Old COPPER Company, Inc. - 10-Q filing on 2015-12-09

Retirement Benefit Plans

9 Months Ended

Oct. 31, 2015

The components of net periodic benefit expense/(income) for our non-contributory qualified defined benefit pension plan (Primary Pension Plan), non-contributory supplemental pension plans and contributory postretirement health and welfare plan were as follows:



	Three Months Ended						Nine Months Ended
($ in millions)	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Primary Pension Plan
Service cost	$	17		$	15		$	52		$	46
Interest cost	49			53			147			158
Other cost	2			—			5			—
Expected return on plan assets	(89		)	(87		)	(267		)	(261		)
Amortization of actuarial loss/(gain)	26			13			77			38
Amortization of prior service cost/(credit)	2			1			6			5
Loss/(gain) on transfer of benefits	—			6			—			6
Net periodic benefit expense/(income)	$	7		$	1		$	20		$	(8	)

Supplemental Pension Plans
Service cost	$	—		$	—		$	—		$	—
Interest cost	2			3			5			7
Amortization of actuarial loss/(gain)	3			3			10			11
Amortization of prior service cost/(credit)	—			—			—			—
Loss/(gain) on transfer of benefits	—			(6		)	—			(6		)
Net periodic benefit expense/(income)	$	5		$	—		$	15		$	12

Primary and Supplemental Pension Plans Total
Service cost	$	17		$	15		$	52		$	46
Interest cost	51			56			152			165
Other cost	2			—			5			—
Expected return on plan assets	(89		)	(87		)	(267		)	(261		)
Amortization of actuarial loss/(gain)	29			16			87			49
Amortization of prior service cost/(credit)	2			1			6			5
Loss/(gain) on transfer of benefits	—			—			—			—
Net periodic benefit expense/(income)	$	12		$	1		$	35		$	4

Postretirement Health and Welfare Plan
Service cost	$	—		$	—		$	—		$	—
Interest cost	—			—			—			—
Amortization of actuarial loss/(gain)	—			—			—			—
Amortization of prior service cost/(credit)	(2		)	(2		)	(6		)	(6		)
Net periodic benefit expense/(income)	$	(2	)	$	(2	)	$	(6	)	$	(6	)

Retirement Benefit Plans Total
Service cost	$	17		$	15		$	52		$	46
Interest cost	51			56			152			165
Other cost	2			—			5			—
Expected return on plan assets	(89		)	(87		)	(267		)	(261		)
Amortization of actuarial loss/(gain)	29			16			87			49
Amortization of prior service cost/(credit)	—			(1		)	—			(1		)
Loss/(gain) on transfer of benefits	—			—			—			—
Net periodic benefit expense/(income)	$	10		$	(1	)	$	29		$	(2	)

Net periodic benefit expense/(income) for our noncontributory postretirement health and welfare plan was predominantly included in SG&A expense in the unaudited Interim Consolidated Statements of Operations.

During the third quarter of 2014, we transferred $25 million of supplemental pension plan benefits, as allowed under the Employee Retirement Income Security Act of 1974, out of one of our supplemental pension plans and into our Primary Pension Plan. The transfer did not have a significant impact on our unaudited Interim Consolidated Financial Statements.

Primary Pension Plan Lump-Sum Payment Offer and Annuity Contract

In August 2015, as a result of a plan amendment, we offered approximately 31,000 retirees and beneficiaries in the Primary Pension Plan who commenced their benefit between January 1, 2000 and August 31, 2012 the option to receive a lump-sum settlement payment. In addition, we offered approximately 8,000 participants in the Primary Pension Plan who separated from service and had a deferred vested benefit as of August 31, 2012 the option to receive a lump-sum settlement payment. Approximately 12,000 retirees and beneficiaries elected to receive voluntary lump-sum payments to settle the Primary Pension Plan's obligation to them. In addition, approximately 1,900 former employees having deferred vested benefits elected to receive lump-sums. The lump-sum settlement payments were made by the Company on November 5, 2015 using assets from the Primary Pension Plan. Accordingly, the settlement expense related to the lump sum payments will be recognized in the fourth quarter of 2015.

The Company has also entered into a definitive agreement to purchase a group annuity contract from The Prudential Insurance Company of America (Prudential), under which Prudential will pay and administer future benefit payments to select retirees. The agreement provides for the Primary Pension Plan to transfer a portion of its obligations and assets to Prudential. The annuity transaction closed on December 7, 2015, and the Company has an option to transfer additional portions in 2016 if market conditions warrant.

Defined Contribution Plans

Our defined contribution plans include a qualified Savings, Profit-Sharing and Stock Ownership Plan (401(k) plan), which includes a non-contributory retirement account, and a non-qualified contributory unfunded mirror savings plan offered to certain members of management. Total expense for our defined contribution plans for the third quarters of 2015 and 2014 was $16 million and $12 million, respectively, and was predominantly included in SG&A expenses in the unaudited Interim Consolidated Statements of Operations. Total expense for the first nine months of 2015 and 2014 was $43 million and $38 million, respectively.