Note 17: Retirement Benefit Plans

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Profit Sharing Plans

We provide tax-qualified profit sharing retirement plans for the benefit of eligible employees, former employees, and retirees in the U.S. and certain other countries. The plans are designed to provide employees with an accumulation of funds for retirement on a tax-deferred basis and provide for annual discretionary employer contributions. Our Chief Executive Officer (CEO) determines the amounts to be contributed to the U.S. Profit Sharing Plan under delegation of authority from our Board of Directors, pursuant to the terms of the Profit Sharing Plan. As of December 27, 2008, approximately 75% of our U.S. Profit Sharing Fund was invested in equities, and approximately 25% was invested in fixed-income instruments. Most assets are managed by external investment managers.

For the benefit of eligible U.S. employees, we also provide a non-tax-qualified supplemental deferred compensation plan for certain highly compensated employees. This plan is designed to permit certain discretionary employer contributions and to permit employee deferral of a portion of salaries in excess of certain tax limits and deferral of bonuses. This plan is unfunded.

We expensed $289 million for the qualified and non-qualified U.S. profit sharing retirement plans in 2008 ($302 million in 2007 and $313 million in 2006). In the first quarter of 2009, we funded $276 million for the 2008 contribution to the qualified U.S. Profit Sharing Plan.

Contributions that we make to the U.S. Profit Sharing Plan on behalf of our employees vest based on the employee's years of service. Vesting occurs after two years of service in 20% annual increments until the employee is 100% vested after six years, or earlier if the employee reaches age 60.

Pension and Postretirement Benefit Plans

U.S. Pension Benefits. We provide a tax-qualified defined-benefit pension plan for the benefit of eligible employees and retirees in the U.S. The plan provides for a minimum pension benefit that is determined by a participant's years of service and final average compensation (taking into account the participant's social security wage base), reduced by the participant's balance in the U.S. Profit Sharing Plan. If the pension benefit exceeds the participant's balance in the U.S. Profit Sharing Plan, the participant will receive a combination of pension and profit sharing amounts equal to the pension benefit. However, the participant will receive only the benefit from the Profit Sharing Plan if that benefit is greater than the value of the pension benefit. If we do not continue to contribute to, or significantly reduce contributions to, the U.S. Profit Sharing Plan, the projected benefit obligation of the U.S. defined-benefit plan could increase significantly. The significant decrease in the fair value of the U.S. Profit Sharing Plan assets during 2008 contributed to an increase in the projected benefit obligation of the U.S. defined-benefit plan.

Non-U.S. Pension Benefits. We also provide defined-benefit pension plans in certain other countries. Consistent with the requirements of local law, we deposit funds for certain plans with insurance companies, with third-party trustees, or into government-managed accounts, and/or accrue for the unfunded portion of the obligation. The assumptions used in calculating the obligation for the non-U.S. plans depend on the local economic environment.

Postretirement Medical Benefits. Upon retirement, eligible U.S. employees are credited with a defined dollar amount based on years of service. These credits can be used to pay all or a portion of the cost to purchase coverage in an Intel-sponsored medical plan. If the available credits are not sufficient to pay the entire cost of the coverage, the remaining cost is the responsibility of the retiree.

Funding Policy. Our practice is to fund the various pension plans in amounts sufficient to meet the minimum requirements of U.S. federal laws and regulations or applicable local laws and regulations. Additional funding may be provided as deemed appropriate. The assets of the various plans are invested in corporate equities, corporate debt instruments, government securities, and other institutional arrangements. The portfolio of each plan depends on plan design and applicable local laws. Depending on the design of the plan, local customs, and market circumstances, the liabilities of a plan may exceed qualified plan assets. We accrue for all such liabilities.

Benefit Obligation and Plan Assets

The changes in the benefit obligations and plan assets for the plans described above were as follows:

		U.S. Pension Benefits						Non-U.S. Pension Benefits						Postretirement Medical Benefits
(In Millions)		2008			2007			2008			2007			2008			2007
Change in projected benefit obligation:
Beginning benefit obligation		$	291		$	345		$	794		$	686		$	213		$	204
Service cost			14			18			64			70			12			12
Interest cost			16			17			42			37			12			11
Plan participants' contributions			—			—			10			10			3			3
Actuarial (gain) loss			244			(31)			(157)			(59)			(60)			(11)
Currency exchange rate changes			—			—			13			77			—			—
Plan amendments			—			(25)			—			—			—			—
Plan curtailments(1)			—			—			(20)			—			—			—
Plan settlements(1)			—			—			(27)			—			—			—
Benefits paid to plan participants			(23)			(33)			(28)			(27)			(7)			(6)
Ending projected benefit obligation		$	542		$	291		$	691		$	794		$	173		$	213

		U.S. Pension Benefits						Non-U.S. Pension Benefits						Postretirement Medical Benefits
(In Millions)		2008			2007			2008			2007			2008			2007
Change in plan assets:
Beginning fair value of plan assets		$	227		$	245		$	548		$	447		$	1		$	1
Actual return on plan assets			(6)			15			(132)			20			(1)			(1)
Employer contributions			105			—			80			52			5			4
Plan participants' contributions			—			—			10			10			3			3
Currency exchange rate changes			—			—			22			49			—			—
Plan settlements(1)			—			—			(43)			—			—			—
Benefits paid to participants			(23)			(33)			(28)			(30)			(7)			(6)
Ending fair value of plan assets(2)		$	303		$	227		$	457		$	548		$	1		$	1

(1)	2008 curtailments and settlements were primarily related to the divestiture of our NOR flash memory business for employees at our Israel and Philippines facilities.
(2)	As of December 27, 2008, our plan financial assets and liabilities were valued using the provisions of SFAS No. 157.

The following table summarizes the amounts recognized on the consolidated balance sheet as of December 27, 2008:

(In Millions)		U.S. Pension Benefits			Non-U.S. Pension Benefits			Postretirement Medical Benefits
Other long-term assets		$	—		$	39		$	—
Accrued compensation and benefits			—			(4)			(4)
Other long-term liabilities			(239)			(269)			(168)
Accumulated other comprehensive loss (income)			307			167			(49)
Net amount recognized		$	68		$	(67)		$	(221)

The following table summarizes the amounts recorded to accumulated other comprehensive income (loss) before taxes, as of December 27, 2008:

(In Millions)		U.S. Pension Benefits			Non-U.S. Pension Benefits			Postretirement Medical Benefits
Net prior service cost		$	—		$	—		$	(16)
Net actuarial gain (loss)			(307)			(165)			65
Reclassification adjustment of transition obligation			—			(2)			—
Defined benefit plans, net		$	(307)		$	(167)		$	49

The following table summarizes the amounts recognized on the consolidated balance sheet as of December 29, 2007:

(In Millions)		U.S. Pension Benefits			Non-U.S. Pension Benefits			Postretirement Medical Benefits
Other long-term assets		$	—		$	53		$	—
Accrued compensation and benefits			—			(6)			(10)
Other long-term liabilities			(64)			(293)			(202)
Accumulated other comprehensive loss			49			146			15
Net amount recognized		$	(15)		$	(100)		$	(197)

Included in the aggregate data in the following tables are the amounts applicable to our pension plans, with accumulated benefit obligations in excess of plan assets, as well as plans with projected benefit obligations in excess of plan assets. Amounts related to such plans were as follows:

		U.S. Pension Benefits						Non-U.S. Pension Benefits
(In Millions)		2008			2007			2008			2007
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligations		$	—		$	—		$	447		$	155
Plan assets		$	—		$	—		$	255		$	31
Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligations		$	542		$	291		$	531		$	573
Plan assets		$	303		$	227		$	258		$	274

Assumptions

Weighted-average actuarial assumptions used to determine benefit obligations for the plans were as follows:

		U.S. Pension Benefits						Non-U.S. Pension Benefits						Postretirement Medical Benefits
		2008			2007			2008			2007			2008			2007
Discount rate			6.7%			5.6%			5.6%			5.5%			6.8%			5.6%
Rate of compensation increase			5.0%			5.0%			3.5%			4.5%			—			—

Weighted-average actuarial assumptions used to determine costs for the plans were as follows:

		U.S. Pension Benefits						Non-U.S. Pension Benefits						Postretirement Medical Benefits
		2008			2007			2008			2007			2008			2007
Discount rate			5.6%			5.5%			5.2%			5.2%			5.6%			5.5%
Expected return on plan assets			5.1%			5.6%			6.5%			6.2%			—			—
Rate of compensation increase			5.0%			5.0%			4.3%			4.5%			—			—

For the U.S. plans, we developed the discount rate by calculating the benefit payment streams by year to determine when benefit payments will be due. We then matched the benefit payment streams by year to the AA corporate bond rates to match the timing and amount of the expected benefit payments and discounted back to the measurement date to determine the appropriate discount rate. For the non-U.S. plans, we used two approaches to develop the discount rate. In certain countries, we used a model consisting of a theoretical bond portfolio for which the timing and amount of cash flows approximates the estimated benefit payments of our pension plans. In other countries, we analyzed current market long-term bond rates and matched the bond maturity with the average duration of the pension liabilities. We consider several factors in developing the asset return assumptions for the U.S. and non-U.S. plans. We analyzed rates of return relevant to the country where each plan is in effect and the investments applicable to the plan, expectations of future returns, local actuarial projections, and the projected long-term rates of return from investment managers. The expected long-term rate of return shown for the non-U.S. plan assets is weighted to reflect each country's relative portion of the non-U.S. plan assets.

Net Periodic Benefit Cost

The net periodic benefit cost for the plans included the following components:

		U.S. Pension Benefits									Non-U.S. Pension Benefits									Postretirement Medical Benefits
(In Millions)		2008			2007			2006			2008			2007			2006			2008			2007			2006
Service cost		$	14		$	18		$	4		$	64		$	70		$	51		$	12		$	6		$	12
Interest cost			16			17			13			42			37			27			12			11			10
Expected return on plan assets			(11)			(10)			(12)			(39)			(29)			(15)			—			—			—
Amortization of prior service cost			—			(25)			—			—			1			—			4			4			4
Recognized net actuarial loss			1			7			—			6			11			—			—			—			—
Recognized curtailment gains(1)			—			—			—			(4)			—			—			—			—			—
Recognized settlement losses(1)			—			—			—			17			—			—			—			—			—
Net periodic benefit cost		$	20		$	7		$	5		$	86		$	90		$	63		$	28		$	21		$	26

(1)	2008 curtailments and settlements were primarily related to the divestiture of our NOR flash memory business for employees at our Israel and Philippines facilities.

U.S. Plan Assets

In general, the investment strategy for U.S. plan assets is to assure that the pension assets are available to pay benefits as they come due and to minimize market risk. When deemed appropriate, we may invest a portion of the fund in futures contracts for the purpose of acting as a temporary substitute for an investment in a particular equity security. The fund does not engage in speculative futures transactions. The U.S. plan assets are managed to remain within the target allocation ranges listed below. As of December 27, 2008, our plan assets were not within our target allocation due to market volatility. At times our allocation will temporarily fall outside the target allocation range, as we re-allocate plan assets due to market conditions, such as volatility and liquidity concerns, to minimize market risk. The expected long-term rate of return for the U.S. plan assets is 4.5%.

The asset allocation for our U.S. Pension Plan at the end of fiscal years 2008 and 2007, and the target allocation rate for 2009, by asset category, are as follows:

				Percentage of Plan Assets
Asset Category		Target Allocation		2008			2007
Equity securities		10%–20%			7.5%			15.0%
Debt instruments		80%–90%			92.5%			85.0%

Non-U.S. Plan Assets

The investments of the non-U.S. plans are managed by insurance companies, third-party trustees, or pension funds, consistent with regulations or market practice of the country where the assets are invested. The investment manager makes investment decisions within the guidelines set by us or local regulations. The investment manager evaluates performance by comparing the actual rate of return to the return on other similar assets. Investments managed by qualified insurance companies or pension funds under standard contracts follow local regulations, and we are not actively involved in their investment strategies. In general, the investment strategy is designed to accumulate a diversified portfolio among markets, asset classes, or individual securities in order to reduce market risk and assure that the pension assets are available to pay benefits as they come due. The average expected long- term rate of return for the non-U.S. plan assets is 6.6%.

The asset allocation for our non-U.S. plans, excluding assets managed by qualified insurance companies, at the end of fiscal years 2008 and 2007, and the target allocation rate for 2009, by asset category, are as follows:

				Percentage of Plan Assets
Asset Category		Target Allocation		2008			2007
Equity securities		64.0%			64.0%			67.0%
Debt instruments		12.0%			12.0%			8.0%
Other		24.0%			24.0%			25.0%

Investment assets managed by qualified insurance companies are invested as part of the insurance companies' general fund. We do not have control over the target allocation of those investments. Those investments made up 36% of total non-U.S. plan assets in 2008 (31% in 2007).

Funding Expectations

Under applicable law for the U.S. Pension Plan, we are not required to make any contributions during 2009. Our expected funding for the non- U.S. plans during 2009 is approximately $62 million. We expect employer contributions to the postretirement medical benefits plan to be approximately $5 million during 2009.

Estimated Future Benefit Payments

We expect the benefits to be paid through 2018 from the U.S. and non-U.S. pension plans and other postretirement benefit plans to be approximately $75 million annually.