Pensions and Other Postretirement Benefits (Tables)

12 Months Ended

Dec. 31, 2012

Changes in Projected Benefit Obligations, Plan Assets and Funded Status

The following table sets forth the changes in projected benefit obligations (“PBO”) (as calculated as of December 31), plan assets, the funded status and the amounts recognized in the accompanying consolidated balance sheet for the Company’s defined benefit pension and other postretirement benefit plans:



	Pensions						Other Postretirement Benefits
(Millions)	2012			2011			2012			2011
Projected benefit obligation, January 1	$	5,333		$	4,952		$	1,394		$	1,235
Service cost	54			57			19			16
Interest cost	217			231			50			55
Plan amendments	(2		)	—			(19		)	22
Actuarial losses / (gains) - net	443			444			(33		)	126
Benefits paid	(347		)	(281		)	(62		)	(64		)
Foreign currency translation adjustments	59			(37		)	3			(3		)
Curtailment and special termination benefits	(6		)	(58		)	—			—
Impact of Commodity Chemicals transaction⁽¹⁾	29			29			10			11
Other	4			(4		)	—			(4		)
Projected benefit obligation, December 31	$	5,784		$	5,333		$	1,362		$	1,394
Market value of plan assets, January 1	$	4,382		$	4,127
Actual return on plan assets	571			426
Company contributions	80			113
Participant contributions	2			2
Benefits paid	(335		)	(262		)
Plan expenses and other-net	(1		)	(2		)
Foreign currency translation adjustments	50			(30		)
Impact of Commodity Chemicals transaction⁽¹⁾	1			8
Market value of plan assets, December 31	$	4,750		$	4,382
Funded Status	$	(1,034	)	$	(951	)	$	(1,362	)	$	(1,394	)
Amounts recognized in the Consolidated Balance Sheet:
Other assets (long-term)	27			23			—			—
Accounts payable and accrued liabilities	(20		)	(13		)	(75		)	(87		)
Accrued pensions	(1,041		)	(961		)	—			—
Other postretirement benefits	—			—			(1,287		)	(1,307		)
Net liability recognized	$	(1,034	)	$	(951	)	$	(1,362	)	$	(1,394	)

Accumulated Other Comprehensive Loss Pretax Amounts Not Yet Reflected in Net Periodic Benefit Cost

Amounts (pretax) not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss include the following:



(Millions)	Pensions						Other Postretirement Benefits
	2012			2011			2012			2011
Accumulated net actuarial losses	$	2,097		$	2,052		$	505		$	571
Accumulated prior service credit	(3		)	(2		)	(45		)	(37		)
Total	$	2,094		$	2,050		$	460		$	534

Change in Accumulated Other Comprehensive Loss (Pretax) Relating to Defined Benefit Pension and Other Postretirement Benefits

The decrease in accumulated other comprehensive loss (pretax) in 2012 relating to defined benefit pension and other postretirement benefits consists of:



(Millions)	Pensions			Other Postretirement Benefits
Net actuarial loss (gain) arising during the year	$	177		$	(33	)
New prior service credit	(1		)	(19		)
Amortization of actuarial loss	(150		)	(34		)
Amortization of prior service cost	—			12
Foreign currency translation adjustments and other	18			—
Net change	$	44		$	(74	)

Net Periodic Benefit Cost

Net periodic benefit cost for the three years ended December 31, 2012, included the following:



	Pensions									Other Postretirement Benefits
(Millions)	2012			2011			2010			2012			2011			2010
Service cost	$	54		$	57		$	57		$	19		$	16		$	17
Interest cost	217			231			227			50			55			56
Expected return on plan assets	(261		)	(280		)	(250		)	—			—			—
Amortization of prior service cost (credit)	—			1			4			(10		)	(10		)	(4		)
Amortization of actuarial losses	133			106			108			31			26			16
Curtailments and special termination benefits	—			5			—			—			—			—
Net periodic benefit cost	$	143		$	120		$	146		$	90		$	87		$	85

Effect of One Percentage Point Increase or Decrease in Health Care Cost Trend Rates

If these 2013 health care cost trend rates were increased or decreased by one percentage point per year, such increase or decrease would have the following effects:



	One-Percentage Point
(Millions)	Increase		Decrease
Increase (decrease) in the aggregate of service and interest cost components of annual expense	$	10	$	(8	)
Increase (decrease) in the benefit obligation	$	155	$	(91	)

Weighted Average Target Pension Plan Asset Allocations

The following summarizes the weighted average target pension plan asset allocation as of December 31, 2012 and 2011 for all PPG defined benefit plans:



Asset Category	Dec. 31, 2012	Dec. 31, 2011
Equity securities	35-70%	40-75%
Debt securities	30-65%	25-60%
Real estate	0–10%	0-10%
Other	0–10%	0-10%

Fair Values of the Company's Pension Plan Assets by Asset Category

The fair values of the Company’s pension plan assets at December 31, 2012, by asset category, are as follows:



(Millions)			Level 1⁽¹⁾		Level 2⁽¹⁾		Level 3⁽¹⁾		Total
Asset Category
Equity securities:
	U.S.
		Large cap	$	1	$	172	$	—	$	173
		Small cap	—		146		—		146
		PPG common stock	244		—		—		244
	Non-U.S.
		Developed and emerging markets⁽²⁾	—		578		—		578
Debt securities:
	Cash and cash equivalents		—		499		—		499
	Corporate⁽³⁾
		U.S.⁽⁴⁾	—		922		76		998
		Developed and emerging markets⁽²⁾	—		185		—		185
	Diversified⁽⁵⁾		—		635		4		639
	Government
		U.S.⁽⁴⁾	196		69		—		265
		Developed markets	—		301		—		301
	Other⁽⁶⁾		—		155		27		182
Real estate, hedge funds, and other			—		128		412		540
	Total		$	441	$	3,790	$	519	$	4,750


(1)	These levels refer to the accounting guidance on fair value measurement described in Note 9, “Fair Value Measurement.”


(2)	These amounts represent holdings in investment grade debt or equity securities of issuers in both developed markets and emerging economies.


(3)	This category represents investment grade debt securities from a diverse set of industry issuers.


(4)	These investments are primarily long duration fixed income securities.


(5)	This category represents commingled funds invested in diverse portfolios of debt securities.


(6)	This category includes mortgage-backed and asset backed debt securities, municipal bonds and other debt securities including derivatives.

The fair values of the Company’s pension plan assets at December 31, 2011, by asset category, are as follows:



(Millions)			Level 1⁽¹⁾		Level 2⁽¹⁾		Level 3⁽¹⁾		Total
Asset Category
Equity securities:
	U.S.
		Large cap	$	—	$	342	$	—	$	342
		Small cap	125		80		—		205
		PPG common stock	151		—		—		151
	Non-U.S.
		Developed and emerging markets⁽²⁾	—		640		—		640
Debt securities:
	Cash and cash equivalents		—		270		—		270
	Corporate⁽³⁾
		U.S.⁽⁴⁾	—		672		68		740
		Developed and emerging markets⁽²⁾	—		338		—		338
	Diversified⁽⁵⁾		—		339		—		339
	Government
		U.S.⁽⁴⁾	397		113		—		510
		Developed markets	—		267		—		267
	Other⁽⁶⁾		5		188		28		221
Real estate, hedge funds, and other			41		73		245		359
	Total		$	719	$	3,322	$	341	$	4,382


(1)	These levels refer to the accounting guidance on fair value measurement described in Note 9, “Fair Value Measurement.”


(2)	These amounts represent holdings in investment grade debt or equity securities of issuers in both developed markets and emerging economies.


(3)	This category represents investment grade debt securities from a diverse set of industry issuers.


(4)	These investments are primarily long duration fixed income securities.


(5)	This category represents commingled funds invested in diverse portfolios of debt securities.


(6)	This category includes mortgage-backed and asset backed debt securities, municipal bonds and other debt securities.

Change in the Fair Value of the Company's Level 3 Pension Assets

The change in the fair value of the Company’s Level 3 pension assets for the years ended December 31, 2012 and 2011 was as follows:



(Millions)	Real Estate			Other Debt Securities			Hedge Funds & Other assets			Total
Balance, January 1, 2011	$	117		$	39		$	22		$	178
Realized gain/(loss)	(1		)	—			(9		)	(10		)
Unrealized gain/(loss) for positions still held	15			—			6			21
Transfers in/(out)	25			(11		)	138			152
Currency	—			—			—			—
Balance, December 31, 2011	$	156		$	28		$	157		$	341
Realized gain/(loss)	8			—			13			21
Unrealized gain/(loss) for positions still held	8			—			(1		)	7
Transfers in/(out)	4			(1		)	148			151
Currency	—			—			(1		)	(1		)
Balance, December 31, 2012	$	176		$	27		$	316		$	519

Benefit Obligations

Weighted Average Assumptions Used for the Defined Benefit Pension and Other Postretirement Plans

The following weighted average assumptions were used to determine the benefit obligation for the Company’s defined benefit pension and other postretirement plans as of December 31, 2012 and 2011:



	2012		2011
Discount rate	4.1	%	4.6	%
Rate of compensation increase	4.0	%	3.9	%

Benefit Costs

Weighted Average Assumptions Used for the Defined Benefit Pension and Other Postretirement Plans

The following weighted average assumptions were used to determine the net periodic benefit cost for the Company’s defined benefit pension and other postretirement benefit plans for the three years in the period ended December 31, 2012:



	2012		2011		2010
Discount rate	4.6	%	5.3	%	5.7	%
Expected return on assets	7.0	%	7.6	%	7.8	%
Rate of compensation increase	3.9	%	3.8	%	3.9	%