and certain hourly employees of International Paper an opportunity to accumulate personal funds, and to provide additional benefits to employees hired after June 30, 2004 for their retirement. Contributions may be made on a before-tax basis to substantially all of these plans. As determined by the provisions of each plan, International Paper matches the employees’ basic voluntary contributions and, for employees hired after June 30, 2004, contributes an additional percentage of pay. Such contributions to the plans totaled approximately $87 million, $95 million and $66 million for the plan years ending in 2004, 2003 and 2002, respectively. The net assets of these plans were approximately $4.3 billion as of the 2004 plan year-end including approximately $789 million (18.5%) in International Paper common stock. (a) Excludes $19.4 million of net settlement gains and $1.2 million of curtailment gains in 2004 related to the divestitures of Weldwood, Papeteries de Souche and the CHH Tissue business that were recorded in Net losses (gains) on sales and impairments of businesses held for sale in the consolidated statement of operations. The following table shows the changes in the benefit obligation for 2004 and 2003. The fair value of plan assets for non-U.S. plans amounted to $255 million and $423 million at December 31, 2004 and 2003, respectively. The reduction in plan assets is mainly due to the sale of Weldwood. For non-U.S. plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligations, accumulated benefit obligations, and fair values of plan assets totaled $272 million, $240 million, and $164 million, respectively. Plan assets consist principally of common stock and fixed income securities. Adjustments to the non-U.S. plans’ additional minimum liabilities resulted in a credit to OCI of $1 million and a charge of $4 million after taxes and minority interest at December 31, 2004 and 2003, respectively. International Paper sponsors defined contribution plans (primarily 401(k)) to provide substantially all U.S. salaried In accordance with FSP FAS 106-2, the effects of the Act on International Paper’s plans have been recorded prospectively beginning July 1, 2004. This resulted in a reduction in 2004 of net postretirement benefit cost of approximately $8 million and a reduction of the accumulated postretirement benefit obligation of approximately $110 million, which is treated as a reduction of unrecognized actuarial losses that are amortized to expense over the average remaining service period of employees eligible for postretirement benefits. In addition, net postretirement benefit cost in 2004 was reduced by $5 million, and the accumulated postretirement benefit obligation by $56 million, reflecting assumptions about plan participation. On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. This Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. International Paper provides certain retiree health care and life insurance benefits covering a majority of U.S. salaried and certain hourly employees. These employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Excluded from company-provided medical benefits are salaried employees whose age plus years of employment with the Company total less than 60 as of January 1, 2004. International Paper does not fund these benefits prior to payment and has the right to modify or terminate certain of these plans in the future. NOTE 16 POSTRETIREMENT BENEFITS U.S. Postretirement Benefits Other Plans 74 In millions 2004 ) 2003) Change in projected benefit obligation: Benefit obligation, January 1 $ 587) $422) Obligations for additional plans 9) 15) Service cost 32) 28) Interest cost 34) 29) Plan participants’ contributions 7) 4) Plan amendments (3) -) Divestitures (292) -) Settlement / curtailment gains -) (1) Actuarial loss 10) 18) Benefits paid (41) (24) Effect of foreign currency exchange rate movements 22) 96) Benefit obligation, December 31 $ 365) $587) In millions 2004 ) 2003) 2002) Service cost $ 32) $ 28) $ 22) Interest cost 34) 29) 25) Expected return on plan assets (29) (24) (24) Actuarial loss 5) 5) 1) Amortization of prior service cost 1) 1) 1) Curtailment gain -) (1) -) Estimated expenses 1) 1) 1) Net periodic pension expense (a) $ 44) $ 39) $ 26)