Retirement Plans

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Retirement Plans

9.  Retirement Plans

We have funded noncontributory defined benefit pension plans for a significant portion of our employees.  In addition, we have an unfunded supplemental pension plan covering certain employees, which provides incremental payments that would have been payable from our principal pension plans, were it not for limitations imposed by income tax regulations.  The plans provide defined benefits based on years of service and final average salary to our U.S. employees hired prior to January 1, 2017 and to our employees in the United Kingdom (U.K.).  The U.S. employees hired on or after January 1, 2017 participate under a cash accumulation formula and receive credits to a notional account based on a percentage of pensionable wages. Interest accrues on the balance in the notional account at a rate determined in accordance with plan provisions. Additionally, we maintain an unfunded postretirement medical plan that provides health benefits to certain U.S. qualified retirees from ages 55 through 65.  The measurement date for all retirement plans is December 31.

The following table summarizes the benefit obligations, the fair value of plan assets, and the funded status of our pension and postretirement medical plans:

	Funded Pension Plans				Unfunded Pension Plan				Postretirement Medical Plan
	2021		2020		2021		2020		2021		2020
	(In millions)
Change in Benefit Obligation
Balance at January 1,	$	3,085	$	2,667	$	269	$	242	$	65	$	75
Service cost	41		37		10		13		3		3
Interest cost	52		68		3		5		1		1
Actuarial (gains) loss (a)	(126)		385		(8)		26		(3)		(8)
Benefit payments (b)	(100)		(93)		(26)		(17)		(7)		(6)
Plan amendments	2		—		—		—		—		—
Foreign currency exchange rate changes	(6)		21		—		—		—		—
Balance at December 31, (c)	2,948		3,085		248		269		59		65
Change in Fair Value of Plan Assets
Balance at January 1,	$	3,043	$	2,732	$	—	$	—	$	—	$	—
Actual return on plan assets	417		378		—		—		—		—
Employer contributions	6		4		26		17		7		6
Benefit payments (b)	(100)		(93)		(26)		(17)		(7)		(6)
Foreign currency exchange rate changes	(9)		22		—		—		—		—
Balance at December 31,	3,357		3,043		—		—		—		—
Funded Status (Plan assets greater (less) than benefit obligations) at December 31,	$	409	$	(42)	$	(248)	$	(269)	$	(59)	$	(65)
Unrecognized Net Actuarial (Gains) Losses	$	501	$	900	$	66	$	86	$	(21)	$	(19)

(a)Changes in discount rates resulted in actuarial gains of $178 million in 2021 (2020: $387 million of actuarial losses). Changes in the inflation assumptions for our U.K. pension plan resulted in actuarial losses of $36 million in 2021 (2020: $24 million of actuarial losses). Changes in mortality assumptions resulted in actuarial losses of $7 million in 2021 (2020: $18 million of actuarial gains). Changes in all other assumptions, including demographic assumptions, resulted in actuarial gains of $2 million in 2021 (2020: $10 million of actuarial losses).

(b)Benefit payments include lump-sum settlement payments of $34 million in 2021 (2020: $23 million).

(c)At December 31, 2021, the accumulated benefit obligation for the funded and unfunded defined benefit pension plans was $2,856 million and $208 million, respectively (2020: $2,993 million and $228 million, respectively).

  Amounts recognized in the Consolidated Balance Sheet at December 31 consisted of the following:

	Funded Pension Plans				Unfunded Pension Plan				Postretirement Medical Plan
	2021		2020		2021		2020		2021		2020
	(In millions)
Noncurrent assets	$	409	$	45	$	—	$	—	$	—	$	—
Current liabilities	—		—		(34)		(49)		(6)		(7)
Noncurrent liabilities	—		(87)		(214)		(220)		(53)		(58)
Pension assets / (accrued benefit liability)	$	409	$	(42)	$	(248)	$	(269)	$	(59)	$	(65)
Accumulated other comprehensive (income) loss, pre-tax (a)	$	501	$	900	$	66	$	86	$	(21)	$	(19)

(a)The after‑tax deficit reflected in Accumulated other comprehensive income (loss) was $338 million at December 31, 2021 (2020: $759 million deficit).

The net periodic benefit cost for funded and unfunded pension plans, and the postretirement medical plan, is as follows:

	Pension Plans						Postretirement Medical Plan
	2021		2020		2019		2021		2020		2019
	(In millions)
Service cost	$	51	$	50	$	44	$	3	$	3	$	2
Interest cost	55		73		89		1		1		2
Expected return on plan assets	(197)		(180)		(180)		—		—		—
Amortization of unrecognized net actuarial losses (gains)	58		48		52		(1)		(1)		(1)
Settlement loss	9		—		93		—		—		—
Curtailment gain	—		—		—		—		—		—
Net Periodic Benefit Cost / (Income) (a)	$	(24)	$	(9)	$	98	$	3	$	3	$	3

(a)Net non-service cost, which is included in Other, net in the Statement of Consolidated Income, was income of $75 million in 2021 (2020: $59 million of income; 2019: $55 million of expense).

In 2019, the trust for the Hess Corporation Employees’ Pension Plan (the “Plan”) purchased a single premium annuity contract at a cost of $249 million using assets of the Plan to settle and transfer certain of its obligations to a third party.  The settlement transaction resulted in a noncash charge of $88 million to recognize unamortized pension actuarial losses that is included in Other, net in the Statement of Consolidated Income.

In 2022, we forecast service cost for our pension and postretirement medical plans to be approximately $50 million and net non-service cost of approximately $135 million of income, which is comprised of interest cost of approximately $65 million, amortization of unrecognized net actuarial losses of approximately $15 million, and estimated expected return on plan assets of approximately $215 million.

Assumptions:  The weighted average actuarial assumptions used to determine benefit obligations at December 31 and net periodic benefit cost for the three years ended December 31 for our funded and unfunded pension plans were as follows:

	2021	2020	2019
Benefit Obligations:
Discount rate	2.5%	2.2%	2.9%
Rate of compensation increase	3.8%	3.8%	3.8%
Net Periodic Benefit Cost:
Discount rate
Service cost	2.6%	3.2%	3.9%
Interest cost	1.7%	2.6%	3.4%
Expected return on plan assets	6.6%	6.7%	7.1%
Rate of compensation increase	3.8%	3.8%	3.8%

The actuarial assumptions used to determine benefit obligations at December 31 for the postretirement medical plan were as follows:

	2021	2020	2019
Discount rate	2.4%	1.9%	2.8%
Initial health care trend rate	5.5%	6.0%	6.5%
Ultimate trend rate	4.0%	4.5%	4.5%
Year in which ultimate trend rate is reached	2046	2038	2038

The assumptions used to determine net periodic benefit cost for each year were established at the end of each previous year while the assumptions used to determine benefit obligations were established at each year‑end.  The net periodic benefit cost and the actuarial present value of benefit obligations are based on actuarial assumptions that are reviewed on an annual basis.  The discount rate is developed based on a portfolio of high‑quality, fixed income debt instruments with maturities that approximate the expected payment of plan obligations.

The overall expected return on plan assets is developed from the expected future returns for each asset category, weighted by the target allocation of pension assets to that asset category.  The future expected return assumptions for individual asset categories are largely based on inputs from various investment experts regarding their future return expectations for particular asset categories.

Our investment strategy is to maximize long‑term returns at an acceptable level of risk through broad diversification of plan assets in a variety of asset classes.  Asset classes and target allocations are determined by our investment committee and include domestic and foreign equities, fixed income, and other investments, including hedge funds, real estate and private equity.  Investment managers are prohibited from investing in securities issued by us unless indirectly held as part of an index strategy.  The majority of plan assets

are highly liquid, providing ample liquidity for benefit payment requirements.  The current target allocations for plan assets are 45% equity securities, 35% fixed income securities (including cash and short‑term investment funds) and 20% to all other types of investments.  Asset allocations are rebalanced on a periodic basis throughout the year to bring assets to within an acceptable range of target levels.

Fair value:  The following tables provide the fair value of the financial assets of the funded pension plans at December 31, 2021 and 2020 in accordance with the fair value measurement hierarchy described in Note 1, Nature of Operations, Basis of Presentation and Summary of Accounting Policies.

	Level 1		Level 2		Level 3		Net Asset Value (c)		Total
	(In millions)
December 31, 2021
Cash and Short-Term Investment Funds	$	19	$	—	$	—	$	—	$	19
Equities:
U.S. equities (domestic)	601		—		—		87		688
International equities (non-U.S.)	73		56		—		375		504
Global equities (domestic and non-U.S.)	—		7		—		224		231
Fixed Income:
Treasury and government related (a)	—		361		—		41		402
Mortgage-backed securities (b)	—		128		—		63		191
Corporate	128		452		—		55		635
Other:
Hedge funds	—		—		—		81		81
Private equity funds	—		—		—		382		382
Real estate funds	29		—		—		195		224
Total investments	$	850	$	1,004	$	—	$	1,503	$	3,357
December 31, 2020
Cash and Short-Term Investment Funds	$	44	$	—	$	—	$	—	$	44
Equities:
U.S. equities (domestic)	585		—		—		164		749
International equities (non-U.S.)	94		43		—		352		489
Global equities (domestic and non-U.S.)	—		8		—		217		225
Fixed Income:
Treasury and government related (a)	—		350		—		49		399
Mortgage-backed securities (b)	—		116		—		70		186
Corporate	—		381		—		62		443
Other:
Hedge funds	—		—		—		73		73
Private equity funds	—		—		—		251		251
Real estate funds	23		—		—		161		184
Total investments	$	746	$	898	$	—	$	1,399	$	3,043

(a)Includes securities issued and guaranteed by U.S. and non‑U.S. governments, and securities issued by governmental agencies and municipalities.

(b)Comprised of U.S. residential and commercial mortgage-backed securities.

(c)Includes certain investments that have been valued using the net asset value (NAV) practical expedient, and therefore have not been categorized in the fair value hierarchy.  The inclusion of such amounts in the above table is intended to aid reconciliation of investments categorized in the fair value hierarchy to total pension plan assets.  

The following describes the financial assets of the funded pension plans:

Cash and short‑term investment funds - Consists of cash on hand and short-term investment funds that provide for daily investments and redemptions which are classified as Level 1.

Equities - Consists of individually held U.S. and international equity securities.  This investment category also includes funds that consist primarily of U.S. and international equity securities.  Equity securities, which are individually held and are traded actively on exchanges, are classified as Level 1.  Certain funds, consisting primarily of equity securities, are classified as Level 2 if the NAV is determined and published daily, and is the basis for current transactions.  Commingled funds, consisting primarily of equity securities, are valued using the NAV per fund share.

Fixed income investments - Consists of individually held securities issued by the U.S. government, non-U.S. governments, governmental agencies, municipalities and corporations, and agency and non-agency mortgage-backed securities.  This investment category also includes funds that consist of fixed income securities.  Individual fixed income securities are generally priced based on

evaluated prices from independent pricing services, which are monitored and provided by the third-party custodial firm responsible for safekeeping assets of the particular plan and are classified as Level 2.  Exchange-traded funds consisting of fixed income securities are classified as Level 1. Certain funds, consisting primarily of fixed income securities, are classified as Level 2 if the NAV is determined and published daily, and is the basis for current transactions.  Commingled funds, consisting primarily of fixed income securities, are valued using the NAV per fund share.

Other investments - Consists of exchange‑traded real estate investment trust securities, which are classified as Level 1.  Commingled funds and limited partnership investments in hedge funds, private equity and real estate funds are valued at the NAV per fund share.

Contributions and estimated future benefit payments:  In 2022, we expect to contribute approximately $45 million to our funded pension plans.

Estimated future benefit payments by the funded and unfunded pension plans, and the postretirement medical plan, which reflect expected future service, are as follows (in millions):

2022	$	131
2023	132
2024	137
2025	125
2026	131
Years 2027 to 2031	662

We also have defined contribution plans for certain eligible employees.  Employees may contribute a portion of their compensation to these plans and we match a portion of the employee contributions.  We recorded expense of $18 million in 2021 for contributions to these plans (2020: $22 million; 2019: $20 million).