|UNION CARBIDE CORP /NEW/ filed this Form 10-K on 02/15/2018|
NOTE 16 - PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Corporation has a defined benefit pension plan that covers substantially all employees in the United States. Benefits are based on length of service and the employee's three highest consecutive years of compensation. Employees hired on or after January 1, 2008, earn benefits that are based on a set percentage of annual pay, plus interest. The Corporation also has a non-qualified supplemental pension plan.
The Corporation's funding policy is to contribute to the plan when pension laws or economics either require or encourage funding. In 2017, UCC contributed $162 million to its pension plans including contributions to fund benefit payments for its non-qualified supplemental plan. UCC expects to contribute approximately $42 million to its pension plans in 2018.
The weighted-average assumptions used to determine pension plan obligations and net periodic benefit costs are provided below:
Other Postretirement Benefits
The Corporation provides certain health care and life insurance benefits to retired U.S. employees and survivors. The plan provides health care benefits, including hospital, physicians' services, drug and major medical expense coverage and life insurance benefits. The Corporation and the retiree share the cost of these benefits, with the Corporation portion increasing as the retiree has increased years of credited service, although there is a cap on the Corporation portion. The Corporation has the ability to change these benefits at any time. Employees hired after January 1, 2008, are not covered under this plan.
The Corporation funds most of the cost of these health care and life insurance benefits as incurred. In 2017, UCC did not make any contributions to its other postretirement benefit plan trust. Likewise, UCC does not expect to contribute assets to its other postretirement benefit plan trust in 2018.
The weighted-average assumptions used to determine other postretirement benefit obligations and net periodic benefit costs for the plan are provided in the following table:
Assumed health care cost trend rates have a modest effect on the amounts reported for the health care plan. A one percentage point change in assumed health care cost trend rates would have an immaterial impact on service and interest cost and the postretirement benefit obligation.
The Corporation determines the expected long-term rate of return on plan assets by performing a detailed analysis of key economic and market factors driving historical returns for each asset class and formulating a projected return based on factors in the current environment. Factors considered include, but are not limited to, inflation, real economic growth, interest rate yield, interest rate spreads, and other valuation measures and market metrics. The expected long-term rate of return for each asset class is then weighted based on the strategic asset allocation approved by the governing body for each plan. The Corporation's historical experience with the pension fund asset performance is also considered.