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Employee Benefit Plans | 12 Months Ended
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Jun. 30, 2011
Employee Benefit Plans |
Employee Benefit Plans |
Note 15. | Employee Benefit Plans
The Company provides substantially all U.S. employees and employees at certain international subsidiaries with pension benefits. Eligible U.S. employees with five or more years of service prior to January 1, 2009 participate in a defined benefit pension plan. Eligible U.S. employees hired on or after January 1, 2009 and eligible salaried employees with less than five years of service prior to January 1, 2009 participate in a “cash balance” pension formula. The Company provides eligible U.S. employees who retire under qualifying conditions with access to postretirement health care, at full cost to the retiree (certain employees are “grandfathered” into subsidized coverage). The Company also maintains 401(k) plans covering substantially all U.S. employees. The Company contributes cash to the plans to match qualifying employee contributions, and also provides a non-matching employer contribution of 1% of pay to eligible participants. Under an employee stock ownership component of the 401(k) plans, employees may choose to invest in ADM stock as part of their own investment elections. The employer contributions are expensed when paid. Assets of the Company’s 401(k) plans consist primarily of listed common stocks and pooled funds. The Company’s 401(k) plans held 16.3 million shares of Company common stock at June 30, 2011, with a market value of $490 million. Cash dividends received on shares of Company common stock by these plans during the year ended June 30, 2011 were $10 million.
|  | Pension Benefits |  | Postretirement Benefits |
|  | 2011 |  | 2010 |  | 2009 |  | 2011 |  | 2010 |  | 2009 |
|  | (In millions) |  | (In millions) |
Retirement plan expense |  |  |  |  |  |  |  |  |  |  |  |  |
Defined benefit plans: |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost (benefits earned during the period) |  | $ | 71 |  | $ | 58 |  | $ | 52 |  | $ | 8 |  | $ | 9 |  | $ | 7 |
Interest cost |  | 120 |  | 119 |  | 111 |  | 13 |  | 16 |  | 13 |
Expected return on plan assets |  | (132 | ) | (117 | ) | (113 | ) | — |  | — |  | — |
Curtailment/Plan settlements |  | — |  | — |  | — |  | — |  | — |  | (15 | )
Amortization of actuarial loss |  | 59 |  | 31 |  | 2 |  | — |  | 5 |  | 1 |
Other amortization |  | 5 |  | 6 |  | 6 |  | (1 | ) | (1 | ) | (1 | )
Net periodic defined benefit plan expense |  | 123 |  | 97 |  | 58 |  | 20 |  | 29 |  | 5 |
Defined contribution plans |  | 43 |  | 40 |  | 35 |  | — |  | — |  | — |
Total retirement plan expense |  | $ | 166 |  | $ | 137 |  | $ | 93 |  | $ | 20 |  | $ | 29 |  | $ | 5 |
The Company uses a June 30 measurement date for all defined benefit plans. The following tables set forth changes in the defined benefit obligation and the fair value of defined benefit plan assets:
|  | Pension Benefits |  | Postretirement Benefits |
|  | 2011 |  | 2010 |  | 2011 |  | 2010 |
|  | (In millions) |  | (In millions) |
Benefit obligation, beginning |  | $ | 2,299 |  | $ | 2,012 |  | $ | 224 |  | $ | 256 |
Service cost |  | 71 |  | 58 |  | 8 |  | 9 |
Interest cost |  | 120 |  | 119 |  | 13 |  | 16 |
Actuarial loss (gain) |  | (63 | ) | 271 |  | (32 | ) | (51 | )
Employee contributions |  | 2 |  | 2 |  | — |  | — |
Curtailments |  | — |  | (3 | ) | — |  | — |
Business combinations |  | 36 |  | 2 |  | 22 |  | — |
Benefits paid |  | (90 | ) | (86 | ) | (6 | ) | (6 | )
Plan amendments |  | (9 | ) | — |  | — |  | — |
Foreign currency effects |  | 104 |  | (76 | ) | — |  | — |
Benefit obligation, ending |  | $ | 2,470 |  | $ | 2,299 |  | $ | 229 |  | $ | 224 |
Fair value of plan assets, beginning |  | $ | 1,721 |  | $ | 1,427 |  | $ | — |  | $ | — |
Actual return on plan assets |  | 283 |  | 182 |  | — |  | — |
Employer contributions |  | 116 |  | 249 |  | 6 |  | 6 |
Employee contributions |  | 2 |  | 2 |  | — |  | — |
Business combinations |  | 22 |  | 2 |  | — |  | — |
Benefits paid |  | (90 | ) | (86 | ) | (6 | ) | (6 | )
Foreign currency effects |  | 80 |  | (55 | ) | — |  | — |
Fair value of plan assets, ending |  | $ | 2,134 |  | $ | 1,721 |  | $ | — |  | $ | — |
Funded status |  | $ | (336 | ) | $ | (578 | ) | $ | (229 | ) | $ | (224 | )
Prepaid benefit cost |  | $ | 51 |  | $ | 17 |  | $ | — |  | $ | — |
Accrued benefit liability – current |  | (16 | ) | (13 | ) | (8 | ) | (7 | )
Accrued benefit liability – long-term |  | (371 | ) | (582 | ) | (221 | ) | (217 | )
Net amount recognized in the balance sheet |  | $ | (336 | ) | $ | (578 | ) | $ | (229 | ) | $ | (224 | )
Included in accumulated other comprehensive income for pension benefits at June 30, 2011, are the following amounts that have not yet been recognized in net periodic pension cost: unrecognized transition obligation of $3 million, unrecognized prior service cost of $15 million and unrecognized actuarial loss of $655 million. The transition obligation, prior service cost and actuarial loss included in accumulated other comprehensive income expected to be recognized in net periodic pension cost during the fiscal year ended June 30, 2012, is $1 million, $4 million and $49 million, respectively. Included in accumulated other comprehensive income for postretirement benefits at June 30, 2011, are the following amounts that have not yet been recognized in net periodic pension cost: unrecognized prior service credit of $6 million and unrecognized actuarial gain of $11 million. The prior service credit included in accumulated other comprehensive income expected to be recognized in net periodic benefit cost during the fiscal year ended June 30, 2012, is $1 million. The following table sets forth the principal assumptions used in developing net periodic pension cost:
|  | Pension Benefits |  | Postretirement Benefits |
|  | 2011 |  | 2010 |  | 2011 |  | 2010 |
Discount rate |  | 5.2 | % | 6.1 | % | 5.4 | % | 6.3 | %
Expected return on plan assets |  | 7.1 | % | 7.1 | % | N/A |  | N/A |
Rate of compensation increase |  | 3.9 | % | 3.8 | % | N/A |  | N/A |
The following table sets forth the principal assumptions used in developing the year-end actuarial present value of the projected benefit obligations:
|  | Pension Benefits |  | Postretirement Benefits |
|  | 2011 |  | 2010 |  | 2011 |  | 2010 |
Discount rate |  | 5.5 | % | 5.2 | % | 5.5 | % | 5.4 | %
Rate of compensation increase |  | 3.9 | % | 3.9 | % | N/A |  | N/A |
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with projected benefit obligations in excess of plan assets were $2.1 billion, $1.9 billion, and $1.7 billion, respectively, as of June 30, 2011, and $2.2 billion, $2.0 billion, and $1.6 billion, respectively, as of June 30, 2010. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $671 million, $657 million, and $425 million, respectively, as of June 30, 2011, and $2.1 billion, $1.9 billion, and $1.5 billion, respectively, as of June 30, 2010. The accumulated benefit obligation for all pension plans as of June 30, 2011 and 2010, was $2.3 billion and $ 2.1 billion, respectively. For postretirement benefit measurement purposes, a 7.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2011. The rate was assumed to decrease gradually to 5% for 2022 and remain at that level thereafter. A 1% change in assumed health care cost trend rates would have the following effects:
|  | 1% Increase |  | 1% Decrease |
|  | (In millions) |
Effect on combined service and interest cost components |  | $ | 3 |  | $ | (2 | )
Effect on accumulated postretirement benefit obligations |  | $ | 33 |  | $ | (27 | )
Plan Assets The Company’s employee benefit plan assets are principally comprised of the following types of investments: ADM and other common stock: Equity securities are valued based on quoted exchange prices and are classified within Level 1 of the valuation hierarchy. Mutual funds: Mutual funds are valued at the closing price reported on the active market on which they are traded and are classified within Level 1 of the valuation hierarchy. Common collective trust (CCT) funds: The fair values of the CCTs are based on the cumulative net asset value (NAV) of their underlying investments. The investments in CCTs are comprised of international equity funds, a small cap U.S. equity fund, large cap U.S. equity funds, fixed income funds, and other funds. The fund units are valued at NAV based on the closing market value of the units bought or sold as of the valuation date and are classified in Level 2 of the fair value hierarchy. The CCTs seek primarily to provide investment results approximating the aggregate price, dividend performance, total return, and income stream of underlying investments of the funds. Issuances and redemptions of certain of the CCT investments may be restricted by date and/or amount. Corporate debt instruments: Corporate debt instruments are valued at the closing price reported on the active market on which they are traded and are classified within Level 2 of the valuation hierarchy. U.S. Treasury instruments: U.S. Treasury instruments are valued at the closing price reported on the active market on which they are traded and are classified within Level 1 of the valuation hierarchy. U.S. government agency, state, and local government bonds: U.S. government agency obligations and state and municipal debt securities are valued using third-party pricing services and are classified within Level 2 of the valuation hierarchy. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants’ methods, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following tables set forth, by level within the fair value hierarchy, the fair value of plan assets as of June 30, 2011 and 2010.
|  | Fair Value Measurements at June 30, 2011 |
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total |
|  | (In millions) |
Common stock |  |  |  |  |  |  |  |  |
U.S. companies |  | $ | 180 |  | $ | — |  | $ | — |  | $ | 180 |
International companies |  | 5 |  | — |  | — |  | 5 |
Equity mutual funds |  |  |  |  |  |  |  |  |
Emerging markets |  | 70 |  | — |  | — |  | 70 |
International |  | 99 |  | — |  | — |  | 99 |
Large cap U.S. |  | 378 |  | — |  | — |  | 378 |
Other |  | 1 |  | — |  | — |  | 1 |
Common collective trust funds |  |  |  |  |  |  |  |  |
International equity |  | — |  | 341 |  | — |  | 341 |
Large cap U.S. equity |  | — |  | 24 |  | — |  | 24 |
Fixed income |  | — |  | 444 |  | — |  | 444 |
Other |  | — |  | 60 |  | — |  | 60 |
Debt instruments |  |  |  |  |  |  |  |  |
Corporate bonds |  | — |  | 442 |  | — |  | 442 |
U.S. Treasury instruments |  | 49 |  | — |  | — |  | 49 |
U.S. government agency, state and local government bonds |  | — |  | 35 |  | — |  | 35 |
Other |  | — |  | 6 |  | — |  | 6 |
Total assets at fair value |  | $ | 782 |  | $ | 1,352 |  | $ | — |  | $ | 2,134 |
|  | Fair Value Measurements at June 30, 2010 |
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total |
|  | (In millions) |
Common stock |  |  |  |  |  |  |  |  |
ADM common stock |  | $ | 19 |  | $ | — |  | $ | — |  | $ | 19 |
U.S. companies |  | 64 |  | — |  | — |  | 64 |
International companies |  | 3 |  | — |  | — |  | 3 |
Equity mutual funds |  |  |  |  |  |  |  |  |
Emerging markets |  | 53 |  | — |  | — |  | 53 |
International |  | 70 |  | — |  | — |  | 70 |
Large cap U.S. |  | 230 |  | — |  | — |  | 230 |
Other |  | 1 |  | — |  | — |  | 1 |
Common collective trust funds |  |  |  |  |  |  |  |  |
International equity |  | — |  | 365 |  | — |  | 365 |
Small cap U.S. equity |  | — |  | 76 |  | — |  | 76 |
Large cap U.S. equity |  | — |  | 52 |  | — |  | 52 |
Fixed income |  |  |  | 252 |  | — |  | 252 |
Other |  |  |  | 32 |  | — |  | 32 |
Debt instruments |  |  |  |  |  |  |  |  |
Corporate bonds |  | — |  | 383 |  | — |  | 383 |
U.S. Treasury instruments |  | 84 |  | — |  | — |  | 84 |
U.S. government agency, state and local government bonds |  | — |  | 16 |  | — |  | 16 |
Other |  | — |  | 21 |  | — |  | 21 |
Total assets at fair value |  | $ | 524 |  | $ | 1,197 |  | $ | — |  | $ | 1,721 |
Level 3 Gains and Losses: There are no Plan assets classified as Level 3 in the fair value hierarchy; therefore there are no associated gains or losses. The following table sets forth the actual asset allocation for the Company’s global pension plan assets as of the measurement date:
|  | 2011(1), (2) |  | 2010 |
Equity securities |  | 52 | % | 48 | %
Debt securities |  | 47 | % | 50 | %
Other |  | 1 | % | 2 | %
Total |  | 100 | % | 100 | %
(1) The Company’s U.S. pension plans contain approximately 66% of the Company’s global pension plan assets. The actual asset allocation for the Company’s U.S. pension plans as of the measurement date consists of 60% equity securities and 40% debt securities. The target asset allocation for the Company’s U.S. pension plans is the same as the actual asset allocation. The actual asset allocation for the Company’s foreign pension plans as of the measurement date consists of 36% equity securities, 62% debt securities, and 2% in other investments. The target asset allocation for the Company’s foreign pension plans is approximately the same as the actual asset allocation. (2) The Company’s pension plans did not hold any shares of Company common stock as of the June 30, 2011 measurement date. Cash dividends received on shares of Company common stock by these plans during the twelve-month period ended June 30, 2011, were $0.1 million. Investment objectives for the Company’s plan assets are to: · Optimize the long-term return on plan assets at an acceptable level of risk. · Maintain a broad diversification across asset classes and among investment managers. · Maintain careful control of the risk level within each asset class. Asset allocation targets promote optimal expected return and volatility characteristics given the long-term time horizon for fulfilling the obligations of the pension plans. Selection of the targeted asset allocation for plan assets was based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes. The U.S. pension plans target asset allocation is also based on an asset and liability study that is updated periodically. Investment guidelines are established with each investment manager. These guidelines provide the parameters within which the investment managers agree to operate, including criteria that determine eligible and ineligible securities, diversification requirements, and credit quality standards, where applicable. In some countries, derivatives may be used to gain market exposure in an efficient and timely manner; however, derivatives may not be used to leverage the portfolio beyond the market value of underlying investments. The Company uses external consultants to assist in monitoring the investment strategy and asset mix for the Company’s plan assets. To develop the Company’s expected long-term rate of return assumption on plan assets, the Company generally uses long-term historical return information for the targeted asset mix identified in asset and liability studies. Adjustments are made to the expected long-term rate of return assumption when deemed necessary based upon revised expectations of future investment performance of the overall investment markets. Contributions and Expected Future Benefit Payments Based on actuarial calculations, the Company expects to contribute $47 million to the pension plans and $8 million to the postretirement benefit plan during 2012. The Company may elect to make discretionary contributions in 2012. The following benefit payments, which reflect expected future service, are expected to be paid:
|  | Pension Benefits |  | Postretirement Benefits |
|  | (In millions) |
2012 |  | $ | 102 |  | $ | 8 |
2013 |  | 106 |  | 9 |
2014 |  | 111 |  | 10 |
2015 |  | 116 |  | 10 |
2016 |  | 123 |  | 11 |
2017 – 2021 |  | 719 |  | 72 |

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- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 87 -Paragraph 264 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 158 -Paragraph 7, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Staff Position (FSP) -Number FAS106-2 -Paragraph 20, 21, 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Implementation Guide (Q and A) -Number FAS88 -Paragraph 63 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph h -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 30 -Paragraph 26 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph a -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 03-2 -Paragraph 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5, 6, 7, 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 8 -Subparagraph m -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 132R -Paragraph 5 -Subparagraph q -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 106 -Paragraph 518 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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