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Retirement Plans and Post Retirement Benefits | 12 Months Ended
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Dec. 31, 2021
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 the defined contribution retirement 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. Participation in the defined benefit pension plans is limited to active and retired employees that were eligible prior to the plans being frozen. 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 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 three percent 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 its U.S. plans. The remaining defined benefit pension plans in Canada used a variety of benefit formulas, and we discontinued providing contribution credits effective January 1, 2020. In November 2021, the Company initiated the termination of our frozen U.S. and Canadian defined benefit pension plans (the Plan), which would result in the full settlement of the Company's Plan obligations. The distribution of Plan assets pursuant to the termination will not be made until the Plan termination satisfies all regulatory requirements, which is expected to occur by the end of 2022. Plan participants will receive their full accrued benefits from Plan assets by electing either lump-sum distributions or annuity contracts with a qualifying third-party annuity provider. The Plan termination is expected to result in pension settlement expense in 2022, which will be determined based on prevailing market conditions, the actual lump-sum distributions, and annuity purchase rates at the date of distribution. As a result, we are currently unable to reasonably estimate the timing or final amount of such settlement charges. Upon settlement, we expect to recognize pre-tax pension settlement charges that will include a non-cash charge for the recognition of all pre-tax actuarial losses accumulated in Accumulated Other Comprehensive Loss ($101 million as of December 31, 2021) and (2) any cash contributions to settle the Plan’s obligations ($6 million net projected benefit obligation as of December 31, 2021). The actual amount of the settlement charges and any potential cash contribution will depend on various factors, including interest rates, Plan asset returns, and the lump-sum election rate. 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, 2021 and 2020:
| 2021 |  | 2020
Change in benefit obligation: |  |  |
Beginning of year balance | $ | 319 |  |  | $ | 312 |
Service cost | 1 |  |  | 1 |
Interest cost | 7 |  |  | 9 |
Actuarial (gains) losses, net | (8) |  |  | 17 |
Foreign exchange rate changes | 1 |  |  | 1 |
Benefits paid | (19) |  |  | (21) |
End of year balance | $ | 301 |  |  | $ | 319 |
Change in assets (fair value): |  |  |
Beginning of year balance | $ | 310 |  |  | $ | 294 |
Actual return on plan assets | 5 |  |  | 35 |
Employer contribution | — |  |  | — |
Foreign exchange rate changes | 1 |  |  | 2 |
Benefits paid | (19) |  |  | (21) |
End of year balance | $ | 296 |  |  | $ | 310 |
Plan assets less than benefit obligations | $ | (6) |  |  | $ | (10) |
Amounts included in the balance sheet: |  |  |
Non-current pension assets, included in “Other assets” | $ | 6 |  |  | $ | 7 |
Current pension liabilities, included in “Accounts payable and accrued liabilities” | — |  |  | — |
Non-current pension liabilities, included in “Other long-term liabilities” | (12) |  |  | (17) |
Net amount recognized | $ | (6) |  |  | $ | (10) |
Amounts in accumulated other comprehensive income: |  |  |
Net actuarial loss | $ | (95) |  |  | $ | (101) |
Prior service costs | (6) |  |  | (8) |
Total pre-tax amounts in accumulated other comprehensive income | $ | (101) |  |  | $ | (109) |
The 2021 actuarial gains of $8 million were primarily related to the impact of plan termination assumptions on the discount rate. The 2020 actuarial losses of $17 million were largely the result of the actual return on assets exceeding the expected asset return offset by the increase in liability due to a decrease in the discount rate used to measure the obligations under the pension plans. The changes recognized in other comprehensive loss were as follows:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Net actuarial gain (loss) and prior service (cost) arising during the period, net of tax | $ | (1) |  |  | $ | 3 |  |  | $ | — |
Amortization of actuarial loss, prior service cost and settlements, net of tax | 6 |  |  | 5 |  |  | 4 |
Total amounts recognized in other comprehensive income | $ | 5 |  |  | $ | 8 |  |  | $ | 4 |
Weighted-average assumptions used to calculate our benefit obligations at December 31, 2021 and 2020:
| 2021 |  | 2020
Discount rate: |  |  |
U.S. | 2.6 | % |  | 2.3 | %
Canada | 2.6 | % |  | 2.3 | %
Rate of compensation increase: |  |  |
U.S. | NA |  | NA
Canada | NA |  | NA
Benefit obligations by plan category are as follows:
| 2021
| U.S. |  | Canada |  | Total
Fair value of plan assets | $ | 237 |  |  | $ | 59 |  |  | $ | 296 |
Benefit obligation | 247 |  |  | 54 |  |  | 301 |
Funded Status | $ | (11) |  |  | $ | 5 |  |  | $ | (6) |
| 2020
| U.S. |  | Canada |  | Total
Fair value of plan assets | $ | 246 |  |  | $ | 64 |  |  | $ | 310 |
Benefit obligation | 262 |  |  | 58 |  |  | 319 |
Funded Status | $ | (16) |  |  | $ | 6 |  |  | $ | (10) |
The benefits expected to be paid from the benefit plans, which reflect expected future service, are as follows:
Year |
2022 | $ | 76 |
2023 | 19 |
2024 | 16 |
2025 | 16 |
2026 | 16 |
2027– 2031 | 72 |
These estimated benefit payments are based upon assumptions about future events, including planned termination and expected settlements in 2022. 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,
| 2021 |  | 2020 |  | 2019
Service cost | $ | 1 |  |  | $ | 1 |  |  | $ | 3 |
Other components of net periodic pension cost: |  |  |  |  |
Interest cost | 7 |  |  | 9 |  |  | 12 |
Expected return on plan assets | (13) |  |  | (14) |  |  | (14) |
Amortization of prior service cost and net transition asset | 1 |  |  | 1 |  |  | 1 |
Amortization of net actuarial loss | 6 |  |  | 6 |  |  | 5 |
Net periodic pension cost before loss due to settlement | 2 |  |  | 2 |  |  | 6 |
Loss due to settlement | 2 |  |  | — |  |  | — |
Total net periodic pension cost | $ | 4 |  |  | $ | 2 |  |  | $ | 6 |
Net periodic pension cost included in cost of sales | $ | — |  |  | $ | — |  |  | $ | 2 |
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 |  |  | 1 |  |  | 3 |
| $ | 4 |  |  | $ | 2 |  |  | $ | 6 |
Weighted average assumptions used to calculate our net periodic pension costs for the years ended December 31, 2021, 2020, and 2019:
| 2021 |  | 2020 |  | 2019
Discount rate: |  |  |  |  |
U.S. | 2.3 | % |  | 3.1 | % |  | 4.2 | %
Canada | 2.3 | % |  | 3.0 | % |  | 3.8 | %
Expected return on plan assets: |  |  |  |  |
U.S. | 5.3 | % |  | 5.8 | % |  | 5.8 | %
Canada | 2.3 | % |  | 3.2 | % |  | 3.4 | %
Rate of compensation increase: |  |  |  |  |
U.S. | NA |  | NA |  | NA
Canada | NA |  | 3.5 | % |  | 3.5 | %
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 2021* |  | Actual Allocation
2021 |  | 2020
Asset category |  |  |  |  |
U.S. Plans |  |  |  |  |
Equity securities | — | % |  | — | % |  | 41 | %
Debt securities | 76 | % |  | 76 | % |  | 38 | %
Multi-Strategy Funds | — | % |  | — | % |  | 20 | %
Cash and cash equivalents | 24 | % |  | 24 | % |  | 1 | %
Total Allocation for U.S. Plans | 100 | % |  | 100 | % |  | 100 | %
Non-U.S. Plans |  |  |  |  |
Debt securities | 54 | % |  | 22 | % |  | 40 | %
Multi-Strategy Funds | — | % |  | 59 | % |  | 60 | %
Cash and cash equivalents | 46 | % |  | 19 | % |  | — | %
Total Allocation for Non-U.S. Plans | 100 | % |  | 100 | % |  | 100 | %
*Target allocation relates to the Company's Plan as of December 31, 2021. During fiscal 2021, the investment policy for the Company's Plan was updated to establish modified asset allocation targets. The updated investment objective is intended to reduce risk assets in favor of fixed-income investments as a result of the planned termination and expected settlement of the Plan in fiscal 2022. 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 1 at December 31, 2021, and 2020, are as follows:
| December 31, 2021
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
Fixed-income investment funds: |  |  |  |  |  |  |  |  |
Domestic bond funds | 180 |  |  | — |  |  | 180 |  |  | — |  |  | — |
International bond funds | 47 |  |  | — |  |  | 13 |  |  | — |  |  | 34 |
Multi-strategy funds | — |  |  | — |  |  | — |  |  | — |  |  | — |
Cash and cash equivalents | 68 |  |  | 58 |  |  | 11 |  |  | — |  |  | — |
Total | $ | 296 |  |  | $ | 58 |  |  | $ | 204 |  |  | $ | — |  |  | $ | 34 |
| December 31, 2020
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 | $ | 56 |  |  | $ | 56 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
International stock funds | 46 |  |  | 46 |  |  | — |  |  | — |  |  | — |
Fixed-income investment funds |  |  |  |  |  |  |  |  |
Domestic bond funds | 94 |  |  | 17 |  |  | — |  |  | — |  |  | 77 |
International bond funds | 64 |  |  | — |  |  | 26 |  |  | — |  |  | 38 |
Multi-strategy funds | 48 |  |  | 48 |  |  | — |  |  | — |  |  | — |
Cash and cash equivalents | 2 |  |  | — |  |  | 2 |  |  | — |  |  | — |
Total | $ | 310 |  |  | $ | 167 |  |  | $ | 28 |  |  | $ | — |  |  | $ | 115 |
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 five percent 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 one million shares of LP common stock that represented approximately nine percent of the total market value of plan assets at December 31, 2021. 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 three percent of eligible earnings and match 50% of an employee’s deferrals up to a maximum of three percent of each employee’s eligible earnings (subject to certain limits). Expenses related to the U.S. and Canadian defined contribution plans and the Registered Retirement Savings Plans, including the profit-sharing feature, were $22 million, $16 million, and $10 million in 2021, 2020, and 2019, respectively. 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 obligation at December 31, 2021 and 2020, for these post-retirement benefits was $10 million for each period. The net expense related to these plans was not significant in 2021 or 2020. In 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 a five percent 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 at December 31, 2021, and 2020, respectively, and is included in Other long-term liabilities on our Consolidated Balance Sheets.

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