3M 2014 Annual Report Download - page 26

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Pension and postretirement defined benefit plans:
On a worldwide basis, 3M’s pension and postretirement plans were 85 percent funded at year-end 2014. The primary U.S.
qualified pension plan, which is approximately 68 percent of the worldwide pension obligation, was 92 percent funded and
the international pension plans were 85 percent funded. The U.S. non-qualified pension plan is not funded due to tax
considerations and other factors. Asset returns in 2014 for the primary U.S. qualified pension plan was 13.0%, as 3M
strategically invests in both growth assets and fixed income matching assets to manage its funded status. For the primary
U.S. qualified pension plan, the expected long-term rate of return on an annualized basis for 2015 is 7.75%, unchanged
from 2014. The primary U.S. qualified pension plan year-end 2014 discount rate was 4.10%, down 0.88 percentage points
from the year-end 2013 discount rate of 4.98%. The decrease in U.S. discount rates resulted in an increased valuation of
the projected benefit obligation, which decreased the plans’ funded status. Additional detail and discussion of international
plan asset returns and discount rates is provided in Note 10 (Pension and Postretirement Benefit Plans).
The changes in 3M’s defined benefit pension and postretirement plans’ funded status, which is required to be measured
as of each year-end, significantly impacted several balance sheet amounts. In the fourth quarter of 2014, these required
annual measurements decreased prepaid pension benefits by $0.7 billion, increased deferred taxes within other assets by
$0.8 billion, increased pension and postretirement benefits' long-term liabilities by $1.9 billion, and decreased
stockholders’ equity by $1.8 billion. Other pension and postretirement changes during the year, such as contributions and
amortization, also impacted these balance sheet amounts.
In addition, two items will impact the income statement in 2015:
• In the fourth quarter of 2014, 3M’s Board of Directors approved an amendment of the U.S. defined benefit
pension plan to include a lump sum payment option for employees that have vested retirement benefits who
commence their pension January 1, 2015, or later. This option is also available to vested employees who leave
3M before becoming eligible to retire at the time of termination. This change reduced 3M’s year-end 2014
projected benefit obligation (PBO) liability by approximately $266 million.
• As of December 31, 2014, the Company converted to the "RP 2014 Mortality Tables" and updated the mortality
improvement scale it used for calculating the year-end 2014 U.S. defined benefit pension annuitant and
postretirement obligations and 2015 expense. The impact of this change increased the year-end 2014 U.S. PBO
for pension by approximately $820 million and the 2014 U.S. accumulated postretirement benefit obligation by
approximately $100 million.
3M expects to contribute approximately $100 million to $200 million of cash to its global defined benefit pension and
postretirement plans in 2015. The Company does not have a required minimum cash pension contribution obligation for
its U.S. plans in 2015. 3M expects global defined benefit pension and postretirement expense in 2015 (before
settlements, curtailments, special termination benefits and other) to increase by approximately $210 million pre-tax when
compared to 2014. Refer to “Critical Accounting Estimates” within MD&A and Note 10 (Pension and Postretirement
Benefit Plans) for additional information concerning 3M’s pension and post-retirement plans.