Pension and Other Postretirement Benefits

9 Months Ended

Sep. 30, 2012

Pension and Other Postretirement Benefits

11.    Pension and Other Postretirement Benefits

The components of pension expense for the defined benefit pension plan reflected in our consolidated statement of income (loss) are shown in the table below and reflect the portion of the pension expense of the combined HSBC North America Pension Plan (either the “HSBC North America Pension Plan” or the “Plan”) which has been allocated to HSBC Finance Corporation:

	Three Months  Ended September 30,						Nine Months  Ended September 30,
	2012			2011			2012			2011
	(in millions)
Service cost – benefits earned during the period	$	1		$	1		$	5		$	4
Interest cost on projected benefit obligation		14			8			35			25
Expected return on assets		(19	)		(10	)		(46	)		(29	)
Recognized losses		11			4			23			12
Curtailment gain		(4	)		-			(4	)		-
Pension expense	$	3		$	3		$	13		$	12

Pension expense was flat during the three and nine months ended September 30, 2012 as higher expected returns on plan assets due to higher asset levels, including additional contributions to the Plan during 2012 and 2011 and the recognition of a curtailment gain, were offset by higher interest costs and higher recognized losses. During the three and nine months ended September 30, 2012 we recognized a $4 million curtailment gain associated with the decision in the third quarter of 2012 to cease all future contributions under the Cash Balance formula and freeze the Plan effective January 1, 2013. While participants with existing balances will continue to receive interest credits until the account is distributed, they will no longer accrue benefits beginning in 2013.

Components of the net periodic benefit cost for our postretirement medical plan benefits other than pensions are as follows:

	Three Months  Ended September 30,				Nine Months  Ended September 30,
	2012		2011		2012		2011
	(in millions)
Service cost – benefits earned during the period	$	-	$	-	$	-	$	-
Interest cost		2		1		5		3
Pension expense	$	2	$	1	$	5	$	3