Employee and Retiree Benefit Plans

12 Months Ended

Dec. 31, 2023

Retirement Benefits [Abstract]

Employee and Retiree Benefit Plans

Note J – 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 Sheets and to recognize changes in that funded status between periods through “Accumulated other comprehensive loss”.

The tables that follow provide a reconciliation of the changes in the plans’ benefit obligations, fair value of assets and funded status for the respective periods presented.

	Pension Benefits				Other Postretirement Benefits
(Thousands of dollars)	2023		2022		2023		2022
Change in benefit obligation
Obligation at January 1	$	663,073	$	939,380	$	67,679	$	96,133
Service cost	6,542		7,875		495		968
Interest cost	34,140		22,747		3,241		2,211
Participant contributions	–		–		2,629		2,283
Actuarial loss (gain)	26,625		(238,407)		(5,567)		(29,533)
Medicare Part D subsidy	–		–		299		331
Exchange rate changes	6,089		(21,018)		2		(20)
Benefits paid	(56,296)		(47,504)		(4,970)		(4,694)
Plan amendments 1	18,978		–		–		–
Obligation at December 31	699,151		663,073		63,808		67,679
Change in plan assets
Fair value of plan assets at January 1	450,944		611,302		–		–
Actual return on plan assets	39,953		(133,395)		–		–
Employer contributions	37,546		41,145		2,042		2,080
Participant contributions	–		–		2,629		2,283
Medicare Part D subsidy	–		–		299		331
Exchange rate changes	5,662		(20,604)		–		–
Benefits paid	(56,296)		(47,504)		(4,970)		(4,694)
Fair value of plan assets at December 31	477,809		450,944		–		–
Funded status and amounts recognized in the Consolidated Balance Sheets at December 31
Deferred charges and other assets	3,192		3,584		–		–
Other accrued liabilities	(10,219)		(9,693)		(4,433)		(4,830)
Deferred credits and other liabilities	(214,315)		(206,020)		(59,375)		(62,849)
Fund Status and net plan liability recognized at December 31	$	(221,342)	$	(212,129)	$	(63,808)	$	(67,679)

1 At December 31, 2023, the Company recognized an increase to its domestic plan benefit obligation related to a plan amendment. The amendment provides a permanent increase to benefits for retirees and beneficiaries who commenced payments prior to 2020.

In 2023, the increase to the pension benefits obligation is primarily due to the decrease in the interest rate assumption.

At December 31, 2023, 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)	$	(202,868)	$	44,165
Prior service (credit) cost	(20,561)		3,937
	$	(223,429)	$	48,102

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)	2023		2022		2023		2022		2023		2022
Funded qualified plans where accumulated benefit obligation exceeds fair value of plan assets	$	534,751	$	511,375	$	523,096	$	499,338	$	461,363	$	434,283
Unfunded nonqualified and directors’ plans where accumulated benefit obligation exceeds fair value of plan assets	151,146		141,917		148,661		139,634		–		–
Unfunded other postretirement plans	63,808		67,679		63,808		67,679		–		–

The table that follows provides the components of net periodic benefit expense for each of the three years presented.

	Pension Benefits						Other Postretirement Benefits
(Thousands of dollars)	2023		2022		2021		2023		2022		2021
Service cost	$	6,542	$	7,875	$	8,199	$	495	$	968	$	1,295
Interest cost	34,140		22,747		14,784		3,241		2,211		2,071
Expected return on plan assets	(32,839)		(36,458)		(19,222)		–		–		–
Amortization of prior service cost (credit)	620		(684)		591		(532)		(532)		–
Recognized actuarial (gain) loss	9,776		16,098		20,565		(3,512)		(615)		(29)
Net periodic benefit expense	18,239		9,578		24,917		(308)		2,032		3,337
Curtailment expense	219		–		–		–		–		–
Total net periodic benefit expense	$	18,458	$	9,578	$	24,917	$	(308)	$	2,032	$	3,337

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

	Pension Benefits				Other Postretirement Benefits
(Thousands of dollars)	2023		2022		2023		2022
Benefit obligation at December 31	$	133,822	$	122,915	$	115	$	107
Fair value of plan assets at December 31	119,236		115,862		–		–
Net plan liabilities recognized	(14,586)		(7,053)		(115)		(107)
Net periodic benefit expense (benefit)	1,387		(5,322)		(44)		62

The following table provides the weighted-average assumptions used in the measurement of the Company’s benefit obligations at December 31, 2023 and 2022 and net periodic benefit expense for 2023 and 2022.

	Benefit Obligations								Net Periodic Benefit Expense
	Pension Benefits				Other Postretirement Benefits				Pension Benefits				Other Postretirement Benefits
	December 31,				December 31,				Year				Year
	2023		2022		2023		2022		2023		2022		2023		2022
Discount rate on obligation, interest cost and service cost	5.03	%	5.30	%	5.15	%	5.41	%	5.27	%	3.13	%	5.41	%	2.86	%
Rate of compensation increase	3.52	%	3.50	%	–		–		3.52	%	3.00	%	–		–
Cash balance interest credit rate	3.20	%	3.20	%	–		–		–		–		–		–
Expected return on plan assets	–		–		–		–		7.35	%	6.24	%	–		–

The discount rates used for determining the plan obligations and expense are based on 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. The plan’s cash balance interest accumulation rate is the greater of the annual yield on 10-year treasury constant maturities or 1.89%.

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
2024	$	47,042	$	4,433
2025	47,424		4,456
2026	48,004		4,479
2027	48,481		4,491
2028	49,834		4,614
2029-2033	248,023		22,037

For purposes of measuring postretirement benefit obligations at December 31, 2023, the future annual rates of increase in the cost of health care were assumed to be 7.4% for 2024 decreasing each year to an ultimate rate of 4.0% in 2048 and thereafter.

During 2023, the Company made contributions of $34.7 million to its domestic defined benefit pension plans and $2.0 million to its domestic postretirement benefits plan. During 2024, the Company currently expects to make contributions of $35.8 million to its domestic defined benefit pension plans, $2.2 million to its foreign defined benefit pension plans and $4.4 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 includes 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 issued 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 40-75% equity securities, 20-60% fixed income securities, 0-15% alternatives and 0-20% 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 the respective balance sheet dates are shown in the following table.

	December 31,
	2023		2022
Equity securities	62.6	%	65.7	%
Fixed income securities	29.1	%	23.4	%
Alternatives	5.1	%	7.3	%
Cash equivalents	3.2	%	3.6	%
	100.0	%	100.0	%

The Company’s weighted average expected return on plan assets was 7.4% in 2023 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 7.4% expected return was comprised of the weighted average expected future equity securities return of 8.4% and a fixed income securities return of 4.7%. An average expected investment expense of 0.8% is included in this calculation. Over the last 10 years, the return on funded retirement plan assets has averaged 3.0%.

At December 31, 2023, 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, 2023		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	$	105,212	$	105,212	$	–	$	–
U.S. small/midcap	64,165		64,165		–		–
Other alternative strategies	3,831		–		–		3,831
International equity	31,820		31,820		–		–
Emerging market equity	10,525		10,525		–		–
Fixed income securities:
U.S. fixed income	132,608		56,381		76,227		–
Cash and equivalents	10,412		10,412		—		–
Total Domestic Plans	358,573		278,515		76,227		3,831
Foreign Plans
Equity securities funds	24,389		–		24,389		–
Fixed income securities funds	23,930		–		23,930		–
Diversified pooled fund	45,162		–		45,162		–
Other	20,623		–		–		20,623
Cash and equivalents	5,133		–		5,133		–
Total Foreign Plans	119,236		–		98,613		20,623
Total	$	477,809	$	278,515	$	174,841	$	24,454

At December 31, 2022, 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, 2022		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	$	96,433	$	96,433	$	–	$	–
U.S. small/midcap	64,421		64,421		–		–
Other alternative strategies	12,106		–		–		12,106
International equity	44,672		44,672		–		–
Emerging market equity	13,541		13,541		–		–
Fixed income securities:
U.S. fixed income	85,190		35,661		49,528		–
Cash and equivalents	18,719		18,719		–		–
Total Domestic Plans	335,082		273,447		49,528		12,106
Foreign Plans
Equity securities funds	23,877		–		23,877		–
Fixed income securities funds	30,727		–		30,727		–
Diversified pooled fund	31,246		–		31,246		–
Other	20,628		–		–		20,628
Cash and equivalents	9,384		–		9,384		–
Total Foreign Plans	115,862		–		95,234		20,628
Total	$	450,944	$	273,447	$	144,763	$	32,734

The definition of levels within the fair value hierarchy in the tables above is included in Note O.

For domestic plans, U.S. core, small/midcap, international, emerging market equity securities and U.S. treasury securities are valued based on 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 two investments. One of these investments is valued annually based on net asset value and permits withdrawals annually after a 90-day notice, and the other investment is also valued quarterly based on net asset values and has a three-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, 2021	$	82,854
Actual return on plan assets:
Relating to assets held at the reporting date	(38,389)
Purchases, sales and settlements	(11,731)
Total at December 31, 2022	32,734
Actual return on plan assets:
Relating to assets held at the reporting date	711
Relating to assets sold during the period	(8,991)
Total at December 31, 2023	$	24,454

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 6.0%. Amounts charged to expense for the Company’s match to these plans were $8.5 million in 2023, $6.0 million in 2022 and $5.4 million in 2021.