Freeport-McMoRan 2013 Annual Report Download - page 101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2013 ANNUAL REPORT | 99
Information on the FCX (including FMC’s plans and FCX’s SERP
plans) and PT-FI plans as of December 31 follows:
FCX PT-FI
2013 2012 2013 2012
Change in benefit obligation:
Benefit obligation at beginning
of year $ 1,954 $ 1,791 $ 240 $ 206
Service cost 30 27 20 17
Interest cost 77 79 14 14
Actuarial (gains) losses (103) 142 13 25
Plan amendment — — 33 —
Foreign exchange losses (gains) 1 1 (53) (13)
Benefits paid (88) (86) (8) (9)
Benefit obligation at end of year 1,871 1,954 259 240
Change in plan assets:
Fair value of plan assets at
beginning of year 1,300 1,141 130 107
Actual return on plan assets 112 140 (3) 12
Employer contributions
a
26 105 35 26
Foreign exchange losses — — (30) (6)
Benefits paid (88) (86) (8) (9)
Fair value of plan assets at end
of year 1,350 1,300 124 130
Funded status $ (521) $ (654) $ (135) $ (110)
Accumulated benefit obligation $ 1,742 $ 1,842 $ 141 $ 136
Weighted-average assumptions used
to determine benefit obligations:
Discount rate 5.00% 4.10% 9.00% 6.25%
Rate of compensation increase
b
3.75% 3.75% 10.00% 8.00%
Balance sheet classification of
funded status:
Other assets $ 8 $ 7 $ — $ —
Accounts payable and
accrued liabilities (4) (4) — —
Other liabilities (525) (657) (135) (110)
Total $ (521) $ (654) $ (135) $ (110)
a. Employer contributions for 2014 are expected to approximate $5 million for the FCX plans
and $22 million for the PT-FI plan (based on a December 31, 2013, exchange rate of 12,128
Indonesian rupiah to one U.S. dollar).
b. The rate of compensation increase shown for the PT-FI plan in 2013 related to non-staff
employees (staff employees was 8 percent).
The weighted-average assumptions used to determine net periodic
benefit cost and the components of net periodic benefit cost for
FCX’s pension plans for the years ended December 31 follow:
2013 2012 2011
Weighted-average assumptions:
a
Discount rate 4.10% 4.60% 5.40%
Expected return on plan assets 7.50% 7.50% 8.00%
Rate of compensation increase 3.75% 3.75% 3.75%
Service cost $ 30 $ 27 $ 24
Interest cost 77 79 83
Expected return on plan assets (95) (86) (86)
Amortization of prior service cost — (1) (1)
Amortization of net actuarial losses 38 33 19
Net periodic benefit cost $ 50 $ 52 $ 39
a. The assumptions shown relate only to the FMC plans.
with the Mercer Pension Discount Curve — Above Mean Yield.
The Mercer Pension Discount Curve — Above Mean Yield is
constructed from the bonds in the Mercer Pension Discount Curve
that have a yield higher than the regression mean yield curve.
The Mercer Pension Discount Curve consists of spot (i.e., zero
coupon) interest rates at one-half year increments for each of the
next 30 years and is developed based on pricing and yield
information for high-quality corporate bonds. Changes in the
discount rate are reflected in FCX’s benefit obligation and,
therefore, in future pension costs.
Other FCX Plans. In February 2004, FCX established an
unfunded Supplemental Executive Retirement Plan (SERP) for its
two most senior executive officers. The SERP provides for
retirement benefits payable in the form of a joint and survivor
annuity or an equivalent lump sum. The annuity will equal a
percentage of the executive’s highest average compensation for
any consecutive three-year period during the five years
immediately preceding 25 years of credited service. The SERP
benefit will be reduced by the value of all benefits paid or due
under any defined benefit or defined contribution plan sponsored
by FM Services Company, FCX’s wholly owned subsidiary, FCX
or its predecessor, but not including accounts funded exclusively
by deductions from participant’s pay.
PT-FI Plan. PT-FI has a defined benefit pension plan denominated
in Indonesian rupiah covering substantially all of its Indonesian
national employees. PT-FI funds the plan and invests the assets in
accordance with Indonesian pension guidelines. The pension
obligation was valued at an exchange rate of 12,128 rupiah to one
U.S. dollar on December 31, 2013, and 9,622 rupiah to one U.S.
dollar on December 31, 2012. Indonesian labor laws enacted in
2003 require that companies provide a minimum level of benefits
to employees upon employment termination based on the reason
for termination and the employee’s years of service. PT-FI’s
pension benefit disclosures include benefits related to this law.
PT-FI’s expected rate of return on plan assets is evaluated
at least annually, taking into consideration its long-range
estimated return for the plan based on the asset mix. Based on
these factors, PT-FI expects its pension assets will earn an
average of 7.75 percent per annum beginning January 1, 2014.
Plan Information. FCX uses a measurement date of December 31
for its plans. Information for those plans where the accumulated
benefit obligations exceed the fair value of plan assets follows:
December 31, 2013 2012
Projected benefit obligation $ 2,180 $ 2,247
Accumulated benefit obligation 1,933 2,031
Fair value of plan assets 1,490 1,443