Freeport-McMoRan 2012 Annual Report Download - page 89

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The expected benefit payments for FCX’s (including FMC’s
plans and FCX’s SERP, director and excess benefits plans) and
PT Freeport Indonesia’s pension plans follow:
PT Freeport
FCX Indonesia
a
2013 $ 89 $ 14
2014 141 10
2015 92 11
2016 95 11
2017 98 15
2018 through 2022 536 130
a. Based on a December 31, 2012, exchange rate of 9,622 Indonesian rupiah to one U.S. dollar.
Atlantic Copper’s plan is administered by a third-party
insurance company, and Atlantic Copper is not provided asset
allocations. Atlantic Copper’s expected benefit payments by a
third-party insurance company are $7 million per year (based on
a December 31, 2012, exchange rate of $1.32 per euro).
Postretirement and Other Benefits. FCX also provides
postretirement medical and life insurance benefits for certain U.S.
employees and, in some cases, employees of certain international
subsidiaries. These postretirement benefits vary among plans,
and many plans require contributions from retirees. The expected
cost of providing such postretirement benefits is accrued during
the years employees render service.
The discount rate for FCX’s postretirement medical and life
insurance benefit plans was determined on the same basis as FCX’s
pension plans. Information on the postretirement benefit plans
as of December 31 follows:
2012 2011
Change in benefit obligation:
Benefit obligation at beginning of year $ 223 $ 240
Service cost 1 1
Interest cost 9 11
Actuarial losses (gains) 2 (7)
Benefits paid, net of employee and joint venture partner
contributions, and Medicare Part D subsidy (22) (22)
Benefit obligation at end of year 213 223
Change in plan assets:
Fair value of plan assets at beginning of year — —
Employer and partner contributions 25 25
Employee contributions 10 12
Benefits paid (35) (37)
Fair value of plan assets at end of year — —
Funded status $ (213) $ (223)
Discount rate assumption 3.50% 4.20%
Balance sheet classification of funded status:
Accounts payable and accrued liabilities $ (21) $ (23)
Other liabilities (192) (200)
Total $ (213) $ (22 3)
Included in accumulated other comprehensive loss are amounts
not recognized in net periodic benefit cost for unrecognized
actuarial gains of $2 million ($1 million net of tax and
noncontrolling interests) at December 31, 2012, and $4 million
($3 million net of tax and noncontrolling interests) at
December 31, 2011. No amount is expected to be recognized in net
periodic benefit cost in 2013 for unrecognized actuarial gains.
Expected benefit payments for these plans total $21 million for
2013, $19 million for 2014, $18 million for 2015, $17 million for
2016, $16 million for 2017 and $76 million for 2018 through 2022.
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:
2012 2011 2010
Weighted-average assumptions:
Discount rate 4.20% 4.90% 5.20%
Service cost $ 1 $ 1 $ 1
Interest cost 9 11 13
Net periodic benefit cost $ 10 $ 12 $ 14
The assumed medical-care trend rates at December 31 follow:
2012 2011
Medical-care cost trend rate assumed for
the next year 7.75% 8.00%
Rate to which the cost trend rate is assumed
to decline (the ultimate trend rate) 4.25% 4.50%
Year that the rate reaches the ultimate trend rate 2027 2026
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 $6 million and the effect of a one-percent
decrease is approximately $5 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
$69 million (included in other liabilities) at December 31, 2012, and
a current portion of $7 million (included in accounts payable
and accrued liabilities) and a long-term portion of $57 million
(included in other liabilities) at December 31, 2011.
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 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 contributes to these plans at varying
rates and matches a percentage of employee pre-tax deferral
87