3M 2013 Annual Report Download - page 82

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credit and $10 million in U.S. committed lines of credit with other banking partners as of December 31, 2013. These lines
of credit are utilized in connection with normal business activities. Under both the $1.5 billion and $150 million credit
agreements, the Company is required to maintain its EBITDA to Interest Ratio as of the end of each fiscal quarter at not
less than 3.0 to 1. This is calculated (as defined in the agreement) as the ratio of consolidated total EBITDA for the four
consecutive quarters then ended to total interest expense on all funded debt for the same period. At December 31, 2013,
this ratio was approximately 55 to 1. Debt covenants do not restrict the payment of dividends.
NOTE 10. Pension and Postretirement Benefit Plans
3M has company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the
United States. In total, 3M has over 80 defined benefit plans in 25 countries. Pension benefits associated with these plans
generally are based on each participant’s years of service, compensation, and age at retirement or termination. The
primary U.S. defined-benefit pension plan was closed to new participants effective January 1, 2009. The Company also
provides certain postretirement health care and life insurance benefits for substantially all of its U.S. employees who reach
retirement age while employed by the Company. Most international employees and retirees are covered by government
health care programs. The cost of company-provided postretirement health care plans for international employees is not
material and is combined with U.S. amounts in the tables that follow.
The Company also sponsors employee savings plans under Section 401(k) of the Internal Revenue Code. These plans
are offered to substantially all regular U.S. employees. Effective January 1, 2010, substantially all Company contributions
to the plans are made in cash. For substantially all employees hired prior to January 1, 2009, employee
401(k) contributions of up to 6% of eligible compensation are matched at rates of 60% or 75%, depending on the plan the
employee participated in. Employees hired on or after January 1, 2009 receive a cash match of 100% for employee
401(k) contributions of up to 6% of eligible compensation and also receive an employer retirement income account cash
contribution of 3% of the participant’s total eligible compensation. All contributions are invested in a number of investment
funds pursuant to the employees’ elections. Employer contributions to the U.S. plans were $136 million, $124 million and
$109 million for 2013, 2012 and 2011, respectively. 3M subsidiaries in various international countries also participate in
defined contribution plans. Employer contributions to the international plans were $71 million, $58 million and $54 million
for 2013, 2012 and 2011, respectively.
The Company’s defined benefit pension funding policy is to deposit with independent trustees amounts allowable by law.
Trust funds and deposits with insurance companies are maintained to provide pension benefits to plan participants and
their beneficiaries. There are no plan assets in the non-qualified plan due to its nature. For its U.S. postretirement health
care and life insurance benefit plans, the Company has set aside amounts at least equal to annual benefit payments with
an independent trustee.
In August 2006, the Pension Protection Act (PPA) was signed into law in the U.S. The PPA transition rules increased the
funding target for defined benefit pension plans to 100% of the target liability by 2011. 3M’s primary U.S. qualified defined
benefit plan does not have a mandatory cash contribution because the Company has a significant credit balance from
previous discretionary contributions that can be applied to any PPA funding requirements.
In the fourth quarter of 2010, the Company made further changes to its U.S. postretirement benefit plans. As a result of
these changes, the Company will transition all current and future retirees to the savings account benefits-based plan
announced in 2008. These changes became effective beginning January 1, 2013, for all Medicare eligible retirees and
their Medicare eligible dependents and will become effective beginning January 1, 2015, for all non-Medicare eligible
retirees and their eligible dependents.
In December 2011, the Company began offering a voluntary early retirement incentive program to certain eligible
participants of its U.S. pension plans who meet age and years of pension service requirements. The eligible participants
who accepted the offer and retired on February 1, 2012 received an enhanced pension benefit. Pension benefits were
enhanced by adding one additional year of pension service and one additional year of age for certain benefit calculations.
616 participants accepted the offer and retired on February 1, 2012. As a result, the Company incurred a $26 million
charge related to these special termination benefits in the first quarter of 2012.
Effective July 1, 2012, 3M Canada closed its pension plans for salaried employees to new participants. The change did
not trigger a plan remeasurement and therefore there is no immediate impact to the liability and expense.
3M was informed during the first quarter of 2009 that the general partners of WG Trading Company, in which 3M’s benefit
plans hold limited partnership interests, are the subject of a criminal investigation as well as civil proceedings by the SEC