By Dan Berman
3M told investors this week that it would drastically reduce contributions to its pension system because its funding ratio has improved.
Payments will be reduced from $500 billion this year to between $100 billion and $200 billion each year from 2014 through 2017, said David Meline, senior vice president and chief financial officer of 3M, at the company’s 2014 outlook meeting.
The funding ratio of the St. Paul, Minn., company’s worldwide pension plan is expected to be 93 percent at the end of 2013 compared to 87 percent in 2012. Its U.S. pension system
is expected to be 103 percent funded at the end of the year, Meline said.
Future pension payments, he said, would largely be directed to 3M’s international fund, which is 88 percent funded.
Payments in recent years have ranged from $500 billion in 2008 to $1.4 billion in 2009 and $1.1 billion in 2012.
Meline said a shift of workers from the company’s defined benefits plan to a defined contributions plan was helping lower costs. A higher discount rate on liabilities and higher than expected return on investment helped improve the funding status of the pension plan, he said.
3M had global sales of $30 billion in 2012. It employs 88,000 people worldwide and manufactures consumer products like Scotch brand tape and Post-it notes, as well as goods aimed at industry, the health care market and other sectors.
Originally published on BenefitsPro.com