ArcelorMittal Annual Report 2008

Notes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 23: Deferred Employee BenefitsArcelorMittal’s Operating Subsidiarieshave different types of pension plansfor their employees. Also, some ofthe Operating Subsidiaries offer otherpost-employment benefits, principallyhealth care. The expense associated withthese pension plans and employee benefits,as well as the carrying amount of therelated liability/asset on the balance sheetsare based on a number of assumptionsand factors such as the discount rate,expected compensation increases,expected return on plan assets, futurehealth care cost trends and market valueof the underlying assets. Actual resultsthat differ from these assumptions areaccumulated and amortized over futureperiods and, therefore, will affect thestatement of income and the recordedobligation in future periods. The totalaccumulated unrecognized actuarial lossamounted to 1,969 for pensions and454 for other post retirement benefitsas of December 31, 2008.On August 30, 2008 ArcelorMittal USAreached a labor agreement with the UnitedSteelworkers of America (the “USW”)for most of our steel plants and iron oreoperations in the US. The USW ratifiedthis agreement on October 21, 2008.The agreement increased wages, provideda signing bonus of six thousand dollars peremployee, increased the pension multiplierfor certain employees, increased paymentsinto Steelworkers pension trust, providedfor a lump sum payment upon retirementfor certain employees, and reduced thepremium retirees must pay for healthcare.The most significant change to thisagreement is the change in the fundingprinciples of a Voluntary Employee BenefitAssociation (“VEBA”) for retiree healthcare.Previously this fund was accounted foras a profit-sharing arrangement.The change in the contractual obligationled to the recognition of a liability andother post-employment expense of1,424 for those obligations that hadpreviously vested.The cash outflow related to these benefitsis a requirement to fund 25 per quarterinto the VEBA for the first four years plusan initial cash payment of 90 upon thesigning of the contract. The impact ofthose changes is discussed further inthe post-employment benefits sectionof this note.The Company agreed to transfer toArcelorMittal USA a number of shares heldin treasury equal to 130, subject to certainadjustments, in several tranches until theend of 2009 to provide a means forArcelorMittal USA to meet its cash fundingrequirements to the ArcelorMittal USAPension Trust. The first tranche, consistingof 1,121,995 treasury shares, wastransferred on December 29, 2008 forconsideration of $23.72 per share, theNYSE opening price on December 23, 2008.A summary of the significant definedbenefit pension plans is as follows:AmericasU.S.ArcelorMittal USA’s Pension Plan andPension Trust is a non-contributory definedbenefit plan covering approximately24% of its employees. Benefits for mostnon-represented employees who receivepension benefits are determined undera “Cash Balance” formula as an accountbalance which grows as a result of interestcredits and of allocations based ona percentage of pay. Benefits for othernon-represented salaried employees whoreceive pension benefits are determinedas a monthly benefit at retirementdepending on final pay and service.Benefits for wage and salaried employeesrepresented by a union are determinedas a monthly benefit at retirement basedon fixed rate and service.CanadaThe primary pension plans are those ofArcelorMittal Dofasco and ArcelorMittalMining Canada. The ArcelorMittalDofasco (Hamilton) pension plan isa hybrid plan providing the benefitsof both a defined benefit and definedcontribution pension plan.The defined contribution componentis financed by both employer and employeecontributions. The employer alsocontributes a percentage of profits in thedefined contribution plan. The ArcelorMittalMining Canada (QCM) defined benefitplan provides salary related benefit fornon-union employees and a flat dollarpension depending on employee lengthof service.BrazilThe primary defined benefit plans, financedthrough trust funds, have been closed tonew entrants. Brazilian entities have allestablished defined contribution plans thatare financed by employer and employeecontributions.EuropeCertain European Operating Subsidiariesmaintain primarily unfunded defined benefitpension plans for a certain number ofemployees. Benefits are based on suchemployees’ length of service and applicablepension table under the terms of individualagreements. Some of these unfunded planshave been closed to new entrants andreplaced by defined contributions pensionplans for active members financed byemployer and employee contributions.South AfricaThere are two primary defined benefitpension plans. These plans are closed tonew entrants. The assets are held inpension funds under the control of thetrustees and both funds are wholly fundedfor qualifying employees. South Africanentities have also implemented definedcontributions pension plans that arefinanced by employers’ and employees’contributions.OtherA limited number of funded definedbenefit plans are in place in countrieswhere funding of multi-employer pensionplans is mandatory.128