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Postretirement Benefits
 12 Months Ended
Dec. 31, 2012
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]  
Postretirement Benefits
POSTRETIREMENT BENEFITS
U.S. POSTRETIREMENT BENEFITS
International Paper provides certain retiree health care and life insurance benefits covering certain U.S. salaried and hourly employees. These employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Excluded from company-provided medical benefits are salaried employees whose age plus years of employment with the Company totaled less than 60 as of January 1, 2004. International Paper does not fund these benefits prior to payment and has the right to modify or terminate certain of these plans in the future.
The components of postretirement benefit expense in 2012, 2011 and 2010 were as follows:
 
In millions
2012

2011

2010

Service cost
$
3

$
2

$
2

Interest cost
20

21

23

Actuarial loss
10

9

12

Amortization of prior service credits
(30
)
(25
)
(31
)
Curtailment gain
(7
)
—

—

Net postretirement (benefit) expense
$
(4
)
$
7

$
6

International Paper evaluates its actuarial assumptions annually as of December 31 (the measurement date) and considers changes in these long-term factors based upon market conditions and the requirements of employers’ accounting for postretirement benefits other than pensions. International Paper's postretirement plan was remeasured on January 31, 2012 due to a negative plan amendment which reduced our obligation by $29 million and reduced the 2012 expected benefit cost by $11 million. Temple-Inland's postretirement plan was also remeasured on July 31, 2012 due to a negative plan amendment which reduced the obligation by $6 million and reduced 2012 expense by $1 million.
The discount rates used to determine net cost for the years ended December 31, 2012, 2011 and 2010 were as follows: 
 
2012

 
2011

2010

Discount rate
4.40
%
(a)
5.30
%
5.40
%

(a)
Represents the weighted average rate for the IP plan for 2012 due to the remeasurement. The weighted average rate used for Temple-Inland in 2012 was 4.19%.
The weighted average assumptions used to determine the benefit obligation at December 31, 2012 and 2011 were as follows: 
 
2012

2011

Discount rate
3.70
%
4.80
%
Health care cost trend rate assumed for next year
7.50
%
8.00
%
Rate that the cost trend rate gradually declines to
5.00
%
5.00
%
Year that the rate reaches the rate it is assumed to remain
2017

2017



A 1% increase in the assumed annual health care cost trend rate would have increased the accumulated postretirement benefit obligation at December 31, 2012 by approximately $19 million. A 1% decrease in the annual trend rate would have decreased the accumulated postretirement benefit obligation at December 31, 2012 by approximately $17 million. The effect on net postretirement benefit cost from a 1% increase or decrease would be approximately $1 million.
The plan is only funded in an amount equal to benefits paid. The following table presents the changes in benefit obligation and plan assets for 2012 and 2011:
 
In millions
2012

2011

Change in projected benefit obligation:
 
 
Benefit obligation, January 1
$
425

$
425

Service cost
3

2

Interest cost
20

21

Participants’ contributions
34

46

Actuarial (gain) loss
44

29

Acquisitions
108

—

Plan amendments
(63
)
—

Benefits paid
(107
)
(108
)
Less: Federal subsidy
7

10

Restructuring
(17
)
—

Curtailment
(5
)
—

Benefit obligation, December 31
$
449

$
425

Change in plan assets:
 
 
Fair value of plan assets, January 1
$
0

$
0

Company contributions
73

62

Participants’ contributions
34

46

Benefits paid
(107
)
(108
)
Fair value of plan assets, December 31
$
0

$
0

Funded status, December 31
$
(449
)
$
(425
)
Amounts recognized in the consolidated balance sheet under ASC 715:
 
 
Current liability
$
(59
)
$
(43
)
Non-current liability
(390
)
(382
)
 
$
(449
)
$
(425
)
Amounts recognized in accumulated other comprehensive income under ASC 715 (pre-tax):
 
 
Net actuarial loss
$
115

$
81

Prior service credit
(65
)
(35
)
 
$
50

$
46


The non-current portion of the liability is included with the postemployment liability in the accompanying consolidated balance sheet under Postretirement and postemployment benefit obligation.

The components of the $4 million increase in the amounts recognized in OCI during 2012 consisted of:
 
In millions
  
Curtailment
$
2

Current year actuarial loss
44

Amortization of actuarial loss
(10
)
Current year prior service credit
(62
)
Amortization of prior service credit
30

 
$
4


The portion of the change in the funded status that was recognized in either net periodic benefit cost or OCI was $0 million, $47 million and $5 million in 2012, 2011 and 2010, respectively.
The estimated amounts of net loss and prior service credit that will be amortized from OCI into net postretirement benefit cost in 2013 are expected to be $12 million and $(25) million, respectively.
At December 31, 2012, estimated total future postretirement benefit payments, net of participant contributions and estimated future Medicare Part D subsidy receipts, were as follows:
 
In millions
Benefit
Payments

Subsidy
Receipts

2013
$
63

$
3

2014
49

3

2015
41

3

2016
39

3

2017
37

3

2018 – 2022
155

13


NON-U.S. POSTRETIREMENT BENEFITS
In addition to the U.S. plan, certain Brazilian and Moroccan employees are eligible for retiree health care and life insurance benefits. Net postretirement benefit cost for our non-U.S. plans was $1 million for 2012, $2 million for 2011 and $1 million for 2010. The benefit obligation for these plans was $22 million at December 31, 2012 and $23 million at December 31, 2011.