International Paper 2012 Annual Report Download - page 110

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million for the plan years ending in 2012, 2011 and
2010, respectively.
NOTE 16 POSTRETIREMENT BENEFITS
U.S. POSTRETIREMENT BENEFITS
International Paper provides certain retiree health
care and life insurance benefits covering certain U.S.
salaried and hourly employees. These employees
are generally eligible for benefits upon retirement
and completion of a specified number of years of
creditable service. Excluded from company-provided
medical benefits are salaried employees whose age
plus years of employment with the Company totaled
less than 60 as of January 1, 2004. International
Paper does not fund these benefits prior to payment
and has the right to modify or terminate certain of
these plans in the future.
The components of postretirement benefit expense
in 2012 , 2011 and 2010 were as follows:
In millions 2012 2011 2010
Service cost $3 $2 $2
Interest cost 20 21 23
Actuarial loss 10 912
Amortization of prior service credits (30) (25) (31)
Curtailment gain (7) ——
Net postretirement (benefit) expense $ (4) $7 $6
International Paper evaluates its actuarial assump-
tions annually as of December 31 (the measurement
date) and considers changes in these long-term fac-
tors based upon market conditions and the require-
ments of employers’ accounting for postretirement
benefits other than pensions. International Paper’s
postretirement plan was remeasured on January 31,
2012 due to a negative plan amendment which
reduced our obligation by $29 million and reduced
the 2012 expected benefit cost by $11 million.
Temple-Inland’s postretirement plan was also
remeasured on July 31, 2012 due to a negative plan
amendment which reduced the obligation by $6 mil-
lion and reduced 2012 expense by $1 million.
The discount rates used to determine net cost for the
years ended December 31, 2012, 2011 and 2010 were
as follows:
2012 2011 2010
Discount rate 4.40% (a) 5.30% 5.40%
(a) Represents the weighted average rate for the IP plan for 2012
due to the remeasurement. The weighted average rate used for
Temple-Inland in 2012 was 4.19%.
The weighted average assumptions used to
determine the benefit obligation at December 31,
2012 and 2011 were as follows:
2012 2011
Discount rate 3.70% 4.80%
Health care cost trend rate assumed for next year 7.50% 8.00%
Rate that the cost trend rate gradually declines to 5.00% 5.00%
Year that the rate reaches the rate it is assumed to
remain 2017 2017
A 1% increase in the assumed annual health care
cost trend rate would have increased the accumu-
lated postretirement benefit obligation at
December 31, 2012 by approximately $19 million. A
1% decrease in the annual trend rate would have
decreased the accumulated postretirement benefit
obligation at December 31, 2012 by approximately
$17 million. The effect on net postretirement benefit
cost from a 1% increase or decrease would be
approximately $1 million.
The plan is only funded in an amount equal to bene-
fits paid. The following table presents the changes in
benefit obligation and plan assets for 2012 and 2011:
In millions 2012 2011
Change in projected benefit obligation:
Benefit obligation, January 1 $ 425 $ 425
Service cost 32
Interest cost 20 21
Participants’ contributions 34 46
Actuarial (gain) loss 44 29
Acquisitions 108 —
Plan amendments (63) —
Benefits paid (107) (108)
Less: Federal subsidy 710
Restructuring (17) —
Curtailment (5) —
Benefit obligation, December 31 $ 449 $ 425
Change in plan assets:
Fair value of plan assets, January 1 $0 $0
Company contributions 73 62
Participants’ contributions 34 46
Benefits paid (107) (108)
Fair value of plan assets, December 31 $ 0 $0
Funded status, December 31 $(449) $(425)
Amounts recognized in the consolidated balance
sheet under ASC 715:
Current liability $ (59) $ (43)
Non-current liability (390) (382)
$(449) $(425)
Amounts recognized in accumulated other
comprehensive income under ASC 715 (pre-tax):
Net actuarial loss $ 115 $81
Prior service credit (65) (35)
$50 $46
The non-current portion of the liability is included
with the postemployment liability in the accompany-
ing consolidated balance sheet under Postretirement
and postemployment benefit obligation.
83