International Paper 2015 Annual Report Download - page 93

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fund’s third-party administrator based upon the
valuation of the underlying securities and instruments
and primarily by applying a market or income valuation
methodology as appropriate depending on the specific
type of security or instrument held. Funds-of-funds are
valued based upon the net asset values of the
underlying investments in hedge funds.
Private equity consists of interests in partnerships that
invest in U.S. and non-U.S. debt and equity securities.
Partnership interests are valued using the most recent
general partner statement of fair value, updated for any
subsequent partnership interest cash flows.
Real estate includes commercial properties, land and
timberland, and generally includes, but is not limited to,
retail, office, industrial, multifamily and hotel properties.
Real estate fund values are primarily reported by the
fund manager and are based on valuation of the
underlying investments which include inputs such as
cost, discounted cash flows, independent appraisals
and market based comparable data.
Risk Parity Funds are defined as engineered beta
exposure to a wide range of asset classes and risk
premia, including equity, interest rates, credit, and
commodities. Risk parity funds seek to provide high
risk-adjusted returns while providing a high level of
diversification relative to a traditional equity/fixed
income portfolio. These funds seek to achieve this
objective with the use of modest leverage applied to
lower-risk, more diverse asset classes. Investments in
Risk parity funds are valued using monthly reported net
asset values. Also included in these funds are related
derivative instruments which are generally employed
as asset class substitutes for managing asset/liability
mismatches, or bona fide hedging or other appropriate
risk management purposes. Derivative instruments are
generally valued by the investment managers or in
certain instances by third-party pricing sources.
The fair value measurements using significant unobservable inputs (Level 3) at December 31, 2015 were as
follows:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
In millions
Other
fixed
income
Hedge
funds
Private
equity
Real
estate
Risk
parity
funds Total
Beginning balance at December 31, 2014 $ 10 $ 867 $ 519 $ 1,101 $ 376 $ 2,873
Actual return on plan assets:
Relating to assets still held at the reporting date —27 27 41 (39)56
Relating to assets sold during the period —3 (9)27 (7)14
Purchases, sales and settlements — (3) (45) (75) 10 (113)
Transfers in and/or out of Level 3 —— — — — —
Ending balance at December 31, 2015 $ 10 $ 894 $ 492 $ 1,094 $ 340 $ 2,830
FUNDING AND CASH FLOWS
The Company’s funding policy for the Pension Plan is
to contribute amounts sufficient to meet legal funding
requirements, plus any additional amounts that the
Company may determine to be appropriate considering
the funded status of the plans, tax deductibility, cash
flow generated by the Company, and other factors. The
Company continually reassesses the amount and
timing of any discretionary contributions. Contributions
to the qualified plan totaling $750 million, $353 million
and $31 million were made by the Company in 2015,
2014 and 2013, respectively. Generally, International
Paper’s non-U.S. pension plans are funded using the
projected benefit as a target, except in certain countries
where funding of benefit plans is not required.
At December 31, 2015, projected future pension benefit
payments, excluding any termination benefits, were as
follows:
In millions
2016 $782
2017 792
2018 803
2019 818
2020 832
2021 – 2025 4,365
OTHER U.S. PLANS
International Paper sponsors the International Paper
Company Salaried Savings Plan and the International
Paper Company Hourly Savings Plan, both of which are
tax-qualified defined contribution 401(k) savings plans.