The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities. Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense. The Company recognized after tax interest of $34 million income, $36 million expense and $69 mil- lion expense in 2010, 2009 and 2008, respectively. The total amount of accrued interest was $264 million and $309 million in 2010 and 2009, respectively. The Company sponsors various retirement and pension plans, including defined benefit, defined contribution and termination indemnity plans, which cover most employees worldwide. The Company also provides postretirement benefits, primarily health care, to all U.S. retired employees and their dependents. Many international employees are covered by government- sponsored programs and the cost to the Company is not significant. Retirement plan benefits are primarily based on the employee’s compensation during the last three to five years before retirement and the number of years of service. International subsidiaries have plans under which funds are deposited with trustees, annuities are purchased under group contracts, or reserves are provided. The Company does not fund retiree health care benefits in advance and has the right to modify these plans in the future. The Company uses the date of its consolidated financial state- ments (January 2, 2011 and January 3, 2010, respectively) as the measurement date for all U.S. and international retirement and other benefit plans. In accordance with U.S. GAAP, the Company has adopted the recent standards related to employers’ accounting for defined benefit pension and other postretirement plans. At the end of 2010 and 2009, employee related obligations recorded on the Consolidated Balance Sheet were: 9. Employee Related Obligations (Dollars in Millions) 2010 2009 Pension benefits $2,175 2,792 Postretirement benefits 2,359 2,245 Postemployment benefits 1,379 1,504 Deferred compensation 820 790 Total employee obligations 6,733 7,331 Less current benefits payable 646 562 Employee related obligations — non-current $6,087 6,769 Prepaid employee related obligations of $615 million and $266 mil- lion for 2010 and 2009, respectively, are included in other assets on the consolidated balance sheet. Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans for 2010, 2009 and 2008 include the following components: Retirement Plans Other Benefit Plans ____________________________________ ____________________________________ (Dollars in Millions) 2010 2009 2008 2010 2009 2008 Service cost $ 550 511 545 $134 137 142 Interest cost 791 746 701 202 174 166 Expected return on plan assets (1,005) (934) (876) (1) (1) (2) Amortization of prior service cost 10 13 10 (4) (5) (4) Amortization of net transition asset 1 1 2 — — — Recognized actuarial losses 236 155 62 48 55 64 Curtailments and settlements 1 (11) 7 — (1) — Net periodic benefit cost $ 584 481 451 $379 359 366 The net periodic benefit cost attributable to U.S. retirement plans was $294 million, $286 million and $220 million in 2010, 2009 and 2008, respectively. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 53 10. Pensions and Other Benefit Plans