RETIREMENT PLANS AND POSTRETIREMENT BENEFITS

LP sponsors various defined benefit and defined contribution retirement plans that provide retirement benefits to substantially all of its 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 specifically allows for participation in LP’s plans. LP contributes to a multiemployer plan for certain employees covered by collective bargaining agreements. LP also provides other post retirement benefits consisting primarily of healthcare benefits to certain retirees who meet age and service requirements.

Defined Benefit 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. LP contributes additional funds as necessary to maintain desired funding levels.

Benefit accruals under our most significant plans, 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 these plans. The remaining defined benefit pension plans (primarily in Canada) use a variety of benefit formulas.

LP also maintains a Supplemental Executive Retirement Plan (SERP), an unfunded, non-qualified defined benefit plan intended to provide supplemental retirement benefits to key executives. Benefits are generally based on compensation in the years immediately preceding normal retirement. LP has established a grantor trust that provides funds for the benefits payable under the SERP. The assets of the grantor trust are invested in corporate-owned life insurance policies. At December 31, 2012 and 2011, the trust assets were valued at $8.8 million and $16.7 million and are included in “Other assets” on the Consolidated Balance Sheets. LP did not contribute to this trust in 2012 or 2011. During the year ended December 31, 2012, LP paid its retiring CEO his accumulated SERP liability of $10.4 million through the use of the assets included in the grantor trust. In connection with this distribution, LP recorded a plan settlement charge of $2.2 million.

The components of LP’s net periodic pension costs and the assumptions related to those costs consisted of the following:



	Year ended December 31,
Dollar amounts in millions	2012			2011			2010
Service cost	$	3.7		$	2.9		$	2.8
Interest cost	14.6			15.9			16.5
Expected return on plan assets	(16.8		)	(18.2		)	(18.2		)
Amortization of prior service cost and net transition asset	0.3			0.3			0.3
Amortization of net actuarial loss	6.6			4.6			2.7
Net periodic pension cost	$	8.4		$	5.5		$	4.1
Loss (gain) due to settlement	$	2.2		$	—		$	0.2
Discount rate	4.41		%	5.12		%	5.95		%
Rate of compensation increase	0.7		%	0.6		%	0.6		%
Expected return on plan assets	6.87		%	7.04		%	7.17		%

Other changes in plan assets and benefit obligations recognized in other comprehensive income:



	Year ended December 31,
Dollar amounts in millions	2012			2011			2010
Net actuarial (gain) loss	$	11.3		$	43.2		$	13.1
Amortization of net actuarial loss	(6.6		)	(4.6		)	(2.7		)
Amortization of prior service cost	(0.3		)	(0.3		)	(0.4		)
Settlement	(2.2		)	—			—
Foreign exchange rate changes	—			(0.1		)	0.2
Total recognized in OCI	$	2.2		$	38.2		$	10.2

LP calculates the net periodic pension cost for a given fiscal year based upon assumptions developed at the end of the previous fiscal year. LP made the decision in the fourth quarter of 2008 to freeze future contribution credits as of January 1, 2010 to its qualified U.S. defined benefit pension plans. The decrease in net periodic pension cost from 2009 to 2010 was attributable to the decrease in service cost and a decrease in the amount of net actuarial loss amortized due to the lengthening of the amortization period based upon the frozen U.S. plans. LP recognized settlement charges of $2.2 million related to the LP SERP pension plan associated with the retirement of LP's previous CEO.

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.

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 benefit plan obligation, funded status and the assumptions related to the obligations as of the measurement date for each year presented as of December 31 follow:



	December 31,
Dollar amounts in millions	2012			2011
Change in benefit obligation:
Beginning of year balance	$	339.3		$	316.2
Service cost	3.7			2.9
Interest cost	14.6			15.9
Actuarial (gain)/loss	23.1			23.4
Curtailments/settlements	(2.2		)	—
Foreign exchange rate changes	1.3			(1.5		)
Benefits paid	(27.8		)	(17.6		)
End of year balance	$	352.0		$	339.3
Change in assets (fair value):
Beginning of year balance	$	247.1		$	255.2
Actual return on plan assets	26.4			(1.7		)
Employer contribution	12.6			11.9
Foreign exchange rate changes	1.0			(0.7		)
Benefits paid	(27.8		)	(17.6		)
End of year balance	$	259.3		$	247.1
Funded status	$	(92.7	)	$	(92.2	)
Weighted average assumptions for obligations as of measurement date
Discount rate for obligations	3.78		%	4.41		%
Rate of compensation increase	0.64		%	0.61		%

The table above reflects contribution for the year ended December 31, 2012 which include the $10.4 million of assets used from the guarantor fund in payment of the SERP liability related to the retirement of LP's former CEO as noted above.

The amounts recognized in LP’s Consolidated Balance Sheets as of December 31 consist of the following:



Dollar amounts in millions	2012			2011
Noncurrent pension assets, included in “Other assets”	$	0.4		$	1.0
Current pension liabilities, included in “Accounts payable and accrued liabilities”	(0.2		)	(0.2		)
Noncurrent pension liabilities, included in “Other long-term liabilities”	(92.9		)	(93.0		)
Total	$	(92.7	)	$	(92.2	)
Amounts recognized in other comprehensive income—pre-tax
Net actuarial loss	$	156.0		$	153.2
Prior service cost	0.4			0.7
Total	$	156.4		$	153.9

The total accumulated benefit obligation for all pension plans as of December 31, 2012 and 2011 was $346.0 million and $334.0 million.

The accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $331.7 million and $244.6 million at December 31, 2012 and $320.8 million and $232.9 million at December 31, 2011. The projected benefit obligations and fair value of plan assets of plans with projected benefit obligations in excess of plan assets were $337.7 million and $244.6 million at December 31, 2012 and $326.1 million and $232.9 million at December 31, 2011.

The amounts of accumulated other comprehensive income that is expected to be amortized as expense during 2013 is:



Dollar amounts in millions
Net actuarial loss	$	7.2
Prior service cost	0.3
Total	$	7.5

LP expects to contribute approximately $1.9 million to its pension plans in 2013.

The benefits expected to be paid from the benefit plans, which reflect expected future service, are as follows:



Dollar amounts in millions
Year
2013	$	18.1
2014	25.5
2015	20.0
2016	20.5
2017	23.6
2018 – 2022	112.5

These estimated benefit payments are based upon assumptions about future events. Actual benefit payments may vary significantly from these estimates.

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 2012		Actual Allocation
	Target Allocation 2012		2012		2011
Asset category
Equity securities	36.8	%	36.4	%	50.6	%
Debt securities	37.3		37.8		23.6
Real estate	8.0		5.8		5.9
Other, including cash and cash equivalents	17.9		20.0		19.9
Total	100.0	%	100.0	%	100.0	%

LP’s 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. LP’s U.S. plans include real estate, hedge funds and real return investment strategies to increase returns and reduce volatility. LP’s 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 LP’s pension plan assets at December 31, 2012 and December 31, 2011, fair value asset categories and the level of inputs as defined in Note 3 are as follows:



Dollar amounts in millions Asset Category	December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity investment funds:^(a)
Domestic stock funds	$	54.6	$	25.0	$	29.6	$	—
International stock funds	39.6		12.1		27.5		—
Fixed income investment funds:^(b)
Domestic bond funds	52.2		52.2		—		—
International bond funds	34.0		—		34.0		—
Diversified real asset funds	11.8		11.8		—		—
Real estate funds^(c)	15.2		—		—		15.2
Multi-strategy funds^(d)	49.5		—		—		49.5
Cash & cash equivalents	2.4		—		2.4		—
Total	$	259.3	$	101.1	$	93.5	$	64.7



Dollar amounts in millions Asset Category	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity investment funds:^(a)
Domestic stock funds	$	78.4	$	47.0	$	31.4	$	—
International stock funds	46.4		23.2		23.2		—
Fixed income investment funds:^(b)
Domestic bond funds	26.5		26.5		—		—
International bond funds	31.6				31.6		—
Real estate funds^(c)	14.5		—		—		14.5
Multi-strategy funds^(d)	46.4		—		—		46.4
Cash & cash equivalents	3.3		0.3		3.0		—
Total	$	247.1	$	97.0	$	89.2	$	60.9

_______________


^(a)	Equity investments include investments in funds that are primarily invested in large capitalization U.S. and international equity securities and a mutual fund.


^(b)	Fixed income investments include investments in funds that are primarily invested in a diversified portfolio of investment grade U.S. and international debt securities.


^(c)	Real estate investments are primarily invested in U.S. commercial real estate.


^(d)	The multi-strategy funds invest in various hedge funds of fund strategies.

Level 1 investments are valued based on active market quotations.

Level 2 investments are valued based on the unit prices quoted by the funds, representing the fair value of underlying investments.

Due to the lack of observable market quotations on real estate and multi-strategy funds, LP evaluates their 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		Real Estate			Total
Balance at January 1, 2011	$	45.4	$	13.9		$	59.3
Total unrealized gains (losses)	0.8		1.2			2.0
Net income	—		(0.6		)	(0.6		)
Management fees	0.2		—			0.2
Balance at December 31, 2011	$	46.4	$	14.5		$	60.9

Total unrealized gains (losses)	$	3.1	$	1.0		$	4.1
Net income	—		(0.3		)	(0.3		)
Management fees	—		—			—
Balance at December 31, 2012	$	49.5	$	15.2		$	64.7

Defined Contribution Plans

LP also sponsors 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 3.5% of an employee’s eligible wages (subject to certain limits). Effective January 2009, LP discontinued its company match feature for its U.S. plans. Effective January 1, 2010, LP reinstated a match of up to 2% of an employee’s eligible wages. Under the profit sharing feature of these plans, LP 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 3.0 million shares of LP common stock that represented approximately 21.2% of the total market value of plan assets at December 31, 2012.

In Canada, LP sponsors both defined contribution plans and Registered Retirement Savings Plans for hourly and salaried employees that allow for pre-tax employee deferrals. LP provides a base contribution of 2.5% of eligible earnings and matches 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 multiemployer plan in 2012, 2011 and 2010 were $5.2 million, $5.5 million and $4.2 million.

Other Benefit Plans

LP has several plans that provide postretirement benefits other than pensions, primarily for salaried employees in the U.S. and certain groups of Canadian employees. The funded status at December 31, 2012 and 2011 was $9.7 million and $8.5 million. Net expense related to these plans was not significant in 2012 or 2011.

Effective August 16, 2004, LP adopted the Louisiana-Pacific Corporation 2004 Executive Deferred Compensation Plan (the Plan). Pursuant to the Plan, certain management employees are eligible to defer up to 90% of their regular salary and annual cash incentives that exceed the limitation as set forth by the Internal Revenue Service. Each 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 this plan amounted to $1.5 million and $2.1 million at December 31, 2012 and December 31, 2011 and is included in “Other long-term liabilities” on LP’s Consolidated Balance Sheets.