3M 2014 Annual Report Download - page 88

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to $200 million of cash to its U.S. and international retirement plans. The Company does not have a required minimum
cash pension contribution obligation for its U.S. plans in 2015. Future contributions will depend on market conditions,
interest rates and other factors.
Future Pension and Postretirement Benefit Payments
The following table provides the estimated pension and postretirement benefit payments that are payable from the plans
to participants.
Qualified and Non-qualified
Pension Benefits
Postretirement
(Millions)
United States
International
Benefits
2015 Benefit Payments
$
946 $
209 $ 127
2016 Benefit Payments
964 226 139
2017 Benefit Payments
983 237 156
2018 Benefit Payments
1,010 256 160
2019 Benefit Payments
1,037 273 162
Next five years
5,381 1,563 860
Plan Asset Management
3M’s investment strategy for its pension and postretirement plans is to manage the funds on a going-concern basis. The
primary goal of the trust funds is to meet the obligations as required. The secondary goal is to earn the highest rate of
return possible, without jeopardizing its primary goal, and without subjecting the Company to an undue amount of
contribution risk. Fund returns are used to help finance present and future obligations to the extent possible within
actuarially determined funding limits and tax-determined asset limits, thus reducing the potential need for additional
contributions from 3M. The investment strategy has used long duration cash bonds and derivative instruments to offset a
significant portion of the interest rate sensitivity of U.S. pension liabilities.
Normally, 3M does not buy or sell any of its own securities as a direct investment for its pension and other postretirement
benefit funds. However, due to external investment management of the funds, the plans may indirectly buy, sell or hold
3M securities. The aggregate amount of 3M securities are not considered to be material relative to the aggregate fund
percentages.
The discussion that follows references the fair value measurements of certain assets in terms of levels 1, 2 and 3. See
Note 12 for descriptions of these levels. While the company believes the valuation methods are appropriate and
consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of
certain financial instruments could result in a different estimate of fair value at the reporting date.
U.S. Pension Plans Assets
In order to achieve the investment objectives in the U.S. pension plans, the investment policy includes a target strategic
asset allocation. The investment policy allows some tolerance around the target in recognition that market fluctuations and
illiquidity of some investments may cause the allocation to a specific asset class to vary from the target allocation,
potentially for long periods of time. Acceptable ranges have been designed to allow for deviation from strategic targets
and to allow for the opportunity for tactical over- and under-weights. The portfolio will normally be rebalanced when the
quarter-end asset allocation deviates from acceptable ranges. The allocation is reviewed regularly by the named fiduciary
of the plans.
The Company revised the classification of amounts previously presented in the table below for absolute return and
long/short equity assets held by the U.S. pension plans as of December 31, 2013. These immaterial revisions reclassified
$100 million and $67 million of previously presented absolute return and long/short equity amounts from level 3 to level 2,
respectively. The revision to the classification of absolute return assets is also reflected within net transfers into/(out of)
level 3 in the later table summarizing changes in the fair values of the U.S. pension plans’ level 3 assets for the year
ended December 31, 2013. The revision to the classification of long/short equity assets is also reflected within the
January 1, 2013 balance in the later table summarizing changes in the fair values of the U.S. pension plans’ level 3
assets.