Pensions and Other Benefits | 12 Months Ended |
Dec. 31, 2013 |
Compensation and Retirement Disclosure [Abstract] | ' |
Pensions and Other Benefits | ' |
Pensions and Other Benefits |
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U. S. Steel has defined contribution or multi-employer retirement benefits for more than half of its North American employees and non-contributory defined benefit pension plans covering the remaining North American employees. In the United States, benefits under the defined benefit pension plans are based upon years of service and final average pensionable earnings, or a minimum benefit based upon years of service, whichever is greater. In addition, pension benefits for most salaried employees in the United States under these plans are based upon a percent of total career pensionable earnings. Most salaried employees in the United States, including those not participating in the defined benefit pension plans of the Company, participate in defined contribution plans |
(401(k) plans) whereby the Company matches a certain percentage of salary based on the amount contributed by the participant. For those without defined benefit coverage, the Company also provides a retirement account benefit based on salary and attained age. The main U. S. Steel defined benefit pension plan was closed to new participants in 2003. At December 31, 2013, approximately 60 percent of U. S. Steel’s union employees in the United States are covered by the Steelworkers Pension Trust (SPT), a multi-employer pension plan, to which U. S. Steel contributes on the basis of a fixed dollar amount for each hour worked. |
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The majority of employees and retirees of USSC participate in defined benefit pension plans and retiree health and life insurance plans. The majority of USSC union employees participate in defined benefit pension plans for which benefits are based upon years of service multiplied by a flat dollar rate. The main Hamilton bargaining unit defined benefit pension plan was closed to new entrants effective October 15, 2011, and the main Lake Erie bargaining unit defined benefit pension plan was closed to new entrants effective April 16, 2010. Hamilton and Lake Erie union employees hired on or after those respective dates are covered by defined contribution arrangements. The salaried Hamilton and Lake Erie defined benefit pension plans were closed to new participants in 1997 and currently less than half of active salaried USSC employees participate in these plans where benefits are based on final average pensionable earnings or a flat dollar rate. The balance of salaried employees participates in defined contribution arrangements. |
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U.S. Steel’s defined benefit retiree health care and life insurance plans (Other Benefits) cover the majority of its employees in North America upon their retirement. Health care benefits are provided through hospital, surgical, major medical and drug benefit provisions or through health maintenance organizations, both subject to various cost sharing features, and in most cases domestically, an employer cap on total costs. Upon their retirement, most salaried employees in the United States are provided with a flat dollar pre-Medicare benefit and a death benefit. |
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The majority of U. S. Steel’s European employees are covered by government-sponsored programs into which U. S. Steel makes required contributions. Also, U. S. Steel sponsors defined benefit plans for most European employees covering benefit payments due to employees upon their retirement, some of which are government mandated. These same employees receive service awards throughout their careers based on stipulated service and, in some cases, age and service. |
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U. S. Steel uses a December 31 measurement date for its plans and may have an interim measurement date if significant events occur. Details relating to Pension Benefits and Other Benefits are below. |
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| | Pension Benefits | | Other Benefits | | | | | | | | | | |
(In millions) | | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | |
Change in benefit obligations | | | | | | | | | | | | | | | | | | |
Benefit obligations at January 1 | | $ | 11,347 | | | $ | 10,770 | | | $ | 3,940 | | | $ | 4,186 | | | | | | | | | | | |
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Service cost | | 128 | | | 118 | | | 27 | | | 28 | | | | | | | | | | | |
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Interest cost | | 403 | | | 467 | | | 141 | | | 170 | | | | | | | | | | | |
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Plan amendments | | — | | | 29 | | | — | | | (522 | ) | | | | | | | | | | |
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Actuarial losses (gains) | | (421 | ) | | 848 | | | (420 | ) | | 375 | | | | | | | | | | | |
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Exchange rate loss (gain) | | (234 | ) | | 81 | | | (55 | ) | | 19 | | | | | | | | | | | |
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Settlements, curtailments and termination benefits | | (16 | ) | | (28 | ) | | — | | | — | | | | | | | | | | | |
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Benefits paid | | (950 | ) | | (938 | ) | | (255 | ) | | (316 | ) | | | | | | | | | | |
Benefit obligations at December 31 | | $ | 10,257 | | | $ | 11,347 | | | $ | 3,378 | | | $ | 3,940 | | | | | | | | | | | |
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Change in plan assets | | | | | | | | | | | | | | | | | | |
Fair value of plan at January 1 | | $ | 8,659 | | | $ | 8,353 | | | $ | 1,732 | | | $ | 1,473 | | | | | | | | | | | |
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Actual return on plan assets | | 1,363 | | | 945 | | | 346 | | | 196 | | | | | | | | | | | |
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Employer contributions | | 226 | | | 234 | | | 10 | | | 76 | | | | | | | | | | | |
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Exchange rate gain (loss) | | (187 | ) | | 56 | | | — | | | — | | | | | | | | | | | |
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Benefits paid from plan assets | | (939 | ) | | (929 | ) | | (118 | ) | | (13 | ) | | | | | | | | | | |
Fair value of plan assets at December 31 | | $ | 9,122 | | | $ | 8,659 | | | $ | 1,970 | | | $ | 1,732 | | | | | | | | | | | |
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Funded status of plans at December 31 | | $ | (1,135 | ) | | $ | (2,688 | ) | | $ | (1,408 | ) | | $ | (2,208 | ) | | | | | | | | | | |
Amounts recognized in accumulated other comprehensive loss: |
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| | | | 2013 | | | | | | | | | | | | |
(In millions) | | 12/31/12 | | Amortization | | Activity | | 12/31/13 | | | | | | | | | | |
Pensions | | | | | | | | | | | | | | |
Prior Service Cost | | $ | 99 | | | $ | (24 | ) | | $ | 1 | | | $ | 76 | | | | | | | | | | | |
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Actuarial losses | | 4,656 | | | (367 | ) | | (1,165 | ) | | 3,124 | | | | | | | | | | | |
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Other Benefits | | | | | | | | | | | | | | | | | | |
Prior Service Cost | | (180 | ) | | 13 | | | — | | | (167 | ) | | | | | | | | | | |
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Actuarial Losses | | 613 | | | (31 | ) | | (632 | ) | | (50 | ) | | | | | | | | | | |
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As of December 31, 2013 and 2012, the following amounts were recognized in the balance sheet: |
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| | Pension Benefits | | Other Benefits | | | | | | | | | | |
(In millions) | | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | |
Noncurrent assets | | $ | 23 | | | $ | 11 | | | $ | — | | | $ | — | | | | | | | | | | | |
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Current liabilities | | (298 | ) | | (245 | ) | | (337 | ) | | (360 | ) | | | | | | | | | | |
Noncurrent liabilities | | (860 | ) | | (2,454 | ) | | (1,071 | ) | | (1,848 | ) | | | | | | | | | | |
Accumulated other comprehensive loss (a) | | 3,200 | | | 4,755 | | | (217 | ) | | 433 | | | | | | | | | | | |
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Net amount recognized | | $ | 2,065 | | | $ | 2,067 | | | $ | (1,625 | ) | | $ | (1,775 | ) | | | | | | | | | | |
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(a) | Accumulated other comprehensive loss effects associated with accounting for pensions and other benefits in accordance with ASC Topic 715 at December 31, 2013 and December 31, 2012, respectively, are reflected net of tax of $886 million and $1,568 million respectively, on the Statement of Stockholders’ Equity. | | | | | | | | | | | | | | | | | | | | | | | | | |
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The Accumulated Benefit Obligation (ABO) for all defined benefit pension plans was $9,798 million and $10,817 million at December 31, 2013 and 2012, respectively. |
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| | December 31, | | | | | | | | | | | | | | | | | | |
(In millions) | | 2013 | | 2012 | | | | | | | | | | | | | | | | | | |
Information for pension plans with an accumulated benefit obligation in excess of plan assets: | | | | | | | | | | | | | | | | | | | | | | |
Aggregate accumulated benefit obligations (ABO) | | $ | (9,685 | ) | | $ | (10,782 | ) | | | | | | | | | | | | | | | | | | |
Aggregate projected benefit obligations (PBO) | | (10,144 | ) | | (11,313 | ) | | | | | | | | | | | | | | | | | | |
Aggregate fair value of plan assets | | 8,986 | | | 8,614 | | | | | | | | | | | | | | | | | | | |
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The aggregate ABO in excess of plan assets reflected above is included in the payroll and benefits payable and employee benefits lines on the balance sheet. |
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Following are the details of net periodic benefit costs related to Pension and Other Benefits: |
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| | Pension Benefits | | Other Benefits | | |
(In millions) | | 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | 2011 | | |
Components of net periodic benefit cost: | | | | | | | | | | | | | | |
Service cost | | $ | 128 | | | $ | 118 | | | $ | 111 | | | $ | 27 | | | $ | 28 | | | $ | 25 | | | |
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Interest cost | | 403 | | | 467 | | | 511 | | | 141 | | | 170 | | | 209 | | | |
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Expected return on plan assets | | (611 | ) | | (614 | ) | | (623 | ) | | (131 | ) | | (117 | ) | | (105 | ) | | |
Amortization - prior service costs | | 24 | | | 22 | | | 21 | | | (13 | ) | | 11 | | | 25 | | | |
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- actuarial losses | | 367 | | | 352 | | | 352 | | | 31 | | | 8 | | | 5 | | | |
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Net periodic benefit cost, excluding below | | 311 | | | 345 | | | 372 | | | 55 | | | 100 | | | 159 | | | |
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Multiemployer plans (a) | | 74 | | | 70 | | | 65 | | | — | | | — | | | — | | | |
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Settlement, termination and curtailment (gains)/losses | | 11 | | | (3 | ) | | 6 | | | — | | | — | | | — | | | |
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Net periodic benefit cost | | $ | 396 | | | $ | 412 | | | $ | 443 | | | $ | 55 | | | $ | 100 | | | $ | 159 | | | |
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(a) | Primarily represents pension expense for the SPT covering USW employees hired from National Steel Corporation and new USW employees hired after May 21, 2003. | | | | | | | | | | | | | | | | | | | | | | | | | |
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Prior to the 2012 Labor Agreements, profit-based amounts were used to reduce retiree medical premiums. This amount was recognized on a deferred basis and estimated as part of the actuarial calculations used to derive Other Benefit expense. Other Benefit expense in 2012 and 2011 included approximately $40 million in costs to reflect the profit-based payments. |
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Net periodic benefit cost for pensions and other benefits is projected to be approximately $330 million and approximately $15 million, respectively, in 2014. The pension cost projection includes $78 million of contributions to the SPT. The amounts in accumulated other comprehensive income that are expected to be recognized as components of net periodic benefit cost during 2014 are as follows: |
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(In millions) | | Pension | | Other | | | | | | | | | | | | | | | | | | |
Benefits | Benefits | | | | | | | | | | | | | | | | | | |
2014 | 2014 | | | | | | | | | | | | | | | | | | |
Amortization of actuarial loss/(gain) | | $ | 282 | | | $ | (13 | ) | | | | | | | | | | | | | | | | | | |
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Amortization of prior service cost | | 22 | | | (3 | ) | | | | | | | | | | | | | | | | | | |
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Total recognized from accumulated other comprehensive income | | $ | 304 | | | $ | (16 | ) | | | | | | | | | | | | | | | | | | |
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Assumptions used to determine the benefit obligation at December 31 and net periodic benefit cost for the year ended December 31 are detailed below: |
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| | Pension Benefits | | Other Benefits | | |
| | 2013 | | 2012 | | 2013 | | 2012 | | |
| | U.S. | | International | | U.S. | | International | | U.S. | | International | | U.S. | | International | | |
Actuarial assumptions used to determine benefit obligations at December 31: | | | | | | | | | | | | | | | | | | |
Discount rate | | 4.5 | % | | 4.5 | % | | 3.75 | % | | 3.75 | % | | 4.5 | % | | 4.5 | % | | 3.75 | % | | 3.75 | % | | |
Increase in compensation rate | | 4 | % | | 3 | % | | 4 | % | | 3 | % | | 4 | % | | 3 | % | | 4 | % | | 3 | % | | |
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| | Pension Benefits | | | | | | | | |
| | 2013 | | 2012 | | 2011 | | | | | | | | |
| | U.S. | | International | | U.S. | | International | | U.S. | | International | | | | | | | | |
Actuarial assumptions used to determine net periodic benefit cost for the year ended December 31: | | | | | | | | | | | | | | | | | | | | |
Discount rate | | 3.75 | % | | 3.75 | % | | 4.5 | % | | 4.5 | % | | 5 | % | | 5 | % | | | | | | | | |
Expected annual return on plan assets | | 7.75 | % | | 7.25 | % | | 7.75 | % | | 7.25 | % | | 8 | % | | 7.5 | % | | | | | | | | |
Increase in compensation rate | | 4 | % | | 3 | % | | 4 | % | | 3 | % | | 4 | % | | 3 | % | | | | | | | | |
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| | Other Benefits | | | | | | | | |
| | 2013 | | 2012 | | 2011 | | | | | | | | |
| | U.S. | | International | | U.S. | | International | | U.S. | | International | | | | | | | | |
Discount rate | | 3.75 | % | | 3.75 | % | | 4.5 | % | | 4.5 | % | | 5 | % | | 5 | % | | | | | | | | |
Expected annual return on plan assets | | 7.75 | % | | n/a | | | 7.75 | % | | n/a | | | 8 | % | | n/a | | | | | | | | | |
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Increase in compensation rate | | 4 | % | | 3 | % | | 4 | % | | 3 | % | | 4 | % | | 3 | % | | | | | | | | |
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The discount rate reflects the current rate at which the pension and other benefit liabilities could be effectively settled at the measurement date. In setting the domestic rates, we utilize several AAA and AA corporate bond indices as an indication of interest rate movements and levels. Based on this evaluation at December 31, 2013, U. S. Steel increased the discount rate used to measure both domestic Pension and Other Benefits obligations to 4.5 percent. For USSC benefit plans, a discount rate was selected through a similar review process using Canadian bond rates and indices and at December 31, 2013, U. S. Steel increased the discount rate to 4.5 percent for its Canadian-based pension and other benefits. |
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At December 31, 2013, due to a periodic review of the plans' mortality experience, the Company updated the mortality table used to calculate its main U.S. defined benefit pension and other postretirement benefit liabilities for formerly represented retirees. Previously, custom mortality tables based on plan experience, with no future mortality improvement, were used. As a result of the study, the prior table now assumes mortality improvement of 7 years from the date of liability measurement for this population and increased our projected benefit obligations by approximately $350 million. |
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| | 2013 | | 2012 | | | | | | | | | | | | | | | | | | |
Assumed health care cost trend rates at December 31: | | U.S. | | Canada | | U.S. | | Canada | | | | | | | | | | | | | | | | | | |
Health care cost trend rate assumed for next year | | 7.00% | | 6.00% | | 7.00% | | 6.00% | | | | | | | | | | | | | | | | | | |
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) | | 5.00% | | 5.00% | | 5.00% | | 5.00% | | | | | | | | | | | | | | | | | | |
Year that the rate reaches the ultimate trend rate | | 2018 | | 2018 | | 2017 | | 2017 | | | | | | | | | | | | | | | | | | |
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A one-percentage-point change in the assumed return on plan assets, discount rate or health care cost trend rates would have the following effects: |
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(In millions) | | 1-Percentage- | | 1-Percentage- | | | | | | | | | | | | | | | | | | |
Point Increase | Point Decrease | | | | | | | | | | | | | | | | | | |
Expected return on plan assets | | | | | | | | | | | | | | | | | | | | | | |
Incremental (decrease) increase in: | | | | | | | | | | | | | | | | | | | | | | |
Net periodic pension costs for 2014 | | $ | (100 | ) | | $ | 100 | | | | | | | | | | | | | | | | | | | |
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Discount rate | | | | | | | | | | | | | | | | | | | | | | |
Incremental (decrease) increase in: | | | | | | | | | | | | | | | | | | | | | | |
Net periodic pension & other benefits costs for 2014 | | $ | (39 | ) | | $ | 55 | | | | | | | | | | | | | | | | | | | |
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Pension & other benefits liabilities at December 31, 2013 | | $ | (1,191 | ) | | $ | 1,418 | | | | | | | | | | | | | | | | | | | |
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Health care cost escalation trend rates | | | | | | | | | | | | | | | | | | | | | | |
Incremental increase (decrease) in: | | | | | | | | | | | | | | | | | | | | | | |
Other postretirement benefit obligations | | $ | 191 | | | $ | (161 | ) | | | | | | | | | | | | | | | | | | |
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Service and interest costs components | | $ | 10 | | | $ | (8 | ) | | | | | | | | | | | | | | | | | | |
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U. S. Steel reviews its own actual historical rate experience and expectations of future health care cost trends to determine the escalation of per capita health care costs under U. S. Steel’s benefit plans. About two thirds of our costs for the domestic USW participants’ retiree health benefits in the Company’s main domestic benefit plan are limited to a per capita dollar maximum calculation based on 2006 base year actual costs incurred under the main U. S. Steel benefit plan for USW participants (cost cap). The full effect of the cost cap was deferred in the 2012 Labor Agreements until 2015. After 2015, the Company’s costs for a majority of USW retirees and their dependents are expected to remain fixed with the application of the cost cap and as a result, the cost impact of health care escalation for the Company is projected to be limited for this group. |
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In our Canadian retiree medical plans, most health care cost escalation results from the drug programs since most hospital and physician benefits are provided by the Government which incurs the escalation. Health care cost escalation applies to most other groups within the Company’s benefit plans, but does not apply to most domestic non-union retirees since their benefits are limited to flat dollar amounts or are not existent. |
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Plan Assets |
ASC Topic 820 on fair value measurements includes a three-tier hierarchy as a framework for the inputs used in measuring fair value. The categories for determining fair market value are summarized below: |
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•Level 1 – quoted prices in active markets for identical investments |
•Level 2 – other significant and observable comparable investments (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
•Level 3 – investments lacking easily comparable data (including the plan’s own assumptions in determining the fair value of investments) |
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U. S. Steel’s Pension plan and Other Benefits plan assets are classified as follows: |
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Level 1 | | Level 2 | | Level 3 | | | | | | | | | | | | | | | | | | | | | | |
Investment Trusts | | Internally Managed Partnerships | | Private Equities | | | | | | | | | | | | | | | | | | | | | | |
Exchange-traded Funds | | Non-public Investment Partnerships | | Timberlands | | | | | | | | | | | | | | | | | | | | | | |
Short-term Investments | | Debt Securities - U.S. | | Real Estate | | | | | | | | | | | | | | | | | | | | | | |
Equity Securities - U.S. | | Debt Securities - Foreign | | Mineral Interests | | | | | | | | | | | | | | | | | | | | | | |
Equity Securities - Foreign | | Pooled Funds | | | | | | | | | | | | | | | | | | | | | | | | |
Government Bonds - U.S. | | Government Bonds - Foreign | | | | | | | | | | | | | | | | | | | | | | | | |
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An instrument’s level is based on the lowest level of any input that is significant to the fair value measurement. Investments in investment trusts and exchange-traded funds are valued using a market approach at the closing price reported in an active market. Short term investments are valued at amortized cost which approximates fair value due to the short-term maturity of the instruments. Equity Securities – U.S. and Equity Securities – Foreign are valued at the closing price reported on the active exchange on which the individual securities are traded. Government Bonds – U.S. are valued by accepting a price from a public pricing source. Investments in Internally Managed Partnerships are valued using a market approach at the net asset value of units held, however investment opportunities in these partnerships are restricted to the benefit plans of U. S. Steel, its subsidiaries and current and former affiliates. Investments in non-public investment partnerships and pooled funds are valued using a market approach based on the aggregated value of the underlying investments. Government Bonds – Foreign, Debt Securities – U.S. and Debt Securities – Foreign are valued by accepting a price from a public pricing source or broker quotes. Private Equities are valued using information provided by external managers for each individual investment held in the fund. In 2013, real estate investments were valued using information provided by external managers. Timberland investments (and real estate investments in 2012) are either appraised or valued using the investment managers’ assessment of the assets within the fund. Mineral Interests are valued at the present value of estimated future cash flows discounted at estimated market rates for assets of similar quality and duration. |
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The following is a summary of U. S. Steel’s Pension plan assets carried at fair value at December 31, 2013 and 2012: |
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| | Fair Value Measurements at December 31, 2013 (in millions) | | | | | | | | | | |
| | Total | | Quoted Prices in | | Significant | | Significant | | | | | | | | | | |
Active Markets | Observable | Unobservable | | | | | | | | | | |
(Level 1) | Inputs | Inputs | | | | | | | | | | |
| (Level 2) | (Level 3) | | | | | | | | | | |
Asset Classes | | | | | | | | | | | | | | | | | | |
Interest in Internally Managed Partnership – Fixed Income(a) | | $ | 1,830 | | | $ | — | | | $ | 1,830 | | | $ | — | | | | | | | | | | | |
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Interest in Internally Managed Partnership – Equity(b) | | 3,658 | | | — | | | 3,658 | | | — | | | | | | | | | | | |
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Interest in Investment Partnerships(c) | | 823 | | | — | | | 823 | | | — | | | | | | | | | | | |
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Equity securities – Foreign(d) | | 444 | | | 444 | | | — | | | — | | | | | | | | | | | |
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Pooled funds(e) | | 540 | | | — | | | 540 | | | — | | | | | | | | | | | |
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Timberlands | | 302 | | | — | | | — | | | 302 | | | | | | | | | | | |
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Private equities | | 306 | | | — | | | — | | | 306 | | | | | | | | | | | |
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Real estate | | 301 | | | — | | | — | | | 301 | | | | | | | | | | | |
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Other(f) | | 918 | | | 458 | | | 456 | | | 4 | | | | | | | | | | | |
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Total | | $ | 9,122 | | | $ | 902 | | | $ | 7,307 | | | $ | 913 | | | | | | | | | | | |
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(a) | UCF Fixed Income Fund LP – a Delaware limited partnership that offers interests to employee benefit plans for which United States Steel and Carnegie Pension Fund (UCF) acts as trustee, investment advisor and/or investment manager. Looking through the limited partnership, the plan’s holdings are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Debt Securities – U.S. | $ | 1,127 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Government Bonds – U.S. | 629 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Agency Mortgages | 65 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Other | 9 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 1,830 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(b) | UCF Equity Fund LP – a Delaware limited partnership that offers interests to employee benefit plans for which UCF acts as trustee, investment advisor and/or investment manager. Looking through the limited partnership, the plan’s holdings are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Equity Securities – U.S. | $ | 3,346 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Equity Securities – Foreign | 181 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Investment sales receivable | 130 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Other | 1 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 3,658 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(c) | Private investment partnerships whose investment objectives are to achieve long-term capital appreciation by investing in global equity markets. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(d) | Includes investments held in a diversified portfolio of Canadian equity securities with no single sector representing more than 30 percent of the portfolio by value. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(e) | Investments in funds incorporated in Canada that invest in diversified portfolios of global debt and equity securities. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(f) | Asset categories that are greater than 3% of investments at fair value are disclosed separately. All Other includes interests in investment trusts, exchange-traded funds, equity securities – U.S., short-term investments, government bonds - foreign, debt securities – foreign, mineral interests and miscellaneous receivables and payables. | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements at December 31, 2012 (in millions) | | | | | | | | | | |
| | Total | | Quoted Prices in | | Significant | | Significant | | | | | | | | | | |
Active Markets | Observable | Unobservable | | | | | | | | | | |
(Level 1) | Inputs | Inputs | | | | | | | | | | |
| (Level 2) | (Level 3) | | | | | | | | | | |
Asset Classes | | | | | | | | | | | | | | | | | | |
Interest in Internally Managed Partnership – Fixed Income(a) | | $ | 1,688 | | | $ | — | | | $ | 1,688 | | | $ | — | | | | | | | | | | | |
| | | | | | | | | |
Interest in Internally Managed Partnership – Equity(b) | | 3,491 | | | — | | | 3,491 | | | — | | | | | | | | | | | |
| | | | | | | | | |
Interest in Investment Partnerships(c) | | 608 | | | — | | | 608 | | | — | | | | | | | | | | | |
| | | | | | | | | |
Equity securities – Foreign(d) | | 482 | | | 482 | | | — | | | — | | | | | | | | | | | |
| | | | | | | | | |
Government bonds – Foreign(e) | | 499 | | | — | | | 499 | | | — | | | | | | | | | | | |
| | | | | | | | | |
Pooled funds(f) | | 312 | | | — | | | 312 | | | — | | | | | | | | | | | |
| | | | | | | | | |
Private equities | | 342 | | | — | | | — | | | 342 | | | | | | | | | | | |
| | | | | | | | | |
Real estate | | 300 | | | — | | | — | | | 300 | | | | | | | | | | | |
| | | | | | | | | |
Other(g) | | 937 | | | 503 | | | 193 | | | 241 | | | | | | | | | | | |
| | | | | | | | | |
Total | | $ | 8,659 | | | $ | 985 | | | $ | 6,791 | | | $ | 883 | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | UCF Fixed Income Fund LP - a Delaware limited partnership that offers interests to employee benefit plans for which UCF acts as trustee, investment advisor and/or investment manager. Looking through the limited partnership, the plan’s holdings are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Debt Securities – U.S. | $ | 1,112 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Government Bonds – U.S. | 473 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Agency Mortgages | 85 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Other | 18 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 1,688 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(b) | UCF Equity Fund LP - a Delaware limited partnership that offers interests to employee benefit plans for which UCF acts as trustee, investment advisor and/or investment manager. Looking through the limited partnership, the plan’s holdings are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Equity Securities – U.S. | $ | 3,166 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Equity Securities – Foreign | 149 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Investment sales receivable | 111 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Other | 65 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 3,491 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(c) | Private investment partnerships whose investment objectives are to achieve long-term capital appreciation by investing in global equity markets. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(d) | Includes investments held in a diversified portfolio of Canadian equity securities with no single sector representing more than 30 percent of the portfolio by value. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(e) | Includes investments in Canadian National and Provincial government bonds. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(f) | Investments in funds incorporated in Canada that invest in diversified portfolios of global debt and equity securities. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(g) | Asset categories that are greater than 3% of investments at fair value are disclosed separately. All Other includes interests in investment trusts, exchange-traded funds, short-term investments, government bonds – U.S., debt securities – U.S., debt securities – foreign, timberlands, mineral interests and miscellaneous receivables and payables. | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following table sets forth a summary of changes in the fair value of U. S. Steel’s Pension plan Level 3 assets for the years ended December 31, 2013 and 2012 (in millions): |
|
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Other | | | | | | | | | | | | | | | | | | |
(Level 3 assets only) | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2012 | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 883 | | | $ | 850 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Transfers in and/or out of Level 3 | | — | | | — | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Actual return on plan assets: | | | | | | | | | | | | | | | | | | | | | | |
Realized gain | | 89 | | | 69 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Net unrealized gain | | 45 | | | 8 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Purchases, sales, issuances and settlements: | | | | | | | | | | | | | | | | | | | | | | |
Purchases | | 102 | | | 98 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Sales | | (206 | ) | | (142 | ) | | | | | | | | | | | | | | | | | | |
Balance at end of period | | $ | 913 | | | $ | 883 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
|
The following is a summary of U. S. Steel’s Other Benefits plan assets carried at fair value at December 31, 2013 and 2012: |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements at December 31, 2013 (in millions) | | | | | | | | | | |
| | Total | | Quoted Prices in | | Significant | | Significant | | | | | | | | | | |
Active Markets | Observable | Unobservable | | | | | | | | | | |
(Level 1) | Inputs | Inputs | | | | | | | | | | |
| (Level 2) | (Level 3) | | | | | | | | | | |
Asset Classes | | | | | | | | | | | | | | | | | | |
Interest in Internally Managed Partnership – Fixed Income (a) | | $ | 513 | | | $ | — | | | $ | 513 | | | $ | — | | | | | | | | | | | |
| | | | | | | | | |
Interest in Internally Managed Partnership – Equity(b) | | 1,190 | | | — | | | 1,190 | | | — | | | | | | | | | | | |
| | | | | | | | | |
Interest in Investment Partnerships(c) | | 131 | | | — | | | 131 | | | — | | | | | | | | | | | |
| | | | | | | | | |
All Other(d) | | 136 | | | 37 | | | — | | | 99 | | | | | | | | | | | |
| | | | | | | | | |
Total | | $ | 1,970 | | | $ | 37 | | | $ | 1,834 | | | $ | 99 | | | | | | | | | | | |
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | UCF Fixed Income Fund LP – a Delaware limited partnership that offers interests to employee benefit plans for which UCF acts as trustee, investment advisor and/or investment manager. Looking through the limited partnership, the plan’s holdings are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Debt Securities – U.S. | $ | 308 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Government Bonds – U.S. | 172 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Agency Mortgages | 18 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Partner contribution receivable | 19 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Other | (4 | ) | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 513 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(b) | UCF Equity Fund LP – a Delaware limited partnership that offers interests to employee benefit plans for which UCF acts as trustee, investment advisor and/or investment manager. Looking through the limited partnership, the plan’s holdings are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Equity Securities – U.S. | $ | 1,081 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Equity Securities – Foreign | 59 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Exchange-traded funds | 42 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Other | 8 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 1,190 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(c) | Private investment partnerships whose investment objectives are to achieve long-term capital appreciation by investing in global equity markets. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(d) | Asset categories that are greater than 3% of investments at fair value are disclosed separately. All Other includes short-term investments, exchange-traded funds, private equities, real estate, timberlands and miscellaneous receivables and payables. | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements at December 31, 2012 (in millions) | | | | | | | | | | |
| | Total | | Quoted Prices in | | Significant | | Significant | | | | | | | | | | |
Active Markets | Observable | Unobservable | | | | | | | | | | |
(Level 1) | Inputs | Inputs | | | | | | | | | | |
| (Level 2) | (Level 3) | | | | | | | | | | |
Asset Classes | | | | | | | | | | | | | | | | | | |
Interest in Internally Managed Partnership – Fixed Income(a) | | $ | 468 | | | $ | — | | | $ | 468 | | | $ | — | | | | | | | | | | | |
| | | | | | | | | |
Interest in Internally Managed Partnership – Equity(b) | | 1,061 | | | — | | | 1,061 | | | — | | | | | | | | | | | |
| | | | | | | | | |
Interest in Investment Partnerships(c) | | 94 | | | — | | | 94 | | | — | | | | | | | | | | | |
| | | | | | | | | |
All Other(d) | | 109 | | | 38 | | | — | | | 71 | | | | | | | | | | | |
| | | | | | | | | |
Total | | $ | 1,732 | | | $ | 38 | | | $ | 1,623 | | | $ | 71 | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | UCF Fixed Income Fund LP – a Delaware limited partnership that offers interests to employee benefit plans for which UCF acts as trustee, investment advisor and/or investment manager. Looking through the limited partnership, the plan’s holdings are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Debt Securities – U.S. | $ | 308 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Government Bonds – U.S. | 131 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Agency Mortgages | 24 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Other | 5 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 468 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(b) | UCF Equity Fund LP – a Delaware limited partnership that offers interests to employee benefit plans for which UCF acts as trustee, investment advisor and/or investment manager. Looking through the limited partnership, the plan’s holdings are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Equity Securities – U.S. | $ | 950 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Equity Securities – Foreign | 45 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Investment sales receivable | 33 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Other | 33 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 1,061 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(c) | Private investment partnerships whose investment objectives are to achieve long-term capital appreciation by investing in global equity markets. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(d) | Asset categories that are greater than 3% of investments at fair value are disclosed separately. All Other includes short-term investments, exchange-traded funds, private equities, real estate, timberlands and miscellaneous receivables and payables. | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following table sets forth a summary of changes in the fair value of U. S. Steel’s Other Benefits plan Level 3 assets for the years ended December 31, 2013 and 2012 (in millions): |
|
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Other | | | | | | | | | | | | | | | | | | |
(Level 3 assets only) | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2012 | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 71 | | | $ | 57 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Transfers in and/or out of Level 3 | | — | | | — | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Actual return on plan assets: | | | | | | | | | | | | | | | | | | | | | | |
Realized gain | | 8 | | | 2 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Net unrealized gain | | 6 | | | 3 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Purchases, sales, issuances and settlements: | | | | | | | | | | | | | | | | | | | | | | |
Purchases | | 29 | | | 17 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Sales | | (15 | ) | | (8 | ) | | | | | | | | | | | | | | | | | | |
Balance at end of period | | $ | 99 | | | $ | 71 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
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U. S. Steel’s investment strategy for its U.S. pension and other benefits plan assets provides for a diversified mix of public equities, high quality bonds and selected smaller investments in private equities, investment trusts and partnerships, timber and mineral interests. For its U.S. Pension and Other Benefit plans, U. S. Steel has a target allocation for plan assets of 60 percent and 70 percent in equities, respectively, with the balance primarily invested in corporate bonds, Treasury bonds and government-backed mortgages. U. S. Steel believes that returns on equities over the long term will be higher than returns from fixed-income securities as actual historical returns from U. S. Steel’s trusts have shown. Returns on bonds tend to offset some of the short-term volatility of stocks. Both equity and fixed-income investments are made across a broad range of industries and companies to provide protection against the impact of volatility in any single industry as well as company specific developments. U. S. Steel will use a 7.75 percent assumed rate of return on assets for the development of net periodic cost for the main defined benefit pension plan and domestic OPEB plans in 2014. The 2014 assumed rate of return is the same as the rate of return used for 2013 domestic expense and was determined by taking into account the intended asset mix and some moderation of the historical premiums that fixed-income and equity investments have yielded above government bonds. Actual returns since the inception of the plans have exceeded this 7.75 percent rate and while recent annual returns have been volatile, it is U. S. Steel’s expectation that rates will achieve this level in future periods. |
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For USSC defined benefit pension plans, U. S. Steel’s investment strategy is similar to its strategy for U.S. plans, whereby the Company seeks a diversified mix of large and mid-cap equities, high quality corporate and government bonds and selected smaller investments with a target allocation for plan assets of 65 percent equities. U. S. Steel will use a 7.25 percent assumed rate of return on assets for the development of net periodic costs for the USSC defined benefit expense in 2014. This is lower than the U.S. pension plan assumption as subcategories within the asset mix are from a more limited investment universe and, as a result, have a lower expected return. The 2014 assumed rate of return is the same as the rate of return used for 2013 USSC expense. |
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Steelworkers Pension Trust |
U. S. Steel participates in a multi-employer defined benefit pension plan, the Steelworkers Pension Trust (SPT). For most bargaining unit employees participating in the SPT, U. S. Steel contributes to the SPT a fixed dollar amount for each hour worked of $2.65; a rate agreed to as part of the 2012 Labor Agreements, which is set to expire on September 1, 2015. U. S. Steel’s contributions to the SPT represented greater than 5% of the total combined contributions of all employers participating in the plan for the years ended December 31, 2013, 2012 and 2011. |
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Participation in a multi-employer pension plan agreed to under the terms of a collective bargaining agreement differ from a traditional qualified single employer defined benefit pension plan. The SPT shares risks associated with the plan in the following respects: |
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a. Contributions to the SPT by U. S. Steel may be used to provide benefits to employees of other participating employers; |
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b. If a participating employer stops contributing to the SPT, the unfunded obligations of the plan may be borne by the remaining participating employers; |
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c. If U. S. Steel chooses to stop participating in the SPT, U. S. Steel may be required to pay an amount based on the underfunded status of the plan, referred to as a withdrawal liability. |
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On March 21, 2011 the Board of Trustees of the SPT elected funding relief which has the effect of decreasing the amount of required minimum contributions in near-term years, but will increase the minimum funding requirements during later plan years. As a result of the election of funding relief, the SPT’s zone funding under the Pension Protection Act may be impacted. |
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In addition to the funding relief election, the Board of Trustees also elected a special amortization rule, which allows the SPT to separately amortize investment losses incurred during the SPT’s December 31, 2008 plan year-end over a 29 year period, whereas they were previously required to be amortized over a 15 year period. |
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U. S. Steel’s participation in the SPT for the annual periods ended December 31, 2013, 2012 and 2011 is outlined in the table below. |
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| | Employer | | Pension | | FIP/RP Status | | U.S. Steel | | Surcharge | | Expiration Date |
Identification | Protection | Pending/ | Contributions | Imposed(c) | of Collective |
Number/ | Act Zone | Implemented(b) | (in millions) | | Bargaining |
Pension Plan | Status as of | | | | Agreement |
Number | December 31(a) | | | | |
Pension Fund | | | 2013 | | 2012 | | | 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | |
Steelworkers Pension Trust | | 23-6648508/499 | | Green | | Green | | No | | $ | 74 | | | $ | 69 | | | $ | 63 | | | No | | No | | September 1, 2015 |
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(a) | The zone status is based on information that U. S. Steel received from the plan and is certified by the plan’s actuary. Among other factors, plans in the green zone are at least 80 percent funded, while plans in the yellow zone are less than 80 percent funded and plans in the red zone are less than 65 percent funded. | | | | | | | | | | | | | | | | | | | | | | | | | |
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(b) | Indicates if a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. | | | | | | | | | | | | | | | | | | | | | | | | | |
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(c) | Indicates whether there were charges to U. S. Steel from the plan. | | | | | | | | | | | | | | | | | | | | | | | | | |
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Cash Flows |
Employer Contributions – In addition to the contributions to the Steelworkers Pension Trust noted in the table above, U. S. Steel made voluntary contributions in 2013 of $140 million to its main defined benefit pension plan, $82 million in required contributions to the USSC plans and $30 million of pension payments not funded by trusts. In 2012, U. S. Steel made a $140 million voluntary contribution to its main defined benefit pension plan, $94 million in required contributions to the USSC plans and $20 million of pension payments not funded by trusts. |
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Cash payments totaling $137 million and $303 million were made for other postretirement benefit payments not funded by trusts in 2013 and 2012, respectively. The decrease in cash benefit payments not funded by trusts is due to the conversion of our Medicare eligible USW retirees to a fully insured plan and the utilization of assets previously contributed to our trust for represented retiree health care on a voluntary basis to pay retiree benefits during 2013. In addition, in 2013, we made a $10 million contribution to our trust for represented retiree health care and life insurance benefits; however, the $75 million contribution to a restricted account within the same trust as required by collective bargaining agreements, that was due in December 2013 has been deferred until December 2016. U. S. Steel is similarly required to make $75 million contributions to that trust account during both 2014 and 2015 annual periods. |
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In conjunction with the acquisition of Stelco, now USSC, U. S. Steel assumed the pension plan funding agreement (the Pension Agreement) that Stelco had entered into with the Superintendent of Financial Services of Ontario (the Province) on March 31, 2006 that covers USSC’s four main pension plans. The Pension Agreement requires minimum contributions of C$70 million (approximately $67 million) per year in 2011 through 2015 plus additional annual contributions for benefit improvements, primarily related to union retiree indexing provisions. With the Hamilton Works and Lake Erie Works collective bargaining agreement settlements in 2011 and 2010, respectively, cost of living provisions are no longer provided through the pension plan covering former represented employees. The Pension Agreement remains in effect with its defined annual contributions as noted above until the earlier of full solvency funding for the four main plans or until December 31, 2015, when minimum funding requirements for the plans resume under the provincial pension legislation. |
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Estimated Future Benefit Payments – The following benefit payments, which reflect expected future service as appropriate, are expected to be paid from U. S. Steel’s defined benefit plans: |
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(In millions) | | Pension | | Other | | | | | | | | | | | | | | | | | | |
Benefits | Benefits | | | | | | | | | | | | | | | | | | |
2014 | | $ | 955 | | | $ | 266 | | | | | | | | | | | | | | | | | | | |
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2015 | | 808 | | | 285 | | | | | | | | | | | | | | | | | | | |
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2016 | | 796 | | | 280 | | | | | | | | | | | | | | | | | | | |
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2017 | | 789 | | | 241 | | | | | | | | | | | | | | | | | | | |
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2018 | | 771 | | | 232 | | | | | | | | | | | | | | | | | | | |
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Years 2019 - 2023 | | 3,563 | | | 1,077 | | | | | | | | | | | | | | | | | | | |
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Defined contribution plans |
U. S. Steel also contributes to several defined contribution plans for its salaried employees. Approximately 66% of non-union salaried employees in North America receive pension benefits through a defined contribution pension plan with contribution percentages based on age, for which company contributions totaled $19 million, $17 million and $15 million in 2013, 2012 and 2011, respectively. U. S. Steel’s matching contributions to salaried employees’ defined contribution savings fund plans, which for the most part are based on a percentage of the employees’ contributions, totaled $23 million in 2013, $21 million in 2012 and $20 million in 2011. Most union employees are eligible to participate in a defined contribution savings fund plan where there is no company match on savings except for certain Canadian and Tubular hourly employees whose company contributions totaled $3 million in 2013 and 2012 and $2 million in 2011. U. S. Steel also maintains a supplemental thrift plan to provide benefits which are otherwise limited by the Internal Revenue Service for qualified plans. U. S. Steel’s costs under these defined contribution plans totaled $2 million in 2013, $1 million in 2012 and $2 million in 2011. |
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Other postemployment benefits |
The Company provides benefits to former or inactive employees after employment but before retirement. Certain benefits including workers’ compensation and black lung benefits represent material obligations to the Company and under the guidance for nonretirement postemployment benefits, have historically been treated as accrued benefit obligations, similar to the accounting treatment provided for pensions and other benefits. APBO liabilities for these benefits recorded at December 31, 2013, totaled $122 million as compared to $102 million at December 31, 2012. APBO amounts were developed assuming a discount rate of 4.50 percent and 3.75 percent at December 31, 2013 and 2012. Net periodic benefit cost for these benefits is projected to be $16 million in 2014 compared to $13 million in 2013 and $12 million in 2012. The projected cost in 2014 includes $1 million in unrecognized actuarial losses that will be recorded against accumulated other comprehensive income. |
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Pension Funding |
In November 2013, U. S. Steel’s Board of Directors (the Board) authorized voluntary contributions to U. S. Steel’s trusts for pensions and other benefits of up to $300 million through the end of 2015. |
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In July 2012, pension stabilization legislation was enacted that includes a revised interest rate formula to be used to measure defined benefit pension obligations for calculating minimum annual contributions. The new interest rate formula results in higher interest rates for minimum funding calculations as compared to prior law over the next few years, which will improve the funded status of our main defined benefit pension plan and reduce minimum required contributions. U. S. Steel made voluntary contributions to our main U.S. defined benefit plan of $140 million in 2013 and 2012. U. S. Steel will likely make voluntary contributions of similar amounts in future periods in order to mitigate potentially larger mandatory contributions in later years. Assuming future asset performance consistent with our expected long-term earnings rate assumption of 7.75%, we anticipate that the pension stabilization legislation interest rate changes will allow us to continue to make voluntary contributions of approximately $140 million per year through 2015 before we could be required to contribute more than that amount should the current low interest rate environment persist. |