International Paper 2015 Annual Report Download - page 90

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The components of the $44 million and $2 million
increase related to U.S. plans and non-U.S. plans,
respectively, in the amounts recognized in OCI during
2015 consisted of:
In millions
U.S.
Plans
Non-
U.S.
Plans
Current year actuarial (gain) loss $ 530 $ 5
Amortization of actuarial loss (428)(1)
Amortization of prior service cost (43) —
Settlements (15) —
Effect of foreign currency exchange
rate movements —(2)
$44$ 2
The accumulated benefit obligation at December 31,
2015 and 2014 was $14.3 billion and $14.6 billion,
respectively, for our U.S. defined benefit plans and
$189 million and $208 million, respectively, at
December 31, 2015 and 2014 for our non-U.S. defined
benefit plans.
The following table summarizes information for pension
plans with an accumulated benefit obligation in excess
of plan assets at December 31, 2015 and 2014:
2015 2014
In millions
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
Projected benefit
obligation $ 14,438 $ 182 $ 14,741 $ 196
Accumulated benefit
obligation 14,282 168 14,559 176
Fair value of plan assets 10,923 126 10,918 135
ASC 715, “Compensation – Retirement Benefits”
provides for delayed recognition of actuarial gains and
losses, including amounts arising from changes in the
estimated projected plan benefit obligation due to
changes in the assumed discount rate, differences
between the actual and expected return on plan assets
and other assumption changes. These net gains and
losses are recognized prospectively over a period that
approximates the average remaining service period of
active employees expected to receive benefits under
the plans to the extent that they are not offset by gains
in subsequent years. The estimated net loss and prior
service cost that will be amortized from AOCI into net
periodic pension cost for the U.S. plans during the next
fiscal year are expected to be $374 million and $41
million, respectively.
NET PERIODIC PENSION EXPENSE
Service cost is the actuarial present value of benefits
attributed by the plans’ benefit formula to services
rendered by employees during the year. Interest cost
represents the increase in the projected benefit
obligation, which is a discounted amount, due to the
passage of time. The expected return on plan assets
reflects the computed amount of current-year earnings
from the investment of plan assets using an estimated
long-term rate of return.
Net periodic pension expense for qualified and
nonqualified U.S. and non-U.S. defined benefit plans
comprised the following:
2015 2014 2013
In millions
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
U.S.
Plans
Non-
U.S.
Plans
Service cost $ 161 $ 6 $ 145 $ 5 $ 188 $ 4
Interest cost 597 10 600 13 576 11
Expected return
on plan assets (783) (11) (762) (14) (738)(11)
Actuarial loss /
(gain) 428 1 374 — 485 1
Amortization of
prior service
cost 43 — 30 — 34 —
Curtailment
gain ———(4)——
Settlement loss 15 — ————
Net periodic
pension
expense (a) $ 461 $ 6 $ 387 $ — $ 545 $ 5
(a) Excludes $1 million in curtailments in 2014 related to the pension
freeze remeasurement that were recorded in restructuring and
other charges.
The increase in 2015 pension expense reflects a
decrease in the discount rate from 4.65% in 2014 to
4.10% in 2015, updated mortality assumptions, higher
amortization of unrecognized actuarial losses and a
settlement charge in 2015.
ASSUMPTIONS
International Paper evaluates its actuarial assumptions
annually as of December 31 (the measurement date)
and considers changes in these long-term factors
based upon market conditions and the requirements for
employers’ accounting for pensions. These
assumptions are used to calculate benefit obligations
as of December 31 of the current year and pension
expense to be recorded in the following year (i.e., the
discount rate used to determine the benefit obligation
as of December 31, 2015 was also the discount rate
used to determine net pension expense for the 2016
year).