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4 companies disclose $3.1 billion in pension contributions in fourth quarter

Four companies made discretionary contributions totaling $3.1 billion to their respective U.S. defined benefit plans in the fourth quarter, their earnings statements show.

Caterpillar Inc., Peoria, Ill., and Raytheon Co., Waltham, Mass., each contributed $1 billion to their U.S. DB plans in the fourth quarter. Meanwhile, 3M Co., St. Paul, Minn., contributed $600 million. 3M's contribution was partially the result of the Tax Cuts and Jobs Act of 2017 being signed into law, according to its earnings release.

Finally, Northrop Grumman Corp., Falls Church, Va., made a discretionary contribution of $500 million in the quarter. The company's fourth-quarter earnings were reduced by higher tax expense resulting from the enactment of the Tax Cuts and Jobs Act and the company's related $500 million discretionary pre-tax pension contribution, which together reduced net earnings by $317 million.

Current tax law allows plan sponsors to deduct a portion of pension contributions based on their tax rates. Since future pension contributions will receive a lower tax deduction after the recently passed corporate tax rate cut, it could be cheaper for plan sponsors to make more sizable contributions to their plans in 2017.

Caterpillar had $12.2 billion in its U.S. DB plan as of Sept. 30, according to Pensions & Investments data. It announced plans to contribute $350 million to its U.S. DB plans in 2017, according to its 10-K filing last year.

Caterpillar's asset allocation as of Sept. 30 was 61.6% U.S. fixed income, 22.5% U.S. equities, 13.5% international equities, 1.4% private equity and 1% cash.

Raytheon's U.S. pension plan had $18.7 billion in assets as of Sept. 30, according to P&I data. It expected to make required contributions of $750 million to its pension plans in 2017, said its 10-K last year.

Raytheon's asset allocation was 30% U.S. fixed income, 27% U.S. equities, 19% international equities, 9% alternatives, 7% private equity, 6% real estate and 2% cash.

3M's U.S. DB assets totaled $14.1 billion as of Dec. 31, 2016, according to its most recent 10-K. It announced in its 10-K filing on Feb. 9, 2017, that it planned to contribute between $300 million and $500 million in cash to its global DB plans in 2017. Breakouts of the planned 2017 contributions were not immediately available.

3M's asset allocation assumption as of Dec. 31, 2016, was 41% fixed income, 25% global equities, 18% private equities and 16% hedge funds.

Northrop Grumman had $27 billion in its U.S. DB plan as of Sept. 30, according to P&I data. The company planned to make about $82 million in required minimum contributions to its U.S. defined benefit plans in 2017, it said in its 10-K filing last year.

Northrop Grumman's asset allocation as of Sept. 30 was 28.3% U.S. fixed income, 16.8% global equities, 12% international equities, 11.4% cash, 11.3% U.S. equities, 10.9% private equity, 8.1% real estate and 1.2% alternatives.