Pensions and Other Postretirement Benefits 10-K (Tables)

12 Months Ended

Dec. 31, 2013

Defined Benefit Plans and Other Postretirement Benefit Plans [Line Items]

The assumptions used in determining the projected benefit obligation of the HSBC North America Pension Plan at December 31 are as follows:



	2013		2012		2011
Discount rate	4.80	%	3.95	%	4.60	%
Salary increase assumption	*		2.75		2.75

* As the result of decision to cease all future contributions under the cash balance formula and to freeze the plan effective January 1, 2013, a salary increase assumption no longer applies to the Plan.

HSBC North America Pension Plan [Member]

Defined Benefit Plans and Other Postretirement Benefit Plans [Line Items]

Components of Net Periodic Benefit Cost

The following table reflects the portion of pension expense and its related components of the HSBC North America Pension Plan which has been allocated to us and is recorded in our consolidated statement of income (loss).



Year Ended December 31,	2013			2012			2011
	(in millions)
Service cost – benefits earned during the period	$	4		$	15		$	14
Interest cost on projected benefit obligation	71			67			74
Expected return on assets	(83		)	(91		)	(81		)
Amortization of prior service cost (benefit)	—			(5		)	(6		)
Recognized losses	49			46			38
Curtailment benefit recognized	—			(31		)	—
Pension expense	$	41		$	1		$	39

Schedule of Assumptions Used

The assumptions used in determining the projected benefit obligation of the HSBC North America Pension Plan at December 31 are as follows:



	2013		2012		2011
Discount rate	4.80	%	3.95	%	4.60	%
Salary increase assumption	*		2.75		2.75

The assumptions used in determining pension expense of the HSBC North America Pension Plan are as follows:



	2013		2012		2011
Discount rate	3.95	%	4.60	%	5.30	%
Salary increase assumption	*		2.75		2.75
Expected long-term rate of return on Plan assets	6.00		7.00		7.25

Schedule of Allocation of Plan Assets

The following table presents the fair values associated with the major categories of Plan assets and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair values as of December 31, 2013 and 2012.



	Fair Value Measurement at December 31, 2013
	Total			(Level 1)			(Level 2)			(Level 3)
	(in millions)
Investments at Fair Value:
Cash and short term investments	$	106		$	106		$	—		$	—
Equity Securities
U.S. Large-cap⁽¹⁾	303			303			—			—
U.S. Small-cap⁽²⁾	104			104			—			—
International Large-cap⁽³⁾	310			28			282			—
Global	387			65			322			—
Emerging Market	206			—			206			—
U.S. Treasury	716			716			—			—
U.S. Government agency issued or guaranteed	83			9			74			—
Obligations of U.S. states and political subdivisions	70			—			70			—
Asset-backed securities	31			—			11			20
U.S. corporate debt securities⁽⁴⁾	827			—			827			—
Foreign debt securities	279			—			268			11
Other investments	114			—			114			—
Accrued interest	23			6			17			—
Total investments	3,559			1,337			2,191			31
Receivables:
Receivables from sale of investments in process of settlement	106			106			—			—
Derivative financial assets	5			—			5			—
Total receivables	111			106			5			—
Total Assets	3,670			1,443			2,196			31
Derivative financial liabilities	(137		)	(13		)	(124		)	—
Other liabilities	(98		)	(98		)	—			—
Total Liabilities	(235		)	(111		)	(124		)	—
Total Net Assets	$	3,435		$	1,332		$	2,072		$	31



	Fair Value Measurement at December 31, 2012
	Total			(Level 1)			(Level 2)		(Level 3)
	(in millions)
Investments at Fair Value:
Cash and short term investments	$	74		$	74		$	—	$	—
Equity Securities
U.S. Large-cap⁽¹⁾	378			374			4		—
U.S. Small-cap⁽²⁾	109			109			—		—
International Large-Cap⁽³⁾	401			150			251		—
Global	189			53			136		—
Emerging Market	207			—			207		—
U.S. Treasury	829			829			—		—
U.S. Government agency issued or guaranteed	82			7			75		—
Obligations of U.S. states and political subdivisions	70			—			70		—
Asset-backed securities	44			—			1		43
U.S. corporate debt securities⁽⁴⁾	754			—			752		2
Corporate stocks – preferred	4			4			—		—
Foreign debt securities	211			4			186		21
Other investments	103			—			103		—
Accrued interest	20			6			14		—
Total investments	3,475			1,610			1,799		66
Receivables:
Receivables from sale of investments in process of settlement	89			89			—		—
Derivative financial assets	7			—			7		—
Total receivables	96			89			7		—
Total Assets	3,571			1,699			1,806		66
Liabilities	(86		)	(86		)	—		—
Total Net Assets	$	3,485		$	1,613		$	1,806	$	66


⁽¹⁾	This category comprises actively managed enhanced index investments that track the S&P 500 and actively managed U.S. investments that track the Russell 1000.


⁽²⁾	This category comprises actively managed U.S. investments that track the Russell 2000.

⁽³⁾

This category comprises actively managed equity investments in non-U.S. and Canada developed markets that generally track the MSCI EAFE index. MSCI EAFE is an equity market index of 21 developed market countries in Europe, Australia, Asia and the Far East including Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.


⁽⁴⁾	This category represents predominantly investment grade bonds of U.S. issuers from diverse industries.

The target sector allocations of Plan assets at December 31, 2013 are as follows:



	Percentage of Plan Assets at December 31, 2013
Domestic Large/Mid-Cap Equity	9.9	%
Domestic Small Cap Equity	3.3
International Large Cap Equity	8.1
International Small Cap Equity	3.2
Global Equity	11.4
Emerging Market Equity	5.4
Fixed Income Securities	58.7
Cash or Cash Equivalents	—
Total	100.0	%

Schedule of Changes in Fair Value of Plan Assets

A reconciliation of beginning and ending balances of the fair value of net assets associated with the HSBC North America Pension Plan is shown below.



Year Ended December 31,	2013			2012
	(in millions)
Fair value of net Plan assets at beginning of year	$	3,485		$	3,130
Cash contributions by HSBC North America	131			181
Actual return on Plan assets	(8		)	383
Benefits paid	(173		)	(209		)
Fair value of net Plan assets at end of year	$	3,435		$	3,485

Schedule of Credit Ratings

The following table provides additional detail regarding the rating of our U.S. corporate debt securities at December 31, 2013:



	Level 2		Level 3		Total
	(in millions)
AAA to AA⁽¹⁾	$	104	$	—	$	104
A+ to A-⁽¹⁾	299		—		299
BBB+ to Unrated⁽¹⁾	424		—		424
Total	$	827	$	—	$	827


⁽¹⁾	We obtain ratings on U.S. corporate debt securities from both Moody’s Investor Services and Standard and Poor’s Corporation. In the event the ratings obtained from these agencies differ, the lower of the two ratings

Schedule of Effect of Significant Unobservable Inputs, Changes in Plan Assets

The following table summarizes additional information about changes in the fair value of Level 3 assets during 2013 and 2012.



			Total Gains and (Losses) Included in																	Current Period Unrealized Gains (Losses)
	Jan 1, 2013		Income		Other Comp. Income			Purchases		Settlement			Transfers Into Level 3		Transfers Out of Level 3			Dec. 31, 2013		Current Period Unrealized Gains (Losses)
	(in millions)
Asset-backed securities	43		—		(1		)	—		(21		)	—		(1		)	20		4
U.S. corporate debt securities	2		—		—			—		(2		)	—		—			—		—
Foreign debt securities	21		—		—			5		(10		)	—		(5		)	11		—
Total assets	$	66	$	—	$	(1	)	$	5	$	(33	)	$	—	$	(6	)	$	31	$	4



			Total Gains and (Losses) Included in																	Current Period UnrealizedGains (Losses)
	Jan 1, 2012		Income		Other Comp. Income			Purchases		Settlement			Transfers Into Level 3		Transfers Out of Level 3			Dec. 31, 2012		Current Period UnrealizedGains (Losses)
	(in millions)
Obligations of U.S. states and political subdivisions	$	8	$	—	$	—		$	—	$	(1	)	$	—	$	(7	)	$	—	$	—
Asset-backed securities	36		—		3			9		(5		)	—		—			43		4
U.S. corporate debt securities	$	—	$	—	$	—		$	2	$	—		$	—	$	—		$	2	$	—
Foreign debt securities	8		—		(2		)	17		—			—		(2		)	21		1
Total assets	$	52	$	—	$	1		$	28	$	(6	)	$	—	$	(9	)	$	66	$	5

Schedule of Changes in Projected Benefit Obligations

A reconciliation of beginning and ending balances of the projected benefit obligation of the defined benefit pension plan is shown below and reflects the projected benefit obligation of the merged HSBC North American plan.



	2013			2012
	(in millions)
Projected benefit obligation at beginning of year	$	4,374		$	3,923
Service cost	11			39
Interest cost	176			168
Actuarial losses (gains)	(496		)	453
Benefits paid	(173		)	(209		)
Projected benefit obligation at end of year	$	3,892		$	4,374

Schedule of Expected Benefit Payments

Estimated future benefit payments for the HSBC North America Pension Plan are as follows:



	HSBC North America
	(in millions)
2014	$	179
2015	182
2016	185
2017	188
2018	190
2019-2022	1,007

Schedule of Accumulated and Projected Benefit Obligations

A reconciliation of the beginning and ending balances of the accumulated postretirement benefit obligation is as follows:



	2013			2012
	(in millions)
Accumulated benefit obligation at beginning of year	$	70		$	85
Service cost	1			1
Interest cost	2			3
Actuarial losses (gains)	(8		)	(2		)
Plan curtailments	—			(8		)
Benefits paid	(6		)	(9		)
Accumulated benefit obligation at end of year	$	59		$	70

Postretirement Plans Other Than Pensions [Member]

Defined Benefit Plans and Other Postretirement Benefit Plans [Line Items]

Components of Net Periodic Benefit Cost

The following table reflects the components of the net periodic postretirement benefit cost:



Year Ended December 31,	2013		2012		2011
	(in millions)
Service cost – benefits earned during the period	$	1	$	1	$	1
Interest cost	$	2	$	3	4
Amortization of transition obligation	—		2		2
Net periodic postretirement benefit cost	$	3	$	6	$	7

Schedule of Assumptions Used

The assumptions used in determining the benefit obligation of our postretirement benefit plans at December 31 are as follows:



	2013		2012
Discount rate	4.35	%	3.35	%
Salary increase assumption	2.75		2.75

The assumptions used in determining the net periodic postretirement benefit cost for our postretirement benefit plans are as follows:



	2013		2012		2011
Discount rate	3.35	%	4.25	%	4.95	%
Salary increase assumption	2.75		2.75		2.75

Schedule of Expected Benefit Payments

Estimated future benefit payments for our postretirement benefit plans are summarized in the following table.



	(in millions)
2014	$	6
2015	6
2016	6
2017	6
2018	6
2019-2022	28

Schedule of Effect of One-Percentage-Point Change in Assumed Health Care Cost Trend Rates

Assumed health care cost trend rates have an effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would increase (decrease) service and interest costs and the postretirement benefit obligation as follows:



	One Percent Increase		One Percent Decrease
	(in millions)
Effect on total of service and interest cost components	$	—	$	—
Effect on accumulated postretirement benefit obligation	1		(1		)