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Note 12 Pension and Other Postretirement Benefit Plans
Net periodic benefit cost for our pension and other postretirement benefit plans consisted of the following (in millions):
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Pension Benefits |
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Other Benefits |
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Three Months Ended |
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July 1,
2011 |
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July 2,
2010 |
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July 1,
2011 |
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July 2,
2010 |
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Service cost
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$ 62 |
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$ 28 |
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$ 8 |
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$ 6 |
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Interest cost
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98 |
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53 |
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12 |
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6 |
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Expected return on plan assets
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(124 |
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(61 |
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(2 |
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(2 |
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Amortization of prior service cost (credit)
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2 |
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1 |
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(16 |
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(15 |
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Amortization of net actuarial loss
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21 |
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15 |
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Net periodic benefit cost (credit)
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59 |
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36 |
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2 |
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(5 |
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Curtailment charge (credit)
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(1 |
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Special termination benefits1
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1 |
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1 |
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Total cost (credit) recognized in statements of income
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$ 59 |
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$ 36 |
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$ 2 |
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$ (4 |
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1 Primarily relate to the Company's productivity, integration and restructuring initiatives. Refer to Note 11 for additional information related to these initiatives.
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Pension Benefits |
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Other Benefits |
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Six Months Ended |
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July 1,
2011 |
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July 2,
2010 |
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July 1,
2011 |
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July 2,
2010 |
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Service cost
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$ 124 |
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$ 57 |
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$ 16 |
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$ 11 |
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Interest cost
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195 |
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108 |
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23 |
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13 |
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Expected return on plan assets
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(246 |
) |
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(123 |
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(4 |
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(4 |
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Amortization of prior service cost (credit)
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3 |
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2 |
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(31 |
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(30 |
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Amortization of net actuarial loss
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42 |
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29 |
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1 |
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1 |
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Net periodic benefit cost (credit)
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118 |
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73 |
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5 |
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(9 |
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Curtailment charge (credit)
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(1 |
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Special termination benefits1
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4 |
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1 |
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2 |
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1 |
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Total cost (credit) recognized in statements of income
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$ 122 |
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$ 73 |
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$ 7 |
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$ (8 |
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1 Primarily relate to the Company's productivity, integration and restructuring initiatives. Refer to Note 11 for additional information related to these initiatives.
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We contributed $811 million to our pension plans during the six months ended July 1, 2011, which primarily consisted of $360 million to our primary U.S. pension plans and $314 million to certain European pension plans whose assets are managed through one of our captive insurance companies. We anticipate making additional contributions of approximately $24 million to our pension plans during the remainder of 2011. The Company contributed $46 million to our pension plans during the six months ended July 2, 2010.
During the first quarter of 2011, the Company began using its Ireland-based insurance captive to reinsure group annuity insurance contracts which cover the pension obligations of certain of our European pension plans. In accordance with local insurance regulations, our Ireland-based insurance captive is required to meet and maintain minimum solvency capital requirements, which resulted in the Company transferring $242 million in solvency funds to the captive. Although the solvency capital will eventually be invested in an actively managed portfolio of trading securities, only a portion of the funds had been invested in trading securities as of July 1, 2011. The Company classified the solvency capital in the line item other assets in our condensed consolidated balance sheet because the assets are not available to satisfy our current obligations.
On March 23, 2010, the Patient Protection and Affordable Care Act (HR 3590) was signed into law in the United States. As a result of this legislation, entities are no longer eligible to receive a tax deduction for the portion of prescription drug expenses reimbursed under the Medicare Part D subsidy. This change resulted in a reduction of our deferred tax assets and a corresponding charge to income tax expense of $14 million during the first quarter of 2010. Refer to Note 13.
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