Postretirement Plans
The majority of our employees are earning benefits under defined benefit pension plans. All nonunion and some union employees hired after December 31, 2008 are not covered by defined benefit plans. We fund our major pension plans through trusts. Pension assets are placed in trust solely for the benefit of the plans’ participants, and are structured to maintain liquidity that is sufficient to pay benefit obligations as well as to keep pace over the long-term with the growth of obligations for future benefit payments.
We also have other postretirement benefits (OPB) other than pensions which consist principally of health care coverage for eligible retirees and qualifying dependents, and to a lesser extent, life insurance to certain groups of retirees. Retiree health care is provided principally until age 65 for approximately half those retirees who are eligible for health care coverage. Certain employee groups, including employees covered by most United Auto Workers bargaining agreements, are provided lifetime health care coverage.
The funded status of the plans is measured as the difference between the plan assets at fair value and the projected benefit obligation (PBO). We have recognized the aggregate of all overfunded plans in Other assets, and the aggregate of all underfunded plans in either Accrued retiree health care or Accrued pension plan liability, net. The portion of the amount by which the actuarial present value of benefits included in the PBO exceeds the fair value of plan assets, payable in the next 12 months, is reflected in Accrued liabilities. The components of net periodic benefit cost were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension | | Other Postretirement Benefits |
Years ended December 31, | 2013 |
| | 2012 |
| | 2011 |
| | 2013 |
| | 2012 |
| | 2011 |
|
Service cost |
| $1,886 |
| |
| $1,649 |
| |
| $1,406 |
| |
| $148 |
| |
| $146 |
| |
| $221 |
|
Interest cost | 2,906 |
| | 3,005 |
| | 3,116 |
| | 263 |
| | 313 |
| | 484 |
|
Expected return on plan assets | (3,874 | ) | | (3,831 | ) | | (3,741 | ) | | (6 | ) | | (7 | ) | | (6 | ) |
Amortization of prior service costs | 196 |
| | 225 |
| | 244 |
| | (180 | ) | | (197 | ) | | (96 | ) |
Recognized net actuarial loss | 2,231 |
| | 1,937 |
| | 1,254 |
| | 95 |
| | 119 |
| | 178 |
|
Settlement and curtailment loss | 104 |
| | 25 |
| | 64 |
| |
|
| | (1 | ) | | 3 |
|
Net periodic benefit cost |
| $3,449 |
| |
| $3,010 |
| |
| $2,343 |
| |
| $320 |
| |
| $373 |
| |
| $784 |
|
| | | | | | | | | | | |
Net periodic benefit cost included in Earnings from operations |
| $3,036 |
| |
| $2,407 |
| |
| $1,648 |
| |
| $353 |
| |
| $543 |
| |
| $692 |
|
During the quarter ended September 30, 2011, we determined the accumulated benefit obligation (ABO) for certain other postretirement benefit plans was understated. As a result, we recognized an additional $294 of postretirement benefit obligations at September 30, 2011. This increased net periodic benefit cost during 2011 by $184, which includes service cost of $73, interest cost of $68 and recognized net actuarial loss of $43.
Under our accounting policy, a portion of net periodic benefit cost is allocated to production as inventoried costs. Of the $184 increase in net periodic benefit cost described above, the associated cost included in Earnings from operations was $161 for the quarter ended September 30, 2011, with the remaining cost of $23 classified as inventory.
The following tables show changes in the benefit obligation, plan assets and funded status of both pensions and OPB for the years ended December 31, 2013 and 2012. Benefit obligation balances presented below reflect the PBO for our pension plans, and accumulated postretirement benefit obligations (APBO) for our OPB plans.
|
| | | | | | | | | | | | | | | |
| Pension | | Other Postretirement Benefits |
| 2013 |
| | 2012 |
| | 2013 |
| | 2012 |
|
Change in benefit obligation | | | | | | | |
Beginning balance |
| $75,895 |
| |
| $67,651 |
| |
| $7,981 |
| |
| $7,997 |
|
Service cost | 1,886 |
| | 1,649 |
| | 148 |
| | 146 |
|
Interest cost | 2,906 |
| | 3,005 |
| | 263 |
| | 313 |
|
Plan participants’ contributions | 8 |
| | 9 |
| |
| |
|
Amendments | 111 |
| | 13 |
| | 4 |
| | 12 |
|
Actuarial (gain)/loss | (9,205 | ) | | 6,378 |
| | (905 | ) | | (53 | ) |
Settlement/curtailment/other | (81 | ) | | (76 | ) | | (57 | ) | | (1 | ) |
Gross benefits paid | (2,874 | ) | | (2,744 | ) | | (451 | ) | | (474 | ) |
Subsidies | | | | | 32 |
| | 37 |
|
Exchange rate adjustment | (21 | ) | | 10 |
| | (7 | ) | | 4 |
|
Ending balance |
| $68,625 |
| |
| $75,895 |
| |
| $7,008 |
| |
| $7,981 |
|
Change in plan assets | | | | | | | |
Beginning balance at fair value |
| $56,178 |
| |
| $51,051 |
| |
| $110 |
| |
| $102 |
|
Actual return on plan assets | 3,316 |
| | 6,300 |
| | 23 |
| | 1 |
|
Company contribution | 1,542 |
| | 1,550 |
| | 14 |
| | 15 |
|
Plan participants’ contributions | 8 |
| | 9 |
| | 3 |
| | 3 |
|
Settlement/curtailment/other | (103 | ) | | (71 | ) | | 11 |
| | 10 |
|
Benefits paid | (2,792 | ) | | (2,669 | ) | | (21 | ) | | (21 | ) |
Exchange rate adjustment | (18 | ) | | 8 |
| |
| |
|
Ending balance at fair value |
| $58,131 |
| |
| $56,178 |
| |
| $140 |
| |
| $110 |
|
Amounts recognized in statement of financial position at December 31 consist of: | | | | | | | |
Other assets |
| $60 |
| |
| $5 |
| | | | |
Other accrued liabilities | (80 | ) | | (71 | ) | |
| ($340 | ) | |
| ($343 | ) |
Accrued retiree health care |
| |
| | (6,528 | ) | | (7,528 | ) |
Accrued pension plan liability, net | (10,474 | ) | | (19,651 | ) | | | | |
Net amount recognized |
| ($10,494 | ) | |
| ($19,717 | ) | |
| ($6,868 | ) | |
| ($7,871 | ) |
Amounts recognized in Accumulated other comprehensive loss at December 31 were as follows:
|
| | | | | | | | | | | | | | | |
| Pension | | Other Postretirement Benefits |
| 2013 |
| | 2012 |
| | 2013 |
| | 2012 |
|
Net actuarial loss |
| $15,460 |
| |
| $26,387 |
| |
| $561 |
| |
| $1,651 |
|
Prior service costs/(credits) | 788 |
| | 904 |
| | (614 | ) | | (799 | ) |
Total recognized in Accumulated other comprehensive loss |
| $16,248 |
| |
| $27,291 |
| |
| ($53 | ) | |
| $852 |
|
The estimated amount that will be amortized from Accumulated other comprehensive loss into net periodic benefit cost during the year ended December 31, 2014 is as follows:
|
| | | | | | | |
| Pension |
| | Other Postretirement Benefits |
|
Recognized net actuarial loss |
| $1,032 |
| |
| $7 |
|
Amortization of prior service costs/(credits) | 178 |
| | (141 | ) |
Total |
| $1,210 |
| |
| ($134 | ) |
The ABO for all pension plans was $63,491 and $69,312 at December 31, 2013 and 2012. Key information for our plans with ABO in excess of plan assets as of December 31 is as follows:
|
| | | | | | | |
| 2013 |
| | 2012 |
|
Projected benefit obligation |
| $63,445 |
| |
| $75,851 |
|
Accumulated benefit obligation | 58,334 |
| | 69,272 |
|
Fair value of plan assets | 52,905 |
| | 56,129 |
|
Assumptions
The following assumptions, which are the weighted average for all plans, are used to calculate the benefit obligation at December 31 of each year and the net periodic benefit cost for the subsequent year.
|
| | | | | | | | |
December 31, | 2013 |
| | 2012 |
| | 2011 |
|
Discount rate: | | | | | |
Pension | 4.80 | % | | 3.80 | % | | 4.40 | % |
Other postretirement benefits | 4.20 | % | | 3.30 | % | | 4.00 | % |
Expected return on plan assets | 7.50 | % | | 7.50 | % | | 7.75 | % |
Rate of compensation increase | 4.00 | % | | 4.00 | % | | 3.90 | % |
The discount rate for each plan is determined based on the plans’ expected future benefit payments using a yield curve developed from high quality bonds that are rated as Aa or better by at least half of the four rating agencies utilized as of the measurement date. The yield curve is fitted to yields developed from bonds at various maturity points. Bonds with the ten percent highest and the ten percent lowest yields are omitted. A portfolio of about 400 bonds is used to construct the yield curve. Since corporate bond yields are generally not available at maturities beyond 30 years, it is assumed that spot rates will remain level beyond that 30-year point. The present value of each plan’s benefits is calculated by applying the spot/discount rates to projected benefit cash flows. All bonds are U.S. issues, with a minimum outstanding of $50.
The pension fund’s expected return on plan assets assumption is derived from a review of actual historical returns achieved by the pension trust and anticipated future long-term performance of individual asset classes. While consideration is given to recent trust performance and historical returns, the assumption represents a long-term, prospective return. The expected return on plan assets component of the net periodic benefit cost for the upcoming plan year is determined based on the expected return on plan assets assumption and the market-related value of plan assets (MRVA). Since our adoption of the accounting standard for pensions in 1987, we have determined the MRVA based on a five-year moving average of plan assets. As of December 31, 2013, the MRVA is approximately $1,340 less than the fair market value of assets.
Assumed health care cost trend rates were as follows:
|
| | | | | | | | |
December 31, | 2013 |
| | 2012 |
| | 2011 |
|
Health care cost trend rate assumed next year | 7.00 | % | | 7.50 | % | | 7.50 | % |
Ultimate trend rate | 5.00 | % | | 5.00 | % | | 5.00 | % |
Year that trend reached ultimate rate | 2018 |
| | 2018 |
| | 2018 |
|
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. To determine the health care cost trend rates we look at a combination of information including ongoing claims cost monitoring, annual statistical analyses of claims data, reconciliation of forecast claims against actual claims, review of trend assumptions of other plan sponsors and national health trends, and adjustments for plan design changes, workforce changes, and changes in plan participant behavior. A one-percentage-point change in assumed health care cost trend rates would have the following effect:
|
| | | | | | | |
| Increase |
| | Decrease |
|
Effect on total of service and interest cost |
| $57 |
| |
| ($47 | ) |
Effect on postretirement benefit obligation | 681 |
| | (575 | ) |
Plan Assets
Investment Strategy The overall objective of our pension assets is to earn a rate of return over time to satisfy the benefit obligations of the pension plans and to maintain sufficient liquidity to pay benefits and address other cash requirements of the pension fund. Specific investment objectives for our long-term investment strategy include reducing the volatility of pension assets relative to pension liabilities, achieving a competitive, total investment return, achieving diversification between and within asset classes and managing other risks. Investment objectives for each asset class are determined based on specific risks and investment opportunities identified.
We periodically update our long-term, strategic asset allocations. We use various analytics to determine the optimal asset mix and consider plan liability characteristics, liquidity characteristics, funding requirements, expected rates of return and the distribution of returns. We identify investment benchmarks for the asset classes in the strategic asset allocation that are market-based and investable where possible.
Actual allocations to each asset class vary from target allocations due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully implement investment allocation positions (such as private equity and real estate), and the timing of benefit payments and contributions. Short-term investments and exchange-traded derivatives are used to rebalance the actual asset allocation to the target asset allocation. The asset allocation is monitored and rebalanced on a monthly basis.
The actual and target allocations by asset class for the pension assets at December 31 were as follows:
|
| | | | | | | | | | | |
| Actual Allocations | | Target Allocations |
Asset Class | 2013 |
| | 2012 |
| | 2013 |
| | 2012 |
|
Fixed income | 49 | % | | 49 | % | | 47 | % | | 47 | % |
Global equity | 29 |
| | 29 |
| | 26 |
| | 26 |
|
Private equity | 5 |
| | 5 |
| | 6 |
| | 6 |
|
Real estate and real assets | 8 |
| | 8 |
| | 11 |
| | 11 |
|
Global strategies | 4 |
| | 4 |
| | 4 |
| | 4 |
|
Hedge funds | 5 |
| | 5 |
| | 6 |
| | 6 |
|
Total | 100 | % | | 100 | % | | 100 | % | | 100 | % |
Fixed income securities are invested broadly and primarily in long duration instruments. Global equity securities are invested broadly in U.S. and non-U.S. companies, across various industries and market capitalizations.
Real estate and real assets include global private investments that may be held through an investment in a limited partnership (LP) or other fund structures and publicly traded investments (such as Real Estate Investment Trusts (REIT) in the case of real estate). Real estate includes but is not limited to investments in office, retail, apartment and industrial properties. Real assets include but are not limited to investments in natural resources (such as energy, farmland and timber), commodities and infrastructure. Private equity investment vehicles are primarily limited partnerships (LPs) and fund-of-funds that mainly invest in U.S. and non-U.S. leveraged buyout, venture capital and special situation strategies.
Global strategies investments seek to capitalize on inefficiencies identified across different asset classes or markets, primarily using long-short positions in derivatives and physical securities. Hedge fund strategy types include, but are not limited to, event driven, relative value, long-short and multi-strategy.
Investment managers are retained for explicit investment roles specified by contractual investment guidelines. Certain investment managers are authorized to invest in derivatives, such as equity or bond futures, swaps, options and currency futures or forwards. Derivatives are used to achieve the desired market exposure of a security or an index, transfer value-added performance between asset classes, achieve the desired currency exposure, adjust portfolio duration or rebalance the total portfolio to the target asset allocation.
As a percentage of total pension plan assets, derivative net notional amounts were 18.3% and 10.0% for fixed income, including to-be-announced mortgage-backed securities and treasury forwards, and (2.2%) and (0.3)% for global equity, currency overlay and commodities at December 31, 2013 and 2012.
Risk Management In managing the plan assets, we review and manage risk associated with funded status risk, interest rate risk, market risk, counterparty risk, liquidity risk and operational risk. Liability matching and asset class diversification are central to our risk management approach and are integral to the overall investment strategy. Further, asset classes are constructed to achieve diversification by investment strategy, by investment manager, by industry or sector and by holding. Investment manager guidelines for publicly traded assets are specified and are monitored regularly through the custodian. Credit parameters for counterparties have been established for managers permitted to trade over-the-counter derivatives. Valuation is governed through several types of procedures, including reviews of manager valuation policies, custodian valuation processes, pricing vendor practices, pricing reconciliation, and periodic, security-specific valuation testing.
Fair Value Measurements The following table presents our plan assets using the fair value hierarchy as of December 31, 2013 and 2012. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant unobservable inputs.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 | December 31, 2012 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
|
Fixed income securities: | | | | | | | | |
Corporate |
| $15,262 |
|
|
| $15,238 |
|
| $24 |
|
| $14,363 |
|
|
| $14,360 |
|
| $3 |
|
U.S. government and agencies | 4,537 |
|
| 4,537 |
|
| 4,921 |
|
| 4,921 |
|
|
Mortgage backed and asset backed | 1,040 |
|
| 491 |
| 549 |
| 752 |
|
| 191 |
| 561 |
|
Municipal | 1,722 |
|
|
| 1,722 |
|
|
| 1,770 |
| | 1,770 |
|
|
Sovereign | 1,018 |
|
|
| 1,018 |
|
|
| 1,045 |
| | 1,045 |
| |
Common/collective/pooled funds | 2,538 |
|
| $16 |
| 2,522 |
|
|
| 2,346 |
|
| $17 |
| 2,329 |
| |
Other (1) | 484 |
|
|
| 229 |
| 255 |
| 220 |
| 1 |
| 219 |
|
|
Derivatives: | | | | | | | | |
Assets | 55 |
|
| 55 |
|
| 36 |
| 1 |
| 35 |
|
|
Liabilities | (10 | ) |
| (10 | ) |
| (23 | ) |
| (23 | ) |
|
Cash equivalents and other short-term investments | 801 |
|
|
| 801 |
|
| 2,687 |
| 2,224 |
| 463 |
|
|
Currency overlay derivatives: | | | | | | | | |
Assets | 2 |
|
| 2 |
|
| 56 |
|
| 56 |
|
|
Liabilities | (3 | ) |
| (3 | ) |
| (55 | ) |
| (55 | ) |
|
Equity securities: | | | | | | | | |
U.S. common and preferred stock | 6,919 |
| 6,919 |
|
|
| 6,144 |
| 6,144 |
|
|
|
Non-U.S. common and preferred stock | 7,722 |
| 7,721 |
|
|
| 1 |
| 7,421 |
| 7,421 |
|
|
|
|
Common/collective/pooled funds | 3,239 |
| 564 |
| 2,675 |
|
| 2,294 |
| 344 |
| 1,950 |
|
|
Derivatives: | | | | | | | | |
Assets | 4 |
|
|
| 4 |
|
| 19 |
|
| 19 |
|
|
Liabilities | (6 | ) |
|
| (6 | ) |
| (9 | ) |
|
| (9 | ) |
|
Private equity (1) | 2,968 |
| 10 |
|
| 2,958 |
| 2,942 |
| 26 |
|
| 2,916 |
|
Real estate and real assets: | | | | | | | | |
Real estate | 2,865 |
| 425 |
| 16 |
| 2,424 |
| 2,765 |
| 623 |
| 14 |
| 2,128 |
|
Real assets | 1,506 |
| 336 |
| 464 |
| 706 |
| 1,327 |
| 286 |
| 377 |
| 664 |
|
Derivatives: | | | | | | | | |
Assets | 1 |
|
| 1 |
|
|
| 1 |
|
|
| 1 |
|
|
|
Liabilities | (1 | ) |
| (1 | ) |
|
| (2 | ) |
|
| (2 | ) |
|
|
Global strategies | 2,355 |
|
| 2,355 |
|
|
| 2,147 |
|
|
| 2,147 |
|
|
|
Hedge funds | 2,776 |
|
| 1,667 |
| 1,109 |
| 2,736 |
|
| 1,263 |
| 1,473 |
|
Total |
| $57,794 |
|
| $15,991 |
|
| $33,777 |
|
| $8,026 |
|
| $55,903 |
|
| $17,087 |
|
| $31,071 |
|
| $7,745 |
|
| | | | | | | | |
Cash |
| $87 |
| | | |
| $94 |
| | | |
Receivables | 458 |
| | | | 388 |
| | | |
Payables | (208 | ) | | | | (207 | ) | | | |
Total |
| $58,131 |
| | | |
| $56,178 |
| | | |
| |
(1) | Certain private funds with a fixed income strategy were reclassified from private equity to other fixed income on January 1, 2013. |
Fixed income securities are primarily valued upon a market approach, using matrix pricing and considering a security’s relationship to other securities for which quoted prices in an active market may be available, or an income approach, converting future cash flows to a single present value amount. Inputs used in developing fair value estimates include reported trades, broker quotes, benchmark yields, and base spreads.
Common/collective/pooled funds are typically common or collective trusts valued at their net asset values (NAVs) that are calculated by the investment manager or sponsor of the fund and have daily or monthly liquidity. Derivatives included in the table above are over-the-counter and are primarily valued using an income approach with inputs that include benchmark yields, swap curves, cash flow analysis, rating agency data and interdealer broker rates. Exchange-traded derivative positions are reported in accordance with changes in daily variation margin which is settled daily and therefore reflected in the payables and receivables portion of the table.
Cash equivalents and other short-term investments (which are used to pay benefits) are held in a separate account which consists of a commingled fund (with daily liquidity) and separately held short-term securities and cash equivalents. All of the investments in this cash vehicle are valued daily using a market approach with inputs that include quoted market prices for similar instruments. In the event a market price is not available for instruments with an original maturity of one year or less, amortized cost is used as a proxy for fair value. Common and preferred stock equity securities are primarily valued using a market approach based on the quoted market prices of identical instruments.
Private equity and private debt NAV valuations are based on the valuation of the underlying investments, which include inputs such as cost, operating results, discounted future cash flows and market based comparable data. For those investments reported on a one-quarter lagged basis (primarily LPs) we use NAVs, adjusted for subsequent cash flows and significant events.
Real estate and real asset NAV valuations are based on valuation of the underlying investments, which include inputs such as cost, discounted future cash flows, independent appraisals and market based comparable data. For those investments reported on a one-quarter lagged basis (primarily LPs) NAVs are adjusted for subsequent cash flows and significant events. Publicly traded REITs and infrastructure stocks are valued using a market approach based on quoted market prices of identical instruments. Exchange-traded commodities futures positions are reported in accordance with changes in daily variation margin which is settled daily and therefore reflected in the payables and receivables portion of the table.
Global strategies investments are primarily limited liability company (LLC) or mutual fund structures. The NAVs are based on valuation of the underlying investments, which are primarily valued using a market approach. The funds generally have monthly liquidity.
Hedge funds consist of fund-of-fund LLC structures and direct hedge funds. The NAVs of the fund-of-funds are based on the NAVs of the underlying hedge funds as well as any cash and accruals held at the fund-of-fund level. For direct hedge funds the NAVs are primarily based on valuation of the underlying investments. This is primarily done by applying a market or income valuation methodology depending on the specific type of security or instrument held. Redemptions in hedge funds are based on specific terms and conditions of the individual funds.
Investments in private equity, private debt, real estate, real assets, global strategies, and hedge funds are primarily calculated and reported by the General Partner (GP), fund manager or third party administrator. Pension assets invested in these structures rely on the NAV of these investments as the practical expedient for the valuations.
The following tables present a reconciliation of Level 3 assets held during the year ended December 31, 2013 and 2012. Transfers into and out of Level 3 are reported at the beginning-of-year values.
|
| | | | | | | | | | | | | | | | | | | |
| January 1, 2013 Balance |
| | Net Realized and Unrealized Gains |
| | Net Purchases, Issuances and Settlements |
| | Net Transfers Into/(Out of) Level 3 |
| | December 31, 2013 Balance |
|
Fixed income securities: | | | | | | | | | |
Corporate |
| $3 |
| |
|
| |
| $16 |
| |
| $5 |
| |
| $24 |
|
Mortgage backed and asset backed | 561 |
| |
|
| | (11 | ) | | (1 | ) | | 549 |
|
Other (1) | 245 |
| |
| $37 |
| | (27 | ) | |
|
| | 255 |
|
Equity securities: | | | | | | | | |
|
|
Non-U.S. common and preferred stock |
| |
|
| |
| | 1 |
| | 1 |
|
Private equity (1) | 2,671 |
| | 536 |
| | (249 | ) | |
|
| | 2,958 |
|
Real estate and real assets: | | | | | | | | | |
Real estate | 2,128 |
| | 232 |
| | 64 |
| |
|
| | 2,424 |
|
Real assets | 664 |
| | 78 |
| | (36 | ) | |
|
| | 706 |
|
Hedge funds | 1,473 |
| | 183 |
| | (627 | ) | | 80 |
| | 1,109 |
|
Total |
| $7,745 |
| |
| $1,066 |
| |
| ($870 | ) | |
| $85 |
| |
| $8,026 |
|
| |
(1) | Certain private funds with a fixed income strategy were reclassified from private equity to other fixed income on January 1, 2013. |
For the year ended December 31, 2013, the change in unrealized gain for Level 3 assets still held at December 31, 2013 were $21 for other fixed income, $422 for private equity, $243 for real estate, $71 for real assets and $283 for hedge funds.
|
| | | | | | | | | | | | | | | | | | | |
| January 1, 2012 Balance |
| | Net Realized and Unrealized Gains/(Losses) |
| | Net Purchases, Issuances and Settlements |
| | Net Transfers Into/(Out of) Level 3 |
| | December 31, 2012 Balance |
|
Fixed income securities: | | | | | | | | | |
Corporate |
| $11 |
| |
| ($12 | ) | |
| $11 |
| |
| ($7 | ) | |
| $3 |
|
Mortgage backed and asset backed | 11 |
| | 41 |
| | 151 |
| | 358 |
| | 561 |
|
Municipal | 3 |
| | | |
|
| | (3 | ) | |
|
|
Private equity | 2,859 |
| | 208 |
| | (151 | ) | | | | 2,916 |
|
Real estate and real assets: | | | | | | | | | |
Real estate | 1,820 |
| | 133 |
| | 175 |
| | | | 2,128 |
|
Real assets | 547 |
| | 45 |
| | 72 |
| | | | 664 |
|
Global strategies | 75 |
| |
|
| | | | (75 | ) | |
|
|
Hedge funds | 2,451 |
| | 104 |
| | 52 |
| | (1,134 | ) | | 1,473 |
|
Total |
| $7,777 |
| |
| $519 |
| |
| $310 |
| |
| ($861 | ) | |
| $7,745 |
|
For the year ended December 31, 2012, the change in unrealized gain/(loss) for Level 3 assets still held at December 31, 2012 were ($12) for corporate, $36 for mortgage backed and asset backed, $113 for private equity, $579 for real estate, $62 for real assets and $101 for hedge funds.
OPB Plan Assets The majority of OPB plan assets are invested in a balanced index fund which is comprised of approximately 60% equities and 40% debt securities. The index fund is valued using a market approach based on the quoted market price of an identical instrument (Level 1). The expected rate of return on these assets does not have a material effect on the net periodic benefit cost.
Cash Flows
Contributions Required pension contributions under the Employee Retirement Income Security Act (ERISA), as well as rules governing funding of our non-U.S. pension plans, are expected to be minimal in 2014. We expect to make discretionary contributions to our plans of approximately $750 in 2014. We expect to contribute approximately $12 to our OPB plans in 2014.
Estimated Future Benefit Payments The table below reflects the total pension benefits expected to be paid from the plans or from our assets, including both our share of the benefit cost and the participants’ share of the cost, which is funded by participant contributions. OPB payments reflect our portion only.
|
| | | | | | | | | | | | | | | | | | | | | | | |
Year(s) | 2014 |
| | 2015 |
| | 2016 |
| | 2017 |
| | 2018 |
| | 2019-2023 |
|
Pensions |
| $3,173 |
| |
| $3,346 |
| |
| $3,522 |
| |
| $3,696 |
| |
| $3,865 |
| |
| $21,112 |
|
Other postretirement benefits: | | | | | | | | | | | |
Gross benefits paid | 478 |
| | 507 |
| | 539 |
| | 567 |
| | 614 |
| | 3,250 |
|
Subsidies | (39 | ) | | (41 | ) | | (41 | ) | | (42 | ) | | (43 | ) | | (215 | ) |
Net other postretirement benefits |
| $439 |
| |
| $466 |
| |
| $498 |
| |
| $525 |
| |
| $571 |
| |
| $3,035 |
|
Termination Provisions
Certain of the pension plans provide that, in the event there is a change in control of the Company which is not approved by the Board of Directors and the plans are terminated within five years thereafter, the assets in the plan first will be used to provide the level of retirement benefits required by ERISA, and then any surplus will be used to fund a trust to continue present and future payments under the postretirement medical and life insurance benefits in our group insurance benefit programs.
We have an agreement with the U.S. government with respect to certain pension plans. Under the agreement, should we terminate any of the plans under conditions in which the plan’s assets exceed that plan’s obligations, the U.S. government will be entitled to a fair allocation of any of the plan’s assets based on plan contributions that were reimbursed under U.S. government contracts.
Defined Contribution Plans
We provide certain defined contribution plans to all eligible employees. The principal plans are the Company-sponsored 401(k) plans. The expense for these defined contribution plans was $742, $708 and $658 in 2013, 2012 and 2011, respectively.
