Freeport-McMoRan 2012 Annual Report Download - page 87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted-average assumptions used to determine net periodic
benefit cost and the components of net periodic benefit cost
for FCX’s pension plans (FMC’s plans and FCX’s SERP, director and
excess benefits plans) for the years ended December 31 follow:
2012 2011 2010
Weighted-average assumptions:
Discount rate:
FMC plans 4.60% 5.40% 5.80%
FCX SERP 4.00% 4.00% 4.00%
Expected return on plan assets
a
7.50% 8.00% 8.50%
Rate of compensation increase
a
3.75% 3.75% 4.25%
Service cost $ 27 $ 24 $ 26
Interest cost 79 83 82
Expected return on plan assets (86) (86) (87)
Amortization of prior service cost (1) (1) (1)
Amortization of net actuarial losses 33 19 22
Net periodic benefit cost $ 52 $ 39 $ 42
a. The assumptions shown relate only to the FMC plans.
The weighted-average assumptions used to determine net
periodic benefit cost and the components of net periodic benefit
cost for PT Freeport Indonesia’s pension plan for the years ended
December 31 follow:
2012 2011 2010
Weighted-average assumptions:
Discount rate 7.00% 8.50% 10.50%
Expected return on plan assets 9.25% 9.25% 8.25%
Rate of compensation increase 8.00% 8.00% 8.00%
Service cost $ 17 $ 13 $ 8
Interest cost 14 11 8
Expected return on plan assets (9) (9) (7)
Amortization of prior service cost 1 1 1
Amortization of net actuarial loss 7 3 —
Net periodic benefit cost $ 30 $ 19 $ 10
Included in accumulated other comprehensive loss are the
following amounts that have not been recognized in net periodic
pension cost as of December 31:
2012 2011
After Taxes and After Taxes and
Before Noncontrolling Before Noncontrolling
Taxes Interests Taxes Interests
Prior service credits $ (2) $ (1) $ (2) $ (1)
Net actuarial loss 705 429 642 390
$ 703 $ 428 $ 640 $ 389
Actuarial losses in excess of 10 percent of the greater of the
projected benefit obligation or market-related value of plan assets
are amortized over the expected average remaining future service
period of the current active participants. The amount expected to
be recognized in 2013 net periodic pension cost for actuarial losses
is $47 million ($29 million net of tax and noncontrolling interests).
FCX does not expect to have any plan assets returned to it in
2013. Plan assets are classified within a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities
(Level 1), then to significant observable inputs (Level 2) and
the lowest priority to significant unobservable inputs (Level 3).
For further discussion of the different levels of the fair value
hierarchy, refer to Note 16.
A summary of the fair value hierarchy for pension plan assets
associated with the FCX plans follows:
Fair Value at December 31, 2012
Total Level 1 Level 2 Level 3
Commingled/collective funds:
Global equity $ 481 $ — $ 481 $ —
U.S. real estate securities 61 — 61 —
U.S. small-cap equity 52 — 52 —
Real estate property 41 — — 41
Short-term investments 40 — 40 —
Open-ended mutual funds:
Government bonds 48 48 — —
Emerging markets equity 41 41 — —
Corporate bonds 23 23 — —
Mutual funds:
Foreign bonds 54 54 — —
Emerging markets bond 37 37 — —
Emerging markets equity 28 28 — —
Fixed income:
Government bonds 241 — 241 —
Corporate bonds 82 — 82 —
Private equity investments 45 — — 45
Other investments 33 1 32 —
Total investments 1,307 $ 232 $ 989 $ 86
Cash and receivables 5
Payables (12)
Total pension plan net assets $ 1,300
Fair Value at December 31, 2011
Total Level 1 Level 2 Level 3
Commingled/collective funds:
Global equity $ 408 $ — $ 408 $ —
U.S. real estate securities 52 — 52 —
U.S. small-cap equity 45 — 45 —
Real estate property 35 — — 35
Short-term investments 22 — 22 —
Open-ended mutual funds:
Government bonds 50 50 — —
Emerging markets equity 36 36 — —
Corporate bonds 22 22 — —
Mutual funds:
Foreign bonds 43 43 — —
Emerging markets bond 32 32 — —
Emerging markets equity 24 24 — —
Fixed income:
Government bonds 233 — 233 —
Corporate bonds 73 — 73 —
Private equity investments 50 — — 50
Other investments 23 — 23 —
Total investments 1,148 $ 207 $ 856 $ 85
Cash and receivables 6
Payables (13)
Total pension plan net assets $ 1,141
85