectively. In addition, we recognized a curtailment loss of $7 million during 2009 in our pension plan for Evansville hourly employees. The curtailment gains and loss were recognized in our Consolidated Statement of Income as a component of cost of products sold with an offset to accumulated other comprehensive loss, net of tax.

On February 9, 2009, we announced the suspension of the annual credit to retiree health savings accounts “RHSA” for the majority of active participants. The result of the indefinite suspension was a one-time curtailment gain of $89 million included in net periodic cost with an offset to other comprehensive income, net of tax. During 2009 we recorded $80 million of this gain in our Consolidated Statement of Income as a component of cost of products sold and $9 million was recorded as a component of selling, general and administrative expenses.

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Pre-Tax) in 2011



Millions of dollars	United States Pension Benefits			Foreign Pension Benefits			Other Postretirement Benefits
Current year actuarial (gain) loss	$	285		$	4		$	(6	)
Actuarial (loss) gain recognized during the year	(31		)	(6		)	2
Current year prior service cost (credit)	—			—			(148		)
Prior service credit (cost) recognized during the year	3			(1		)	75
Total recognized in other comprehensive income (pre-tax)	$	257		$	(3	)	$	(77	)
Total recognized in net periodic benefit costs and other comprehensive income (pre-tax)	$	285		$	21		$	(115	)

Estimated Pre-Tax Amounts that will be amortized from Accumulated Other Comprehensive Income into Net Periodic Pension Cost in 2012



Millions of dollars	United States Pension Benefits			Foreign Pension Benefits		Other Postretirement Benefits
Actuarial loss	$	46		$	3	$	1
Prior service (credit) cost	(3		)	1		(46		)
Total	$	43		$	4	$	(45	)

Assumptions

Weighted-average assumptions used to determine benefit obligation at end of year



	United States Pension Benefits				Foreign Pension Benefits				Other Postretirement Benefits
	2011		2010		2011		2010		2011		2010
Discount rate	4.80	%	5.60	%	5.00	%	5.20	%	4.80	%	5.55	%
Rate of compensation increase	4.50	%	4.50	%	3.50	%	3.50	%	—		—

Weighted-average assumptions used to determine net periodic cost



	United States Pension Benefits						Foreign Pension Benefits						Other Postretirement Benefits
	2011		2010		2009		2011		2010		2009		2011		2010		2009
Discount rate	5.60	%	5.75	%	6.05	%	5.20	%	5.40	%	5.90	%	5.60	%	5.40	%	5.80	%
Expected long-term rate of return on plan assets	7.75	%	7.75	%	7.75	%	5.40	%	5.50	%	5.90	%	—		—		—
Rate of compensation increase	4.50	%	4.50	%	4.50	%	3.50	%	3.50	%	3.50	%	—		—		—
Health care cost trend rate
Initial rate	—		—		—		—		—		—		8.00	%	8.00	%	8.00	%
Ultimate rate	—		—		—		—		—		—		5.00	%	5.00	%	5.00	%
Year that ultimate rate will be reached	—		—		—		—		—		—		2015		2016		2017

Discount rate

For our United States pension and postretirement benefit plans, the discount rate for 2011 and 2010 was selected using a hypothetical portfolio of high quality bonds at December 31 that would provide the necessary cash flows to match our projected benefit payments. Prior to 2010, the discount rate was selected using a cash flow matching technique where projected benefit payments were matched to a yield curve based on high quality bond yields as of the measurement date. For our foreign pension and postretirement benefit plans, the discount rate was selected using high quality bond yields for the respective country or region covered by the plan.

Expected return on plan assets

In the United States, the expected rate of return on plan assets was determined by using the historical asset returns for publicly traded equity and fixed income securities tracked from 1927 through 2011 and the historical returns for private equity. The historical equity returns were adjusted downward to reflect future expectations. This adjustment was based on published academic research. The expected returns are weighted by the targeted asset allocations. The resulting weighted-average return was rounded to the nearest quarter of one percent.

For foreign pension plans, the expected rate of return on plan assets was determined by observing historical returns in the local fixed income and equity markets and computing the weighted average returns with the weights being the asset allocation of each plan.

Estimated impact of one percentage-point change in assumed health care cost trend rate

A one percentage point change in assumed health care cost trend rates would have the following effects on our health care plan:



Millions of dollars	One Percentage Point Increase		One Percentage Point Decrease
Effect on total of service and interest cost	$	2	$	(1	)
Effect on postretirement benefit obligations	10		(9		)

Cash Flows

Funding Policy

Our funding policy is to contribute to our United States pension plans amounts sufficient to meet the minimum funding requirement as defined by employee benefit and tax laws, plus additional amounts which we may determine to be appropriate. In certain countries other than the United States, the funding of pension plans is not common practice. Contributions to our United States pension plans may be made in the form of cash or company stock. We pay for retiree medical benefits as they are incurred.

Expected Employer Contributions to Funded Plans



Millions of dollars	United States Pension Benefits⁽¹⁾		Foreign Pension Benefits
2012	$	220	$	11



¹	Contributions include $180 million of minimum contributions required by law.

Expected Benefit Payments



Millions of dollars	United States Pension Benefits		Foreign Pension Benefits		Other Postretirement Benefits
2012	$	307	$	22	$	58
2013	266		20		51
2014	261		24		50
2015	258		22		48
2016	264		22		44
2017-2021	1,278		130		177

Plan Assets

Our overall investment strategy is to achieve an appropriate mix of investments for long-term growth and for near-term benefit payments with a wide diversification of asset types, fund strategies, and investment fund managers. The target allocation for plan assets is generally 50% equity and 50% fixed income, with exceptions for certain foreign pension plans. Of the target allocation for equity securities, approximately 50% is allocated to United States large-cap, 30% to international equity, 13% to United States mid and small-cap companies and 7% in venture capital). The target allocation for fixed income is allocated evenly with 75% to corporate bonds and 25% to United States treasury and other government securities. The fixed income securities duration is intended to match that of our United States pension liabilities.

As a basis for considering such assumptions, a three-tiered fair value hierarchy is established, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets that are observable, either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. We manage the process and approve the results of a third party pricing service to value the majority of our securities and to determine the appropriate level in the fair value hierarchy. The fair values of our pension plan assets at December 31, 2011 and 2010, by asset category were as follows:



	December 31,
Millions of dollars	Quoted prices (Level 1)				Other significant observable inputs (Level 2)				Significant unobservable inputs (Level 3)				Total
	2011		2010		2011		2010		2011		2010		2011		2010
Cash and cash equivalents	$	1	$	6			$	—	$	—	$	—	$	1	$	6
Government and government agency securities^(a)
U.S. securities	—		—		432		394		—		—		432		394
International securities	—		—		50		17		—		—		50		17
Corporate bonds and notes ^(a)
U.S. companies	—		—		692		387		—		—		692		387
International companies	—		—		212		131		—		—		212		131
Equity securities ^(b)
U.S. companies	181		215		—		—		—		—		181		215
International companies	57		79		—		—		—		—		57		79
Mutual funds ^(c)	90		118		—		—		—		—		90		118
Common and collective funds ^(d)
U.S. equity securities	—		—		517		555		—		—		517		555
International equity securities	—		—		245		319		—		—		245		319
Short-term investment fund	—		—		52		34		—		—		52		34
Limited partnerships ^(e)
U.S. private equity investments	—		—		—		—		137		116		137		116
Diversified fund of funds	—		—		—		—		42		41		42		41
Emerging growth	—		—		—		—		14		17		14		17
Real estate ^(f)	—		—		10		9		—		—		10		9
All other investments	—		—		11		22		—		—		11		22
	$	329	$	418	$	2,221	$	1,868	$	193	$	174	$	2,743	$	2,460


(a)	Valued using pricing vendors who use proprietary models to estimate the price a dealer would pay to buy a security using significant observable inputs, such as interest rates, yield curves, and credit risk.


(b)	Valued using the closing stock price on a national securities exchange, which reflects the last reported sales price on the last business day of the year.


(c)	Valued using the net asset value (NAV) of the fund, which is based on the fair value of underlying securities. The fund primarily invests in a diversified portfolio of equity securities issued by non-U.S. companies.


(d)	Valued using the NAV of the fund, which is based on the fair value of underlying securities.


(e)	Valued at estimated fair value based on the proportionate share of the limited partnerships fair value, as determined by the general partner.


(f)	Valued using the NAV of the fund, which is based on the fair value of underlying securities.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)



Millions of dollars	Limited Partnerships
Balance, December 31, 2010	$	174
Realized gains	11
Unrealized gains	20
Purchases	21
Settlements	(33		)
Balance, December 31, 2011	$	193

Additional Information

The projected benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets at December 31, 2011 and 2010 were as follows:



	United States Pension Benefits				Foreign Pension Benefits
Millions of dollars	2011		2010		2011		2010
Projected benefit obligation	$	3,872	$	3,605	$	297	$	276
Fair value of plan assets	2,573		2,288		89		53

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2011 and 2010 were as follows:



	United States Pension Benefits				Foreign Pension Benefits
Millions of dollars	2011		2010		2011		2010
Projected benefit obligation	$	3,872	$	3,605	$	253	$	253
Accumulated benefit obligation	3,859		3,594		241		244
Fair value of plan assets	2,573		2,288		48		45