Freeport-McMoRan 2012 Annual Report Download - page 86

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PT Freeport Indonesia Plan. PT Freeport Indonesia has a defined
benefit pension plan denominated in Indonesian rupiah covering
substantially all of its Indonesian national employees. PT Freeport
Indonesia funds the plan and invests the assets in accordance
with Indonesian pension guidelines. The pension obligation was
valued at an exchange rate of 9,622 rupiah to one U.S. dollar on
December 31, 2012, and 9,060 rupiah to one U.S. dollar on
December 31, 2011. 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 Freeport
Indonesia’s pension benefit disclosures include benefits related to
this law. PT Freeport Indonesia’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 Freeport Indonesia expects its pension
assets will earn an average of 7.5 percent per annum beginning
January 1, 2013.
Atlantic Copper Plan. Atlantic Copper has a contractual obligation
denominated in euros to supplement amounts paid to certain
retired Spanish national employees. As required by Spanish law,
beginning in August 2002, Atlantic Copper began funding
7.2 million euros ($9 million based on a December 31, 2012,
exchange rate of $1.32 per euro) annually for 15 years to an
approved insurance company for its estimated 72 million euro
contractual obligation to the retired employees. The insurance
company invests the plan assets in accordance with Spanish
regulations, and Atlantic Copper has no control over these
investments.
Plan Information. FCX uses a measurement date of
December 31 for its plans. Information for those plans where the
accumulated benefit obligations exceed the plan assets follows:
December 31, 2012 2011
Projected benefit obligation $ 2,247 $ 2,055
Accumulated benefit obligation 2,031 1,874
Fair value of plan assets 1,443 1,261
Information on the FCX (including FMC’s plans and FCX’s SERP,
director and excess benefits plans), PT Freeport Indonesia and
Atlantic Copper plans as of December 31 follows:
PT Freeport
FCX Indonesia Atlantic Copper
2012 2011 2012 2011 2012 2011
Change in benefit obligation:
Benefit obligation at beginning of year $ 1,791 $ 1,598 $ 206 $ 135 $ 65 $ 71
Service cost
27 24 17 13 — —
Interest cost
79 83 14 11 2 3
Actuarial losses
142 172 25 55 — —
Foreign exchange losses (gains) 1 (1) (13) (1) — (1)
Benefits paid
(86) (85) (9) (7) (7) (8)
Benefit obligation at end of year 1,954 1,791 240 206 60 65
Change in plan assets:
Fair value of plan assets at beginning of year 1,141 1,112 107 97 26 23
Actual return on plan assets 140 88 12 9 — —
Employer contributions
a
105 26 26 9 9 11
Foreign exchange losses — — (6) (1) (1) —
Benefits paid
(86) (85) (9) (7) (7) (8)
Fair value of plan assets at end of year 1,300 1,141 130 107 27 26
Funded status $ (654) $ (650) $ (110) $ (99) $ (33) $ (39)
Accumulated benefit obligation $ 1,842 $ 1,701 $ 136 $ 115 $ 60 $ 65
Weighted-average assumptions used to determine benefit obligations:
Discount rate
b
4.10% 4.60% 6.25% 7.00% 6.77% 6.77%
Rate of compensation increase
c
3.75% 3.75% 8.00% 8.00% N/A N/A
Balance sheet classification of funded status:
Other assets $ 7 $ 6 $ — $ — $ — $ —
Accounts payable and accrued liabilities (4) (4) — — — —
Other liabilities
(657) (652) (110) (99) (33) (39)
Total $ (654) $ (650) $ (110) $ (99) $ (33) $ (39)
a. Employer contributions for 2013 are expected to approximate $27 million for the FCX plans, $27 million for the PT Freeport Indonesia plan (based on a December 31, 2012, exchange rate of
9,622 Indonesian rupiah to one U.S. dollar) and $9 million for the Atlantic Copper plan (based on a December 31, 2012, exchange rate of $1.32 per euro).
b. The discount rate shown in 2012 and 2011 for the FCX plans related to all plans except the SERP plan. The SERP plan’s discount rate in 2012 and 2011 was 4.00 percent.
c. The rate of compensation increase shown for the FCX plans related only to the FMC plans.
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