Management Report - Beursgorilla

ArcelorMittal Annual Report 2009Consolidated Financial Statements 65Note 22: Deferred Employee BenefitsArcelorMittal’s Operating Subsidiaries havedifferent types of pension plans for theiremployees. Also, some of the OperatingSubsidiaries offer other post-employmentbenefits, principally healthcare. The expenseassociated with these pension plans andemployee benefits, as well as the carryingamount of the related liability/asset on thestatements of financial position are basedon a number of assumptions and factorssuch as the discount rate, expectedcompensation increases, expected returnon plan assets, future healthcare costtrends and market value of the underlyingassets. Actual results that differ fromthese assumptions are accumulatedand amortized over future periods and,therefore, will affect the statement ofoperations and the recorded obligationin future periods. The total accumulatedunrecognized actuarial loss amountedto 1,678 for pensions and 401 forother post retirement benefits asof December 31, 2009.On August 30, 2008 ArcelorMittal USAreached a labor agreement with the UnitedSteelworkers of America (the “USW”) formost of its steel plants and iron oreoperations in the US. The USW ratified thisagreement on October 21, 2008. Theagreement increased wages, provided asigning 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 for as aprofit-sharing arrangement. The change inthe contractual obligation led to therecognition in 2008 of a liability and otherpost-employment expense of 1,424 forthose obligations had previously vested.The cash outflow related to these benefitsis a requirement to fund 25 per quarter intothe VEBA for the first four years plusa cash payment of 90 in 2008 for profitsearned prior to signing the contract. Theimpact of those changes is discussedfurther in the post-employment benefitssection of this note.The Company agreed in 2008 to transfer toArcelorMittal USA a number of shares held intreasury equal to 130, subject to certainadjustments, in several tranches until the endof 2010 to provide a means for ArcelorMittalUSA to meet its cash funding requirementsto the ArcelorMittal USA Pension Trust. Thefirst tranche, consisting of 1,121,995treasury shares, was transferred onDecember 29, 2008 for consideration of$23.72 per share, the New York StockExchange opening price on December 23,2008. The second tranche, consisting of119,070 treasury shares, was transferred onJune 29, 2009 for consideration of $32.75per share, the New York Stock Exchangeopening price on June 26, 2009. The thirdtranche, consisting of 1,000,095 treasuryshares, was transferred on September 15,2009, for consideration of $39.00 per share,the New York Stock Exchange opening priceon September 14, 2009.Pension PlansA summary of the significant defined benefitpension plans is as follows:U.S.ArcelorMittal USA’s Pension Plan andPension Trust is a non-contributorydefined benefit 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 on apercentage 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 thoseof ArcelorMittal Dofasco and ArcelorMittalMines Canada. The ArcelorMittal Dofascopension plan is a hybrid plan providingthe benefits of both a defined benefitand defined contribution pension plan.The defined contribution componentis financed by both employer andemployee contributions. The employeralso contributes a percentage of profitsin the defined contribution plan.The ArcelorMittal Mines Canada definedbenefit plan provides salary related benefitfor non-union employees and a flat dollarpension depending on an employee’s lengthof service. This plan was closed for newhires on December 31, 2009, and replacedby a defined contribution pension plan withcontributions related to age and services.The ArcelorMittal Mines Canada hourlyworkers’ defined benefit plan is a unionizedplan and is still open to new hires.BrazilThe primary defined benefit plans,financed through trust funds, have beenclosed to new entrants. Brazilian entitieshave all established defined contributionplans that are financed by employer andemployee contributions.EuropeCertain European Operating Subsidiariesmaintain primarily unfunded definedbenefit pension plans for a certain numberof employees. 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 in pensionfunds under the control of the trustees andboth funds are wholly funded for qualifyingemployees. South African entities have alsoimplemented defined contributions pensionplans that are financed by employers’ andemployees’ contributions.OtherA limited number of funded definedbenefit plans are in place in countrieswhere funding of multi-employer pensionplans is mandatory.