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Retirement Plans and Post Retirement Benefits | 12 Months Ended
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Dec. 31, 2019
Retirement Benefits [Abstract] |
Retirement Plans and Postretirement Benefits | RETIREMENT PLANS AND POST-RETIREMENT BENEFITS We sponsor various defined benefit pension plans and defined contribution retirement plans that provide retirement benefits to substantially all of our employees. Most regularly scheduled employees are eligible to participate in these plans except those covered by a collective bargaining agreement unless the collective bargaining agreement explicitly allows for participation in our plans. We contribute to a multiemployer plan for certain employees covered by collective bargaining agreements. We also provide other post-retirement benefits consisting primarily of healthcare benefits to certain retirees who meet age and service requirements. Defined Benefit Pension Plans Pension benefits are earned generally based upon years of service and compensation during active employment. Contributions to the qualified defined benefit pension plans are based on actuarial calculations of amounts to cover current service costs and amortization of prior service costs over periods ranging up to 20 years. We contribute additional funds as necessary to maintain desired funding levels. Benefit accruals under our most significant plan, which account for approximately 80% of the assets and 82% of the benefit obligations in the tables below, had been credited at the rate of 4% of eligible compensation with an interest credit based upon the 30-year U.S. Treasury rate. The Company discontinued providing contribution credits effective January 1, 2010, to this plan. The remaining defined benefit pension plans in Canada use a variety of benefit formulas, and we discontinued providing contribution credits effective January 1, 2020. We also maintained a Supplemental Executive Retirement Plan (SERP), an unfunded, non-qualified defined benefit plan intended to provide supplemental retirement benefits to certain executives. Benefits were generally based on compensation in the years immediately preceding normal retirement. As of December 31, 2019, we have no active participants in the SERP plan. The projected benefit obligation is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated salary increases. The following table details information regarding our pension plans at December 31:
Dollar amounts in millions | 2019 |  | 2018
Change in benefit obligation: |  |  |
Beginning of year balance | $ | 297 |  |  | $ | 346 |
Service cost | 3 |  |  | 3 |
Interest cost | 12 |  |  | 11 |
Actuarial loss (gain) | 24 |  |  | (25 | )
Curtailment | — |  |  | (1 | )
Foreign exchange rate changes | 2 |  |  | (5 | )
Benefits paid | (26 | ) |  | (32 | )
End of year balance | $ | 312 |  |  | $ | 297 |
Change in assets (fair value): |  |  |
Beginning of year balance | $ | 275 |  |  | $ | 266 |
Actual return on plan assets | 39 |  |  | (7 | )
Employer contribution | 4 |  |  | 53 |
Foreign exchange rate changes | 3 |  |  | (5 | )
Benefits paid | (26 | ) |  | (32 | )
End of year balance | $ | 294 |  |  | $ | 275 |
Plan assets less than benefit obligations | $ | (18 | ) |  | $ | (22 | )
Amounts included in the balance sheet: |  |  |
Non-current pension assets, included in “Other assets” | $ | 5 |  |  | $ | 5 |
Current pension liabilities, included in “Accounts payable and accrued liabilities” | — |  |  | (3 | )
Non-current pension liabilities, included in “Other long-term liabilities” | (23 | ) |  | (23 | )
Net amount recognized | $ | (18 | ) |  | $ | (22 | )
The pretax amounts recognized in accumulated comprehensive loss were as follows:
Dollar amounts in millions | Actuarial losses |  | Prior service cost |  | Total
December 31, 2017 | $ | (128 | ) |  | $ | (8 | ) |  | $ | (136 | )
Other comprehensive income (loss) before reclassifications | 4 |  |  | — |  |  | 4 |
Amounts reclassified from accumulated comprehensive loss | 8 |  |  | 1 |  |  | 8 |
December 31, 2018 | (116 | ) |  | (7 | ) |  | (123 | )
Other comprehensive income (loss) before reclassifications | — |  |  | — |  |  | — |
Amounts reclassified from accumulated comprehensive loss | 5 |  |  | (1 | ) |  | 4 |
December 31, 2019 | $ | (111 | ) |  | $ | (8 | ) |  | $ | (119 | )
Weighted-average assumptions used to calculate our benefit obligations at December 31:
| 2019 |  | 2018
Discount rate: |  |  |
U.S. | 3.1 | % |  | 4.2 | %
Canada | 3.0 | % |  | 3.8 | %
SERP | NA |  |  | 2.9 | %
Rate of compensation increase: |  |  |
U.S. | NA |  |  | NA |
Canada | 3.5 | % |  | 3.5 | %
SERP | NA |  |  | 3.0 | %
Benefit obligations by plan category are as follows:
| 2019
Dollar amounts in millions | U.S. |  | Canada |  | SERP |  | Total
Fair value of plan assets | $ | 236 |  |  | $ | 58 |  |  | $ | — |  |  | $ | 294 |
Benefit obligation | 258 |  |  | 54 |  |  | — |  |  | 312 |
Funded Status | $ | (22 | ) |  | $ | 4 |  |  | $ | — |  |  | $ | (18 | )
| 2018
| U.S. |  | Canada |  | SERP |  | Total
Fair value of plan assets | $ | 222 |  |  | $ | 52 |  |  | $ | — |  |  | $ | 275 |
Benefit obligation | 245 |  |  | 49 |  |  | 3 |  |  | 297 |
Funded Status | $ | (22 | ) |  | $ | 3 |  |  | $ | (3 | ) |  | $ | (22 | )
The amount of accumulated other comprehensive income that is expected to be amortized as expense during 2020 is $5 million and $1 million of net actuarial loss and prior service cost, respectively. The benefits expected to be paid from the benefit plans, which reflect expected future service, are as follows:
Dollar amounts in millions |
Year |
2020 | $ | 20 |
2021 | 21 |
2022 | 20 |
2023 | 20 |
2024 | 20 |
2025– 2029 | 94 |
These estimated benefit payments are based upon assumptions about future events. Actual benefit payments may vary significantly from these estimates. The following table sets forth the net periodic pension cost for our defined benefit pension plans. The components of our net periodic pension costs consisted of the following:
| Year ended December 31,
Dollar amounts in millions | 2019 |  | 2018 |  | 2017
Service cost | $ | 3 |  |  | $ | 3 |  |  | $ | 5 |
Other components of net periodic pension cost: |  |  |  |  |
Interest cost | 12 |  |  | 11 |  |  | 13 |
Expected return on plan assets | (14 | ) |  | (14 | ) |  | (13 | )
Amortization of prior service cost and net transition asset | 1 |  |  | 1 |  |  | 1 |
Amortization of net actuarial loss | 5 |  |  | 6 |  |  | 6 |
Net periodic pension cost before loss due to settlement | $ | 6 |  |  | $ | 7 |  |  | $ | 11 |
Loss due to settlement | — |  |  | — |  |  | 3 |
Total net periodic pension cost | $ | 6 |  |  | $ | 7 |  |  | $ | 14 |
Net periodic pension cost included in cost of sales | $ | 2 |  |  | $ | 2 |  |  | $ | 4 |
Net periodic pension cost included in selling, general, and administrative expenses | 1 |  |  | 1 |  |  | 1 |
Net periodic pension cost included in other non-operating items | 3 |  |  | 4 |  |  | 9 |
| $ | 6 |  |  | $ | 7 |  |  | $ | 14 |
Weighted-average assumptions used to calculate our net periodic pension costs for the year ended December 31:
| 2019 |  | 2018 |  | 2017
Discount rate: |  |  |  |  |
U.S. | 4.2 | % |  | 3.5 | % |  | 4.0 | %
Canada | 3.8 | % |  | 3.3 | % |  | 3.7 | %
SERP | NA |  |  | 4.0 | % |  | 2.7 | %
Expected return on plan assets: |  |  |  |  |
U.S. | 5.8 | % |  | 5.8 | % |  | 5.8 | %
Canada | 3.4 | % |  | 4.1 | % |  | 3.8 | %
SERP | NA |  |  | NA |  |  | NA |
Rate of compensation increase: |  |  |  |  |
U.S. | NA |  |  | NA |  |  | NA |
Canada | 3.5 | % |  | 3.5 | % |  | 3.5 | %
SERP | NA |  |  | N/A |  |  | 3.0 | %
The expected long-term rate of return on plan assets reflects the weighted-average expected long-term rates of return for the broad categories of investments currently held in the plans (adjusted for expected changes), based on historical rates of return for each broad category, as well as factors that may constrain or enhance returns in the broad categories in the future. The expected long-term rate of return on plan assets is adjusted when there are fundamental changes in expected returns in one or more broad asset categories, and when the weighted-average mix of assets in the plans changes significantly. Asset allocation targets are established based upon the long-term returns and volatility characteristics of the investment classes and recognize the benefits of diversification and the profits of the plans’ liabilities. The actual and target allocations at the measurement dates are as follows:
| Target Allocation 2019 |  | Actual Allocation
2019 |  | 2018
Asset category |  |  |  |  |
U.S. Plans |  |  |  |  |
Equity securities | 40 | % |  | 40 | % |  | 26 | %
Debt securities | 40 | % |  | 40 | % |  | 52 | %
Multi-Strategy Funds | 20 | % |  | 20 | % |  | 22 | %
Total Allocation for U.S. Plans | 100 | % |  | 100 | % |  | 100 | %
Non-U.S. Plans |  |  |  |  |
Debt securities | 90 | % |  | 90 | % |  | 90 | %
Multi-Strategy Funds | 10 | % |  | 10 | % |  | 10 | %
Total Allocation for Non-U.S. Plans | 100 | % |  | 100 | % |  | 100 | %
Our investment policies for the defined benefit pension plans provide target asset allocations by broad categories of investment and ranges of acceptable allocations. These policies are set by an administrative committee with the goal of maximizing long-term investment returns within acceptable levels of volatility and risk. Our U.S. plans include hedge funds and real return investment strategies to increase returns and reduce volatility. Our plans do not currently invest directly in derivative securities, although such investments may be considered in the future to increase returns and/or reduce volatility. To the extent the expected return on plan assets varies from the actual return, an actuarial gain or loss results. The fair value of our pension plan assets and fair value asset categories and the level of inputs as defined in Note 4 at December 31, 2019 and December 31, 2018, are as follows:
Dollar amounts in millions | December 31, 2019
Asset Category | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) | Net Asset Value
Equity investment funds: |  |  |  |  |  |  |  |
Domestic stock funds | $ | 54 |  |  | $ | 54 |  |  | $ | — |  |  | $ | — |  | $ | — |
International stock funds | 40 |  |  | 40 |  |  | — |  |  | — |  | — |
Fixed-income investment funds: |  |  |  |  |  |  |  |
Domestic bond funds | 93 |  |  | 15 |  |  | — |  |  | — |  | 78 |
International bond funds | 52 |  |  | — |  |  | 20 |  |  | — |  | 32 |
Multi-strategy funds | 53 |  |  | 47 |  |  | — |  |  | — |  | 6 |
Cash & cash equivalents | 2 |  |  | — |  |  | 2 |  |  | — |  | — |
Total | $ | 294 |  |  | $ | 156 |  |  | $ | 22 |  |  | $ | — |  | $ | 116 |
| December 31, 2018
Asset Category | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) | Net Asset Value
Equity investment funds: |  |  |  |  |  |  |  |
Domestic stock funds | $ | 30 |  |  | $ | 22 |  |  | $ | — |  |  | $ | — |  | $ | 8 |
International stock funds | 27 |  |  | 13 |  |  | — |  |  | — |  | 14 |
Fixed-income investment funds |  |  |  |  |  |  |  |  |
Domestic bond funds | 116 |  |  | 27 |  |  | — |  |  | — |  | 89 |
International bond funds | 47 |  |  | — |  |  | 27 |  |  | — |  | 20 |
Multi-strategy funds | 53 |  |  | 35 |  |  | — |  |  | — |  | 18 |
Cash & cash equivalents | 2 |  |  | — |  |  | 2 |  |  | — |  |
Total | $ | 275 |  |  | $ | 97 |  |  | $ | 29 |  |  | $ | — |  | $ | 149 |
Due to the lack of observable market quotations on multi-strategy funds, we evaluate our structure and current market estimates of fair value, including fair value estimates from the funds that rely exclusively on Level 3 inputs. These inputs include those that are based on expected cash flow streams and property values, including assessments of overall market liquidity. The valuations are subject to uncertainties that are difficult to predict. The following table summarizes assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period.
Dollar amounts in millions | Multi-Strategy Funds
Balance at January 1, 2018 | $ | 13 |
Total unrealized gains | — |
Contribution (redemption) | — |
Management fees | — |
Balance at December 31, 2018 | $ | 13 |
Total unrealized gains | $ | — |
Contribution (redemption) | (13 | )
Management fees | — |
Balance at December 31, 2019 | $ | — |
Defined Contribution Plans We also sponsor defined contribution plans in the U.S. and Canada. In the U.S., these plans are primarily 401(k) plans for hourly and salaried employees that allow for pre-tax employee deferrals and a company match of up to 5% of an employee’s eligible wages (subject to certain limits). Under the profit-sharing feature of these plans, we may elect to contribute a discretionary amount as a percentage of eligible wages. Included in the assets of the 401(k) and profit-sharing plans are 1 million shares of LP common stock that represented approximately 7% of the total market value of plan assets at December 31, 2019. In Canada, we sponsor both defined contribution plans and Registered Retirement Savings Plans for hourly and salaried employees that allow for employee tax deferrals. We provide a base contribution of 3% of eligible earnings and match 50% of an employee’s deferrals up to a maximum of 3% of each employee’s eligible earnings (subject to certain limits). Expenses related to defined contribution plans and the Registered Retirement Savings Plans were $10 million in 2019, 2018 and 2017. Other Benefit Plans We have several plans that provide post-retirement benefits other than pensions, primarily for salaried employees in the U.S. and certain groups of Canadian employees. The funded status at December 31, 2019 and 2018, was $7 million and $9 million, respectively. The net expense related to these plans was not significant in 2019 or 2018. Effective August 16, 2004, we adopted the Louisiana-Pacific Corporation 2004 Executive Deferred Compensation Plan (the Deferred Compensation Plan). Pursuant to the Deferred Compensation Plan, participants are eligible to defer up to 90% of their base salary and annual cash incentives that exceed the limitation as set forth by the I.R.S. and receive as 5% match on their contributions. Each Deferred Compensation Plan participant is fully vested in all employee deferred compensation and earnings credited associated with employee contributions. Employer contributions and associated earnings vest over periods, not exceeding five years. The liability under the Deferred Compensation Plan amounted to $2 million and $1 million at December 31, 2019 and 2018, respectively, and is included in “Other long-term liabilities” on our Consolidated Balance Sheets.

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