3M Co., St. Paul, Minn., could contribute $800 million to its U.S. pension plans by the end of the year, depending on current “unsustainably low” interest rates for valuing retirement liabilities, according to company reports.
The company expects to contribute $100 million to its combined $10.4 billion U.S. pension plans by Dec. 31. It also is considering making an additional $700 million contribution either by the end of the year or in first quarter of 2011, assuming that the 4.86% discount rate as of Sept. 30 for valuing plan liabilities doesn’t decline and its U.S. pension plans’ investment return performance for the first nine months of the year “holds,” according to 3M’s 10-Q report filed Nov. 5 with the SEC and an Oct. 28 3M presentation to investors. “If rates of return or discount rates become more favorable, 3M would likely contribute much less than this amount,” the 10-Q report said.
The 3M’s U.S. pension plans’ investments returned 11% for the first nine months of the year, according to the presentation, made jointly by George W. Buckley, 3M chairman, president and CEO, and Patrick D. Campbell, senior vice president and CFO.
In their view, the 4.86% discount rate is at “an unsustainably low level.” according to the presentation. The rate “is down nearly a point from 5.77%” the company used at year-end 2009. 3M’s U.S. pension liabilities totaled $11.3 billion as of Dec. 31.
For the first nine months of the year, 3M contributed a total of $392 million to its U.S. and international pension plans, according to the 10-Q. A breakout was unavailable.
Last year, 3M contributed $755 million to its U.S. pension plans, including $600 million in company stock, and $504 million to its non-U.S. pension plans, according to its 10-K.
Its U.S. pension plans’ investment return was 12.6% in 2009, compared to a 13.6% loss in 2008 and a 14% gain in 2007. The U.S. pension plans’ average annual return for the 10 and 25 years ended Dec. 31, 2009, was 5.6% and 11.2%, respectively.
3M’s non-U.S. pension plans had $3.9 billion in assets and $3.8 billion in liabilities as of Dec. 31.
Officials at 3M couldn’t be reached for comment.