Pension and Other Postretirement Benefit Plans

9 Months Ended

Sep. 30, 2013

Pension and Other Postretirement Benefit Plans

Pension and Other Postretirement Benefit Plans

Note 12 — Pension and Other Postretirement Benefit Plans

The Company and certain of its subsidiaries provide pension, health care and life insurance defined benefits to eligible retired employees, spouses and other eligible dependents through various domestic and foreign plans. The effect of its foreign pension and other postretirement benefit plans is immaterial to the Company's results of operations, liquidity and financial position.

During the first quarter of 2013, the Company announced two changes to its postretirement medical plan that the Company intends to implement as follows:

• Effective March 31, 2013, the Company frozeactive employees' future benefit accruals. A curtailment of benefits occurred as a result of this action because benefits for future services for active employees in the plan were eliminated. Accordingly, during the first quarter of 2013, the Company recorded a pre-tax curtailment gain of $19 million ($12 million after-tax) in net incometo recognize the remaining prior service cost.
• In the first quarter of 2013, the Company also announced a change in the cost sharing arrangement with retirees for pharmacy subsidy payments received from the U.S. Government effective January 1, 2014. As a result of this plan amendment, the plan was re-measured as of March 31, 2013 resulting in a reduced other post retirement benefit obligation of $57 million. This reduction was recorded in accumulated other comprehensive income, net of deferred taxes, resulting in an after-tax increase to shareholders' equity of $37 million.

As a result of these actions, changes in the Company's disclosures at December 31, 2012 were as follows:

• The Company disclosed in Note 10 to the Consolidated Financial Statements in its 2012 Form 10-K that it expected to record pre-tax amortization of prior service costs of $9 million in 2013. The Company had been amortizing these unrecognized gains over a weighted average remaining amortization period of approximately 2.5 years. As a result of the plan changes announced in the first quarter, pre-tax amortization for 2013 is now expected to be $4 million. The $57 million negative prior service cost resulting from the plan amendment is being amortized over the average life expectancy of frozen plan participants of approximately 25 years.

For the nine months ended September 30, 2013, the Company's unrecognized actuarial losses and prior service costs (reported in accumulated other comprehensive income) decreased by $ 113 million pre-tax in the aggregate ($ 73 million after-tax) resulting in an increase in shareholders' equity. This change was primarily a result of the plan amendment described above,normal amortization,and the results of the annual actuarial review completed during the second quarter of 2013, partially offset by the effect of the curtailment.

Pension and Other Postretirement Benefits. Components of net pension and net other postretirement benefit costs were as follows:

	Pension Benefits								Other Postretirement Benefits
	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
(In millions)	2013		2012		2013		2012		2013		2012		2013		2012
Service cost	$	1	$	1	$	2	$	2	$	1	$	-	$	1	$	1
Interest cost		45		50		136		149		3		4		9		12
Expected long-term return on plan assets		(68)		(69)		(204)		(203)		(1)		-		(1)		-
Amortization of:
Net loss from past experience		19		15		56		45				-				-
Prior service cost				-				-		-		(3)		(3)		(9)
Curtailment gain				-				-				-		(19)		-
Settlement loss				-				6				-				-
Net cost	$	(3)	$	(3)	$	(10)	$	(1)	$	3	$	1	$	(13)	$	4

The Company funds its domestic qualified pension plans at least at the minimum amount required by the Pension Protection Act of 2006. For the nine months ended September 30, 2013, the Company contributed $174 million of which $64 million was required and $110 million was voluntary. In October of 2013, the Company made its finalrequired 2013 contribution of $21 million. The Company does not expect to make additional contributions for the remainder of 2013.