18. Pensions and Other Benefits

U. S. Steel has defined contribution or multi-employer arrangements for pension benefits for more than half of its North American employees and non-contributory defined benefit pension plans covering the remaining North American employees. Benefits under the defined benefit pension plans are based upon years of service and final average pensionable earnings, or a minimum benefit based upon years of service, whichever is greater. In addition, pension benefits for most salaried employees in the United States under these plans are based upon a percent of total career pensionable earnings. Most salaried employees in the United States, including those not participating in the defined benefit pension plans of the Company, participate in defined contribution plans (401(k) plans) whereby the Company matches a certain percentage of salary based on the amount contributed by the participant and years of service with the Company. For those without defined benefit coverage, the Company also provides a retirement account benefit based on salary and attained age. The main U. S. Steel defined benefit pension plan was closed to new participants in 2003. At December 31, 2011, approximately 56 percent of U. S. Steel’s union employees in the United States are currently covered by the Steelworkers Pension Trust (SPT), a multi-employer pension plan, to which U. S. Steel contributes on the basis of a fixed dollar amount for each hour worked. Effective December 31, 2011, U. S. Steel adopted new disclosure requirements for multi-employer pension plans as outlined in ASU No 2011-09. Please see below for additional disclosures related to the SPT.

The majority of employees and retirees of USSC participate in defined benefit pension plans and retiree health and life insurance plans. The majority of USSC union employees participate in defined benefit pension plans for which benefits are based upon years of service multiplied by a flat dollar rate. With the ratification of the collective bargaining agreement (CBA) at Hamilton Works in October 2011, the main Hamilton bargaining unit defined benefit pension plan was closed to new entrants effective October 15, 2011, and new Hamilton union employees hired on or after that date are covered by defined contribution arrangements. The CBA settlement at the Lake Erie facility effective April 16, 2010 closed the main Lake Erie defined benefit pension plan to new participants and new Lake Erie union employees hired on or after that date are covered by defined contribution arrangements. The salaried Hamilton and Lake Erie defined benefit pension plans were closed to new participants in 1997 and currently less than half of salaried USSC employees participate in these plans where benefits are based on final average pensionable earnings or a flat dollar rate. The balance of salaried employees participates in defined contribution arrangements.

U.S. Steel’s defined benefit retiree health care and life insurance plans (Other Benefits) cover the majority of its employees in North America upon their retirement. Health care benefits are provided through hospital, surgical, major medical and drug benefit provisions or through health maintenance organizations, both subject to various cost sharing features, and in most cases domestically, an employer cap on total costs. Upon their retirement, most salaried employees in the United States are provided with a flat dollar pre-Medicare benefit and a death benefit.

The majority of U. S. Steel’s European employees are covered by government-sponsored programs into which U. S. Steel makes required contributions. Also, U. S. Steel sponsors defined benefit plans for most European employees covering benefit payments due to employees upon their retirement, some of which are government mandated. These same employees receive service awards throughout their careers based on stipulated service and, in some cases, age and service.

U. S. Steel uses a December 31 measurement date for its plans and may have an interim measurement date if significant events occur. Details relating to Pension Benefits and Other Benefits are below.


	Pension Benefits						Other Benefits
(In millions)	2011			2010			2011			2010
Change in benefit obligations
Benefit obligations at January 1	$	10,630		$	9,988		$	4,340		$	4,224
Service cost		111			101			25			21
Interest cost		511			543			209			227
Plan amendments		5			10			(26	)		22
Actuarial losses (gains)		505			761			(26	)		132
Exchange rate (gain) loss		(59	)		175			(13	)		40
Settlements, curtailments and termination benefits		(20	)		(13	)		-			-
Benefits paid		(913	)		(935	)		(323	)		(326	)

Benefit obligations at December 31	$	10,770		$	10,630		$	4,186		$	4,340
Change in plan assets
Fair value of plan at January 1	$	8,655		$	8,280		$	1,407		$	1,333
Actual return on plan assets		419			941			80			164
Employer contributions		229			220			-			-
Exchange rate (loss) gain		(42	)		141			-			-
Benefits paid from plan assets		(908	)		(927	)		(14	)		(90	)

Fair value of plan assets at December 31	$	8,353		$	8,655		$	1,473		$	1,407

Funded status of plans at December 31	$	(2,417	)	$	(1,975	)	$	(2,713	)	$	(2,933	)

Amounts recognized in accumulated other comprehensive loss:


			2011
(In millions)	12/31/2010		Amortization			Activity			12/31/2011
Pensions
Prior Service Cost	$	112	$	(21	)	$	6		$	97
Actuarial losses		4,197		(352	)		685			4,530

Other Benefits
Prior Service Cost		403		(25	)		(26	)		352
Actuarial Losses		311		(5	)		1			307

As of December 31, 2011 and 2010, the following amounts were recognized in the balance sheet:


	Pension Benefits						Other Benefits
(In millions)	2011			2010			2011			2010
Noncurrent assets	$	14		$	13		$	-		$	-
Current liabilities		(236	)		(234	)		(416	)		(426	)
Noncurrent liabilities		(2,195	)		(1,754	)		(2,297	)		(2,507	)
Accumulated other comprehensive loss^(a)		4,589			4,258			658			733

Net amount recognized	$	2,172		$	2,283		$	(2,055	)	$	(2,200	)

(a)

Accumulated other comprehensive loss effects associated with accounting for pensions and other benefits in accordance with ASC Topic 715 at December 31, 2011 and December 31, 2010, respectively, are reflected net of tax of $1,714 million and $1,673 million respectively, on the Statement of Stockholders’ Equity.

The Accumulated Benefit Obligation (ABO) for all defined benefit pension plans was $10,296 million and $10,199 million at December 31, 2011 and 2010, respectively.


	December 31,
(In millions)	2011			2010
Information for pension plans with an accumulated benefit obligation in excess of plan assets:
Aggregate accumulated benefit obligations (ABO)	$	(10,263	)	$	(10,148	)
Aggregate projected benefit obligations (PBO)		(10,737	)		(10,578	)
Aggregate fair value of plan assets		8,307			8,589

The aggregate ABO in excess of plan assets reflected above is included in the payroll and benefits payable and employee benefits lines on the balance sheet.

Following are the details of net periodic benefit costs related to Pension and Other Benefits:


	Pension Benefits									Other Benefits
(In millions)	2011			2010			2009			2011			2010			2009
Components of net periodic benefit cost:
Service cost	$	111		$	101		$	106		$	25		$	21		$	19
Interest cost		511			543			605			209			227			251
Expected return on plan assets		(623	)		(670	)		(735	)		(105	)		(108	)		(107	)
Amortization - prior service costs		21			24			24			25			23			23
- actuarial losses		352			219			141			5			(11	)		(8	)

Net periodic benefit cost, excluding below		372			217			141			159			152			178
Multiemployer plans^(a)		65			56			50			-			-			-
Settlement, termination and curtailment losses		6			3			80			-			-			13

Net periodic benefit cost	$	443		$	276		$	271		$	159		$	152		$	191

(a)

Primarily represents pension expense for the SPT covering United Steelworkers (USW) employees hired from National Steel Corporation and new USW employees hired after May 21, 2003.

Profit-based amounts used to reduce retiree medical premiums per the 2008 CBAs are calculated as a percentage of consolidated income from operations (as defined in the 2008 CBAs) based on 7.5 percent of profit between $10 and $50 per ton and 10 percent of profit above $50 per ton. This amount is recognized on a deferred basis and estimated as part of the actuarial calculations used to derive Other Benefit expense. Other Benefit expense in 2011 included $37 million in costs to reflect the profit-based payments, compared with $39 million in 2010 and $41 million in 2009.

Net periodic benefit cost for pensions and other benefits is projected to be approximately $415 million and approximately $120 million, respectively, in 2012. The pension cost includes $70 million in payments for the SPT. The amounts in accumulated other comprehensive income that are expected to be recognized as components of net periodic benefit cost during 2012 are as follows:


(In millions)	Pension Benefits 2012		Other Benefits 2012
Amortization of actuarial loss	$	352	$	(1	)
Amortization of prior service cost		19		23

Total recognized from accumulated other comprehensive income	$	371	$	22

Assumptions used to determine the benefit obligation at December 31 and net periodic benefit cost for the year ended December 31 are detailed below:


	Pension Benefits												Other Benefits
	2011						2010						2011						2010
	U.S.			International			U.S.			International			U.S.			International			U.S.			International
Actuarial assumptions used to determine benefit obligations at December 31:
Discount rate		4.50	%		4.50	%		5.00	%		5.00	%		4.50	%		4.50	%		5.00	%		5.00	%
Increase in compensation rate		4.00	%		3.00	%		4.00	%		3.00	%		4.00	%		3.00	%		4.00	%		3.00	%


	Pension Benefits
	2011						2010						2009
	U.S.			International			U.S.			International			U.S.			International
Actuarial assumptions used to determine net periodic benefit cost for the year ended December 31:
Discount rate		5.00	%		5.00	%		5.50	%		6.00	%		6.00	%		6.50	%
Expected annual return on plan assets		8.00	%		7.50	%		8.00	%		7.43	%		8.00	%		7.42	%
Increase in compensation rate		4.00	%		3.00	%		4.00	%		3.00	%		4.00	%		3.00	%


	Other Benefits
	2011						2010						2009
	U.S.			International			U.S.			International			U.S.			International
Discount rate		5.00	%		5.00	%		5.50	%		6.00	%		6.00	%		6.50	%
Expected annual return on plan assets		8.00	%		n/a			8.00	%		n/a			8.00	%		n/a
Increase in compensation rate		4.00	%		3.00	%		4.00	%		3.00	%		4.00	%		3.00	%

The discount rate reflects the current rate at which the pension and other benefit liabilities could be effectively settled at the measurement date. In setting the domestic rates, we utilize several AAA and AA corporate bond indices as an indication of interest rate movements and levels, and we also consider an internally calculated rate determined by matching our expected benefit payments to payments from a stream of AA or higher rated zero coupon corporate bonds theoretically available in the marketplace. Based on this evaluation at December 31, 2011, U. S. Steel decreased the discount rate used to measure both domestic Pension and Other Benefits obligations to 4.50 percent. For USSC benefit plans, a discount rate was selected through a similar review process using Canadian bond rates and indices and at December 31, 2011, U. S. Steel decreased the discount rate to 4.50 percent for its Canadian-based pension and other benefits.


	2011						2010
Assumed health care cost trend rates at December 31:	U.S.			Canada			U.S.			Canada
Health care cost trend rate assumed for next year		7.00	%		6.00	%		8.00	%		6.00	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.00	%		5.00	%		5.00	%		5.00	%
Year that the rate reaches the ultimate trend rate		2016			2014			2016			2014

U. S. Steel reviews its own actual historical rate experience and expectations of future insurance trends to determine the escalation of per capita health care costs under U. S. Steel’s insurance plans. About two thirds of our costs for the domestic United Steelworkers (USW) participants’ retiree health benefits in the Company’s main domestic insurance plan are limited to a per capita dollar maximum calculation based on 2006 base year actual costs incurred under the main U. S. Steel insurance plan for USW participants (the “cost cap”) that was negotiated in 2003. The effective date of the cost cap was deferred with retiree premium rate relief provisions related to profit sharing formulas under the 2008 CBA that remain in effect until 2013. After 2013, the Company’s costs for a majority of USW retirees and their beneficiaries are expected to remain fixed with the application of the cost cap and as a result, the cost impact of health care escalation for the Company is projected to be limited for this group. Retiree premium contributions are set at a fixed amount for most surviving spouses per the terms of the 2008 CBA and the Company is therefore subject to the full impact of health care cost escalation for this group. In our Canadian retiree medical plans, most health care cost escalation results from the drug programs since most hospital and physician benefits are provided by the Government which incurs the escalation. Health care cost escalation applies to most other groups within the Company’s insurance plans, but does not apply to most domestic non-union retirees since their benefits are limited to flat dollar amounts or are not existent. A one-percentage-point change in assumed health care cost trend rates would have the following effects:


(In millions)	1-Percentage- Point Increase		1-Percentage- Point Decrease
Effect on total of service and interest components	$	15	$	(12	)
Effect on other postretirement benefit obligations		263		(222	)

Plan Assets

ASC Topic 820 on fair value measurements includes a three-tier hierarchy as a framework for the inputs used in measuring fair value. The categories for determining fair market value are summarized below:

•

Level 1 – quoted prices in active markets for identical investments

•

Level 2 – other significant and observable comparable investments (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

•

Level 3 – investments lacking easily comparable data (including the plan’s own assumptions in determining the fair value of investments)

U. S. Steel’s Pension plan and Other Benefits plan assets are classified as follows:


Level 1	Level 2	Level 3
Equity Securities - U.S.	Debt Securities - U.S.	Private Equities
Equity Securities - Foreign	Debt Securities - Foreign	Timberlands
Short-term Investments	Mortgage-backed GNMAs & FNMAs	Real Estate
Government Bonds - U.S.	Mortgages	Mineral Interests
Government Bonds - Foreign

An instrument’s level is based on the lowest level of any input that is significant to the fair value measurement. Equity Securities – U.S. (including corporate common stocks), Equity Securities – Foreign (including corporate common stocks and investment trusts), Government Bonds – U.S. and Government Bonds – Foreign are valued at the closing price reported on the active market on which the individual securities are traded. Short term investments are valued at amortized cost which approximates fair value due to the short-term maturity of the instruments. Debt Securities – U.S. and Debt Securities – Foreign are valued by accepting a price from a public pricing source or broker quotes. Mortgage-backed GNMAs and FNMAs are valued using quotes from a mortgage broker. Mortgages are valued based on the yield of a Canadian government bond plus a spread derived from market data as determined by a third party pricing source. Private Equities are valued using information provided by external managers for each individual investment held in the fund. Real Estate investments are either appraised or valued using the investees’ assessment of the assets within the fund. Mineral Interests are valued at the present value of estimated future cash flows discounted at estimated market rates for assets of similar quality and duration. Timberlands are valued using the appraised value plus net working capital and less any estimated performance incentives.

The following is a summary of U. S. Steel’s Pension plan assets carried at fair value at December 31, 2011 and 2010:


	Fair Value Measurements at December 31, 2011 (in millions)
	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Classes
Equity securities – U.S.^(a)	$	3,170	$	3,170	$	-	$	-
Equity securities – Foreign^(a)		1,352		1,352		-		-
Government bonds – U.S.^(a)		335		335		-		-
Government bonds – Foreign		648		648		-		-
Debt securities – U. S.^(a)		1,250		-		1,250		-
Private equities		334		-		-		334
Real estate		274		-		-		274
Other^(b)		990		355		393		242

Total	$	8,353	$	5,860	$	1,643	$	850

(a)

Holdings for the trusts’ limited partnerships and investment trust interests are primarily included in these asset classes. The individual unit of account in these limited partnerships is the individual investment shares and, therefore, would be classified as a Level 2 investment in the fair value hierarchy. However, this disclosure is looking through these investments and classifying the underlying investments based on their level within the fair value hierarchy, which are Level 1 or 2, depending on the underlying investment.

(b)

Asset classes that are greater than 3% of investments at fair value are disclosed separately. Other includes asset categories that are not significant components to the total assets of the trusts, including short-term investments, debt securities – foreign, mortgage-backed GNMAs and FNMAs, mortgages, timberlands, mineral interests and miscellaneous receivables and payables.


	Fair Value Measurements at December 31, 2010 (in millions)
	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Classes
Equity securities – U.S.^(a)	$	3,601	$	3,601	$	-	$	-
Equity securities – Foreign^(a)		1,514		1,514		-		-
Government bonds – U.S.^(a)		474		474		-		-
Government bonds – Foreign		644		644		-		-
Debt securities – U.S.^(a)		1,066		-		1,066		-
Private equities		307		-		-		307
Other^(b)		1,049		188		416		445

Total	$	8,655	$	6,421	$	1,482	$	752

(a)

(b)

Asset classes that are greater than 3% of investments at fair value are disclosed separately. Other includes asset categories that are not significant components to the total assets of the trusts, including short-term investments, debt securities – foreign, mortgage-backed GNMAs and FNMAs, mortgages, timberlands, real estate, mineral interests and miscellaneous receivables and payables.

The following table sets forth a summary of changes in the fair value of U. S. Steel’s Pension plan level 3 assets for the years ended December 31, 2011 and 2010 (in millions):


	Other (level 3 assets only)
	2011			2010
Balance at beginning of period	$	752		$	618
Transfers in and/or out of level 3		-			(35	)
Actual return on plan assets:
Realized gain		25			8
Net unrealized gain		59			78
Purchases, sales, issuances and settlements:
Purchases		108			119
Sales		(94	)		(36	)

Balance at end of period	$	850		$	752

The following is a summary of U. S. Steel’s Other Benefits plan assets carried at fair value at December 31, 2011 and 2010:


	Fair Value Measurements at December 31, 2011 (in millions)
	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Classes
Equity securities – U.S.^(a)	$	806	$	806	$	-	$	-
Equity securities – Foreign^(a)		117		117		-		-
Government bonds – U.S.^(a)		80		80		-		-
Debt securities – U.S.^(a)		301		-		301		-
Other^(b)		169		77		35		57

Total	$	1,473	$	1,080	$	336	$	57

(a)

(b)

Asset classes that are greater than 3% of investments at fair value are disclosed separately. Other includes asset categories that are not significant components to the total assets of the trusts, including mortgage-backed GNMAs and FNMAs, private equities, timberlands, real estate and miscellaneous receivables and payables.


	Fair Value Measurements at December 31, 2010 (in millions)
	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Classes
Equity securities – U.S.^(a)	$	879	$	879	$	-	$	-
Equity securities – Foreign^(a)		83		83		-		-
Short-term investments		47		47		-		-
Government bonds – U.S.^(a)		85		85		-		-
Debt securities – U.S.^(a)		225		-		225		-
Other^(b)		88		6		36		46

Total	$	1,407	$	1,100	$	261	$	46

(a)

(b)

Asset classes that are greater than 3% of investments at fair value are disclosed separately. Other includes asset categories that are not significant components to the total assets of the trusts, including mortgage-backed GNMAs and FNMAs, private equities, timberlands, real estate and miscellaneous receivables and payables.

The following table sets forth a summary of changes in the fair value of U. S. Steel’s Other Benefits plan level 3 assets for the years ended December 31, 2011 and 2010 (in millions):


	Other (level 3 assets only)
	2011			2010
Balance at beginning of period	$	46		$	38
Transfers in and/or out of level 3		-			(4	)
Actual return on plan assets:
Realized gain		1			-
Net unrealized gain		3			5
Purchases, sales, issuances and settlements:
Purchases		12			9
Sales		(5	)		(2	)

Balance at end of period	$	57		$	46

U. S. Steel’s investment strategy for its U.S. pension and other benefits plan assets provides for a diversified mix of public equities, high quality bonds and selected smaller investments in private equities, investment trusts, timber and mineral interests. For its U.S. Pension and Other Benefit plans, U. S. Steel has a target allocation for plan assets of 60 percent and 70 percent in equities, respectively, with the balance primarily invested in corporate bonds, Treasury bonds and government-backed mortgages. U. S. Steel believes that returns on equities over the long term will be higher than returns from fixed-income securities as actual historical returns from U. S. Steel’s trusts have shown. Returns on bonds tend to offset some of the shorter-term volatility of stocks. Both equity and fixed-income investments are made across a broad range of industries and companies to provide protection against the impact of volatility in any single industry as well as company specific developments. U. S. Steel will use a 7.75 percent assumed rate of return on assets for the development of net periodic cost for the main defined benefit pension plan and domestic OPEB plans in 2012. This 2012 assumed rate of return reflects a decline from the 8.0 percent used for 2011 domestic expense and was determined by taking into account the intended asset mix and some moderation of the historical premiums that fixed-income and equity investments have yielded above government bonds. Actual returns since the inception of the plans have exceeded this 7.75 percent rate and while some recent annual returns have not, it is U. S. Steel’s expectation that rates will return to this level in future periods.

For USSC defined benefit pension plans, U. S. Steel’s investment strategy is similar to its strategy for U.S. plans, whereby the Company seeks a diversified mix of large and mid-cap equities, high quality corporate and government bonds and selected smaller investments with a target allocation for plan assets of 65 percent equities. U. S. Steel will use a 7.25 percent assumed rate of return on assets for the development of net periodic costs for the USSC defined benefit expense in 2012. This is lower than the U.S. pension plan assumption as subcategories within the asset mix are from a more limited investment universe and, as a result, have a lower expected return. The 2012 assumed rate of return reflects a decline from the 7.50 percent used for 2011 USSC expense.

Steelworkers Pension Trust

Effective December 31, 2011, U. S. Steel adopted new disclosure requirements for multi-employer pension plans as outlined in ASU No 2011-09. The new guidance requires additional quantitative and qualitative disclosures for employers who participate in multi-employer pension plans and multi-employer other postretirement benefit plans. The disclosure requirements have been applied retrospectively to all years presented.

U. S. Steel participates in a multi-employer defined benefit pension plan, the Steelworkers Pension Trust (SPT). For most bargaining unit employees participating in the SPT, U. S. Steel contributes to the SPT a fixed dollar amount for each hour worked of $2.65; a rate negotiated as part of the 2008 Collective Bargaining Agreement (CBA) which is set to expire on September 1, 2012. U. S. Steel’s contributions to the SPT represented greater than 5% of the total combined contributions of all employers participating in the plan for the years ended December 31, 2011, 2010 and 2009.

Participation in a multi-employer pension plan agreed to under the terms of a collective bargaining agreement differ from a traditional qualified single employer defined benefit pension plan. The SPT shares risks associated with the plan in the following respects:

a. Contributions to the SPT by U. S. Steel may be used to provide benefits to employees of other participating employers;

b. If a participating employer stops contributing to the SPT, the unfunded obligations of the plan may be borne by the remaining participating employers;

c. If U. S. Steel chooses to stop participating in the SPT, U. S. Steel may be required to pay an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

On March 21, 2011 the Board of Trustees of the SPT elected funding relief which has the effect of decreasing the amount of required minimum contributions in near-term years, but will increase the minimum funding requirements during later plan years. As a result of the election of funding relief, the SPT’s zone funding under the Pension Protection Act may be impacted.

In addition to the funding relief election, the Board of Trustees also elected a special amortization rule, which allows the SPT to separately amortize investment losses incurred during the SPT’s December 31, 2008 plan year-end over a 29 year period, whereas they were previously required to be amortized over a 15 year period.

U. S. Steel’s participation in the SPT for the annual periods ended December 31, 2011, 2010 and 2009 is outlined in the table below.

Employer
Identification
Number/
Pension Plan
Number

Pension
Protection
Act Zone
Status as of
December 31^(a)

FIP/RP Status
Pending/
Implemented^(b)

U.S. Steel
Contributions
(in millions)

Surcharge
Imposed^(c)

Expiration Date
of Collective
Bargaining
Agreement

Pension Fund

2011

2010

2011

2010

2009

2011

2010

Steelworkers Pension Trust

23-6648508/499

Green

63.0

56.0

58.0

September 1, 2012

(a)

The zone status is based on information that U. S. Steel received from the plan and is certified by the plan’s actuary. Among other factors, plans in the green zone are at least 80 percent funded, while plans in the yellow zone are less than 80 percent funded and plans in the red zone are less than 65 percent funded.

(b)	Indicates if a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented.

(c)	Indicates whether there were charges to U. S. Steel from the plan.

Cash Flows

Employer Contributions – In addition to the contributions to the Steelworkers Pension Trust noted in the table above, U. S. Steel made voluntary contributions in 2011 of $140 million to its main defined benefit pension plan, $92 million in required contributions to the USSC plans and cash payments of $23 million to pension plans not funded by trusts. In 2010, U. S. Steel made a $140 million voluntary contribution to its main defined benefit pension plan, $81 million in required contributions to the USSC plans and cash payments of $20 million to pension plans not funded by trusts.

The 2008 Collective Bargaining Agreements required U. S. Steel to make annual $75 million contributions during the contract period to a restricted account within our trust for retiree health care and life insurance. This contribution is in addition to an annual $10 million required contribution to the same trust that continues from an earlier agreement. Under this earlier agreement, a $20 million contribution is required if the Company does not contribute at least $75 million to its main pension plan in the prior year. During the first quarter of 2009, the Company made a $10 million contribution to this trust. In April 2009, we reached agreement with the USW to defer the annual $75 million mandatory contributions due in 2009 until 2012 and the $10 million contribution due in January 2010 until 2013. In November 2010, we reached agreement with the USW to defer the annual $75 million mandatory contributions due in 2010 until 2014 and the $10 million contribution due in January 2011 until 2015. Further as part of the 2009 agreement, the USW agreed to permit us to use all or part of the $75 million contribution made in 2008 to pay current retiree health care and life insurance claims, subject to a make-up contribution in 2013. In 2010, we elected to use the $75 million contributed to the restricted account in 2008. In December 2011, we reached agreement with the USW to defer the annual $75 million mandatory contribution due in 2011 until 2015 and the $10 million contribution due in January 2012 until 2016.

Cash payments totaling $309 million and $237 million were made for other postretirement benefit payments not funded by trusts in 2011 and 2010, respectively. These payments exclude amounts which were paid with Medicare Part D Government subsidy funds and with funds received under the Early Retiree Reinsurance Program (ERRP), a temporary program established under the Patient Protection and Affordable Care Act of 2010 (“PPACA”) to reimburse the sponsor of employment-based health plans for a portion of the cost of health care benefits provided to pre-Medicare participants.

In conjunction with the acquisition of Stelco, now USSC, U. S. Steel assumed the pension plan funding agreement (the Pension Agreement) that Stelco had entered into with the Superintendent of Financial Services of Ontario (the Province) on March 31, 2006 that covers USSC’s four main pension plans. The Pension Agreement requires minimum contributions of C$70 million (approximately $69 million) per year in 2011 through 2015 plus additional annual contributions for benefit improvements, primarily related to union retiree indexing provisions. With the Hamilton Works and Lake Erie Works collective bargaining agreement settlements in 2011 and 2010, respectively, retiree indexing provisions are no longer provided through the pension plan covering former represented employees. The Pension Agreement remains in effect with its defined annual contributions as noted above until the earlier of full solvency funding for the four main plans or until December 31, 2015, when minimum funding requirements for the plans resume under the provincial pension legislation.

Estimated Future Benefit Payments – The following benefit payments, which reflect expected future service as appropriate, are expected to be paid from U. S. Steel’s defined benefit plans:


(In millions)	Pension Benefits		Other Benefits
2012	$	920	$	335
2013		845		335
2014		835		335
2015		825		300
2016		815		300
Years 2017 - 2021		3,840		1,335

Non-retirement postemployment benefits

U. S. Steel incurred costs of and paid approximately $85 million during the year ended December 31, 2009 related to employee costs for supplemental unemployment benefits, salary continuance and continuation of health care benefits and life insurance coverage for employees associated with the temporary idling of certain facilities and reduced production at others. U. S. Steel recorded immaterial charges in 2010 and 2011 related to these benefits. Substantially all of the accrued benefits were paid and there was an immaterial accrual for these benefits as of December 31, 2011 and 2010.

Settlements, terminations and curtailments

During 2009, approximately 1,060 non-represented North American and European employees elected to retire under various Voluntary Early Retirement Programs (VERPs) that were offered by U. S. Steel. VERP charges for termination benefits, curtailment and settlement expenses totaled $70 million for defined benefit pension plans and $13 million for other benefit plans and were recorded in cost of sales in 2009. Charges for additional termination and settlement expenses for the remaining employees that retired under the VERP totaled $3 million and were recorded in cost of sales in 2010. Other pension charges related to the VERPs were incurred for defined contribution plans totaling approximately $18 million in 2009.

In connection with the sale of the majority of EJ&E on January 31, 2009 (see Note 6), a pension curtailment charge of approximately $10 million, which reduced the gain related to this transaction, was recognized in the first quarter of 2009.

Defined contribution plans

U. S. Steel also contributes to several defined contribution plans for its salaried employees. Approximately 61% of non-union salaried employees in North America receive pension benefits through a defined contribution pension plan with contribution percentages based on age, for which company contributions totaled $20 million, $11 million and $25 million in 2011, 2010 and 2009, respectively. Contributions for 2009 included $13 million of payments for VERP related benefits. U. S. Steel’s matching contributions to salaried employees’ defined contribution savings fund plans, which for the most part are based on a percentage of the employees’ salary depending on years of service, totaled $15 million in 2011, $11 million in 2010 and zero in 2009. The matching contributions for 2009 were zero because the company match of employee 401(k) contributions was temporarily suspended in 2009. Most union employees are eligible to participate in a defined contribution savings fund plan where there is no company match on savings except for certain Canadian hourly employees whose company contributions totaled $2 million in 2011. U. S. Steel also maintains a supplemental thrift plan to provide benefits which are otherwise limited by the Internal Revenue Service for qualified plans. U. S. Steel’s costs under these defined contribution plans totaled $2 million in 2011 and less than $1 million in 2010 and 2009.

Other postemployment benefits

The Company provides benefits to former or inactive employees after employment but before retirement. Certain benefits including workers’ compensation and black lung benefits represent material obligations to the Company and under the guidance for nonretirement postemployment benefits, have historically been treated as accrued benefit obligations, similar to the accounting treatment provided for pensions and other benefits. Accumulated postretirement benefit obligation (APBO) liabilities for these benefits recorded at December 31, 2011, totaled $104 million as compared to $106 million at December 31, 2010. APBO amounts were developed assuming a discount rate of 4.5 and 5.0 percent at December 31, 2011 and 2010. Net periodic benefit cost for these benefits is projected to be $12 million in 2012 compared to $11 million in 2011 and $8 million in 2010. The projected cost in 2012 includes $3 million in unrecognized actuarial gains that will be recorded against accumulated other comprehensive income.

The Company’s tax-like benefit obligations under the Coal Industry Retiree Health Benefit Act of 1992 are minimal and are included as part of Other Benefits for accounting purposes.

Drug Subsidy Recoveries, Health Care Legislation and Medicare Subsidy Changes

The Company continued to benefit in 2011 from the Medicare Part D drug program subsidies available under the Medicare Act for primarily the Mineworker and certain limited USW, Medicare-eligible, retiree populations. Most subsidies collected for other Medicare participants do not benefit the Company and are provided to retirees as a reduction to their insurance premiums. The Company collected $24 million and $21 million in 2011 and 2010, respectively, which was subsequently used to pay benefits.

The PPACA includes many provisions impacting health care and health insurance coverage in the U.S. Beginning in 2013, PPACA eliminates the tax deductibility of retiree prescription drug expenses allocable to the Medicare Part D subsidies received by an employer. U. S. Steel recorded a tax charge of $27 million in the first quarter of 2010 to adjust deferred tax assets in order to recognize the estimated future tax effects. The Company believes that its retiree health indemnity plans are exempt from the PPACA’s group market reform requirements, but that the HMO plans in which many retirees participate will be required to implement these new requirements, thereby potentially resulting in higher premiums for these retirees. Based on the guidance that has been issued with respect to the PPACA provision which imposes an excise tax on high-cost employer-sponsored health plan coverage beginning in 2018, the Company believes it has a de minimis exposure for future excise taxes on retiree medical benefits, and no amount has been included for this potential liability in Other Benefits. Also, the Federal government has approved the Company’s applications under the ERRP and the Company received approximately $10 million of ERRP reimbursements in 2011 which it used to pay retiree health benefits.

Effective in 2012, the Company changed its major domestic Medicare drug programs to an Employer Group Waiver Plan (“EGWP”) structure. The EGWP structure was made financially attractive for companies due to changes stemming from the PPACA legislation. The Company estimates the EGWP to lower drug liabilities by $95 million in its retiree health programs for union employees. This savings estimate reflects the fact that beginning in 2013, the Company’s costs are not impacted by the EGWP savings since the majority of union participants are covered by a cost cap. With the new EGWP structure, the Company will no longer directly collect Medicare Part D drug subsidies applicable to 2012 or beyond.

Pension Funding

U. S. Steel’s Board of Directors has authorized additional voluntary contributions to U. S. Steel’s trusts for pensions and other benefits of up to $300 million over the time period ranging from 2012 through the end of 2013. U. S. Steel made voluntary contributions of $140 million to the main domestic defined benefit pension plan in both 2011 and 2010. U. S. Steel will likely make voluntary contributions of similar or greater amounts in 2012 or later periods in order to mitigate potentially larger mandatory contributions under the Pension Protection Act of 2006 in later years. The contributions actually required will be greatly influenced by the level of voluntary contributions, the performance of pension fund assets in the financial markets, the election of the use of existing credit balances in future periods and various other economic factors and actuarial assumptions that may come to influence the level of the funded position in future years.