Employee and Retiree Benefit Plans

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Employee and Retiree Benefit Plans

Note K – Employee and Retiree Benefit Plans

PENSION AND OTHER POSTRETIREMENT PLANS – The Company has defined benefit pension plans that are principally noncontributory and cover most full-time employees.  All pension plans are funded except for the U.S. and Canadian nonqualified supplemental plans and the U.S. directors’ plan.  All U.S. tax qualified plans meet the funding requirements of federal laws and regulations.  Contributions to foreign plans are based on local laws and tax regulations.  The Company also sponsors other postretirement benefits such as health care and life insurance benefit plans, which are not funded, that cover most retired U.S. employees.  The health care benefits are contributory; the life insurance benefits are noncontributory.

Upon the disposal of Murphy’s former U.K. downstream assets, the Company retained all vested defined benefit pension obligations associated with former employees of this business.  No additional benefits will accrue to these former U.K. employees under the Company’s retirement plan after the date of their separation from Murphy.

GAAP requires the Company to recognize the overfunded or underfunded status of its defined benefit plans as an asset or liability in its consolidated balance sheet and to recognize changes in that funded status between periods through Accumulated other comprehensive loss.

In 2020, the Company announced that it was closing its headquarters office in El Dorado, Arkansas, its office in Calgary, Alberta, and consolidating all worldwide staff activities to its existing office location in Houston, Texas. As a result of this decision and the subsequent restructuring activities, a pension remeasurement was triggered and the Company incurred pension curtailment and special termination benefit charges as a result of the associated reduction in force in 2020.

The tables that follow provide a reconciliation of the changes in the plans’ benefit obligations and fair value of assets for the years ended December 31, 2021 and 2020 and a statement of the funded status as of December 31, 2021 and 2020.

	Pension Benefits			Other Postretirement Benefits
(Thousands of dollars)	2021		2020	2021	2020
Change in benefit obligation
Obligation at January 1	$	981,467	883,269	108,378	108,401
Service cost	8,199		7,967	1,295	1,373
Interest cost	14,784		21,127	2,071	2,626
Participant contributions	—		—	2,648	2,225
Actuarial loss (gain)	(24,440)		107,258	(9,519)	3,758
Medicare Part D subsidy	—		—	300	243
Exchange rate changes	(1,764)		7,074	3	13
Benefits paid	(38,866)		(46,066)	(4,041)	(4,238)
Curtailments	—		(7,596)	—	(6,023)
Special termination benefits	—		8,434	—	—
Plan amendments	—		—	(5,002)	—
Obligation at December 31	939,380		981,467	96,133	108,378
Change in plan assets
Fair value of plan assets at January 1	586,720		547,484	—	—
Actual return on plan assets	33,687		48,115	—	—
Employer contributions	31,607		30,178	1,093	1,770
Participant contributions	—		—	2,648	2,225
Medicare Part D subsidy	—		—	300	243
Exchange rate changes	(1,846)		7,009	—	—
Benefits paid	(38,866)		(46,066)	(4,041)	(4,238)
Fair value of plan assets at December 31	611,302		586,720	—	—
Funded status and amounts recognized in the Consolidated Balance Sheets at December 31
Deferred charges and other assets	5,535		4,572	—	—
Other accrued liabilities	(10,144)		(9,468)	(4,867)	(5,298)
Deferred credits and other liabilities	(323,469)		(389,851)	(91,266)	(103,080)
Fund Status and net plan liability recognized at December 31	$	(328,078)	(394,747)	(96,133)	(108,378)

At December 31, 2021, amounts included in Accumulated other comprehensive loss (AOCL) in the Consolidated Balance Sheets, before reduction for associated deferred income taxes, which have not been recognized in net periodic benefit expense are shown in the following table.

(Thousands of dollars)	Pension Benefits		Other Postretirement Benefits
Net actuarial gain (loss)	$	(280,462)	13,233
Prior service cost	(2,920)		5,002
	$	(283,382)	18,235

The table that follows includes projected benefit obligations, accumulated benefit obligations and fair value of plan assets for plans where the accumulated benefit obligation exceeded the fair value of plan assets.

	Projected Benefit Obligations			Accumulated Benefit Obligations		Fair Value of Plan Assets
(Thousands of dollars)	2021		2020	2021	2020	2021	2020
Funded qualified plans where accumulated benefit obligation exceeds fair value of plan assets	$	734,375	762,134	723,887	753,475	589,529	564,238
Unfunded nonqualified and directors’ plans where accumulated benefit obligation exceeds fair value of plan assets	188,713		201,372	188,530	198,792	—	—
Unfunded other postretirement plans	96,133		108,378	96,133	108,378	—	—

The table that follows provides the components of net periodic benefit expense for each of the three years ended December 31, 2021.

	Pension Benefits				Other Postretirement Benefits
(Thousands of dollars)	2021		2020	2019	2021	2020	2019
Service cost	$	8,199	7,967	7,964	1,295	1,373	1,559
Interest cost	14,784		21,127	27,835	2,071	2,626	3,864
Expected return on plan assets	(19,222)		(24,316)	(25,719)	—	—	—
Amortization of prior service cost (credit)	591		640	964	—	—	—
Recognized actuarial (gain) loss	20,565		22,828	14,106	(29)	(31)	(193)
Net periodic benefit expense	24,917		28,246	25,150	3,337	3,968	5,230
Termination benefits expense	—		8,434	—	—	—	—
Curtailment expense	—		586	—	—	(1,825)	—
Total net periodic benefit expense	$	24,917	37,266	25,150	3,337	2,143	5,230

The preceding tables in this note include the following amounts related to foreign benefit plans.

	Pension Benefits			Other Postretirement Benefits
(Thousands of dollars)	2021		2020	2021	2020
Benefit obligation at December 31	$	225,117	230,101	526	492
Fair value of plan assets at December 31	218,746		221,463	—	—
Net plan liabilities recognized	(6,371)		(8,638)	(526)	(492)
Net periodic benefit expense (benefit)	598		437	64	46

The following table provides the weighted-average assumptions used in the measurement of the Company’s benefit obligations at December 31, 2021 and 2020 and net periodic benefit expense for 2021 and 2020.

	Benefit Obligations								Net Periodic Benefit Expense
	Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits
	December 31,				December 31,				Year				Year
	2021		2020		2021		2020		2021		2020		2021		2020
Discount rate	2.54	%	2.25	%	2.86	%	2.50	%	2.24	%	2.75	%	2.51	%	3.16	%
Expected return on plan assets	4.25	%	4.43	%	—		—		4.25	%	4.43	%	—		—
Rate of compensation increase	3.04	%	3.04	%	—		—		3.04	%	3.28	%	—		—

The discount rates used for determining the plan obligations and expense are based on the universe of high-quality corporate bonds that are available within each country.  Cash flow analyses are performed in which a spot yield curve is used to discount projected benefit payment streams for the most significant plans.  The discounted cash flows are used to determine an equivalent single rate which is the basis for selecting the discount rate within each country.  Expected plan asset returns are based on long-term expectations for asset portfolios with similar investment mix characteristics.  Expected compensation increases are based on anticipated future averages for the Company.

Benefit payments, reflecting expected future service as appropriate, which are expected to be paid in future years from the assets of the plans or by the Company, are shown in the following table.

(Thousands of dollars)	Pension Benefits		Other Postretirement Benefits
2022	$	45,619	4,867
2023	45,714		4,886
2024	46,581		4,876
2025	46,259		4,835
2026	46,830		4,843
2027-2031	240,308		24,295

For purposes of measuring postretirement benefit obligations at December 31, 2021, the future annual rates of increase in the cost of health care were assumed to be 5.9% for 2021 decreasing each year to an ultimate rate of 3.8% in 2038 and thereafter.

During 2021, the Company made contributions of $31.2 million to its domestic defined benefit pension plans and $1.1 million to its domestic postretirement benefits plan.  During 2022, the Company currently expects to make contributions of $35.0 million to its domestic defined benefit pension plans, $3.2 million to its foreign defined benefit pension plans and $4.9 million to its domestic postretirement benefits plan.

Plan Investments – Murphy Oil Corporation maintains an Investment Policy Statement (Statement) that establishes investment standards related to its funded domestic qualified retirement plan. 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 equities, fixed income and other investments, including hedge funds, real estate and cash equivalent securities. Investment managers are prohibited from investing in equity or fixed income securities issues by the Company. The majority of plan assets are highly liquid, providing flexibility for benefit payment requirements. The current target allocations for plan assets are 40-70% equity securities, 30-60% fixed income securities, 0-15% alternatives and 0-15% cash and equivalents. Asset allocations are rebalanced on a periodic basis throughout the year to bring assets to within an acceptable range of target levels.

The weighted average asset allocation for the Company’s funded pension benefit plans at December 31, 2021 and 2020 are presented in the following table.

	December 31,
	2021		2020
Equity securities	60.9	%	58.1	%
Fixed income securities	21.7		24.0
Alternatives	13.5		13.2
Cash equivalents	3.9		4.7
	100.0	%	100.0	%

The Company’s weighted average expected return on plan assets was 4.0% in 2021, and the return was determined based on an assessment of actual long-term historical returns and expected future returns for a portfolio with investment characteristics similar to that maintained by the plans.  The 4.0% expected return was based on a weighted average expected future equity securities return of 3.4% and a fixed income securities return of 0.6%. There is also an average expected investment expense of 0.5%. Over the last 10 years, the return on funded retirement plan assets has averaged 8.2%.

At December 31, 2021, the fair value measurements of retirement plan assets within the fair value hierarchy are included in the table that follows.

			Fair Value Measurements Using
(Thousands of dollars)	Fair Value at December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Domestic Plans
Equity securities:
U.S. core equity	$	108,422	108,422	—	—
U.S. small/midcap	73,222		73,222	—	—
Other alternative strategies	47,248		—	—	47,248
International equity	47,546		47,546	—	—
Emerging market equity	14,937		14,937	—	—
Fixed income securities:
U.S. fixed income	92,231		36,888	55,343	—
Cash and equivalents	8,951		8,951	—	—
Total Domestic Plans	392,557		289,966	55,343	47,248
Foreign Plans
Equity securities funds	73,642		—	73,642	—
Fixed income securities funds	40,610		—	40,610	—
Diversified pooled fund	54,317		—	54,317	—
Other	35,606		—	—	35,606
Cash and equivalents	14,570		—	14,570	—
Total Foreign Plans	218,745		—	183,139	35,606
Total	$	611,302	289,966	238,482	82,854

At December 31, 2020, the fair value measurements of retirement plan assets within the fair value hierarchy are included in the table that follows.

			Fair Value Measurements Using
(Thousands of dollars)	Fair Value at December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Domestic Plans
Equity securities:
U.S. core equity	$	67,326	67,326	—	—
U.S. small/midcap	28,953		28,953	—	—
Hedged funds and other alternative strategies	42,040		—	—	42,040
International commingled trust fund	76,095		987	55,433	19,675
Emerging market commingled equity fund	32,058		10,480	21,578	—
Fixed income securities:
U.S. fixed income	92,668		—	92,668	—
International commingled trust fund	9,456		—	9,456	—
Cash and equivalents	16,661		16,661	—	—
Total Domestic Plans	365,257		124,407	179,135	61,715
Foreign Plans
Equity securities funds	74,393		—	74,393	—
Fixed income securities funds	45,240		—	45,240	—
Diversified pooled fund	54,871		—	54,871	—
Other	35,970		—	—	35,970
Cash and equivalents	10,989		—	10,989	—
Total Foreign Plans	221,463		—	185,493	35,970
Total	$	586,720	124,407	364,628	97,685

The definition of levels within the fair value hierarchy in the tables above is included in Note P – Assets and Liabilities Measured at Fair Value .

For domestic plans, U.S. core, small/midcap, international, emerging market equity securities and U.S. treasury securities are quoted prices in active markets. For commercial paper securities, the prices received generally utilize observable inputs in the pricing methodologies. Other alternative strategies funds consist of three investments. One of these investments is valued quarterly based on net asset value and permits withdrawals after a 45-day notice, another investment is valued annually based on net asset value and permits withdrawals semi-annually after a 90-day notice, and the third investment is also valued quarterly based on net asset values and has a two-year lock-up period and a 95-day notice following the lock-up period.  

For foreign plans, the equity securities funds are comprised of U.K. and foreign equity funds valued daily based on fund net asset values. Fixed income securities funds are U.K. and Canadian securities valued daily at net asset values. The diversified pooled fund is valued daily at net asset value and contains a combination of U.K. and foreign equity securities.

The effects of fair value measurements using significant unobservable inputs on changes in Level 3 plan assets are outlined below:

(Thousands of dollars)	Hedged Funds and Other Alternative Strategies
Total at December 31, 2019	$	111,586
Actual return on plan assets:
Relating to assets held at the reporting date	5,694
Purchases, sales and settlements	(19,595)
Total at December 31, 2020	97,685
Actual return on plan assets:
Relating to assets held at the reporting date	5,206
Purchases, sales and settlements	(20,037)
Total at December 31, 2021	$	82,854

THRIFT PLANS – Most full-time U.S. employees of the Company may participate in thrift or similar savings plans by allotting up to a specified percentage of their base pay.  The Company matches contributions at a stated percentage of each employee’s allotment based on years of participation in the plans, with a maximum match of 6%.  Amounts charged to expense for the Company’s match to these plans were $5.4 million in 2021, $6.6 million in 2020 and $8.4 million in 2019.