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OTHER LIABILITIES, INCLUDING EMPLOYEE BENEFITS | 12 Months Ended
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Dec. 31, 2017
Other Liabilities, Including Employee Benefits [Abstract] |
Other Liabilities | OTHER LIABILITIES, INCLUDING EMPLOYEE BENEFITS The components of other liabilities follow:
| December 31,
| 2017 |  | 2016
Pension, postretirement, postemployment and other employment benefits a | $ | 1,154 |  |  | $ | 1,345 |
Cerro Verde royalty dispute | 368 |  |  | — |
Provision for tax positions | 291 |  |  | 167 |
Legal matters | 81 |  |  | 77 |
Insurance claim reserves | 47 |  |  | 51 |
Accrued oil and gas contract commitments | — |  |  | 43 |
Other | 71 |  |  | 62 |
Total other liabilities | $ | 2,012 |  |  | $ | 1,745 |
a. | Refer to Note 7 for current portion.
Pension Plans. Following is a discussion of FCX’s pension plans. FMC Plans. FMC has U.S. trusteed, non-contributory pension plans covering substantially all of its U.S. employees and some employees of its international subsidiaries hired before 2007. The applicable FMC plan design determines the manner in which benefits are calculated for any particular group of employees. Benefits are calculated based on final average monthly compensation and years of service or based on a fixed amount for each year of service. Non-bargained FMC employees hired after December 31, 2006, are not eligible to participate in the FMC U.S. pension plan. FCX’s funding policy for these plans provides that contributions to pension trusts shall be at least equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended, for U.S. plans; or, in the case of international plans, the minimum legal requirements that may be applicable in the various countries. Additional contributions also may be made from time to time. FCX’s policy for determining asset-mix targets for the FMC plan assets held in a master trust (Master Trust) includes the periodic development of asset allocation studies and review of the liabilities to determine expected long-term rates of return and expected risk for various investment portfolios. FCX’s retirement plan administration and investment committee considers these studies in the formal establishment of asset-mix targets defined in the investment policy. FCX’s investment objective emphasizes diversification through both the allocation of the Master Trust assets among various asset classes and the selection of investment managers whose various styles are fundamentally complementary to one another and serve to achieve satisfactory rates of return. Diversification, by asset class and by investment manager, is FCX’s principal means of reducing volatility and exercising prudent investment judgment. FCX’s present target asset allocation approximates 50 percent equity investments (primarily global equities), 43 percent fixed income (primarily long-term treasury STRIPS or “separate trading or registered interest and principal securities”; long-term U.S. treasury/agency bonds; global fixed income securities; long-term, high-credit quality corporate bonds; high-yield and emerging markets fixed income securities; and fixed income debt securities) and 7 percent alternative investments (private real estate, real estate investment trusts and private equity). The expected rate of return on plan assets is evaluated at least annually, taking into consideration asset allocation, historical and expected future performance on the types of assets held in the Master Trust, and the current economic environment. Based on these factors, FCX expects the pension assets will earn an average of 6.5 percent per annum beginning January 1, 2018. The 6.5 percent estimation was based on a passive return on a compound basis of 6.0 percent and a premium for active management of 0.5 percent reflecting the target asset allocation and current investment array. For estimation purposes, FCX assumes the long-term asset mix for these plans generally will be consistent with the current mix. Changes in the asset mix could impact the amount of recorded pension costs, the funded status of the plans and the need for future cash contributions. A lower-than-expected return on assets also would decrease plan assets and increase the amount of recorded pension costs in future years. When calculating the expected return on plan assets, FCX uses the market value of assets. Among the assumptions used to estimate the pension benefit obligation is a discount rate used to calculate the present value of expected future benefit payments for service to date. The discount rate assumption for FCX’s U.S. plans is designed to reflect yields on high-quality, fixed-income investments for a given duration. The determination of the discount rate for these plans is based on expected future benefit payments for service to date together with the Mercer Pension Discount Curve - Above Mean Yield. The Mercer Pension Discount Curve - Above Mean Yield is constructed from the bonds in the Mercer Pension Discount Curve that have a yield higher than the regression mean yield curve. The Mercer Pension Discount Curve consists of spot (i.e., zero coupon) interest rates at one-half-year increments for each of the next 30 years and is developed based on pricing and yield information for high-quality corporate bonds. Changes in the discount rate are reflected in FCX’s benefit obligation and, therefore, in future pension costs. SERP Plan. FCX has an unfunded Supplemental Executive Retirement Plan (SERP) for its chief executive officer. The SERP provides for retirement benefits payable in the form of a joint and survivor annuity, life annuity or an equivalent lump sum, which is determined on January 1 of the year in which the participant completed 25 years of credited service. The annuity will equal a percentage of the participant’s highest average compensation for any consecutive three-year period during the five years immediately preceding the completion of 25 years of credited service. The SERP benefit will be reduced by the value of all benefits from current and former retirement plans (qualified and nonqualified) sponsored by FCX, by FM Services Company, FCX’s wholly owned subsidiary, or by any predecessor employer (including FCX’s former parent company), except for benefits produced by accounts funded exclusively by deductions from the participant’s pay. PT-FI Plan. PT-FI has a defined benefit pension plan denominated in Indonesian rupiah covering substantially all of its Indonesian national employees. PT-FI funds the plan and invests the assets in accordance with Indonesian pension guidelines. The pension obligation was valued at an exchange rate of 13,480 rupiah to one U.S. dollar on December 31, 2017, and 13,369 rupiah to one U.S. dollar on December 31, 2016. Indonesian labor laws require that companies provide a minimum level of benefits to employees upon employment termination based on the reason for termination and the employee’s years of service. PT-FI’s pension benefit obligation includes benefits related to this law. PT-FI’s expected rate of return on plan assets is evaluated at least annually, taking into consideration its long-range estimated return for the plan based on the asset mix. Based on these factors, PT-FI expects its pension assets will earn an average of 7.75 percent per annum beginning January 1, 2018. The discount rate assumption for PT-FI’s plan is based on the Mercer Indonesian zero coupon bond yield curve derived from the Indonesian Government Security Yield Curve. Changes in the discount rate are reflected in PT-FI’s benefit obligation and, therefore, in future pension costs. Plan Information. FCX uses a measurement date of December 31 for its plans. Information for those plans where the accumulated benefit obligations exceed the fair value of plan assets follows:
| December 31,
| 2017 |  | 2016
Projected benefit obligation | $ | 2,287 |  |  | $ | 2,127 |
Accumulated benefit obligation | 2,163 |  |  | 2,014 |
Fair value of plan assets | 1,521 |  |  | 1,312 |
Information on the FCX (FMC and SERP plans) and PT-FI plans as of December 31 follows:
| FCX |  | PT-FI
| 2017 |  | 2016 |  | 2017 |  | 2016
Change in benefit obligation: |  |  |  |  |  |  |
Benefit obligation at beginning of year | $ | 2,135 |  |  | $ | 2,104 |  |  | $ | 374 |  |  | $ | 318 |
Service cost | 44 |  |  | 27 |  |  | 20 |  |  | 27 |
Interest cost | 91 |  |  | 93 |  |  | 23 |  |  | 29 |
Actuarial losses (gains) | 188 |  |  | 92 |  |  | (61 | ) |  | 2 |
Foreign exchange losses (gains) | 3 |  |  | (4 | ) |  | (2 | ) |  | 8 |
Curtailment a | — |  |  | — |  |  | (62 | ) |  | — |
Benefits and administrative expenses paid | (118 | ) |  | (177 | ) |  | (52 | ) |  | (10 | )
Benefit obligation at end of year | 2,343 |  |  | 2,135 |  |  | 240 |  |  | 374 |
Change in plan assets: |  |  |  |  |  |  |
Fair value of plan assets at beginning of year | 1,329 |  |  | 1,379 |  |  | 284 |  |  | 204 |
Actual return on plan assets | 230 |  |  | 88 |  |  | 11 |  |  | 47 |
Employer contributions b | 145 |  |  | 42 |  |  | 28 |  |  | 38 |
Foreign exchange gains (losses) | 2 |  |  | (3 | ) |  | (2 | ) |  | 5 |
Benefits and administrative expenses paid | (118 | ) |  | (177 | ) |  | (52 | ) |  | (10 | )
Fair value of plan assets at end of year | 1,588 |  |  | 1,329 |  |  | 269 |  |  | 284 |
Funded status | $ | (755 | ) |  | $ | (806 | ) |  | $ | 29 |  |  | $ | (90 | )
Accumulated benefit obligation | $ | 2,218 |  |  | $ | 2,022 |  |  | $ | 194 |  |  | $ | 225 |
Weighted-average assumptions |  |  |  |  |  |  |
used to determine benefit obligations: |  |  |  |  |  |  |
Discount rate | 3.70 | % |  | 4.40 | % |  | 6.75 | % |  | 8.25 | %
Rate of compensation increase | 3.25 | % |  | 3.25 | % |  | 4.00 | % |  | 8.00 | %
Balance sheet classification of funded status: |  |  |  |  |  |  |
Other assets | $ | 11 |  |  | $ | 9 |  |  | $ | 29 |  |  | $ | — |
Accounts payable and accrued liabilities | (4 | ) |  | (4 | ) |  | — |  |  | — |
Other liabilities | (762 | ) |  | (811 | ) |  | — |  |  | (90 | )
Total | $ | (755 | ) |  | $ | (806 | ) |  | $ | 29 |  |  | $ | (90 | )
a. | Resulted from the 2017 PT-FI reductions in workforce (refer to Restructuring Charges in this note for further discussion).
b. | Employer contributions for 2018 are expected to approximate $75 million for the FCX plans and $17 million for the PT-FI plan (based on a December 31, 2017, exchange rate of 13,480 Indonesian rupiah to one U.S. dollar).
The weighted-average assumptions used to determine net periodic benefit cost and the components of net periodic benefit cost for FCX’s pension plans for the years ended December 31 follow:
| 2017 |  | 2016 |  | 2015
Weighted-average assumptions:a |  |  |  |  |
Discount rate | 4.40 | % |  | 4.60 | % |  | 4.10 | %
Expected return on plan assets | 7.00 | % |  | 7.25 | % |  | 7.25 | %
Rate of compensation increase | 3.25 | % |  | 3.25 | % |  | 3.25 | %
Service cost | $ | 44 |  |  | $ | 27 |  |  | $ | 36 |
Interest cost | 91 |  |  | 93 |  |  | 87 |
Expected return on plan assets | (93 | ) |  | (96 | ) |  | (102 | )
Amortization of net actuarial losses | 49 |  |  | 42 |  |  | 45 |
Special retirement benefits b | — |  |  | — |  |  | 22 |
Net periodic benefit cost | $ | 91 |  |  | $ | 66 |  |  | $ | 88 |
a. | The assumptions shown relate only to the FMC plans.
b. | Resulted from FMC’s 2015 revised mine operating plans and reductions in the workforce (refer to Note 5 for further discussion).
The weighted-average assumptions used to determine net periodic benefit cost and the components of net periodic benefit cost for PT-FI’s pension plan for the years ended December 31 follow:
| 2017 |  | 2016 |  | 2015
Weighted-average assumptions: |  |  |  |  |
Discount rate | 8.25 | % |  | 9.00 | % |  | 8.25 | %
Expected return on plan assets | 7.75 | % |  | 7.75 | % |  | 7.75 | %
Rate of compensation increase | 8.00 | % |  | 9.40 | % |  | 9.00 | %
Service cost | $ | 20 |  |  | $ | 27 |  |  | $ | 26 |
Interest cost | 23 |  |  | 29 |  |  | 23 |
Expected return on plan assets | (21 | ) |  | (17 | ) |  | (14 | )
Amortization of prior service cost | 2 |  |  | 3 |  |  | 3 |
Amortization of net actuarial loss | — |  |  | 5 |  |  | 6 |
Curtailment loss | 4 |  |  | — |  |  | — |
Net periodic benefit cost | $ | 28 |  |  | $ | 47 |  |  | $ | 44 |
Included in accumulated other comprehensive loss are the following amounts that have not been recognized in net periodic pension cost as of December 31:
| 2017 |  | 2016
| Before Taxes |  | After Taxes and Noncontrolling Interests |  | Before Taxes |  | After Taxes and Noncontrolling Interests
Net actuarial loss | $ | 620 |  |  | $ | 412 |  |  | $ | 722 |  |  | $ | 466 |
Prior service costs | 10 |  |  | 6 |  |  | 21 |  |  | 11 |
| $ | 630 |  |  | $ | 418 |  |  | $ | 743 |  |  | $ | 477 |
Actuarial losses in excess of 10 percent of the greater of the projected benefit obligation or market-related value of plan assets are amortized over the expected average remaining future service period of the current active participants. The amount expected to be recognized in 2018 net periodic pension cost for actuarial losses is $47 million. FCX does not expect to have any plan assets returned to it in 2018. Plan assets are classified within a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1), then to significant observable inputs (Level 2) and the lowest priority to significant unobservable inputs (Level 3). A summary of the fair value for pension plan assets, including those measured at net asset value (NAV) as a practical expedient, associated with the FCX plans follows:
| Fair Value at December 31, 2017
| Total |  | NAV |  | Level 1 |  | Level 2 |  | Level 3
Commingled/collective funds: |  |  |  |  |  |  |  |  |
Global equity | $ | 404 |  |  | $ | 404 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Fixed income securities | 154 |  |  | 154 |  |  | — |  |  | — |  |  | — |
Global fixed income securities | 115 |  |  | 115 |  |  | — |  |  | — |  |  | — |
Emerging markets equity | 87 |  |  | 87 |  |  | — |  |  | — |  |  | — |
International small-cap equity | 72 |  |  | 72 |  |  | — |  |  | — |  |  | — |
U.S. small-cap equity | 67 |  |  | 67 |  |  | — |  |  | — |  |  | — |
Real estate property | 50 |  |  | 50 |  |  | — |  |  | — |  |  | — |
U.S. real estate securities | 45 |  |  | 45 |  |  | — |  |  | — |  |  | — |
Short-term investments | 12 |  |  | 12 |  |  | — |  |  | — |  |  | — |
Fixed income: |  |  |  |  |  |  |  |  |
Government bonds | 208 |  |  | — |  |  | — |  |  | 208 |  |  | — |
Corporate bonds | 168 |  |  | — |  |  | — |  |  | 168 |  |  | — |
Global large-cap equity securities | 119 |  |  | — |  |  | 119 |  |  | — |  |  | — |
Private equity investments | 20 |  |  | 20 |  |  | — |  |  | — |  |  | — |
Other investments | 62 |  |  | — |  |  | 19 |  |  | 43 |  |  | — |
Total investments | 1,583 |  |  | $ | 1,026 |  |  | $ | 138 |  |  | $ | 419 |  |  | $ | — |
Cash and receivables | 21 |  |  |  |  |  |  |  |  |
Payables | (16 | ) |  |  |  |  |  |  |  |
Total pension plan net assets | $ | 1,588 |  |  |  |  |  |  |  |  |
| Fair Value at December 31, 2016
| Total |  | NAV |  | Level 1 |  | Level 2 |  | Level 3
Commingled/collective funds: |  |  |  |  |  |  |  |  |
Global equity | $ | 420 |  |  | $ | 420 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Fixed income securities | 129 |  |  | 129 |  |  | — |  |  | — |  |  | — |
Global fixed income securities | 107 |  |  | 107 |  |  | — |  |  | — |  |  | — |
Real estate property | 72 |  |  | 72 |  |  | — |  |  | — |  |  | — |
Emerging markets equity | 66 |  |  | 66 |  |  | — |  |  | — |  |  | — |
U.S. small-cap equity | 60 |  |  | 60 |  |  | — |  |  | — |  |  | — |
International small-cap equity | 51 |  |  | 51 |  |  | — |  |  | — |  |  | — |
U.S. real estate securities | 42 |  |  | 42 |  |  | — |  |  | — |  |  | — |
Short-term investments | 17 |  |  | 17 |  |  | — |  |  | — |  |  | — |
Fixed income: |  |  |  |  |  |  |  |  |
Government bonds | 160 |  |  | — |  |  | — |  |  | 160 |  |  | — |
Corporate bonds | 141 |  |  | — |  |  | — |  |  | 141 |  |  | — |
Private equity investments | 25 |  |  | 25 |  |  | — |  |  | — |  |  | — |
Other investments | 36 |  |  | — |  |  | 1 |  |  | 35 |  |  | — |
Total investments | 1,326 |  |  | $ | 989 |  |  | $ | 1 |  |  | $ | 336 |  |  | $ | — |
Cash and receivables | 4 |  |  |  |  |  |  |  |  |
Payables | (1 | ) |  |  |  |  |  |  |  |
Total pension plan net assets | $ | 1,329 |  |  |  |  |  |  |  |  |
Following is a description of the pension plan asset categories and the valuation techniques used to measure fair value. There have been no changes to the techniques used to measure fair value. Commingled/collective funds are managed by several fund managers and are valued at the NAV per unit of the fund. For most of these funds, the majority of the underlying assets are actively traded securities. These funds (except the real estate property fund) require up to a 60-day notice for redemptions. The real estate property fund is valued at NAV using information from independent appraisal firms, who have knowledge and expertise about the current market values of real property in the same vicinity as the investments. Redemptions of the real estate property fund are allowed once per quarter, subject to available cash. Fixed income investments include government and corporate bonds held directly by the Master Trust. Fixed income securities are valued using a bid-evaluation price or a mid-evaluation price and, as such, are classified within Level 2 of the fair value hierarchy. A bid-evaluation price is an estimated price at which a dealer would pay for a security. A mid-evaluation price is the average of the estimated price at which a dealer would sell a security and the estimated price at which a dealer would pay for a security. These evaluations are based on quoted prices, if available, or models that use observable inputs. Common stocks included in global large-cap equity securities and preferred stocks included in other investments are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy. Private equity investments are valued at NAV using information from general partners and have inherent restrictions on redemptions that may affect the ability to sell the investments at their NAV in the near term. A summary of the fair value hierarchy for pension plan assets associated with the PT-FI plan follows:
| Fair Value at December 31, 2017
| Total |  | Level 1 |  | Level 2 |  | Level 3
Government bonds | $ | 81 |  |  | $ | 81 |  |  | $ | — |  |  | $ | — |
Common stocks | 78 |  |  | 78 |  |  | — |  |  | — |
Mutual funds | 16 |  |  | 16 |  |  | — |  |  | — |
Total investments | 175 |  |  | $ | 175 |  |  | $ | — |  |  | $ | — |
Cash and receivables a | 94 |  |  |  |  |  |  |
Total pension plan net assets | $ | 269 |  |  |  |  |  |  |
| Fair Value at December 31, 2016
| Total |  | Level 1 |  | Level 2 |  | Level 3
Government bonds | $ | 78 |  |  | $ | 78 |  |  | $ | — |  |  | $ | — |
Common stocks | 72 |  |  | 72 |  |  | — |  |  | — |
Mutual funds | 16 |  |  | 16 |  |  | — |  |  | — |
Total investments | 166 |  |  | $ | 166 |  |  | $ | — |  |  | $ | — |
Cash and receivables a | 119 |  |  |  |  |  |  |
Payables | (1 | ) |  |  |  |  |  |
Total pension plan net assets | $ | 284 |  |  |  |  |  |  |
a. | Cash consists primarily of short-term time deposits.
Following is a description of the valuation techniques used for pension plan assets measured at fair value associated with the PT-FI plan. There have been no changes to the techniques used to measure fair value. Common stocks, government bonds and mutual funds are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy. The techniques described above may produce a fair value calculation that may not be indicative of NRV or reflective of future fair values. Furthermore, while FCX believes its valuation techniques are appropriate and consistent with those used by other market participants, the use of different techniques or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The expected benefit payments for FCX’s and PT-FI’s pension plans follow:
| FCX |  | PT-FI a
2018 | $ | 111 |  |  | $ | 48 |
2019 | 151 |  |  | 8 |
2020 | 116 |  |  | 15 |
2021 | 118 |  |  | 20 |
2022 | 120 |  |  | 23 |
2023 through 2027 | 635 |  |  | 166 |
a. | Based on a December 31, 2017, exchange rate of 13,480 Indonesian rupiah to one U.S. dollar.
Postretirement and Other Benefits. FCX also provides postretirement medical and life insurance benefits for certain U.S. employees and, in some cases, employees of certain international subsidiaries. These postretirement benefits vary among plans, and many plans require contributions from retirees. The expected cost of providing such postretirement benefits is accrued during the years employees render service. The benefit obligation (funded status) for the postretirement medical and life insurance benefit plans consisted of a current portion of $14 million (included in accounts payable and accrued liabilities) and a long-term portion of $129 million (included in other liabilities) at December 31, 2017, and a current portion of $16 million and a long-term portion of $138 million at December 31, 2016. The discount rate used to determine the benefit obligation for these plans, which was determined on the same basis as FCX’s pension plans, was 3.50 percent at December 31, 2017, and 3.80 percent at December 31, 2016. Expected benefit payments for these plans total $14 million for 2018, $14 million for 2019, $13 million for 2020, $13 million for 2021, $12 million for 2022 and $50 million for 2023 through 2027. The net periodic benefit cost charged to operations for FCX’s postretirement benefits (primarily for interest costs) totaled $5 million in 2017, $4 million in 2016 and $6 million in 2015. The discount rate used to determine net periodic benefit cost and the components of net periodic benefit cost for FCX’s postretirement benefits was 3.80 percent in 2017, 4.10 percent in 2016 and 3.60 percent in 2015. The medical-care trend rates assumed the first year trend rate was 8.00 percent at December 31, 2017, which declines over the next 15 years with an ultimate trend rate of 4.25 percent. FCX has a number of postemployment plans covering severance, long-term disability income, continuation of health and life insurance coverage for disabled employees or other welfare benefits. The accumulated postemployment benefit consisted of a current portion of $5 million (included in accounts payable and accrued liabilities) and a long-term portion of $38 million (included in other liabilities) at December 31, 2017, and a current portion of $5 million and a long-term portion of $34 million at December 31, 2016. In connection with the retirement of one of its executive officers in December 2015, FCX recorded a charge to selling, general and administrative expenses of $16 million. FCX also sponsors savings plans for the majority of its U.S. employees. The plans allow employees to contribute a portion of their pre-tax income in accordance with specified guidelines. These savings plans are principally qualified 401(k) plans for all U.S. salaried and non-bargained hourly employees. In these plans, participants exercise control and direct the investment of their contributions and account balances among various investment options. FCX contributes to these plans at varying rates and matches a percentage of employee pre-tax deferral contributions up to certain limits, which vary by plan. For employees whose eligible compensation exceeds certain levels, FCX provides an unfunded defined contribution plan, which had a liability balance of $46 million at December 31, 2017, and $47 million at December 31, 2016, all of which was included in other liabilities. The costs charged to operations for employee savings plans totaled $65 million in 2017 (none of which was capitalized), $78 million in 2016 (of which $4 million was capitalized to oil and gas properties) and $98 million in 2015 (of which $13 million was capitalized to oil and gas properties). FCX has other employee benefit plans, certain of which are related to FCX’s financial results, which are recognized in operating costs. Restructuring Charges. As a result of the first-quarter 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT-FI took actions to adjust its cost structure, reduce its workforce and slow investments in its underground development projects and new smelter (refer to Note 13 for further discussion). These actions included workforce reductions through furlough and voluntary retirement programs. Following the furlough and voluntary retirement programs, a significant number of employees and contractors elected to participate in an illegal strike action beginning in May 2017, and were subsequently deemed to have voluntarily resigned under the existing Indonesian laws and regulations. As a result, PT-FI recorded charges in 2017 to production costs of $120 million, and selling, general and administrative costs of $5 million for employee severance and related costs, and a pension curtailment loss of $4 million included in production costs. In early 2016, FCX restructured its oil and gas business to reduce costs and in late 2016, FCX sold substantially all of its remaining oil and gas properties. As a result, FCX recorded charges of $85 million to selling, general and administrative expenses and $6 million to production costs for net restructuring-related costs in 2016. Because of a decline in commodity prices, FCX made adjustments to its operating plans for its mining operations in 2015 (refer to Note 5 for further discussion). As a result of these revisions to its mining operating plans, FCX recorded restructuring charges to production costs in 2015 of $45 million primarily for employee severance and benefit costs, and $22 million for special retirement benefits.
Employee Benefits | OTHER LIABILITIES, INCLUDING EMPLOYEE BENEFITS The components of other liabilities follow:
| December 31,
| 2017 |  | 2016
Pension, postretirement, postemployment and other employment benefits a | $ | 1,154 |  |  | $ | 1,345 |
Cerro Verde royalty dispute | 368 |  |  | — |
Provision for tax positions | 291 |  |  | 167 |
Legal matters | 81 |  |  | 77 |
Insurance claim reserves | 47 |  |  | 51 |
Accrued oil and gas contract commitments | — |  |  | 43 |
Other | 71 |  |  | 62 |
Total other liabilities | $ | 2,012 |  |  | $ | 1,745 |
a. | Refer to Note 7 for current portion.
Pension Plans. Following is a discussion of FCX’s pension plans. FMC Plans. FMC has U.S. trusteed, non-contributory pension plans covering substantially all of its U.S. employees and some employees of its international subsidiaries hired before 2007. The applicable FMC plan design determines the manner in which benefits are calculated for any particular group of employees. Benefits are calculated based on final average monthly compensation and years of service or based on a fixed amount for each year of service. Non-bargained FMC employees hired after December 31, 2006, are not eligible to participate in the FMC U.S. pension plan. FCX’s funding policy for these plans provides that contributions to pension trusts shall be at least equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended, for U.S. plans; or, in the case of international plans, the minimum legal requirements that may be applicable in the various countries. Additional contributions also may be made from time to time. FCX’s policy for determining asset-mix targets for the FMC plan assets held in a master trust (Master Trust) includes the periodic development of asset allocation studies and review of the liabilities to determine expected long-term rates of return and expected risk for various investment portfolios. FCX’s retirement plan administration and investment committee considers these studies in the formal establishment of asset-mix targets defined in the investment policy. FCX’s investment objective emphasizes diversification through both the allocation of the Master Trust assets among various asset classes and the selection of investment managers whose various styles are fundamentally complementary to one another and serve to achieve satisfactory rates of return. Diversification, by asset class and by investment manager, is FCX’s principal means of reducing volatility and exercising prudent investment judgment. FCX’s present target asset allocation approximates 50 percent equity investments (primarily global equities), 43 percent fixed income (primarily long-term treasury STRIPS or “separate trading or registered interest and principal securities”; long-term U.S. treasury/agency bonds; global fixed income securities; long-term, high-credit quality corporate bonds; high-yield and emerging markets fixed income securities; and fixed income debt securities) and 7 percent alternative investments (private real estate, real estate investment trusts and private equity). The expected rate of return on plan assets is evaluated at least annually, taking into consideration asset allocation, historical and expected future performance on the types of assets held in the Master Trust, and the current economic environment. Based on these factors, FCX expects the pension assets will earn an average of 6.5 percent per annum beginning January 1, 2018. The 6.5 percent estimation was based on a passive return on a compound basis of 6.0 percent and a premium for active management of 0.5 percent reflecting the target asset allocation and current investment array. For estimation purposes, FCX assumes the long-term asset mix for these plans generally will be consistent with the current mix. Changes in the asset mix could impact the amount of recorded pension costs, the funded status of the plans and the need for future cash contributions. A lower-than-expected return on assets also would decrease plan assets and increase the amount of recorded pension costs in future years. When calculating the expected return on plan assets, FCX uses the market value of assets. Among the assumptions used to estimate the pension benefit obligation is a discount rate used to calculate the present value of expected future benefit payments for service to date. The discount rate assumption for FCX’s U.S. plans is designed to reflect yields on high-quality, fixed-income investments for a given duration. The determination of the discount rate for these plans is based on expected future benefit payments for service to date together with the Mercer Pension Discount Curve - Above Mean Yield. The Mercer Pension Discount Curve - Above Mean Yield is constructed from the bonds in the Mercer Pension Discount Curve that have a yield higher than the regression mean yield curve. The Mercer Pension Discount Curve consists of spot (i.e., zero coupon) interest rates at one-half-year increments for each of the next 30 years and is developed based on pricing and yield information for high-quality corporate bonds. Changes in the discount rate are reflected in FCX’s benefit obligation and, therefore, in future pension costs. SERP Plan. FCX has an unfunded Supplemental Executive Retirement Plan (SERP) for its chief executive officer. The SERP provides for retirement benefits payable in the form of a joint and survivor annuity, life annuity or an equivalent lump sum, which is determined on January 1 of the year in which the participant completed 25 years of credited service. The annuity will equal a percentage of the participant’s highest average compensation for any consecutive three-year period during the five years immediately preceding the completion of 25 years of credited service. The SERP benefit will be reduced by the value of all benefits from current and former retirement plans (qualified and nonqualified) sponsored by FCX, by FM Services Company, FCX’s wholly owned subsidiary, or by any predecessor employer (including FCX’s former parent company), except for benefits produced by accounts funded exclusively by deductions from the participant’s pay. PT-FI Plan. PT-FI has a defined benefit pension plan denominated in Indonesian rupiah covering substantially all of its Indonesian national employees. PT-FI funds the plan and invests the assets in accordance with Indonesian pension guidelines. The pension obligation was valued at an exchange rate of 13,480 rupiah to one U.S. dollar on December 31, 2017, and 13,369 rupiah to one U.S. dollar on December 31, 2016. Indonesian labor laws require that companies provide a minimum level of benefits to employees upon employment termination based on the reason for termination and the employee’s years of service. PT-FI’s pension benefit obligation includes benefits related to this law. PT-FI’s expected rate of return on plan assets is evaluated at least annually, taking into consideration its long-range estimated return for the plan based on the asset mix. Based on these factors, PT-FI expects its pension assets will earn an average of 7.75 percent per annum beginning January 1, 2018. The discount rate assumption for PT-FI’s plan is based on the Mercer Indonesian zero coupon bond yield curve derived from the Indonesian Government Security Yield Curve. Changes in the discount rate are reflected in PT-FI’s benefit obligation and, therefore, in future pension costs. Plan Information. FCX uses a measurement date of December 31 for its plans. Information for those plans where the accumulated benefit obligations exceed the fair value of plan assets follows:
| December 31,
| 2017 |  | 2016
Projected benefit obligation | $ | 2,287 |  |  | $ | 2,127 |
Accumulated benefit obligation | 2,163 |  |  | 2,014 |
Fair value of plan assets | 1,521 |  |  | 1,312 |
Information on the FCX (FMC and SERP plans) and PT-FI plans as of December 31 follows:
| FCX |  | PT-FI
| 2017 |  | 2016 |  | 2017 |  | 2016
Change in benefit obligation: |  |  |  |  |  |  |
Benefit obligation at beginning of year | $ | 2,135 |  |  | $ | 2,104 |  |  | $ | 374 |  |  | $ | 318 |
Service cost | 44 |  |  | 27 |  |  | 20 |  |  | 27 |
Interest cost | 91 |  |  | 93 |  |  | 23 |  |  | 29 |
Actuarial losses (gains) | 188 |  |  | 92 |  |  | (61 | ) |  | 2 |
Foreign exchange losses (gains) | 3 |  |  | (4 | ) |  | (2 | ) |  | 8 |
Curtailment a | — |  |  | — |  |  | (62 | ) |  | — |
Benefits and administrative expenses paid | (118 | ) |  | (177 | ) |  | (52 | ) |  | (10 | )
Benefit obligation at end of year | 2,343 |  |  | 2,135 |  |  | 240 |  |  | 374 |
Change in plan assets: |  |  |  |  |  |  |
Fair value of plan assets at beginning of year | 1,329 |  |  | 1,379 |  |  | 284 |  |  | 204 |
Actual return on plan assets | 230 |  |  | 88 |  |  | 11 |  |  | 47 |
Employer contributions b | 145 |  |  | 42 |  |  | 28 |  |  | 38 |
Foreign exchange gains (losses) | 2 |  |  | (3 | ) |  | (2 | ) |  | 5 |
Benefits and administrative expenses paid | (118 | ) |  | (177 | ) |  | (52 | ) |  | (10 | )
Fair value of plan assets at end of year | 1,588 |  |  | 1,329 |  |  | 269 |  |  | 284 |
Funded status | $ | (755 | ) |  | $ | (806 | ) |  | $ | 29 |  |  | $ | (90 | )
Accumulated benefit obligation | $ | 2,218 |  |  | $ | 2,022 |  |  | $ | 194 |  |  | $ | 225 |
Weighted-average assumptions |  |  |  |  |  |  |
used to determine benefit obligations: |  |  |  |  |  |  |
Discount rate | 3.70 | % |  | 4.40 | % |  | 6.75 | % |  | 8.25 | %
Rate of compensation increase | 3.25 | % |  | 3.25 | % |  | 4.00 | % |  | 8.00 | %
Balance sheet classification of funded status: |  |  |  |  |  |  |
Other assets | $ | 11 |  |  | $ | 9 |  |  | $ | 29 |  |  | $ | — |
Accounts payable and accrued liabilities | (4 | ) |  | (4 | ) |  | — |  |  | — |
Other liabilities | (762 | ) |  | (811 | ) |  | — |  |  | (90 | )
Total | $ | (755 | ) |  | $ | (806 | ) |  | $ | 29 |  |  | $ | (90 | )
a. | Resulted from the 2017 PT-FI reductions in workforce (refer to Restructuring Charges in this note for further discussion).
b. | Employer contributions for 2018 are expected to approximate $75 million for the FCX plans and $17 million for the PT-FI plan (based on a December 31, 2017, exchange rate of 13,480 Indonesian rupiah to one U.S. dollar).
The weighted-average assumptions used to determine net periodic benefit cost and the components of net periodic benefit cost for FCX’s pension plans for the years ended December 31 follow:
| 2017 |  | 2016 |  | 2015
Weighted-average assumptions:a |  |  |  |  |
Discount rate | 4.40 | % |  | 4.60 | % |  | 4.10 | %
Expected return on plan assets | 7.00 | % |  | 7.25 | % |  | 7.25 | %
Rate of compensation increase | 3.25 | % |  | 3.25 | % |  | 3.25 | %
Service cost | $ | 44 |  |  | $ | 27 |  |  | $ | 36 |
Interest cost | 91 |  |  | 93 |  |  | 87 |
Expected return on plan assets | (93 | ) |  | (96 | ) |  | (102 | )
Amortization of net actuarial losses | 49 |  |  | 42 |  |  | 45 |
Special retirement benefits b | — |  |  | — |  |  | 22 |
Net periodic benefit cost | $ | 91 |  |  | $ | 66 |  |  | $ | 88 |
a. | The assumptions shown relate only to the FMC plans.
b. | Resulted from FMC’s 2015 revised mine operating plans and reductions in the workforce (refer to Note 5 for further discussion).
The weighted-average assumptions used to determine net periodic benefit cost and the components of net periodic benefit cost for PT-FI’s pension plan for the years ended December 31 follow:
| 2017 |  | 2016 |  | 2015
Weighted-average assumptions: |  |  |  |  |
Discount rate | 8.25 | % |  | 9.00 | % |  | 8.25 | %
Expected return on plan assets | 7.75 | % |  | 7.75 | % |  | 7.75 | %
Rate of compensation increase | 8.00 | % |  | 9.40 | % |  | 9.00 | %
Service cost | $ | 20 |  |  | $ | 27 |  |  | $ | 26 |
Interest cost | 23 |  |  | 29 |  |  | 23 |
Expected return on plan assets | (21 | ) |  | (17 | ) |  | (14 | )
Amortization of prior service cost | 2 |  |  | 3 |  |  | 3 |
Amortization of net actuarial loss | — |  |  | 5 |  |  | 6 |
Curtailment loss | 4 |  |  | — |  |  | — |
Net periodic benefit cost | $ | 28 |  |  | $ | 47 |  |  | $ | 44 |
Included in accumulated other comprehensive loss are the following amounts that have not been recognized in net periodic pension cost as of December 31:
| 2017 |  | 2016
| Before Taxes |  | After Taxes and Noncontrolling Interests |  | Before Taxes |  | After Taxes and Noncontrolling Interests
Net actuarial loss | $ | 620 |  |  | $ | 412 |  |  | $ | 722 |  |  | $ | 466 |
Prior service costs | 10 |  |  | 6 |  |  | 21 |  |  | 11 |
| $ | 630 |  |  | $ | 418 |  |  | $ | 743 |  |  | $ | 477 |
Actuarial losses in excess of 10 percent of the greater of the projected benefit obligation or market-related value of plan assets are amortized over the expected average remaining future service period of the current active participants. The amount expected to be recognized in 2018 net periodic pension cost for actuarial losses is $47 million. FCX does not expect to have any plan assets returned to it in 2018. Plan assets are classified within a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1), then to significant observable inputs (Level 2) and the lowest priority to significant unobservable inputs (Level 3). A summary of the fair value for pension plan assets, including those measured at net asset value (NAV) as a practical expedient, associated with the FCX plans follows:
| Fair Value at December 31, 2017
| Total |  | NAV |  | Level 1 |  | Level 2 |  | Level 3
Commingled/collective funds: |  |  |  |  |  |  |  |  |
Global equity | $ | 404 |  |  | $ | 404 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Fixed income securities | 154 |  |  | 154 |  |  | — |  |  | — |  |  | — |
Global fixed income securities | 115 |  |  | 115 |  |  | — |  |  | — |  |  | — |
Emerging markets equity | 87 |  |  | 87 |  |  | — |  |  | — |  |  | — |
International small-cap equity | 72 |  |  | 72 |  |  | — |  |  | — |  |  | — |
U.S. small-cap equity | 67 |  |  | 67 |  |  | — |  |  | — |  |  | — |
Real estate property | 50 |  |  | 50 |  |  | — |  |  | — |  |  | — |
U.S. real estate securities | 45 |  |  | 45 |  |  | — |  |  | — |  |  | — |
Short-term investments | 12 |  |  | 12 |  |  | — |  |  | — |  |  | — |
Fixed income: |  |  |  |  |  |  |  |  |
Government bonds | 208 |  |  | — |  |  | — |  |  | 208 |  |  | — |
Corporate bonds | 168 |  |  | — |  |  | — |  |  | 168 |  |  | — |
Global large-cap equity securities | 119 |  |  | — |  |  | 119 |  |  | — |  |  | — |
Private equity investments | 20 |  |  | 20 |  |  | — |  |  | — |  |  | — |
Other investments | 62 |  |  | — |  |  | 19 |  |  | 43 |  |  | — |
Total investments | 1,583 |  |  | $ | 1,026 |  |  | $ | 138 |  |  | $ | 419 |  |  | $ | — |
Cash and receivables | 21 |  |  |  |  |  |  |  |  |
Payables | (16 | ) |  |  |  |  |  |  |  |
Total pension plan net assets | $ | 1,588 |  |  |  |  |  |  |  |  |
| Fair Value at December 31, 2016
| Total |  | NAV |  | Level 1 |  | Level 2 |  | Level 3
Commingled/collective funds: |  |  |  |  |  |  |  |  |
Global equity | $ | 420 |  |  | $ | 420 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Fixed income securities | 129 |  |  | 129 |  |  | — |  |  | — |  |  | — |
Global fixed income securities | 107 |  |  | 107 |  |  | — |  |  | — |  |  | — |
Real estate property | 72 |  |  | 72 |  |  | — |  |  | — |  |  | — |
Emerging markets equity | 66 |  |  | 66 |  |  | — |  |  | — |  |  | — |
U.S. small-cap equity | 60 |  |  | 60 |  |  | — |  |  | — |  |  | — |
International small-cap equity | 51 |  |  | 51 |  |  | — |  |  | — |  |  | — |
U.S. real estate securities | 42 |  |  | 42 |  |  | — |  |  | — |  |  | — |
Short-term investments | 17 |  |  | 17 |  |  | — |  |  | — |  |  | — |
Fixed income: |  |  |  |  |  |  |  |  |
Government bonds | 160 |  |  | — |  |  | — |  |  | 160 |  |  | — |
Corporate bonds | 141 |  |  | — |  |  | — |  |  | 141 |  |  | — |
Private equity investments | 25 |  |  | 25 |  |  | — |  |  | — |  |  | — |
Other investments | 36 |  |  | — |  |  | 1 |  |  | 35 |  |  | — |
Total investments | 1,326 |  |  | $ | 989 |  |  | $ | 1 |  |  | $ | 336 |  |  | $ | — |
Cash and receivables | 4 |  |  |  |  |  |  |  |  |
Payables | (1 | ) |  |  |  |  |  |  |  |
Total pension plan net assets | $ | 1,329 |  |  |  |  |  |  |  |  |
Following is a description of the pension plan asset categories and the valuation techniques used to measure fair value. There have been no changes to the techniques used to measure fair value. Commingled/collective funds are managed by several fund managers and are valued at the NAV per unit of the fund. For most of these funds, the majority of the underlying assets are actively traded securities. These funds (except the real estate property fund) require up to a 60-day notice for redemptions. The real estate property fund is valued at NAV using information from independent appraisal firms, who have knowledge and expertise about the current market values of real property in the same vicinity as the investments. Redemptions of the real estate property fund are allowed once per quarter, subject to available cash. Fixed income investments include government and corporate bonds held directly by the Master Trust. Fixed income securities are valued using a bid-evaluation price or a mid-evaluation price and, as such, are classified within Level 2 of the fair value hierarchy. A bid-evaluation price is an estimated price at which a dealer would pay for a security. A mid-evaluation price is the average of the estimated price at which a dealer would sell a security and the estimated price at which a dealer would pay for a security. These evaluations are based on quoted prices, if available, or models that use observable inputs. Common stocks included in global large-cap equity securities and preferred stocks included in other investments are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy. Private equity investments are valued at NAV using information from general partners and have inherent restrictions on redemptions that may affect the ability to sell the investments at their NAV in the near term. A summary of the fair value hierarchy for pension plan assets associated with the PT-FI plan follows:
| Fair Value at December 31, 2017
| Total |  | Level 1 |  | Level 2 |  | Level 3
Government bonds | $ | 81 |  |  | $ | 81 |  |  | $ | — |  |  | $ | — |
Common stocks | 78 |  |  | 78 |  |  | — |  |  | — |
Mutual funds | 16 |  |  | 16 |  |  | — |  |  | — |
Total investments | 175 |  |  | $ | 175 |  |  | $ | — |  |  | $ | — |
Cash and receivables a | 94 |  |  |  |  |  |  |
Total pension plan net assets | $ | 269 |  |  |  |  |  |  |
| Fair Value at December 31, 2016
| Total |  | Level 1 |  | Level 2 |  | Level 3
Government bonds | $ | 78 |  |  | $ | 78 |  |  | $ | — |  |  | $ | — |
Common stocks | 72 |  |  | 72 |  |  | — |  |  | — |
Mutual funds | 16 |  |  | 16 |  |  | — |  |  | — |
Total investments | 166 |  |  | $ | 166 |  |  | $ | — |  |  | $ | — |
Cash and receivables a | 119 |  |  |  |  |  |  |
Payables | (1 | ) |  |  |  |  |  |
Total pension plan net assets | $ | 284 |  |  |  |  |  |  |
a. | Cash consists primarily of short-term time deposits.
Following is a description of the valuation techniques used for pension plan assets measured at fair value associated with the PT-FI plan. There have been no changes to the techniques used to measure fair value. Common stocks, government bonds and mutual funds are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy. The techniques described above may produce a fair value calculation that may not be indicative of NRV or reflective of future fair values. Furthermore, while FCX believes its valuation techniques are appropriate and consistent with those used by other market participants, the use of different techniques or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The expected benefit payments for FCX’s and PT-FI’s pension plans follow:
| FCX |  | PT-FI a
2018 | $ | 111 |  |  | $ | 48 |
2019 | 151 |  |  | 8 |
2020 | 116 |  |  | 15 |
2021 | 118 |  |  | 20 |
2022 | 120 |  |  | 23 |
2023 through 2027 | 635 |  |  | 166 |
a. | Based on a December 31, 2017, exchange rate of 13,480 Indonesian rupiah to one U.S. dollar.
Postretirement and Other Benefits. FCX also provides postretirement medical and life insurance benefits for certain U.S. employees and, in some cases, employees of certain international subsidiaries. These postretirement benefits vary among plans, and many plans require contributions from retirees. The expected cost of providing such postretirement benefits is accrued during the years employees render service. The benefit obligation (funded status) for the postretirement medical and life insurance benefit plans consisted of a current portion of $14 million (included in accounts payable and accrued liabilities) and a long-term portion of $129 million (included in other liabilities) at December 31, 2017, and a current portion of $16 million and a long-term portion of $138 million at December 31, 2016. The discount rate used to determine the benefit obligation for these plans, which was determined on the same basis as FCX’s pension plans, was 3.50 percent at December 31, 2017, and 3.80 percent at December 31, 2016. Expected benefit payments for these plans total $14 million for 2018, $14 million for 2019, $13 million for 2020, $13 million for 2021, $12 million for 2022 and $50 million for 2023 through 2027. The net periodic benefit cost charged to operations for FCX’s postretirement benefits (primarily for interest costs) totaled $5 million in 2017, $4 million in 2016 and $6 million in 2015. The discount rate used to determine net periodic benefit cost and the components of net periodic benefit cost for FCX’s postretirement benefits was 3.80 percent in 2017, 4.10 percent in 2016 and 3.60 percent in 2015. The medical-care trend rates assumed the first year trend rate was 8.00 percent at December 31, 2017, which declines over the next 15 years with an ultimate trend rate of 4.25 percent. FCX has a number of postemployment plans covering severance, long-term disability income, continuation of health and life insurance coverage for disabled employees or other welfare benefits. The accumulated postemployment benefit consisted of a current portion of $5 million (included in accounts payable and accrued liabilities) and a long-term portion of $38 million (included in other liabilities) at December 31, 2017, and a current portion of $5 million and a long-term portion of $34 million at December 31, 2016. In connection with the retirement of one of its executive officers in December 2015, FCX recorded a charge to selling, general and administrative expenses of $16 million. FCX also sponsors savings plans for the majority of its U.S. employees. The plans allow employees to contribute a portion of their pre-tax income in accordance with specified guidelines. These savings plans are principally qualified 401(k) plans for all U.S. salaried and non-bargained hourly employees. In these plans, participants exercise control and direct the investment of their contributions and account balances among various investment options. FCX contributes to these plans at varying rates and matches a percentage of employee pre-tax deferral contributions up to certain limits, which vary by plan. For employees whose eligible compensation exceeds certain levels, FCX provides an unfunded defined contribution plan, which had a liability balance of $46 million at December 31, 2017, and $47 million at December 31, 2016, all of which was included in other liabilities. The costs charged to operations for employee savings plans totaled $65 million in 2017 (none of which was capitalized), $78 million in 2016 (of which $4 million was capitalized to oil and gas properties) and $98 million in 2015 (of which $13 million was capitalized to oil and gas properties). FCX has other employee benefit plans, certain of which are related to FCX’s financial results, which are recognized in operating costs. Restructuring Charges. As a result of the first-quarter 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT-FI took actions to adjust its cost structure, reduce its workforce and slow investments in its underground development projects and new smelter (refer to Note 13 for further discussion). These actions included workforce reductions through furlough and voluntary retirement programs. Following the furlough and voluntary retirement programs, a significant number of employees and contractors elected to participate in an illegal strike action beginning in May 2017, and were subsequently deemed to have voluntarily resigned under the existing Indonesian laws and regulations. As a result, PT-FI recorded charges in 2017 to production costs of $120 million, and selling, general and administrative costs of $5 million for employee severance and related costs, and a pension curtailment loss of $4 million included in production costs. In early 2016, FCX restructured its oil and gas business to reduce costs and in late 2016, FCX sold substantially all of its remaining oil and gas properties. As a result, FCX recorded charges of $85 million to selling, general and administrative expenses and $6 million to production costs for net restructuring-related costs in 2016. Because of a decline in commodity prices, FCX made adjustments to its operating plans for its mining operations in 2015 (refer to Note 5 for further discussion). As a result of these revisions to its mining operating plans, FCX recorded restructuring charges to production costs in 2015 of $45 million primarily for employee severance and benefit costs, and $22 million for special retirement benefits.

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