Retirement Plan Benefits

12 Months Ended

Dec. 31, 2012

Compensation and Retirement Disclosure [Abstract]

Retirement Plan Benefits

Retirement Plan Benefits

401(k) Plan

EMC’s Information Infrastructure business has established a deferred compensation program for certain employees that is qualified under Section 401(k) of the Code. EMC will match pre-tax employee contributions up to 6% of eligible compensation during each pay period (subject to a $750 maximum match each quarter). Matching contributions are immediately 100% vested. Our contributions amounted to $88.3 million, $73.2 million and $34.3 million in 2012, 2011 and 2010, respectively.

Employees may elect to invest their contributions in a variety of funds, including an EMC stock fund. The deferred compensation program limits an employee’s maximum investment allocation in the EMC stock fund to 30% of their total contribution. Our matching contribution mirrors the investment allocation of the employee’s contribution.

Defined Benefit Pension Plan

We have noncontributory defined benefit pension plans which were assumed as part of the Data General acquisition, which cover substantially all former Data General employees located in the U.S. In addition, certain of the former Data General foreign subsidiaries also have retirement plans covering substantially all of their employees. All of these plans were frozen in 1999 resulting in employees no longer accruing pension benefits for future services. Certain of our foreign subsidiaries also have a defined benefit pension plan.

Benefits under these plans are generally based on either career average or final average salaries and creditable years of service as defined in the plans. The annual cost for these plans is determined using the projected unit credit actuarial cost method that includes actuarial assumptions and estimates which are subject to change. The measurement date for the plans is December 31.

The Data General U.S. pension plan’s (the “Pension Plan”) investment policy provides that no security, except issues of the U.S. Government, shall comprise more than 5% of total plan assets, measured at market. At December 31, 2012, the Pension Plan held $0.5 million of our common stock.

The Pension Plan is summarized in the following tables. The other pension plans are not presented because they do not have a material impact on our consolidated financial position or results of operations.

The components of the change in benefit obligation of the Pension Plan is as follows (table in thousands):

	December  31, 2012			December  31, 2011
Benefit obligation, at beginning of year	$	482,609		$	427,213
Interest cost	21,440			22,663
Benefits paid	(16,598		)	(15,493		)
Actuarial loss	51,815			48,226
Benefit obligation, at end of year	$	539,266		$	482,609

The reconciliation of the beginning and ending balances of the fair value of the assets of the Pension Plan is as follows (table in thousands):

	December  31, 2012			December  31, 2011
Fair value of plan assets, at beginning of year	$	395,859		$	379,617
Actual return on plan assets	51,442			31,735
Benefits paid	(16,598		)	(15,493		)
Fair value of plan assets, at end of year	$	430,703		$	395,859

We did not make any contributions to the Pension Plan in 2012 or 2011 and we do not expect to make a contribution to the Pension Plan in 2013. The under-funded status of the Pension Plan at December 31, 2012 and 2011 was $108.6 million and $86.8 million, respectively. This amount is classified as a component of other long-term liabilities on the consolidated balance sheets.

In 2012, $12.8 million of the accumulated actuarial loss and prior services cost associated with the Pension Plan were reclassified from accumulated comprehensive loss to a component of net periodic benefit cost. Additionally, the Pension Plan had net losses of $26.4 million included in accumulated other comprehensive loss, which was primarily the result of a decrease in the discount rate at the end of 2012. We expect that $14.1 million of the total balance included in accumulated other comprehensive loss at December 31, 2012 will be recognized as a component of net periodic benefit costs in 2013. We do not expect to receive any refunds from the Pension Plan in 2013.

The components of net periodic expense (benefit) of the Pension Plan are as follows (table in thousands):

	2012			2011			2010
Interest cost	$	21,440		$	22,663		$	22,685
Expected return on plan assets	(26,000		)	(25,008		)	(23,304		)
Recognized actuarial loss	12,847			11,174			12,616
Net periodic expense (benefit)	$	8,287		$	8,829		$	11,997

The weighted-average assumptions used in the Pension Plan to determine benefit obligations at December 31 are as follows:

	December  31, 2012		December  31, 2011		December  31, 2010
Discount rate	3.7	%	4.6	%	5.4	%
Rate of compensation increase	N/A		N/A		N/A

The weighted-average assumptions used in the Pension Plan to determine periodic benefit cost for the years ended December 31 are as follows:

	December  31, 2012		December  31, 2011		December  31, 2010
Discount rate	4.6	%	5.4	%	6.0	%
Expected long-term rate of return on plan assets	6.75	%	6.75	%	6.75	%
Rate of compensation increase	N/A		N/A		N/A

The benefit payments are expected to be paid in the following years (table in thousands):

2013	$	21,610
2014	22,703
2015	24,005
2016	25,546
2017	27,139
2018-2021	155,275

Fair Value of Plan Assets

Following is a description of the valuation methodologies used for assets measured at fair value at December 31, 2012:

Common Collective Trusts – valued at the net asset value calculated by the fund manager based on the underlying investments. These are all classified within Level 2 of the valuation hierarchy. These include: EB Daily Valued Small Cap Stock Index Fund, EB Daily Valued Large Cap Growth Stock Index Fund, EB Daily Valued Large Cap Value Stock Index Fund, EB Daily Valued Stock Index Fund, EB Daily Valued International Stock Index Fund, EB Daily Valued Emerging Markets Index Fund, EB Long Term Government Bond Index Fund, EB Long Term Credit Bond Index and Collective Trust High Yield Fund.

Corporate Debt Securities – valued daily at the closing price reported in active U.S. financial markets and are classified within Level 2 of the valuation hierarchy.

The following table sets forth, by level within the fair value hierarchy, the Pension Plan’s assets at fair value as of December 31, 2012 and 2011 (tables in thousands):

	December 31, 2012
	Level 1		Level 2		Level 3		Total
Common collective trusts	$	—	$	308,233	$	—	$	308,233
Mutual funds	—		—		—		—
U.S. treasury securities	2,275		—		—		2,275
Corporate debt securities	—		120,022		—		120,022
Total	$	2,275	$	428,255	$	—	430,530
Plan payables, net of accrued interest and dividends							173
Total							$	430,703
	December 31, 2011
	Level 1		Level 2		Level 3		Total
Common collective trusts	$	—	$	284,250	$	—	$	284,250
Mutual funds	—		2,666		—		2,666
U.S. treasury securities	2,979		—		—		2,979
Corporate debt securities	—		105,082		—		105,082
Total	$	2,979	$	391,998	$	—	394,977
Plan payables, net of accrued interest and dividends							882
Total							$	395,859

Dividends, accrued interest and net plan payables are not material to the plan assets. Accordingly, we have not classified these into the fair value hierarchy above at December 31, 2012 and 2011.

Concentration of Risks

Pension Plan investments at fair value as of December 31, 2012 and 2011 which represented 5% or more of the Pension Plan’s net assets were as follows:

	2012		2011
EB Daily Valued Small Cap Stock Index Fund	25,842		23,038
EB Daily Valued Stock Index Fund	85,834		82,060
EB Daily Valued International Stock Index Fund	25,850		21,938
EB Long Term Government Bond Index	45,732		44,058
EB Long Term Credit Bond Index	67,902		60,111
Corporate Debt Securities	124,519		105,082
	$	375,679	$	336,287

Investment Strategy

The Pension Plan’s assets are managed by outside investment managers. Our investment strategy with respect to pension assets is to maximize returns while preserving principal.

The expected long-term rate of return on the Pension Plan assets considers the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was weighted based on the target asset allocation to develop the expected long-term rate of return on assets. We continue to shift the asset allocation to lower the percentage of investments in equities and increase the percentage of investments in long-duration fixed-income securities. The continued changes could result in a reduction in the long-term rate of return on the Pension Plan assets and increase future pension expense. The long-term weighted average target asset allocations are as follows:

	December 31, 2012
U.S. large capitalization equities	17	%
U.S. small capitalization equities	4
International equities	4
U.S. long-duration fixed income	75
High yield fixed income	—
Total	100	%

The actual allocation of the assets in the Pension Plan at December 31, 2012 and 2011were as follows:

	December  31, 2012		December  31, 2011
U.S. large capitalization equities	28	%	29	%
U.S. small capitalization equities	6		6
International equities	8		7
U.S. long-duration fixed income	55		55
High yield fixed income	3		3
Total	100	%	100	%