Employee Postretirement Benefits

6 Months Ended

Jun. 30, 2011

Employee Postretirement Benefits

Employee Postretirement Benefits

Note 6. Employee Postretirement Benefits

The table below presents benefit cost information for defined benefit plans and other postretirement benefit plans:

	Defined Benefit Plans						Other Postretirement Benefit Plans
	Three Months Ended June 30
(Millions of dollars)	2011			2010			2011		2010
Service cost	$	14		$	13		$	3	$	3
Interest cost		78			77			11		10
Expected return on plan assets		(87	)		(83	)		—		—
Recognized net actuarial loss		23			24			—		—
Other		2			1			1		1
Net periodic benefit cost	$	30		$	32		$	15	$	14

	Defined Benefit Plans						Other Postretirement Benefit Plans
	Six Months Ended June 30
(Millions of dollars)	2011			2010			2011		2010
Service cost	$	28		$	27		$	7	$	7
Interest cost		154			154			22		21
Expected return on plan assets		(173	)		(167	)		—		—
Recognized net actuarial loss		47			49			—		—
Other		2			4			2		2
Net periodic benefit cost	$	58		$	67		$	31	$	30

During the first and second quarters of 2011, we made cash contributions of $265 million and $150 million, respectively, to our pension trusts. During the first and second quarters of 2010, we made cash contributions of $176 million and $52 million, respectively, to our pension trusts. We currently anticipate contributing between $420 million and $500 million for the full year 2011 to our pension trusts.

Various derivative instruments are utilized in the management of K-C's defined benefit plan assets. These derivative instruments are used to manage risk or achieve a target asset allocation. For the U.S. pension plan, equity volatility is managed by entering into exchange-traded puts and over-the-counter calls to create equity collars with a zero net premium at initiation. The equity collar strategy is designed to reduce potential equity losses and limit gains, resulting in lower equity volatility for the plan. As of June 30, 2011, equity collars are in place on approximately 50 percent of the plan's $1.8 billion equity allocation. In addition to the equity collars, as of June 30, 2011, long-dated Treasury futures contracts to maintain a target asset allocation are in place with a notional value of about $420 million.