Freeport-McMoRan 2007 Annual Report Download - page 94

FREEPORT-McMoRan COPPER & GOLD INC.
2007 Annual Report
92 Financial & Operating Information
Notes to Consolidated Financial Statements
Information for the years ended December 31, 2007 and 2006, on the
postretirement benefit plans follows:
2007 2006
Change in benefit obligation:
Benefit obligation at beginning of year $ 4 $ 5
Acquisition of Phelps Dodge 255 –
Service cost 1 –
Interest cost 11 –
Actuarial losses (gains) 8 (1)
Benefits paid, net of employee contributions (23) –
Benefit obligation at end of year 256 4
Change in plan assets:
Fair value of plan assets at beginning of year – –
Acquisition of Phelps Dodge 173 –
Actual return on plans assets 5 –
Employer contributionsa 2 –
Benefits paid (30) –
Fair value of plan assets at end of year 150 –
Funded status $ (106) $ (4)
Discount rate assumption (percent) 6.00 5.75
Balance sheet classification of funded status:
Accounts payable and accrued liabilities $ (2) $ –
Other liabilities (104) (4)
Total $ (106) $ (4)
a. Employer contributions for 2008 are expected to approximate $2 million.
Expected benefit payments for these plans total $28 million for 2008,
$27 million for 2009, $26 million for 2010, $25 million for 2011, $24 million
for 2012, and $100 million for 2013 through 2017.
The weighted-average assumptions used to determine net periodic
benefit cost and the components of net periodic benefit cost for FCX’s
postretirement benefits for the year ended December 31, 2007, follow:
Weighted-average assumptionsa:
Discount rate – medical retiree 5.62%
Discount rate – life retiree 5.66%
Expected return on plan assets – medical retiree 3.70%
Expected return on plan assets – life retiree 4.50%
Service cost $ 1
Interest cost 11
Expected return on plan assets (5)
Net periodic benefit cost $ 7
a. The assumptions shown only relate to the Phelps Dodge plans.
FCX’s postretirement net periodic benefit costs were less than half a
million for 2006 and 2005.
Included in accumulated other comprehensive income (loss) at
December 31, 2007, are the following amounts that have not been
recognized in net periodic benefit cost: unrecognized prior service credits
of $1 million ($1 million net of tax and minority interest share) and
unrecognized actuarial losses of $8 million ($5 million net of tax and
minority interest share). The amount expected to be recognized in net
periodic benefit cost for 2008 is less than half a million for prior service
credits and actuarial losses.
The assumed medical-care trend rates at December 31, 2007 and
2006, follow:
2007 2006
Medical-care cost trend rate assumed for the next year 9% 10%
Rate to which the cost trend rate is assumed to decline
(the ultimate trend rate) 5% 5%
Year that the rate reaches the ultimate trend rate 2012 2011
Assumed medical-care cost trend rates have a significant effect on the
amounts reported for postretirement medical benefits. The effect of a one
percent increase or decrease in the medical-care cost trend rates
assumed for postretirement medical benefits would result in increases or
decreases of approximately $1 million in the aggregate service and
interest cost components and approximately $9 million in the
postretirement benefit obligation.
As a result of the Phelps Dodge acquisition, FCX has a number of
postemployment plans covering severance, long-term disability income,
continuation of health and life insurance coverage for disabled employees
or other welfare benefits. At December 31, 2007, the accumulated
postemployment benefit consisted of a current portion of $6 million
(included in accounts payable and accrued liabilities) and a long-term
portion of $43 million (included in other liabilities).
FCX also sponsors savings plans for the majority of its U.S. employees.
The plans allow employees to contribute a portion of their pre-tax and/or
after-tax income in accordance with specified guidelines. These savings
plans are principally qualified 401(k) plans for all U.S. salaried and
non-bargained hourly employees. In these plans, participants exercise
control and direct the investment of their contributions and account
balances among a broad range of investment options. FCX matches a
percentage of employee pre-tax deferral contributions up to certain limits,
which varies by plan. In addition, the Phelps Dodge principal savings
plan includes a profit sharing feature for its non-bargained employees.
During 2000, FCX and FM Services Company enhanced their primary
savings plan for substantially all their employees following their decision
to terminate their defined benefit pension plans. Subsequent to the
enhancement, FCX and FM Services Company contribute amounts to
individual accounts totaling either 4 percent or 10 percent of each
employee’s pay, depending on a combination of each employee’s age and
years of service as of June 30, 2000. For employees whose eligible
compensation exceeds certain levels, FCX provides an unfunded defined
contribution plan. The balance of this liability totaled $32 million on
December 31, 2007, and $24 million on December 31, 2006.
As a result of the acquisition of Phelps Dodge, FCX also has a defined
contribution plan for eligible Phelps Dodge employees hired on or after
January 1, 2007. Under this plan, FCX contributes amounts to individual