Employee and Retiree Benefit Plans

9 Months Ended

Sep. 30, 2011

Employee and Retiree Benefit Plans

Note G – Employee and Retiree Benefit Plans

The Company has defined benefit pension plans that are principally noncontributory and cover most full-time employees. All pension plans are funded except for the U.S. and Canadian nonqualified supplemental plans and the U.S. directors’ plan. All U.S. tax qualified plans meet the funding requirements of federal laws and regulations. Contributions to foreign plans are based on local laws and tax regulations. The Company also sponsors health care and life insurance benefit plans, which are not funded, that cover most retired U.S. employees. The health care benefits are contributory; the life insurance benefits are noncontributory. In conjunction with the sale of the Superior, Wisconsin refinery in September 2011, the purchaser assumed the obligations associated with the defined pension and other postretirement plans covering the refinery’s union employees. In conjunction with the sale of the Meraux refinery in October 2011, all benefits associated with the defined pension and other postretirement benefit plans were frozen.

The table that follows provides the components of net periodic benefit expense for the three-month and nine-month periods ended September 30, 2011 and 2010.

	Three Months Ended September 30,
	Pension Benefits						Other Postretirement Benefits
(Thousands of dollars)	2011			2010			2011			2010
Service cost	$	5,915			5,282			1,289			921
Interest cost		7,919			7,480			1,719			1,474
Expected return on plan assets		(6,840	)		(5,933	)		0			0
Amortization of prior service cost		337			387			(66	)		(67	)
Amortization of transitional asset		(51	)		(127	)		3			0
Recognized actuarial loss		2,543			2,995			786			596
		9,823			10,084			3,731			2,924
Termination benefits expense		700			0			0			0
Curtailment expense (gain)		1,105			0			(605	)		0
Net periodic benefit expense	$	11,628			10,084			3,126			2,924

	Nine Months Ended September 30,
	Pension Benefits						Other Postretirement Benefits
(Thousands of dollars)	2011			2010			2011			2010
Service cost	$	17,763			15,738			3,803			2,729
Interest cost		23,855			22,361			5,084			4,379
Expected return on plan assets		(20,634	)		(17,675	)		0			0
Amortization of prior service cost		1,020			1,158			(196	)		(197	)
Amortization of transitional asset		(155	)		(383	)		7			0
Recognized actuarial loss		7,661			8,948			2,326			1,770
		29,510			30,147			11,024			8,681
Termination benefits expense		700			0			0			0
Curtailment expense (gain)		1,105			0			(605	)		0
Net periodic benefit expense	$	31,315			30,147			10,419			8,681

Termination benefits and curtailments in the 2011 periods related to the sales of U.S. refineries in 2011.

During the nine-month period ended September 30, 2011, the Company made contributions of $36.6 million to its defined benefit pension and postretirement benefit plans. Remaining funding in 2011 for the Company’s defined benefit pension and postretirement plans is anticipated to be $8.8 million.

In March 2010, the United States Congress enacted a health care reform law. Along with other provisions, the law (a) eliminates the tax free status of federal subsidies to companies with qualified retiree prescription drug plans that are actuarially equivalent to Medicare Part D plans beginning in 2013; (b) imposes a 40% excise tax on high-cost health plans as defined in the law beginning in 2018; (c) eliminates lifetime or annual coverage limits and required coverage for preventative health services beginning in September 2010; and (d) imposed a fee of $2 (subsequently adjusted for inflation) for each person covered by a health insurance policy beginning in September 2010. The Company provides a health care benefit plan to eligible U.S. active and retired employees. The new law did not significantly affect the Company’s consolidated financial statements as of September 30, 2011 and 2010 and for the three-month and nine-month periods then ended. The Company continues to evaluate the various components of the law as further guidance is issued and cannot predict with certainty all the ways it may impact the Company. However, based on the evaluation performed to date, the Company currently believes that the health care reform law will not have a material effect on its financial condition, net income or cash flow in future periods.