Pensions and Other Postretirement Benefits
Employee Pension and Other Postretirement Benefit Plans
Defined Benefit Pension Plans
Defined benefit pension plans covering eligible U.S. hourly employees (hired prior to October 2007) and Canadian hourly employees generally provide benefits of negotiated, stated amounts for each year of service and supplemental benefits for employees who retire with 30 years of service before normal retirement age. The benefits provided by the defined benefit pension plans covering eligible U.S. (hired prior to January 1, 2001) and Canadian salaried employees and employees in certain other non-U.S. locations are generally based on years of service and compensation history. Accrual of defined pension benefits ceased on September 30, 2012 for U.S. salaried employees and on December 31, 2012 for Canadian salaried employees. There is also an unfunded nonqualified pension plan covering primarily U.S. executives for service prior to January 1, 2007 and it is based on an “excess plan” for service after that date.
Pension Contributions
The funding policy for qualified defined benefit pension plans is to contribute annually not less than the minimum required by applicable law and regulations or to directly pay benefit payments where appropriate. At December 31, 2013 all legal funding requirements had been met. We expect to contribute $100 million to our U.S. non-qualified plans and $749 million to our non-U.S. pension plans in 2014. The following table summarizes contributions made to the defined benefit pension plans (dollars in millions):
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2013 | | 2012 | | 2011 |
U.S. hourly and salaried | $ | 128 |
| | $ | 2,420 |
| | $ | 1,962 |
|
Non-U.S. | 886 |
| | 855 |
| | 836 |
|
Total | $ | 1,014 |
| | $ | 3,275 |
| | $ | 2,798 |
|
We made a voluntary contribution in January 2011 to our U.S. hourly and salaried defined benefit pension plans of 61 million shares of our common stock valued at $2.2 billion for funding purposes at the time of contribution. The contributed shares qualified as a plan asset for funding purposes at the time of contribution and as a plan asset valued at $1.9 billion for accounting purposes in July 2011. This was a voluntary contribution above our funding requirements for the pension plans.
We continue to pursue various options to fund and derisk our pension plans, including continued changes to the pension asset portfolio mix to reduce funded status volatility.
Other Postretirement Benefit Plans
Certain hourly and salaried defined benefit plans provide postretirement medical, dental, legal service and life insurance to eligible U.S. and Canadian retirees and their eligible dependents. Certain other non-U.S. subsidiaries have postretirement benefit plans, although most non-U.S. employees are covered by government sponsored or administered programs.
OPEB Contributions
The following table summarizes contributions to the U.S. OPEB plans (dollars in millions):
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2013 | | 2012 | | 2011 |
Employer contributions | $ | 393 |
| | $ | 432 |
| | $ | 426 |
|
Plan participants' contributions | 29 |
| | 4 |
| | 13 |
|
Total contributions | $ | 422 |
| | $ | 436 |
| | $ | 439 |
|
For the year ended December 31, 2011 we also contributed $1.9 billion to the independent HCT consisting of restricted cash of $782 million and notes payable of $1.1 billion.
Defined Contribution Plans
We have a defined contribution plan for eligible U.S. salaried employees. This plan provides discretionary matching contributions which we instituted in October 2009. U.S. hourly employees hired after September 2007 also participate in a defined contribution plan. Contributions are also made to certain non-U.S. defined contribution plans. We made contributions to our defined contribution plans of $502 million, $352 million and $297 million in the years ended December 31, 2013, 2012 and 2011.
Significant Plan Amendments, Benefit Modifications and Related Events
U.S. Salaried Defined Benefit Life Insurance Plan
In September 2013 we amended the U.S. salaried life insurance plan effective January 1, 2014 to eliminate benefits for retirees and eligible employees retiring on or after August 1, 2009. The remeasurement, settlement and curtailment resulted in a decrease in the OPEB liability of $319 million, a decrease in the net pre-tax actuarial loss component of Accumulated other comprehensive loss of $236 million and a pre-tax gain of $83 million.
U.S. Salaried Defined Benefit Pension Plan
In 2012 we amended the salaried pension plan to cease the accrual of additional benefits effective September 30, 2012 resulting in a curtailment of $309 million which decreased the pension liability. We divided the plan to create a new legally separate defined benefit plan primarily for active and terminated vested participants. Settlement payments of $30.6 billion were made consisting of lump-sum pension distributions of $3.6 billion to retired salaried plan participants, group annuity contracts purchased for a total annuity premium of $25.1 billion and two separate previously guaranteed obligations of $1.9 billion were settled. These agreements unconditionally and irrevocably guarantee the full payment of all annuity payments to the participants that were receiving payments from the plan and the insurance companies assumed all investment risk associated with the assets that were delivered as the annuity contract premiums.
Through these transactions we have settled certain pension obligations in their entirety resulting in a pre-tax settlement loss of $2.6 billion ($2.2 billion after tax) in Automotive cost of sales. The pre-tax loss is composed of existing losses in Accumulated other comprehensive loss of $377 million, and the premium paid to the insurance company of $2.1 billion. The tax benefit of $413 million is composed of the statutory tax benefit of $1.0 billion offset by tax expense of $596 million primarily associated with the removal of prior period income tax allocations between Accumulated other comprehensive loss and Income tax expense (benefit).
In 2012 we provided short-term, interest-free, unsecured loans of $2.2 billion to provide the plan with incremental liquidity to pay ongoing benefits and administrative costs. Contributions of $1.7 billion were made from the $2.2 billion loans. Through December 31, 2012 $430 million was repaid and $90 million of the loan was still outstanding. In the year ended December 31, 2013 $60 million was repaid and the remaining $30 million was deemed a plan contribution.
Active salaried plan participants began receiving additional contributions in the defined contribution plan in October 2012. Lump-sum pension distributions in 2013 of $430 million resulted in a pre-tax settlement gain of $128 million.
Canadian Salaried Defined Benefit Plans
In June 2012 we amended the Canadian salaried pension plan to cease the accrual of additional benefits effective December 31, 2012 and provide active employees a lump-sum distribution option at retirement. The remeasurement, amendments and offsetting curtailment increased the pension liability by $84 million. Active plan participants started receiving additional contributions in the defined contribution plan starting in January 2013.
We also amended the Canadian salaried retiree healthcare plan to eliminate post-65 healthcare benefits for employees retiring on or after July 1, 2014. In conjunction with this change we amended the plan to offer either a monthly monetary payment or an annual lump-sum cash payment to a defined contribution plan for health care in lieu of the benefit coverage provisions formerly provided under the healthcare plan. These amendments decreased the OPEB liability by $28 million.
Canadian HCT
In October 2011 pursuant to a June 2009 agreement between General Motors of Canada Limited (GMCL) and the CAW an independent HCT was implemented to provide retiree healthcare benefits to certain active and retired employees. Concurrent with the implementation of the HCT, GMCL was legally released from all obligations associated with the cost of providing retiree healthcare benefits to CAW retirees and surviving spouses by the class action process and to CAW active employees as of June 8, 2009. We accounted for the related termination of CAW hourly retiree healthcare benefits as a settlement and recorded a gain of $749 million in Automotive cost of sales. The settlement gain represents the difference between the healthcare plan obligation of $3.1 billion (as of the implementation date) and the fair value of the notes and restricted cash contributed totaling $1.9 billion, and recognition of Accumulated other comprehensive loss of $414 million.
Other Remeasurements
In March 2012 certain pension plans in GME were remeasured as part of our goodwill impairment testing, resulting in an increase of $150 million in the pension liability and a pre-tax increase in the net actuarial loss component of Accumulated other comprehensive loss.
In September 2011 a plan which provided legal services to U.S. hourly employees and retirees was remeasured as a result of our labor agreement provisions which terminated the plan effective December 31, 2013. The negotiated termination has been accounted for as a negative plan amendment resulting in a decrease in the OPEB liability and a pre-tax increase of $266 million in the prior service credit component of Accumulated other comprehensive loss was amortized through December 31, 2013.
In March 2011 certain pension plans in GME were remeasured as part of our goodwill impairment testing, resulting in a decrease of $272 million in the pension liability and a pre-tax increase in the net actuarial gain component of Accumulated other comprehensive loss.
Refer to Note 10 for additional information on our Goodwill impairment.
Pension and OPEB Obligations and Plan Assets
The following table summarizes the change in benefit obligations and related plan assets (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2013 | | Year Ended December 31, 2012 |
| Pension Benefits | | Other Benefits | | Pension Benefits | | Other Benefits |
| U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans |
Change in benefit obligations | | | | | | | | | | | | | | | |
Beginning benefit obligation | $ | 82,110 |
| | $ | 29,301 |
| | $ | 6,271 |
| | $ | 1,528 |
| | $ | 108,562 |
| | $ | 25,765 |
| | $ | 5,822 |
| | $ | 1,490 |
|
Service cost | 298 |
| | 394 |
| | 24 |
| | 13 |
| | 452 |
| | 383 |
| | 23 |
| | 16 |
|
Interest cost | 2,837 |
| | 1,010 |
| | 217 |
| | 57 |
| | 4,055 |
| | 1,110 |
| | 234 |
| | 63 |
|
Plan participants' contributions | — |
| | 4 |
| | 29 |
| | 2 |
| | — |
| | 7 |
| | 4 |
| | 1 |
|
Amendments | — |
| | (4 | ) | | — |
| | (4 | ) | | (32 | ) | | 139 |
| | — |
| | (52 | ) |
Actuarial (gains) losses | (7,661 | ) | | (1,009 | ) | | (757 | ) | | (210 | ) | | 8,432 |
| | 2,774 |
| | 622 |
| | 13 |
|
Benefits paid | (5,719 | ) | | (1,683 | ) | | (422 | ) | | (53 | ) | | (8,422 | ) | | (1,551 | ) | | (436 | ) | | (55 | ) |
Foreign currency translation adjustments | — |
| | (528 | ) | | — |
| | (98 | ) | | — |
| | 682 |
| | — |
| | 30 |
|
Business combinations | — |
| | 128 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Curtailments, settlements and other | (385 | ) | | (85 | ) | | (252 | ) | | 3 |
| | (30,937 | ) | | (8 | ) | | 2 |
| | 22 |
|
Ending benefit obligation | 71,480 |
| | 27,528 |
| | 5,110 |
| | 1,238 |
| | 82,110 |
| | 29,301 |
| | 6,271 |
| | 1,528 |
|
Change in plan assets | | | | | | | | | | | | | | | |
Beginning fair value of plan assets | 68,085 |
| | 15,541 |
| | — |
| | — |
| | 94,349 |
| | 14,541 |
| | — |
| | — |
|
Actual return on plan assets | 2,107 |
| | 988 |
| | — |
| | — |
| | 10,332 |
| | 1,344 |
| | — |
| | — |
|
Employer contributions | 128 |
| | 886 |
| | 393 |
| | 51 |
| | 2,420 |
| | 855 |
| | 432 |
| | 54 |
|
Plan participants' contributions | — |
| | 4 |
| | 29 |
| | 2 |
| | — |
| | 7 |
| | 4 |
| | 1 |
|
Benefits paid | (5,719 | ) | | (1,683 | ) | | (422 | ) | | (53 | ) | | (8,422 | ) | | (1,551 | ) | | (436 | ) | | (55 | ) |
Foreign currency translation adjustments | — |
| | (692 | ) | | — |
| | — |
| | — |
| | 389 |
| | — |
| | — |
|
Business combinations | — |
| | 26 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Settlements | (435 | ) | | (87 | ) | | — |
| | — |
| | (30,629 | ) | | (207 | ) | | — |
| | — |
|
Other | — |
| | 3 |
| | — |
| | — |
| | 35 |
| | 163 |
| | — |
| | — |
|
Ending fair value of plan assets | 64,166 |
| | 14,986 |
| | — |
| | — |
| | 68,085 |
| | 15,541 |
| | — |
| | — |
|
Ending funded status | $ | (7,314 | ) | | $ | (12,542 | ) | | $ | (5,110 | ) | | $ | (1,238 | ) | | $ | (14,025 | ) | | $ | (13,760 | ) | | $ | (6,271 | ) | | $ | (1,528 | ) |
Amounts recorded in the consolidated balance sheets | | | | | | | | | | | | | | | |
Non-current assets | $ | — |
| | $ | 137 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 73 |
| | $ | — |
| | $ | — |
|
Current liabilities | (131 | ) | | (379 | ) | | (368 | ) | | (83 | ) | | (95 | ) | | (343 | ) | | (406 | ) | | (84 | ) |
Non-current liabilities | (7,183 | ) | | (12,300 | ) | | (4,742 | ) | | (1,155 | ) | | (13,930 | ) | | (13,490 | ) | | (5,865 | ) | | (1,444 | ) |
Net amount recorded | $ | (7,314 | ) | | $ | (12,542 | ) | | $ | (5,110 | ) | | $ | (1,238 | ) | | $ | (14,025 | ) | | $ | (13,760 | ) | | $ | (6,271 | ) | | $ | (1,528 | ) |
Amounts recorded in Accumulated other comprehensive loss | | | | | | | | | | | | | | | |
Net actuarial gain (loss) | $ | 4,747 |
| | $ | (3,379 | ) | | $ | (542 | ) | | $ | 47 |
| | $ | (1,434 | ) | | $ | (4,786 | ) | | $ | (1,573 | ) | | $ | (188 | ) |
Net prior service (cost) credit | 38 |
| | (87 | ) | | 19 |
| | 91 |
| | 42 |
| | (111 | ) | | 135 |
| | 118 |
|
Total recorded in Accumulated other comprehensive loss | $ | 4,785 |
| | $ | (3,466 | ) | | $ | (523 | ) | | $ | 138 |
| | $ | (1,392 | ) | | $ | (4,897 | ) | | $ | (1,438 | ) | | $ | (70 | ) |
The following table summarizes the total accumulated benefit obligations (ABO), the fair value of plan assets for defined benefit pension plans with ABO in excess of plan assets, and the projected benefit obligation (PBO) and fair value of plan assets for defined benefit pension plans with PBO in excess of plan assets (dollars in millions):
|
| | | | | | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 |
| U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans |
ABO | $ | 71,461 |
| | $ | 27,069 |
| | $ | 82,103 |
| | $ | 28,880 |
|
Plans with ABO in excess of plan assets | | | | | | | |
ABO | $ | 71,461 |
| | $ | 25,897 |
| | $ | 82,103 |
| | $ | 28,156 |
|
Fair value of plan assets | $ | 64,166 |
| | $ | 13,663 |
| | $ | 68,085 |
| | $ | 14,702 |
|
Plans with PBO in excess of plan assets | | | | | | | |
PBO | $ | 71,480 |
| | $ | 26,788 |
| | $ | 82,110 |
| | $ | 28,537 |
|
Fair value of plan assets | $ | 64,166 |
| | $ | 14,109 |
| | $ | 68,085 |
| | $ | 14,704 |
|
The following table summarizes the components of net periodic pension and OPEB expense along with the assumptions used to determine benefit obligations (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2013 | | Year Ended December 31, 2012 | | Year Ended December 31, 2011 |
| Pension Benefits | | Other Benefits | | Pension Benefits | | Other Benefits | | Pension Benefits | | Other Benefits |
| U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans |
Components of expense | | | | | | | | | | | | | | | | | | | | | | | |
Service cost | $ | 395 |
| | $ | 425 |
| | $ | 24 |
| | $ | 13 |
| | $ | 590 |
| | $ | 411 |
| | $ | 23 |
| | $ | 16 |
| | $ | 632 |
| | $ | 399 |
| | $ | 23 |
| | $ | 30 |
|
Interest cost | 2,837 |
| | 1,010 |
| | 217 |
| | 57 |
| | 4,055 |
| | 1,110 |
| | 234 |
| | 63 |
| | 4,915 |
| | 1,215 |
| | 265 |
| | 186 |
|
Expected return on plan assets | (3,562 | ) | | (823 | ) | | — |
| | — |
| | (5,029 | ) | | (870 | ) | | — |
| | — |
| | (6,692 | ) | | (925 | ) | | — |
| | — |
|
Amortization of prior service cost (credit) | (4 | ) | | 19 |
| | (116 | ) | | (14 | ) | | (1 | ) | | 1 |
| | (116 | ) | | (12 | ) | | (2 | ) | | (2 | ) | | (39 | ) | | (9 | ) |
Recognized net actuarial loss | 6 |
| | 208 |
| | 85 |
| | 6 |
| | 2 |
| | 35 |
| | 52 |
| | 6 |
| | — |
| | — |
| | 6 |
| | — |
|
Curtailments, settlements and other (gains) losses | (77 | ) | | (6 | ) | | (62 | ) | | — |
| | 2,580 |
| | 71 |
| | — |
| | 11 |
| | (23 | ) | | (7 | ) | | — |
| | (749 | ) |
Net periodic pension and OPEB expense (income) | $ | (405 | ) | | $ | 833 |
| | $ | 148 |
| | $ | 62 |
| | $ | 2,197 |
| | $ | 758 |
| | $ | 193 |
| | $ | 84 |
| | $ | (1,170 | ) | | $ | 680 |
| | $ | 255 |
| | $ | (542 | ) |
Weighted-average assumptions used to determine benefit obligations | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate | 4.46 | % | | 4.10 | % | | 4.52 | % | | 4.71 | % | | 3.59 | % | | 3.70 | % | | 3.68 | % | | 3.97 | % | | 4.15 | % | | 4.50 | % | | 4.24 | % | | 4.37 | % |
Rate of compensation increase(a) | N/A |
| | 2.90 | % | | N/A |
| | 4.21 | % | | N/A |
| | 2.77 | % | | 4.50 | % | | 4.21 | % | | 4.50 | % | | 3.11 | % | | 4.50 | % | | 4.20 | % |
Weighted-average assumptions used to determine net expense | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate | 3.59 | % | | 3.69 | % | | 3.69 | % | | 3.97 | % | | 4.06 | % | | 4.45 | % | | 4.24 | % | | 4.31 | % | | 4.96 | % | | 5.16 | % | | 5.05 | % | | 5.01 | % |
Expected rate of return on plan assets | 5.77 | % | | 5.70 | % | | N/A |
| | N/A |
| | 6.18 | % | | 6.20 | % | | N/A |
| | N/A |
| | 8.00 | % | | 6.50 | % | | N/A |
| | N/A |
|
Rate of compensation increase(a) | N/A |
| | 2.77 | % | | 4.50 | % | | 4.21 | % | | 4.50 | % | | 3.15 | % | | 4.50 | % | | 4.21 | % | | 3.96 | % | | 3.25 | % | | 4.50 | % | | 4.42 | % |
_________
| |
(a) | As a result of ceasing the accrual of additional benefits for salaried plan participants, the rate of compensation increase does not have a significant effect on our U.S. pension and OPEB plans. |
U.S. pension plan service cost includes administrative expenses of $97 million, $138 million and $138 million in the years ended December 31, 2013, 2012 and 2011. Weighted-average assumptions used to determine net expense are determined at the beginning of the period and updated for remeasurements. Non-U.S. pension plan service cost includes administrative expenses of $31 million and $28 million in the years ended December 31, 2013 and 2012.
The following table summarizes estimated amounts to be amortized from Accumulated other comprehensive loss into net periodic benefit cost in the year ending December 31, 2014 based on December 31, 2013 plan measurements (dollars in millions):
|
| | | | | | | | | | | | | | | |
| U.S. Pension Plans | | Non-U.S. Pension Plans | | U.S. Other Benefit Plans | | Non-U.S. Other Benefit Plans |
Amortization of prior service cost (credit) | $ | (4 | ) | | $ | 19 |
| | $ | (2 | ) | | $ | (14 | ) |
Amortization of net actuarial (gain) loss | (91 | ) | | 159 |
| | 14 |
| | (6 | ) |
| $ | (95 | ) | | $ | 178 |
| | $ | 12 |
| | $ | (20 | ) |
Assumptions
Investment Strategies and Long-Term Rate of Return
Detailed periodic studies conducted by outside actuaries and an internal asset management group are used to determine the long-term strategic mix among asset classes, risk mitigation strategies, and the expected long-term return on asset assumptions for the U.S. pension plans. The U.S. study includes a review of alternative asset allocation and risk mitigation strategies, anticipated future long-term performance and risk of the individual asset classes that comprise the plans' asset mix. Similar studies are performed for the significant non-U.S. pension plans with the assistance of outside actuaries and asset managers. While the studies incorporate data from recent plan performance and historical returns, the expected long-term return on plan asset assumptions are determined based on long-term, prospective rates of return.
The strategic asset mix and risk mitigation strategies for the plans are tailored specifically for each plan. Individual plans have distinct liabilities, liquidity needs, and regulatory requirements. Consequently, there are different investment policies set by individual plan fiduciaries. Although investment policies and risk mitigation strategies may differ among plans, each investment strategy is considered to be appropriate in the context of the specific factors affecting each plan.
In setting new strategic asset mixes, consideration is given to the likelihood that the selected mixes will effectively fund the projected pension plan liabilities, while aligning with the risk tolerance of the plans' fiduciaries. The strategic asset mixes for U.S. defined benefit pension plans are increasingly designed to satisfy the competing objectives of improving funded positions (market value of assets equal to or greater than the present value of the liabilities) and mitigating the possibility of a deterioration in funded status.
Derivatives may be used to provide cost effective solutions for rebalancing investment portfolios, increasing or decreasing exposure to various asset classes and for mitigating risks, primarily interest rate and currency risks. Equity and fixed income managers are permitted to utilize derivatives as efficient substitutes for traditional physical securities. Interest rate derivatives may be used to adjust portfolio duration to align with a plan's targeted investment policy. Alternative investment managers are permitted to employ leverage, including through the use of derivatives, which may alter economic exposure.
In December 2013 an investment policy study was completed for the U.S. pension plans. The study resulted in new target asset allocations being approved for the U.S. pension plans with resulting changes to the expected long-term rate of return on assets. The weighted-average long-term rate of return on assets increased from 5.8% at December 31, 2012 to 6.5% at December 31, 2013 due primarily to higher yields on fixed income securities. The expected long-term rate of return on plan assets used in determining pension expense for non-U.S. plans is determined in a similar manner to the U.S. plans.
Target Allocation Percentages
The following table summarizes the target allocations by asset category for U.S. and non-U.S. defined benefit pension plans:
|
| | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 |
| U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans |
Asset Categories | | | | | | | |
Equity | 19 | % | | 28 | % | | 19 | % | | 30 | % |
Debt | 58 | % | | 49 | % | | 60 | % | | 53 | % |
Other(a) | 23 | % | | 23 | % | | 21 | % | | 17 | % |
Total | 100 | % | | 100 | % | | 100 | % | | 100 | % |
__________
| |
(a) | Primarily includes private equity, real estate and absolute return strategies which mainly consist of hedge funds. |
Assets and Fair Value Measurements
The following tables summarize the fair value of defined benefit pension plan assets by asset class (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements of U.S. Plan Assets at December 31, 2013 | | Fair Value Measurements of Non-U.S. Plan Assets at December 31, 2013 | | Total U.S. and Non-U.S. Plan Assets |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | |
Assets | | | | | | | | | | | | | | | | | |
Cash equivalents and other short-term investments | $ | — |
| | $ | 411 |
| | $ | — |
| | $ | 411 |
| | $ | — |
| | $ | 156 |
| | $ | — |
| | $ | 156 |
| | $ | 567 |
|
Common and preferred stocks(a) | 10,234 |
| | 70 |
| | 6 |
| | 10,310 |
| | 1,816 |
| | 6 |
| | — |
| | 1,822 |
| | 12,132 |
|
Government and agency debt securities(b) | — |
| | 14,971 |
| | — |
| | 14,971 |
| | — |
| | 3,418 |
| | — |
| | 3,418 |
| | 18,389 |
|
Corporate debt securities(c) | — |
| | 20,409 |
| | 58 |
| | 20,467 |
| | — |
| | 2,410 |
| | 12 |
| | 2,422 |
| | 22,889 |
|
Mortgage and asset-backed securities | — |
| | 238 |
| | 72 |
| | 310 |
| | — |
| | 65 |
| | 2 |
| | 67 |
| | 377 |
|
Investment funds | | | | | | | | | | | | | | | | | |
Equity funds | 72 |
| | 190 |
| | 44 |
| | 306 |
| | 128 |
| | 1,930 |
| | — |
| | 2,058 |
| | 2,364 |
|
Fixed income funds | 27 |
| | 8 |
| | 113 |
| | 148 |
| | — |
| | 927 |
| | 12 |
| | 939 |
| | 1,087 |
|
Funds of hedge funds | — |
| | — |
| | 4,285 |
| | 4,285 |
| | — |
| | — |
| | 733 |
| | 733 |
| | 5,018 |
|
Other investment funds | — |
| | 820 |
| | 732 |
| | 1,552 |
| | — |
| | 672 |
| | — |
| | 672 |
| | 2,224 |
|
Private equity and debt investments(d) | — |
| | — |
| | 6,335 |
| | 6,335 |
| | — |
| | — |
| | 430 |
| | 430 |
| | 6,765 |
|
Real estate investments(e) | 390 |
| | 4 |
| | 4,127 |
| | 4,521 |
| | 13 |
| | 12 |
| | 1,405 |
| | 1,430 |
| | 5,951 |
|
Other investments | — |
| | — |
| | 62 |
| | 62 |
| | — |
| | — |
| | 618 |
| | 618 |
| | 680 |
|
Derivatives | | | | | | | | | | | | | | | | | |
Interest rate contracts | 5 |
| | 46 |
| | — |
| | 51 |
| | 1 |
| | 1 |
| | — |
| | 2 |
| | 53 |
|
Foreign exchange and other contracts | 12 |
| | 111 |
| | — |
| | 123 |
| | 2 |
| | 43 |
| | — |
| | 45 |
| | 168 |
|
Total assets | 10,740 |
| | 37,278 |
| | 15,834 |
| | 63,852 |
| | 1,960 |
| | 9,640 |
| | 3,212 |
| | 14,812 |
| | 78,664 |
|
Liabilities | | | | | | | | | | | | | | | | | |
Derivatives | | | | | | | | | | | | | | | | | |
Interest rate contracts | (22 | ) | | (213 | ) | | (6 | ) | | (241 | ) | | (12 | ) | | — |
| | — |
| | (12 | ) | | (253 | ) |
Foreign exchange and other contracts | — |
| | (98 | ) | | — |
| | (98 | ) | | — |
| | (56 | ) | | — |
| | (56 | ) | | (154 | ) |
Total liabilities | (22 | ) | | (311 | ) | | (6 | ) | | (339 | ) | | (12 | ) | | (56 | ) | | — |
| | (68 | ) | | (407 | ) |
Net plan assets subject to leveling | $ | 10,718 |
| | $ | 36,967 |
| | $ | 15,828 |
| | 63,513 |
| | $ | 1,948 |
| | $ | 9,584 |
| | $ | 3,212 |
| | 14,744 |
| | 78,257 |
|
Other plan assets and liabilities(g) | | | | | | | 653 |
| | | | | | | | 242 |
| | 895 |
|
Net Plan Assets | | | | | | | $ | 64,166 |
| | | | | | | | $ | 14,986 |
| | $ | 79,152 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements of U.S. Plan Assets at December 31, 2012 | | Fair Value Measurements of Non-U.S. Plan Assets at December 31, 2012 | | Total U.S. and Non-U.S. Plan Assets |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | |
Assets | | | | | | | | | | | | | | | | | |
Cash equivalents and other short-term investments | $ | — |
| | $ | 551 |
| | $ | — |
| | $ | 551 |
| | $ | — |
| | $ | 151 |
| | $ | — |
| | $ | 151 |
| | $ | 702 |
|
Common and preferred stocks(a) | 9,663 |
| | 26 |
| | 19 |
| | 9,708 |
| | 2,227 |
| | — |
| | — |
| | 2,227 |
| | 11,935 |
|
Government and agency debt securities(b) | — |
| | 17,835 |
| | — |
| | 17,835 |
| | — |
| | 3,722 |
| | — |
| | 3,722 |
| | 21,557 |
|
Corporate debt securities(c) | — |
| | 19,116 |
| | 77 |
| | 19,193 |
| | — |
| | 2,596 |
| | 2 |
| | 2,598 |
| | 21,791 |
|
Mortgage and asset-backed securities | — |
| | 1,804 |
| | 105 |
| | 1,909 |
| | — |
| | 54 |
| | 3 |
| | 57 |
| | 1,966 |
|
Investment funds | | | | | | | | | | | | | | | | | |
Equity funds | 66 |
| | 253 |
| | 195 |
| | 514 |
| | 212 |
| | 2,009 |
| | — |
| | 2,221 |
| | 2,735 |
|
Fixed income funds | 16 |
| | 498 |
| | 190 |
| | 704 |
| | — |
| | 1,046 |
| | 14 |
| | 1,060 |
| | 1,764 |
|
Funds of hedge funds | — |
| | — |
| | 3,768 |
| | 3,768 |
| | — |
| | — |
| | 627 |
| | 627 |
| | 4,395 |
|
Other investment funds | — |
| | 837 |
| | 806 |
| | 1,643 |
| | — |
| | 35 |
| | — |
| | 35 |
| | 1,678 |
|
Private equity and debt investments(d) | — |
| | — |
| | 6,400 |
| | 6,400 |
| | — |
| | — |
| | 381 |
| | 381 |
| | 6,781 |
|
Real estate investments(e) | 412 |
| | — |
| | 4,335 |
| | 4,747 |
| | 19 |
| | 31 |
| | 1,422 |
| | 1,472 |
| | 6,219 |
|
Other investments | — |
| | — |
| | 63 |
| | 63 |
| | — |
| | — |
| | 665 |
| | 665 |
| | 728 |
|
Derivatives | | | | | | | | | | | | | | | | | |
Interest rate contracts | 15 |
| | 1,553 |
| | — |
| | 1,568 |
| | — |
| | — |
| | — |
| | — |
| | 1,568 |
|
Foreign exchange and other contracts | 6 |
| | 124 |
| | 1 |
| | 131 |
| | 2 |
| | 40 |
| | — |
| | 42 |
| | 173 |
|
Total assets | 10,178 |
| | 42,597 |
| | 15,959 |
| | 68,734 |
| | 2,460 |
| | 9,684 |
| | 3,114 |
| | 15,258 |
| | 83,992 |
|
Liabilities | | | | | | | | | | | | | | | | | |
Mortgage and asset-backed securities(f) | — |
| | (15 | ) | | — |
| | (15 | ) | | — |
| | — |
| | — |
| | — |
| | (15 | ) |
Derivatives | | | | | | | | | | | | | | | | | |
Interest rate contracts | (21 | ) | | (977 | ) | | (8 | ) | | (1,006 | ) | | (4 | ) | | — |
| | — |
| | (4 | ) | | (1,010 | ) |
Foreign exchange and other contracts | (4 | ) | | (123 | ) | | (1 | ) | | (128 | ) | | (1 | ) | | (36 | ) | | — |
| | (37 | ) | | (165 | ) |
Total liabilities | (25 | ) | | (1,115 | ) | | (9 | ) | | (1,149 | ) | | (5 | ) | | (36 | ) | | — |
| | (41 | ) | | (1,190 | ) |
Net plan assets subject to leveling | $ | 10,153 |
| | $ | 41,482 |
| | $ | 15,950 |
| | 67,585 |
| | $ | 2,455 |
| | $ | 9,648 |
| | $ | 3,114 |
| | 15,217 |
| | 82,802 |
|
Other plan assets and liabilities(g) | | | | | | | 500 |
| | | | | | | | 324 |
| | 824 |
|
Net Plan Assets | | | | | | | $ | 68,085 |
| | | | | | | | $ | 15,541 |
| | $ | 83,626 |
|
__________
| |
(a) | Includes GM common stock of $2 million and $1.4 billion in Level 1 of U.S. plan assets at December 31, 2013 and 2012. |
| |
(b) | Includes U.S. and sovereign government and agency issues. Excludes mortgage and asset-backed securities. |
| |
(c) | Includes bank debt obligations. |
| |
(d) | Includes private equity investment funds. |
| |
(e) | Includes investment funds and public real estate investment trusts. |
| |
(f) | Primarily investments sold short. |
| |
(g) | Cash held by the plans, net of amounts receivable/payable for unsettled security transactions and payables for investment manager fees, custody fees and other expenses. |
The following tables summarize the activity for U.S. plan assets measured at fair value using Level 3 inputs (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2013 | | Net Realized/Unrealized Gains (Losses) | | Purchases, Sales and Settlements, Net | | Transfers Into/Out of Level 3 | | Balance at December 31, 2013 | | Change in Unrealized Gains/(Losses) Attributable to Assets Held at December 31, 2013 |
Assets | | | | | | | | | | | |
Common and preferred stocks | $ | 19 |
| | $ | 3 |
| | $ | (16 | ) | | $ | — |
| | $ | 6 |
| | $ | 1 |
|
Corporate debt securities | 77 |
| | 5 |
| | (24 | ) | | — |
| | 58 |
| | (2 | ) |
Mortgage and asset-backed securities | 105 |
| | 1 |
| | (34 | ) | | — |
| | 72 |
| | (1 | ) |
Investment funds | | | | | | | | | | | |
Equity funds | 195 |
| | (3 | ) | | (148 | ) | | — |
| | 44 |
| | — |
|
Fixed income funds | 190 |
| | 17 |
| | (94 | ) | | — |
| | 113 |
| | 11 |
|
Funds of hedge funds | 3,768 |
| | 498 |
| | 19 |
| | — |
| | 4,285 |
| | 497 |
|
Other investment funds | 806 |
| | 40 |
| | (114 | ) | | — |
| | 732 |
| | 29 |
|
Private equity and debt investments | 6,400 |
| | 926 |
| | (991 | ) | | — |
| | 6,335 |
| | 436 |
|
Real estate investments | 4,335 |
| | 458 |
| | (666 | ) | | — |
| | 4,127 |
| | 190 |
|
Other investments | 63 |
| | (2 | ) | | 1 |
| | — |
| | 62 |
| | (2 | ) |
Total assets | 15,958 |
| | 1,943 |
| | (2,067 | ) | | — |
| | 15,834 |
| | 1,159 |
|
Derivatives, net | | | | | | | | | | | |
Interest rate contracts | (8 | ) | | 2 |
| | — |
| | — |
| | (6 | ) | | 1 |
|
Total net assets | $ | 15,950 |
| | $ | 1,945 |
| | $ | (2,067 | ) | | $ | — |
| | $ | 15,828 |
| | $ | 1,160 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2012 | | Net Realized/Unrealized Gains (Losses) | | Purchases, Sales and Settlements, Net | | Transfers Into/Out of Level 3 | | Balance at December 31, 2012 | | Change in Unrealized Gains/(Losses) Attributable to Assets Held at December 31, 2012 |
Assets | | | | | | | | | | | |
Common and preferred stocks | $ | 46 |
| | $ | 1 |
| | $ | (25 | ) | | $ | (3 | ) | | $ | 19 |
| | $ | 3 |
|
Government and agency debt securities | 3 |
| | (1 | ) | | (2 | ) | | — |
| | — |
| | — |
|
Corporate debt securities | 352 |
| | 1 |
| | (258 | ) | | (18 | ) | | 77 |
| | (35 | ) |
Mortgage and asset-backed securities | 197 |
| | 34 |
| | (120 | ) | | (6 | ) | | 105 |
| | 24 |
|
Group annuity contracts | 3,209 |
| | 77 |
| | (3,286 | ) | | — |
| | — |
| | — |
|
Investment funds | | | | | | | | | | | |
Equity funds | 521 |
| | 51 |
| | (414 | ) | | 37 |
| | 195 |
| | 18 |
|
Fixed income funds | 1,210 |
| | 47 |
| | (1,067 | ) | | — |
| | 190 |
| | (3 | ) |
Funds of hedge funds | 5,918 |
| | 310 |
| | (2,460 | ) | | — |
| | 3,768 |
| | 239 |
|
Other investment funds | 2,270 |
| | 55 |
| | (1,531 | ) | | 12 |
| | 806 |
| | (2 | ) |
Private equity and debt investments | 8,444 |
| | 1,022 |
| | (3,038 | ) | | (28 | ) | | 6,400 |
| | 154 |
|
Real estate investments | 5,092 |
| | 198 |
| | (955 | ) | | — |
| | 4,335 |
| | (80 | ) |
Other investments | — |
| | — |
| | 63 |
| | — |
| | 63 |
| | — |
|
Total assets | 27,262 |
| | 1,795 |
| | (13,093 | ) | | (6 | ) | | 15,958 |
| | 318 |
|
Derivatives, net | | | | | | | | | | | |
Interest rate contracts | 7 |
| | 3 |
| | (14 | ) | | (4 | ) | | (8 | ) | | (1 | ) |
Foreign exchange and other contracts | (6 | ) | | 1 |
| | 5 |
| | — |
| | — |
| | — |
|
Total net assets | $ | 27,263 |
| | $ | 1,799 |
| | $ | (13,102 | ) | | $ | (10 | ) | | $ | 15,950 |
| | $ | 317 |
|
The following tables summarize the activity for non-U.S. plan assets measured at fair value using Level 3 inputs (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2013 | | Net Realized/Unrealized Gains (Losses) | | Purchases, Sales and Settlements, Net | | Transfers Into/Out of Level 3 | | Effect of Foreign Currency | | Balance at December 31, 2013 | | Change in Unrealized Gains/(Losses) Attributable to Assets Held at December 31, 2013 |
Assets | | | | | | | | | | | | | |
Corporate debt securities | $ | 2 |
| | $ | 1 |
| | $ | 8 |
| | $ | 1 |
| | $ | — |
| | $ | 12 |
| | $ | 1 |
|
Mortgage and asset-backed securities | 3 |
| | — |
| | (1 | ) | | — |
| | — |
| | 2 |
| | — |
|
Investment funds | | | | | | | | | | | | | |
Fixed income funds | 14 |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | 12 |
| | — |
|
Funds of hedge funds | 627 |
| | 111 |
| | 28 |
| | — |
| | (33 | ) | | 733 |
| | 112 |
|
Private equity and debt investments | 381 |
| | 73 |
| | 3 |
| | — |
| | (27 | ) | | 430 |
| | 53 |
|
Real estate investments | 1,422 |
| | 103 |
| | (57 | ) | | — |
| | (63 | ) | | 1,405 |
| | 122 |
|
Other investments | 665 |
| | (10 | ) | | (43 | ) | | — |
| | 6 |
| | 618 |
| | 4 |
|
Total assets | $ | 3,114 |
| | $ | 277 |
| | $ | (63 | ) | | $ | 1 |
| | $ | (117 | ) | | $ | 3,212 |
| | $ | 292 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2012 | | Net Realized/Unrealized Gains (Losses) | | Purchases, Sales and Settlements, Net | | Transfers Into/Out of Level 3 | | Effect of Foreign Currency | | Balance at December 31, 2012 | | Change in Unrealized Gains/(Losses) Attributable to Assets Held at December 31, 2012 |
Assets | | | | | | | | | | | | | |
Government and agency debt securities | $ | 1 |
| | $ | — |
| | $ | (1 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Corporate debt securities | 4 |
| | 2 |
| | (4 | ) | | — |
| | — |
| | 2 |
| | — |
|
Mortgage and asset-backed securities | 4 |
| | — |
| | (4 | ) | | 3 |
| | — |
| | 3 |
| | — |
|
Investment funds | | | | | | | | | | | | | |
Equity funds | 146 |
| | (24 | ) | | (124 | ) | | — |
| | 2 |
| | — |
| | — |
|
Fixed income funds | 20 |
| | — |
| | (6 | ) | | — |
| | — |
| | 14 |
| | — |
|
Funds of hedge funds | 585 |
| | 25 |
| | — |
| | — |
| | 17 |
| | 627 |
| | 26 |
|
Other investment funds | 247 |
| | 17 |
| | (269 | ) | | — |
| | 5 |
| | — |
| | — |
|
Private equity and debt investments | 298 |
| | 46 |
| | 29 |
| | — |
| | 8 |
| | 381 |
| | 24 |
|
Real estate investments | 1,345 |
| | 123 |
| | (82 | ) | | — |
| | 36 |
| | 1,422 |
| | 119 |
|
Other investments | 428 |
| | 16 |
| | 203 |
| | — |
| | 18 |
| | 665 |
| | 10 |
|
Total assets | $ | 3,078 |
| | $ | 205 |
| | $ | (258 | ) | | $ | 3 |
| | $ | 86 |
| | $ | 3,114 |
| | $ | 179 |
|
Investment Fund Strategies
Equity funds include funds that invest in U.S. common and preferred stocks as well as similar equity securities issued by companies incorporated, listed or domiciled in developed and/or emerging markets countries.
Fixed income funds include investments in high quality and high yield funds as well as in credit arbitrage funds. High quality fixed income funds invest in government securities, investment-grade corporate bonds, mortgages and asset-backed securities. High yield fixed income funds invest in high yield fixed income securities issued by corporations which are rated below investment grade, are unrated but are believed by the investment manager to have similar risk characteristics or are rated investment grade or higher but are priced at yields comparable to securities rated below investment grade and believed to have similar risk characteristics. Credit arbitrage funds invest in a variety of credit and credit-related instruments that allow fund managers to profit from mispricing of these credit instruments. Certain derivatives may be used for hedging purposes by some fixed income fund managers to limit exposure to various risk factors.
Funds of hedge funds represent funds that invest in a portfolio of hedge funds. Fund managers typically seek to achieve their objectives by allocating capital across a broad array of funds and/or investment managers.
Other investment funds primarily represent multi-strategy funds. These funds invest in broadly diversified portfolios of equity, fixed income and derivative instruments. Certain funds may also employ multiple alternative investment strategies, in combination, such as global macro, event-driven (which seeks to profit from opportunities created by significant transactional events such as spin-offs, mergers and acquisitions, bankruptcy reorganizations, recapitalizations and share buybacks) and relative value (which seeks to take advantage of pricing discrepancies between instruments including equities, debt, options and futures).
Private equity and debt investments principally consists of investments in private equity and debt funds. These investments provide exposure to and benefit from long-term equity investments in private companies, including leveraged buy-outs, venture capital and distressed debt strategies.
Real estate investments include funds that invest in entities which are principally engaged in the ownership, acquisition, development, financing, sale and/or management of income-producing real estate properties, both commercial and residential. These funds typically seek long-term growth of capital and current income that is above average relative to public equity funds.
Significant Concentrations of Risk
The assets of the pension plans include certain private investment funds, private equity and debt securities, real estate investments and derivative instruments. Investment managers may be unable to quickly sell or redeem some or all of these investments at an amount close or equal to fair value in order to meet a plan's liquidity requirements or to respond to specific events such as deterioration in the creditworthiness of any particular issuer or counterparty.
Illiquid investments held by the plans are generally long-term investments that complement the long-term nature of pension obligations and are not used to fund benefit payments when currently due. Plan management monitors liquidity risk on an ongoing basis and has procedures in place that are designed to maintain flexibility in addressing plan-specific, broader industry and market liquidity events.
The pension plans may invest in financial instruments denominated in foreign currencies and may be exposed to risks that the foreign currency exchange rates might change in a manner that has an adverse effect on the value of the foreign currency denominated assets or liabilities. Forward currency contracts may be used to manage and mitigate foreign currency risk.
The pension plans may invest in fixed income securities for which any change in the relevant interest rates for particular securities might result in an investment manager being unable to secure similar returns upon the maturity or the sale of securities. In addition, changes to prevailing interest rates or changes in expectations of future interest rates might result in an increase or decrease in the fair value of the securities held. Interest rate swaps and other financial derivative instruments may be used to manage interest rate risk.
Counterparty credit risk is the risk that a counterparty to a financial instrument will default on its commitment. Counterparty risk is primarily related to over-the-counter derivative instruments used to manage risk exposures related to interest rates on long-term debt securities and foreign currency exchange rate fluctuations. The risk of default can be influenced by various factors including macro-economic conditions, market liquidity, fiscal and monetary policies and counterparty-specific characteristics and activities. Certain agreements with counterparties employ set-off, collateral support arrangements and other risk mitigating procedures designed to reduce the net exposure to credit risk in the event of counterparty default. Credit policies and processes are in place to manage concentrations of counterparty risk by seeking to undertake transactions with large well-capitalized counterparties and by monitoring the creditworthiness of these counterparties. The majority of derivatives held by the plans at December 31, 2013 were fully collateralized and therefore, the related counterparty credit risk was significantly reduced.
Pension Funding Requirements
We are subject to a variety of U.S. federal rules and regulations, including the Employee Retirement Income Security Act of 1974, as amended and the Pension Protection Act of 2006, which govern the manner in which we fund and administer our pensions for our retired employees and their spouses. In 2012 the U.S. government enacted the Moving Ahead for Progress in the 21st Century Act which allows plan sponsors funding relief for pension plans through the application of higher funding interest rates. As a result, under current economic conditions, we expect no mandatory contributions to our U.S. qualified pension plans for at least five years. The new law does not impact our reported funded status. We have no funding requirements for our U.S. qualified plans in 2014.
We also maintain pension plans for employees in a number of countries outside the U.S. which are subject to local laws and regulations.
Benefit Payments
The following table summarizes net benefit payments expected to be paid in the future, which include assumptions related to estimated future employee service (dollars in millions):
|
| | | | | | | | | | | | | | | |
| Pension Benefits(a) | | Other Benefits |
| U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans |
2014 | $ | 5,780 |
| | $ | 1,609 |
| | $ | 376 |
| | $ | 77 |
|
2015 | $ | 5,687 |
| | $ | 1,597 |
| | $ | 364 |
| | $ | 65 |
|
2016 | $ | 5,475 |
| | $ | 1,688 |
| | $ | 352 |
| | $ | 65 |
|
2017 | $ | 5,368 |
| | $ | 1,711 |
| | $ | 341 |
| | $ | 65 |
|
2018 | $ | 5,210 |
| | $ | 1,581 |
| | $ | 332 |
| | $ | 66 |
|
2019 - 2023 | $ | 24,019 |
| | $ | 7,858 |
| | $ | 1,576 |
| | $ | 357 |
|
__________
| |
(a) | Benefits for most U.S. pension plans and certain non-U.S. pension plans are paid out of plan assets rather than our Cash and cash equivalents. |
