MMM » Topics » Pension and Postretirement Obligations:

This excerpt taken from the MMM 8-K filed May 13, 2009.

Pension and Postretirement Obligations:

 

3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106, “Employer’s Accounting for Postretirement Benefits Other than Pensions,” in measuring plan assets and benefit obligations and in determining the amount of net periodic benefit cost, and SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R),” which was issued in September 2006 and effective as of December 31, 2006. SFAS No. 158 requires employers to recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income, which is a component of shareholders’ equity.

 

 

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Pension benefits associated with these plans are generally based primarily on each participant’s years of service, compensation, and age at retirement or termination. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and liability measurement. The assumed health care trend rate is the most significant postretirement health care assumption. See Note 11 for additional discussion of actuarial assumptions used in determining pension and postretirement health care liabilities and expenses.

 

The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the U.S. pension and postretirement benefit plans. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. The Company sets its rate to reflect the yield of a portfolio of high quality, fixed-income debt instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits. Using this methodology, the Company determined a discount rate of 6.14% to be appropriate as of December 31, 2008, which is an increase from the 6.00% rate used as of December 31, 2007.

 

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets, which is based on historical results for similar allocations among asset classes. For the U.S. pension plan, refer to Note 11 for information on how the 8.50% expected long-term rate of return on an annualized basis for 2009 is determined.

 

For the year ended December 31, 2008, the Company recognized total consolidated pre-tax pension expense (after settlements, curtailments and special termination benefits) of $89 million, down from $190 million in 2007. Pension expense (before settlements, curtailments and special termination benefits) is anticipated to increase to approximately $125 million in 2009. For the pension plans, holding all other factors constant, an increase/decrease in the expected long-term rate of return on plan assets of 0.25 of a percentage point would decrease/increase 2009 pension expense by approximately $26 million for U.S. pension plans and approximately $9 million for international pension plans. Also, holding all other factors constant, an increase in the discount rate used to measure plan liabilities of 0.25 of a percentage point would decrease 2009 pension expense by approximately $30 million for U.S. pension plans and approximately $12 million for international pension plans. A decrease in the discount rate of 0.25 of a percentage point would increase 2009 pension expense by approximately $31 million for U.S. pension plans and approximately $14 million for international pension plans. See Note 11 for details of the impact of a one percentage point change in assumed health care trend rates on the postretirement health care benefit expense and obligation.

 

These excerpts taken from the MMM 10-K filed Feb 17, 2009.

Pension and Postretirement Obligations:

 

3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106, “Employer’s Accounting for Postretirement Benefits Other than Pensions,” in measuring plan assets and benefit obligations and in determining the amount of net periodic benefit cost, and SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R),” which was issued in September 2006 and effective as of December 31, 2006. SFAS No. 158 requires employers to recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and recognize changes

 

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Table of Contents

 

in the funded status in the year in which the changes occur through accumulated other comprehensive income, which is a component of stockholders’ equity.

 

Pension benefits associated with these plans are generally based primarily on each participant’s years of service, compensation, and age at retirement or termination. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and liability measurement. The assumed health care trend rate is the most significant postretirement health care assumption. See Note 11 for additional discussion of actuarial assumptions used in determining pension and postretirement health care liabilities and expenses.

 

The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the U.S. pension and postretirement benefit plans. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. The Company sets its rate to reflect the yield of a portfolio of high quality, fixed-income debt instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits. Using this methodology, the Company determined a discount rate of 6.14% to be appropriate as of December 31, 2008, which is an increase from the 6.00% rate used as of December 31, 2007.

 

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets, which is based on historical results for similar allocations among asset classes. For the U.S. pension plan, refer to Note 11 for information on how the 8.50% expected long-term rate of return on an annualized basis for 2009 is determined.

 

For the year ended December 31, 2008, the Company recognized total consolidated pre-tax pension expense (after settlements, curtailments and special termination benefits) of $89 million, down from $190 million in 2007. Pension expense (before settlements, curtailments and special termination benefits) is anticipated to increase to approximately $125 million in 2009. For the pension plans, holding all other factors constant, an increase/decrease in the expected long-term rate of return on plan assets of 0.25 of a percentage point would decrease/increase 2009 pension expense by approximately $26 million for U.S. pension plans and approximately $9 million for international pension plans. Also, holding all other factors constant, an increase in the discount rate used to measure plan liabilities of 0.25 of a percentage point would decrease 2009 pension expense by approximately $30 million for U.S. pension plans and approximately $12 million for international pension plans. A decrease in the discount rate of 0.25 of a percentage point would increase 2009 pension expense by approximately $31 million for U.S. pension and plans and approximately $14 million for international pension plans. See Note 11 for details of the impact of a one percentage point change in assumed health care trend rates on the postretirement health care benefit expense and obligation.

 

Pension and Postretirement Obligations:



 



3M has various
company-sponsored retirement plans covering substantially all U.S. employees
and many employees outside the United States. The Company accounts for its
defined benefit pension and postretirement health care and life insurance
benefit plans in accordance with Statement of Financial Accounting Standards
(SFAS) No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106, “Employer’s
Accounting for Postretirement Benefits Other than Pensions,” in measuring plan
assets and benefit obligations and in determining the amount of net periodic
benefit cost, and SFAS No. 158, “Employer’s Accounting for Defined Benefit
Pension and Other Postretirement Benefit Plans an amendment of FASB Statements No. 87,
88, 106 and 132(R),” which was issued in September 2006 and effective as
of December 31, 2006. SFAS No. 158 requires employers to recognize
the underfunded or overfunded status of a defined benefit postretirement plan
as an asset or liability in its statement of financial position and recognize
changes



 



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Table of Contents



 



in the funded status in
the year in which the changes occur through accumulated other comprehensive
income, which is a component of stockholders’ equity.



 



Pension benefits
associated with these plans are generally based primarily on each participant’s
years of service, compensation, and age at retirement or termination. Two
critical assumptions, the discount rate and the expected return on plan assets,
are important elements of expense and liability measurement. The assumed health
care trend rate is the most significant postretirement health care assumption.
See Note 11 for additional discussion of actuarial assumptions used in
determining pension and postretirement health care liabilities and expenses.



 



The
Company determines the discount rate used to measure plan liabilities as of the
December 31 measurement date for the U.S. pension and postretirement
benefit plans. The discount rate reflects the current rate at which the
associated liabilities could be effectively settled at the end of the year. The
Company sets its rate to reflect the yield of a portfolio of high quality,
fixed-income debt instruments that would produce cash flows sufficient in
timing and amount to settle projected future benefits. Using this methodology,
the Company determined a discount rate of 6.14% to be appropriate as of December 31,
2008, which is an increase from the 6.00% rate used as of December 31,
2007.



 



A significant element in
determining the Company’s pension expense in accordance with SFAS No. 87
is the expected return on plan assets, which is based on historical results for
similar allocations among asset classes. For the U.S. pension plan, refer to
Note 11 for information on how the 8.50% expected long-term rate of return on
an annualized basis for 2009 is determined.



 



For the year ended December 31,
2008, the Company recognized total consolidated pre-tax pension expense (after
settlements, curtailments and special termination benefits) of $89 million,
down from $190 million in 2007. Pension expense (before settlements,
curtailments and special termination benefits) is anticipated to increase to
approximately $125 million in 2009. For the pension plans, holding all
other factors constant, an increase/decrease in the expected long-term rate of
return on plan assets of 0.25 of a percentage point would decrease/increase
2009 pension expense by approximately $26 million for U.S. pension plans
and approximately $9 million for international pension plans. Also, holding all
other factors constant, an increase in the discount rate used to measure plan
liabilities of 0.25 of a percentage point would decrease 2009 pension expense
by approximately $30 million for U.S. pension plans and approximately $12
million for international pension plans. A decrease in the discount rate of
0.25 of a percentage point would increase 2009 pension expense by approximately
$31 million for U.S. pension and plans and approximately $14 million for
international pension plans. See Note 11 for details of the impact of a
one percentage point change in assumed health care trend rates on the
postretirement health care benefit expense and obligation.



 



This excerpt taken from the MMM 8-K filed May 19, 2008.

Pension and Postretirement Obligations:

 

3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106, “Employer’s Accounting for Postretirement Benefits Other than Pensions,” in measuring plan assets and benefit obligations and in determining the amount of net periodic benefit cost, and SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R),” which was issued in September 2006 and effective as of December 31, 2006. SFAS No. 158 requires employers to recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income, which is a component of stockholders’ equity.

 

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Pension benefits associated with these plans are generally based primarily on each participant’s years of service, compensation, and age at retirement or termination. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and liability measurement. The assumed health care trend rate is the most significant postretirement health care assumption. See Note 11 for additional discussion of actuarial assumptions used in determining pension and postretirement health care liabilities and expenses.

 

The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the U.S. pension and postretirement benefit plans. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks at rates of return on fixed-income investments of similar duration to the liabilities in the plan that receive high, investment grade ratings by recognized ratings agencies. Using this methodology, the Company determined a discount rate of 6.00% to be appropriate as of December 31, 2007, which is an increase of 0.25 of a percentage point from the rate used as of December 31, 2006.

 

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets, which is based on historical results for similar allocations among asset classes. For the U.S. pension plan, the Company’s assumption for the expected return on plan assets was 8.75% for 2007 and will be reduced to 8.50% for 2008. Refer to Note 11 for information on how this rate is determined.

 

For the year ended December 31, 2007, the Company recognized total consolidated pre-tax pension expense (after settlements, curtailments and special termination benefits) of $190 million, down from $347 million in 2006. Pension expense (before settlements, curtailments and special termination benefits) is anticipated to decrease to approximately $90 million in 2008. For the pension plans, holding all other factors constant, an increase/decrease in the expected long-term rate of return on plan assets of 0.25 of a percentage point would decrease/increase 2008 pension expense by approximately $26 million for U.S. pension plans and approximately $11 million for international pension plans. Also, holding all other factors constant, an increase/decrease in the discount rate used to measure plan liabilities of 0.25 of a percentage point would decrease/increase 2008 pension expense by approximately $32 million for U.S. pension plans and approximately $21 million for international pension plans. See Note 11 for details of the impact of a one percentage point change in assumed health care trend rates on the postretirement health care benefit expense and obligation.

 

These excerpts taken from the MMM 10-K filed Feb 15, 2008.

Pension and Postretirement Obligations:

3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106, “Employer’s Accounting for Postretirement Benefits Other than Pensions,” in measuring plan assets and benefit obligations and in determining the amount of net periodic benefit cost, and SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R),” which was issued in September 2006 and effective as of December 31, 2006. SFAS No. 158 requires employers to recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income, which is a component of stockholders’ equity.

 

28



 

Pension benefits associated with these plans are generally based primarily on each participant’s years of service, compensation, and age at retirement or termination. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and liability measurement. The assumed health care trend rate is the most significant postretirement health care assumption. See Note 11 for additional discussion of actuarial assumptions used in determining pension and postretirement health care liabilities and expenses.

 

The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the U.S. pension and postretirement benefit plans. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks at rates of return on fixed-income investments of similar duration to the liabilities in the plan that receive high, investment grade ratings by recognized ratings agencies. Using this methodology, the Company determined a discount rate of 6.00% to be appropriate as of December 31, 2007, which is an increase of 0.25 of a percentage point from the rate used as of December 31, 2006.

 

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets, which is based on historical results for similar allocations among asset classes. For the U.S. pension plan, the Company’s assumption for the expected return on plan assets was 8.75% for 2007 and will be reduced to 8.50% for 2008. Refer to Note 11 for information on how this rate is determined.

 

For the year ended December 31, 2007, the Company recognized total consolidated pre-tax pension expense (after settlements, curtailments and special termination benefits) of $190 million, down from $347 million in 2006. Pension expense (before settlements, curtailments and special termination benefits) is anticipated to decrease to approximately $90 million in 2008. For the pension plans, holding all other factors constant, an increase/decrease in the expected long-term rate of return on plan assets of 0.25 of a percentage point would decrease/increase 2008 pension expense by approximately $26 million for U.S. pension plans and approximately $11 million for international pension plans. Also, holding all other factors constant, an increase/decrease in the discount rate used to measure plan liabilities of 0.25 of a percentage point would decrease/increase 2008 pension expense by approximately $32 million for U.S. pension plans and approximately $21 million for international pension plans. See Note 11 for details of the impact of a one percentage point change in assumed health care trend rates on the postretirement health care benefit expense and obligation.

 

Pension and Postretirement Obligations:



3M has various
company-sponsored retirement plans covering substantially all U.S. employees
and many employees outside the United States. The Company accounts for its
defined benefit pension and postretirement health care and life insurance
benefit plans in accordance with Statement of Financial Accounting Standards
(SFAS) No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106, “Employer’s
Accounting for Postretirement Benefits Other than Pensions,” in measuring plan
assets and benefit obligations and in determining the amount of net periodic
benefit cost, and SFAS No. 158, “Employer’s Accounting for Defined Benefit
Pension and Other Postretirement Benefit Plans an amendment of FASB Statements No. 87,
88, 106 and 132(R),” which was issued in September 2006 and effective as
of December 31, 2006. SFAS No. 158 requires employers to recognize
the underfunded or overfunded status of a defined benefit postretirement plan
as an asset or liability in its statement of financial position and recognize
changes in the funded status in the year in which the changes occur through
accumulated other comprehensive income, which is a component of stockholders’
equity.



 



28
















 



Pension benefits
associated with these plans are generally based primarily on each participant’s
years of service, compensation, and age at retirement or termination. Two
critical assumptions, the discount rate and the expected return on plan assets,
are important elements of expense and liability measurement. The assumed health
care trend rate is the most significant postretirement health care assumption.
See Note 11 for additional discussion of actuarial assumptions used in
determining pension and postretirement health care liabilities and expenses.



 



The
Company determines the discount rate used to measure plan liabilities as of the
December 31 measurement date for the U.S. pension and postretirement
benefit plans. The discount rate reflects the current rate at which the
associated liabilities could be effectively settled at the end of the year. In
estimating this rate, the Company looks at rates of return on fixed-income
investments of similar duration to the liabilities in the plan that receive
high, investment grade ratings by recognized ratings agencies. Using this
methodology, the Company determined a discount rate of 6.00% to be appropriate
as of December 31, 2007, which is an increase of 0.25 of a percentage
point from the rate used as of December 31, 2006.



 



A significant element in
determining the Company’s pension expense in accordance with SFAS No. 87
is the expected return on plan assets, which is based on historical results for
similar allocations among asset classes. For the U.S. pension plan, the Company’s
assumption for the expected return on plan assets was 8.75% for 2007 and will
be reduced to 8.50% for 2008. Refer to Note 11 for information on how this rate
is determined.



 



For the year ended December 31,
2007, the Company recognized total consolidated pre-tax pension expense (after
settlements, curtailments and special termination benefits) of $190 million,
down from $347 million in 2006. Pension expense (before settlements,
curtailments and special termination benefits) is anticipated to decrease to
approximately $90 million in 2008. For the pension plans, holding all
other factors constant, an increase/decrease in the expected long-term rate of
return on plan assets of 0.25 of a percentage point would decrease/increase
2008 pension expense by approximately $26 million for U.S. pension plans
and approximately $11 million for international pension plans. Also, holding
all other factors constant, an increase/decrease in the discount rate used to
measure plan liabilities of 0.25 of a percentage point would decrease/increase
2008 pension expense by approximately $32 million for U.S. pension plans and
approximately $21 million for international pension plans. See Note 11 for
details of the impact of a one percentage point change in assumed health care
trend rates on the postretirement health care benefit expense and obligation.



 



This excerpt taken from the MMM 8-K filed May 25, 2007.

Pension and Postretirement Obligations:

3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106, “Employer’s Accounting for Postretirement Benefits Other than Pensions,” in measuring plan assets and benefit obligations and in determining the amount of net periodic benefit cost, and SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R),” which was issued in September 2006 and effective as of December 31, 2006. SFAS No. 158 requires employers to recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income, which is a component of stockholders’ equity. As a result of the implementation of SFAS No. 158, the Company recognized an after-tax decrease in accumulated other comprehensive income of $1.187 billion and $513 million for the U.S. and International pension benefit plans, respectively, and $218 million for the postretirement health care and life insurance benefit plan.

 

Pension benefits associated with these plans are generally based primarily on each participant’s years of service, compensation, and age at retirement or termination. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and liability measurement. The assumed health care trend rate is the most significant postretirement health care assumption. See Note 11 for additional discussion of actuarial assumptions used in determining pension and postretirement health care liabilities and expenses.

 

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The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the U.S. pension and postretirement benefit plans. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks at rates of return on fixed-income investments of similar duration to the liabilities in the plan that receive high, investment grade ratings by recognized ratings agencies. Using this methodology, the Company determined a discount rate of 5.75% to be appropriate as of December 31, 2006, which is an increase of 0.25 of a percentage point from the rate used as of December 31, 2005.

 

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets, which is based on historical results for similar allocations among asset classes. For the U.S. pension plan, the Company’s assumption for the expected return on plan assets was 8.75% for 2006 and will remain at 8.75% for 2007. Refer to Note 11 for information on how this rate is determined.

 

As of December 31, 2005, the Company converted to the RP (Retirement Plans) 2000 Mortality Table for calculating the year-end 2005 U.S. pension and postretirement obligations and 2006 expense. The impact of this change increased the year-end 2005 U.S. Projected Benefit Obligations for pension by $385 million, the year-end 2005 U.S. Accumulated Benefit Obligations for pension by $349 million and the 2005 U.S. Accumulated Postretirement Benefit Obligation by $93 million. This change also increased pension expenses for 2006 by $64 million and postretirement expenses by $17 million.

 

For the year ended December 31, 2006, the Company recognized total consolidated pre-tax pension expense (after settlements, curtailments and special termination benefits) of $347 million, up from $331 million in 2005. Pension expense (before settlements, curtailments and special termination benefits) is anticipated to decrease to approximately $174 million in 2007. For the pension plans, holding all other factors constant, an increase/decrease in the expected long-term rate of return on plan assets of 0.25 of a percentage point would decrease/increase 2007 pension expense by approximately $24 million for U.S. pension plans and approximately $9 million for international pension plans. Also, holding all other factors constant, an increase/decrease in the discount rate used to measure plan liabilities of 0.25 of a percentage point would decrease/increase 2006 pension expense by approximately $32 million for U.S. pension plans and approximately $17 million for international pension plans. See Note 11 for details of the impact of a one percentage point change in assumed health care trend rates on the postretirement health care benefit expense and obligation.

 

This excerpt taken from the MMM 10-K filed Feb 26, 2007.

Pension and Postretirement Obligations:

3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106, “Employer’s Accounting for Postretirement Benefits Other than Pensions,” in measuring plan assets and benefit obligations and in determining the amount of net periodic benefit cost, and SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R),” which was issued in September 2006 and effective as of December 31, 2006. SFAS No. 158 requires employers to recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income, which is a component of stockholders’ equity. As a result of the implementation of SFAS No. 158, the Company recognized an after-tax decrease in accumulated other comprehensive income of $1.187 billion and $513 million for the U.S. and International pension benefit plans, respectively, and $218 million for the postretirement health care and life insurance benefit plan.

Pension benefits associated with these plans are generally based primarily on each participant’s years of service, compensation, and age at retirement or termination. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and liability measurement. The assumed health care trend rate is the most significant postretirement health care assumption. See Note 11 for additional discussion of actuarial assumptions used in determining pension and postretirement health care liabilities and expenses.

The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the U.S. pension and postretirement benefit plans. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks at

26




rates of return on fixed-income investments of similar duration to the liabilities in the plan that receive high, investment grade ratings by recognized ratings agencies. Using this methodology, the Company determined a discount rate of 5.75% to be appropriate as of December 31, 2006, which is an increase of 0.25 of a percentage point from the rate used as of December 31, 2005.

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets, which is based on historical results for similar allocations among asset classes. For the U.S. pension plan, the Company’s assumption for the expected return on plan assets was 8.75% for 2006 and will remain at 8.75% for 2007. Refer to Note 11 for information on how this rate is determined.

As of December 31, 2005, the Company converted to the RP (Retirement Plans) 2000 Mortality Table for calculating the year-end 2005 U.S. pension and postretirement obligations and 2006 expense. The impact of this change increased the year-end 2005 U.S. Projected Benefit Obligations for pension by $385 million, the year-end 2005 U.S. Accumulated Benefit Obligations for pension by $349 million and the 2005 U.S. Accumulated Postretirement Benefit Obligation by $93 million. This change also increased pension expenses for 2006 by $64 million and postretirement expenses by $17 million.

For the year ended December 31, 2006, the Company recognized total consolidated pre-tax pension expense (after settlements, curtailments and special termination benefits) of $347 million, up from $331 million in 2005. Pension expense (before settlements, curtailments and special termination benefits) is anticipated to decrease to approximately $174 million in 2007. For the pension plans, holding all other factors constant, an increase/decrease in the expected long-term rate of return on plan assets by 0.25 of a percentage point would decrease/increase U.S. 2007 pension expense by approximately $24 million for U.S. pension plans and approximately $9 million for international pension plans. Also, holding all other factors constant, an increase/decrease in the discount rate used to measure plan liabilities by 0.25 of a percentage point would decrease/increase 2006 pension expense by approximately $32 million for U.S. pension plans and approximately $17 million for international pension plans. See Note 11 for details of the impact of a one percentage point change in assumed health care trend rates on the postretirement health care benefit expense and obligation.

This excerpt taken from the MMM 8-K filed Sep 21, 2006.

Pension and Postretirement Obligations:

3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions” and SFAS No. 106, “Employer’s Accounting for Postretirement Benefits Other than Pensions”, which require that amounts recognized in financial statements be determined on an actuarial basis. Pension benefits associated with these plans are generally based primarily on each participant’s years of service, compensation, and age at retirement or termination. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and liability measurement. The assumed health care trend rate is the most significant postretirement health care assumption. See Note 10 to the Consolidated Financial Statements for additional discussion of actuarial assumptions used in determining pension and postretirement health care liabilities and expenses.

The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the U.S. pension and postretirement benefit plans. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks at rates of return on fixed-income investments of similar duration to the liabilities in the plan that receive high, investment grade ratings by recognized ratings agencies. Using these methodologies, the Company determined a discount rate of 5.50% to be appropriate as of December 31, 2005, which is a reduction of 0.25 percentage points from the rate used as of December 31, 2004.

As of December 31, 2005, the Company converted to the RP (Retirement Plans) 2000 Mortality Table for calculating the year-end 2005 U.S. pension and postretirement obligations and 2006 expense. The impact of this change increased the year-end 2005 U.S. Projected Benefit Obligations for pension by $385 million, the year-end 2005 U.S. Accumulated Benefit Obligations for pension by $349 million and the 2005 U.S. Accumulated

22




Postretirement Benefit Obligation by $93 million. This change will also increase pension expenses for 2006 by $64 million and postretirement expenses by $17 million.

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets, which is based on historical results for similar allocations among asset classes. For the U.S. pension plan, the Company’s assumption for the expected return on plan assets was 8.75% for 2005 and will remain at 8.75% for 2006. Refer to Note 10 to the Consolidated Financial Statements for information on how this rate is determined.

The difference between the expected return and the actual return on plan assets is deferred and, under certain circumstances, amortized over future years of service. Therefore, the net deferral of past asset gains (losses) ultimately affects future pension expense. This is also true of changes to actuarial assumptions. As of December 31, 2005, the Company had net unrecognized pension actuarial losses of $2.676 billion and $954 million for the U.S. and International pension benefit plans, respectively, and $1.005 billion for the postretirement health care and life insurance benefit plan. These amounts represent potential future pension and postretirement expenses that would be amortized over average future service periods. The average remaining service periods for U.S. and International pension plans and the postretirement plans are 10.2 years, 14.1 years and 10.0 years, respectively.

For the year ended December 31, 2005, the Company recognized total consolidated pre-tax pension expense (after settlements, curtailments and special termination benefits) of $331 million, up from $325 million in 2004. Pension expense (before settlements, curtailments and special termination benefits) is anticipated to decrease to approximately $300 million in 2006. For the pension plans, holding all other factors constant, an increase/decrease in the expected long-term rate of return on plan assets by 0.25 percentage points would decrease/increase U.S. 2006 pension expense by approximately $22 million for U.S. pension plans and approximately $7 million for international pension plans. Also, holding all other factors constant, an increase/decrease in the discount rate used to measure plan liabilities by 0.25 percentage points would decrease/increase 2006 pension expense by approximately $31 million for U.S. pension plans and approximately $7 million for international pension plans. See Note 10 to the Consolidated Financial Statements for details of the impact of a one percentage point change in assumed health care trend rates on the postretirement health care benefit expense and obligation.

This excerpt taken from the MMM 10-K filed Feb 21, 2006.

Pension and Postretirement Obligations:

3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions” and SFAS No. 106, “Employer’s Accounting for Postretirement Benefits Other than Pensions”, which require that amounts recognized in financial statements be determined on an actuarial basis. Pension benefits associated with these plans are generally based primarily on each participant’s years of service, compensation, and age at retirement or termination. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and liability measurement. The assumed health care trend rate is the most significant postretirement health care assumption. See Note 10 to the Consolidated Financial Statements for additional discussion of actuarial assumptions used in determining pension and postretirement health care liabilities and expenses.

 

The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the U.S. pension and postretirement benefit plans. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks at rates of return on fixed-income investments of similar duration to the liabilities in the plan that receive high, investment grade ratings by recognized ratings agencies. Using these methodologies, the Company determined a discount rate of 5.50% to be appropriate as of December 31, 2005, which is a reduction of 0.25 percentage points from the rate used as of December 31, 2004.

 

As of December 31, 2005, the Company converted to the RP (Retirement Plans) 2000 Mortality Table for calculating the year-end 2005 U.S. pension and postretirement obligations and 2006 expense. The impact of this change increased the year-end 2005 U.S. Projected Benefit Obligations for pension by $385 million, the year-end 2005 U.S. Accumulated Benefit Obligations for pension by $349 million and the 2005 U.S. Accumulated Postretirement Benefit Obligation by $93 million. This change will also increase pension expenses for 2006 by $64 million and postretirement expenses by $17 million.

 

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets, which is based on historical results for similar allocations among asset classes. For the U.S. pension plan, the Company’s assumption for the expected return on plan assets was 8.75% for 2005 and will remain at 8.75% for 2006. Refer to Note 10 to the Consolidated Financial Statements for information on how this rate is determined.

 

The difference between the expected return and the actual return on plan assets is deferred and, under certain circumstances, amortized over future years of service. Therefore, the net deferral of past asset gains (losses) ultimately affects future pension expense. This is also true of changes to actuarial assumptions. As of December 31, 2005, the Company had net unrecognized pension actuarial losses of $2.676 billion and $954 million for the U.S. and International pension benefit plans, respectively, and $1.005 billion for the postretirement health care and life insurance benefit plan. These amounts represent potential future pension and postretirement expenses that would be amortized over average future service periods. The average remaining service periods for U.S. and International pension plans and the postretirement plans are 10.2 years, 14.1 years and 10.0 years, respectively.

 

For the year ended December 31, 2005, the Company recognized total consolidated pre-tax pension expense (after settlements, curtailments and special termination benefits) of $331 million, up from $325 million in 2004. Pension expense (before settlements, curtailments and special termination benefits) is anticipated to decrease to approximately $300 million in 2006. For the pension plans, holding all other factors constant, an increase/decrease in the expected long-term rate of return on plan assets by 0.25 percentage points would decrease/increase U.S. 2006 pension expense by approximately $22 million for U.S. pension plans and approximately $7 million for

 

25



 

international pension plans. Also, holding all other factors constant, an increase/decrease in the discount rate used to measure plan liabilities by 0.25 percentage points would decrease/increase 2006 pension expense by approximately $31 million for U.S. pension plans and approximately $7 million for international pension plans. See Note 10 to the Consolidated Financial Statements for details of the impact of a one percentage point change in assumed health care trend rates on the postretirement health care benefit expense and obligation.

 

This excerpt taken from the MMM 8-K filed Sep 7, 2005.

Pension and Postretirement Obligations:

3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension plans in accordance with SFAS No. 87, “Employers’ Accounting for Pensions”, which requires that amounts recognized in financial statements be determined on an actuarial basis. Pension benefits associated with these plans are generally based primarily on each participant’s years of service, compensation, and age at retirement or termination. See Note 11

 

 

17



 

to the Consolidated Financial Statements for additional discussion of actuarial assumptions used in determining pension liability and expense.

 

As previously disclosed in the Company’s June 30, 2004 and September 30, 2004 Form 10-Qs, in 2004, the Company’s U.S. plan measurement date was changed from September 30 to December 31. The primary reasons for this change include consistency between the U.S. and international dates, the increased clarity that results from having the same measurement and balance sheet dates, and administrative simplification. This change did not have a material impact on the determination of periodic pension cost or pension obligations.

 

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets, which is based on projected results for similar allocations among asset classes. The difference between the expected return and the actual return on plan assets is deferred and, under certain circumstances, amortized over future years of service. Therefore, the net deferral of past asset gains (losses) ultimately affects future pension expense. For the U.S. pension plan, the Company’s assumption for the expected return on plan assets was 9.00% for 2004. Refer to Note 11 to the Consolidated Financial Statements for information on how this rate is determined. The Company is lowering the 2005 expected return on plan assets by 0.25 percentage points to 8.75%.

 

The discount rate used to measure pension plan liabilities reflects the current rate at which the pension liabilities could be effectively settled as of December 31, 2004. In estimating this rate, the Company looks at rates of return on fixed-income investments of similar duration to the liabilities in the plan that receive high, investment grade ratings by recognized ratings agencies. By applying this methodology, the Company determined a discount rate of 5.75% to be appropriate as of December 31, 2004, which is a reduction of 0.25 percentage points from the rate used as of September 30, 2003.

 

For the year ended December 31, 2004, the change in the minimum pension liability within accumulated other comprehensive income increased stockholders’ equity by $1.193 billion (after-tax). This increase was primarily the result of the assets being above the Accumulated Benefit Obligation for the U.S. qualified plan, which caused the minimum pension liability recorded for the years ended December 31, 2003 and 2002 to be reversed. As a result, the Company’s U.S. qualified plan recorded a Prepaid Pension Asset of $1.851 billion.

 

For the year ended December 31, 2004, the Company recognized total consolidated pre-tax pension expense (after settlements, curtailments and special termination benefits) of $325 million, up from $168 million in 2003. Pension expense (before settlements, curtailments and special termination benefits) is anticipated to increase to approximately $342 million in 2005. As previously mentioned, the Company lowered the expected return on assets assumption from 9.00% in 2004 to 8.75% in 2005. For the U.S. pension plans, holding all other factors constant, an increase/decrease in the expected long-term rate of return on plan assets by 0.25 percentage points would decrease/increase U.S. pension expense by approximately $19 million in 2005. For the U.S. pension plans, holding all other factors constant, an increase/decrease in the discount rate used to measure plan liabilities by 0.25 percentage points would decrease/increase U.S. pension expense by approximately $30 million in 2005.

 

This excerpt taken from the MMM 10-K filed Feb 24, 2005.

Pension and Postretirement Obligations:

3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension plans in accordance with SFAS No. 87, “Employers’ Accounting for Pensions”, which requires that amounts recognized in financial statements be determined on an actuarial basis. Pension benefits associated with these plans are generally based primarily on each participant’s years of service, compensation, and age at retirement or termination. See Note 11 to the Consolidated Financial Statements for additional discussion of actuarial assumptions used in determining pension liability and expense.

 

28



 

As previously disclosed in the Company’s June 30, 2004 and September 30, 2004 Form 10-Qs, in 2004, the Company’s U.S. plan measurement date was changed from September 30 to December 31. The primary reasons for this change include consistency between the U.S. and international dates, the increased clarity that results from having the same measurement and balance sheet dates, and administrative simplification. This change did not have a material impact on the determination of periodic pension cost or pension obligations.

 

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets, which is based on projected results for similar allocations among asset classes. The difference between the expected return and the actual return on plan assets is deferred and, under certain circumstances, amortized over future years of service. Therefore, the net deferral of past asset gains (losses) ultimately affects future pension expense. For the U.S. pension plan, the Company’s assumption for the expected return on plan assets was 9.00% for 2004. Refer to Note 11 to the Consolidated Financial Statements for information on how this rate is determined. The Company is lowering the 2005 expected return on plan assets by 0.25 percentage points to 8.75%.

 

The discount rate used to measure pension plan liabilities reflects the current rate at which the pension liabilities could be effectively settled as of December 31, 2004. In estimating this rate, the Company looks at rates of return on fixed-income investments of similar duration to the liabilities in the plan that receive high, investment grade ratings by recognized ratings agencies. By applying this methodology, the Company determined a discount rate of 5.75% to be appropriate as of December 31, 2004, which is a reduction of 0.25 percentage points from the rate used as of September 30, 2003.

 

For the year ended December 31, 2004, the change in the minimum pension liability within accumulated other comprehensive income increased stockholders’ equity by $1.193 billion (after-tax). This increase was primarily the result of the assets being above the Accumulated Benefit Obligation for the U.S. qualified plan, which caused the minimum pension liability recorded for the years ended December 31, 2003 and 2002 to be reversed. As a result, the Company’s U.S. qualified plan recorded a Prepaid Pension Asset of $1.851 billion.

 

For the year ended December 31, 2004, the Company recognized total consolidated pre-tax pension expense (after settlements, curtailments and special termination benefits) of $325 million, up from $168 million in 2003. Pension expense (before settlements, curtailments and special termination benefits) is anticipated to increase to approximately $342 million in 2005. As previously mentioned, the Company lowered the expected return on assets assumption from 9.00% in 2004 to 8.75% in 2005. For the U.S. pension plans, holding all other factors constant, an increase/decrease in the expected long-term rate of return on plan assets by 0.25 percentage points would decrease/increase U.S. pension expense by approximately $19 million in 2005. For the U.S. pension plans, holding all other factors constant, an increase/decrease in the discount rate used to measure plan liabilities by 0.25 percentage points would decrease/increase U.S. pension expense by approximately $30 million in 2005.

 

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