Freeport-McMoRan 2010 Annual Report Download - page 87

FREEPORT-McMoRan COPPER & GOLD INC. 2010 Annual Report
85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Included in accumulated other comprehensive income (loss) are
the following amounts that have not been recognized in net periodic
benefit cost: unrecognized prior service credits of less than
$1 million and unrecognized actuarial losses of $3 million ($2 million
net of tax and noncontrolling interests) at December 31, 2010; and
unrecognized prior service credits of less than $1 million and
unrecognized actuarial losses of $15 million ($12 million net of tax
and noncontrolling interests) at December 31, 2009. The amount
expected to be recognized in net periodic benefit cost for 2011 is
less than $1 million for prior service credits.
Expected benefit payments for these plans total $26 million for
2011, $24 million for 2012, $23 million for 2013, $22 million for
2014, $21 million for 2015 and $91 million for 2016 through 2020.
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 years ended December 31 follow:
2010 2009 2008
Weighted-average assumptions:
a
Discount rate 5.20% 6.30% 6.00%
Expected return on plan assets –
medical retiree
b
N/A N/A 3.30%
Expected return on plan assets –
life retiree
b
N/A N/A 4.30%
Service cost
$ 1 $ 1 $ 1
Interest cost
13 15 14
Expected return on plan assets
b
— — (4)
Curtailments
c
— (3) 23
Special retirement benefits
c
— 2 —
Net periodic benefit cost
$ 14 $ 15 $ 34
a. The assumptions shown only relate to the FMC plans.
b. During 2008, the two Voluntary Employees’ Beneficiary Association (VEBA) trusts
were amended to allow benefit payments for both active employees and retirees;
therefore, the VEBA trusts no longer qualified as plan assets.
c. Resulted from revised mine operating plans and reductions in the workforce (refer to
Note 17 for further discussion).
The assumed medical-care trend rates at December 31 follow:
2010 2009
Medical-care cost trend rate assumed for the next year 8.25% 8.5%
Rate to which the cost trend rate is assumed
to decline (the ultimate trend rate)
4.75% 5.0%
Year that the rate reaches the ultimate trend rate
2025 2020
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 less than $1 million in the
aggregate service and interest cost components; for the
postretirement benefit obligation, the effect of a one-percent increase
is approximately $8 million and the effect of a one-percent decrease
is approximately $7 million.
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. The
accumulated postemployment benefit consisted of a current portion
of $8 million (included in accounts payable and accrued liabilities)
and a long-term portion of $53 million (included in other liabilities)
at December 31, 2010, and a current portion of $7 million (included
in accounts payable and accrued liabilities) and a long-term portion
of $49 million (included in other liabilities) at December 31, 2009.
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 various investment
options. FCX matches a percentage of employee pre-tax deferral
contributions up to certain limits, which vary by plan. In addition,
prior to January 1, 2009, the FMC principal savings plan included a
profit sharing feature for its non-bargained employees. Effective
January 1, 2009, the FMC principal savings plan was merged into the
FCX savings plan, which does not include a profit sharing feature.
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 $49 million on December 31, 2010, and
$43 million on December 31, 2009.
Prior to January 1, 2009, FMC had a defined contribution
plan for its eligible employees hired on or after January 1, 2007.
Under this plan, FMC contributed amounts to individual accounts
ranging from 3 percent to 6 percent of each eligible employee’s
earnings, depending on years of service. Effective January 1, 2009,
this plan was merged into the FCX savings plan. Subsequent to
January 1, 2009, FMC contributes enhanced amounts for its eligible
employees hired on or after January 1, 2007, totaling 4 percent
of each eligible employee’s earnings, regardless of years of service.
However, most eligible FMC employees who were receiving
more than 4 percent of their eligible earnings under the previous
FMC defined contribution plan will continue to receive the higher
percentage of their eligible earnings.
The costs charged to operations for FCX’s, FM Services Company’s,
and FMC’s employee savings plans and defined contribution plans
totaled $36 million in 2010, $30 million in 2009 and $58 million
in 2008.
FCX has other employee benefit plans, certain of which are related
to FCX’s financial results, which are recognized in operating costs.