Freeport-McMoRan 2014 Annual Report Download - page 104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
102
law. PT-FI’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-FI expects its pension assets will earn an average of
7.75 percent per annum beginning January 1, 2015. The discount
rate assumption for PT-FI’s plan is based on the Mercer
Indonesian zero coupon bond yield curve derived from the
Indonesian Government Security Yield Curve. Changes in the
discount rate are reflected in PT-FI’s benefit obligation and,
therefore, in future pension costs.
Plan Information. FCX uses a measurement date of December 31
for its plans. Information for those plans where the accumulated
benefit obligations exceed the fair value of plan assets follows:
December 31, 2014 2013
Projected benefit obligation $ 2,221 $ 2,180
Accumulated benefit obligation 2,090 1,933
Fair value of plan assets 1,433 1,490
Information on the FCX (including FMC’s plans and FCX’s SERP
plans) and PT-FI plans as of December 31 follows:
FCX PT-FI
2014 2013 2014 2013
Change in benefit obligation:
Benefit obligation at beginning
of year
$ 1,871 $ 1,954 $ 259 $ 240
Service cost 30 30 22 20
Interest cost 92 77 23 14
Actuarial losses (gains) 278 (103) 30 13
Plan amendment — — — 33
Foreign exchange (gains) losses (2) 1 (7) (53)
Benefits paid (90) (88) (9) (8)
Benefit obligation at end of year 2,179 1,871 318 259
Change in plan assets:
Fair value of plan assets at
beginning of year
1,350 1,300 124 130
Actual return on plan assets 151 112 20 (3)
Employer contributions
a
6 26 55 35
Foreign exchange losses (1) — (5) (30)
Benefits paid (90) (88) (9) (8)
Fair value of plan assets at end
of year 1,416 1,350 185 124
Funded status
$ (763) $ (521) $ (133) $ (135)
Accumulated benefit obligation
$ 2,048 $ 1,742 $ 168 $ 141
Weighted-average assumptions used
to determine benefit obligations:
Discount rate
4.10% 5.00% 8.25% 9.00%
Rate of compensation increase 3.25% 3.75% 9.00% 9.00%
Balance sheet classification of
funded status:
Other assets
$ 8 $ 8 $ — $ —
Accounts payable and
accrued liabilities (4) (4) — —
Other liabilities (767) (525) (133) (135)
Total $ (763) $ (521) $ (133) $ (135)
a. Employer contributions for 2015 are expected to approximate $98 million for the FCX plans
and $20 million for the PT-FI plan (based on a December 31, 2014, exchange rate of 12,378
Indonesian rupiah to one U.S. dollar).
The weighted-average assumptions used to determine net periodic
benefit cost and the components of net periodic benefit cost for
FCX’s pension plans for the years ended December 31 follow:
2014 2013 2012
Weighted-average assumptions:
a
Discount rate 5.00% 4.10% 4.60%
Expected return on plan assets 7.50% 7.50% 7.50%
Rate of compensation increase 3.75% 3.75% 3.75%
Service cost $ 30 $ 30 $ 27
Interest cost 92 77 79
Expected return on plan assets (98) (95) (86)
Amortization of prior service credit (1) — (1)
Amortization of net actuarial losses 28 38 33
Net periodic benefit cost $ 51 $ 50 $ 52
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-FI’s pension plan for the years ended December 31 follow:
2014 2013 2012
Weighted-average assumptions:
Discount rate 9.00% 6.25% 7.00%
Expected return on plan assets 7.75% 7.50% 9.25%
Rate of compensation increase 9.00% 8.00% 8.00%
Service cost $ 22 $ 20 $ 17
Interest cost 23 14 14
Expected return on plan assets (10) (10) (9)
Amortization of prior service cost 3 — 1
Amortization of net actuarial loss 8 8 7
Net periodic benefit cost $ 46 $ 32 $ 30
Included in accumulated other comprehensive loss are the
following amounts that have not been recognized in net periodic
pension cost as of December 31:
2014 2013
After Taxes and After Taxes and
Before Noncontrolling Before Noncontrolling
Taxes Interests Taxes Interests
Prior service costs
$ 28 $ 15 $ 32 $ 17
Net actuarial loss 749 456 542 326
$ 777 $ 471 $ 574 $ 343
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 2015 net periodic pension cost for actuarial losses
is $52 million ($32 million net of tax and noncontrolling interests).
FCX does not expect to have any plan assets returned to it in
2015. 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