Pensions and Other Postretirement Benefits 10-K (Tables)

12 Months Ended

Dec. 31, 2014

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:



	2014		2013		2012
Discount rate	3.95	%	4.80	%	3.95	%
Salary increase assumption	*		*		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



Year Ended December 31,	2014			2013			2012
	(in millions)
Service cost – benefits earned during the period	$	7		$	4		$	15
Interest cost on projected benefit obligation	70			71			67
Expected return on plan assets	(87		)	(83		)	(91		)
Amortization of net actuarial loss	34			49			46
Amortization of prior service cost (benefit)	—			—			(5		)
Curtailment benefit recognized	—			—			(31		)
Pension expense	$	24		$	41		$	1

Schedule of Assumptions Used

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



	2014		2013		2012
Discount rate	4.80	%	3.95	%	4.60	%
Salary increase assumption	*		*		2.75
Expected long-term rate of return on Plan assets	6.00		6.00		7.00

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, 2014 and 2013:



	Fair Value Measurement at December 31, 2014
	Total			(Level 1)			(Level 2)			(Level 3)
	(in millions)
Investments at Fair Value:
Cash and short term investments	$	81		$	81		$	—		$	—
Equity Securities
U.S. Large-cap⁽¹⁾	330			330			—			—
U.S. Small-cap⁽²⁾	106			106			—			—
International⁽³⁾	301			36			265			—
Global⁽⁴⁾	269			103			166			—
Emerging Market⁽⁵⁾	205			—			205			—
U.S. Treasury	646			646			—			—
U.S. Government agency issued or guaranteed	91			—			91			—
Obligations of U.S. states and political subdivisions	109			—			109			—
Asset-backed securities	32			—			12			20
U.S. corporate debt securities⁽⁶⁾	1,117			—			1,117			—
Foreign debt securities	316			—			307			9
Emerging Market Debt/High-Yield Debt/Leveraged Loans	131			39			92			—
Other investments	103			—			103			—
Accrued interest	25			5			20			—
Total investments	3,862			1,346			2,487			29
Receivables:
Receivables from sale of investments in process of settlement	124			124			—			—
Derivative financial assets	16			—			16			—
Total receivables	140			124			16			—
Total Assets	4,002			1,470			2,503			29
Derivative financial liabilities	(9		)	(8		)	(1		)	—
Other liabilities	(118		)	(118		)	—			—
Total Liabilities	(127		)	(126		)	(1		)	—
Total Net Assets	$	3,875		$	1,344		$	2,502		$	29



	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⁽³⁾	310			28			282			—
Global⁽⁴⁾	387			65			322			—
Emerging Market⁽⁵⁾	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⁽⁶⁾	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


⁽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 are primarily large-cap, and 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 comprises actively and passively managed global investments that track the MSCI AC World Index.


⁽⁵⁾	This category comprises actively managed emerging market investments that track the MSCI Emerging Markets Index.


⁽⁶⁾	This category represents predominantly investment grade bonds of U.S. issuers from diverse industries.

The target sector allocations of Plan assets at December 31, 2014 are as follows:



	Percentage of Plan assets at December 31, 2014
Domestic Large/Mid-Cap Equity	9.5	%
Domestic Small Cap Equity	3.0
International Large Cap Equity	8.0
International Small Cap Equity	3.0
Global Equity	7.0
Emerging Market Equity	5.5
Diversified Credit	4.0
Fixed Income Securities	59.0
Cash or Cash Equivalents	1.0
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,	2014			2013
	(in millions)
Fair value of net Plan assets at beginning of year	$	3,435		$	3,485
Cash contributions by HSBC North America	74			131
Actual return on Plan assets	551			(8		)
Benefits paid	(185		)	(173		)
Fair value of net Plan assets at end of year	$	3,875		$	3,435

Schedule of Credit Ratings

The following table provides additional detail regarding the rating of our U.S. corporate debt securities at December 31, 2014:



	Level 2		Level 3		Total
	(in millions)
AAA to AA-⁽¹⁾	$	69	$	—	$	69
A+ to A-⁽¹⁾	347		—		347
BBB+ to Unrated⁽¹⁾	701		—		701
Total	$	1,117	$	—	$	1,117


⁽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 is utilized.

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 2014 and 2013:



			Total Gains and (Losses) Included in															Current Period Unrealized Gains (Losses)
	Jan 1, 2014		Income		Other Comp. Income		Purchases		Settlement			Transfers Into Level 3		Transfers Out of Level 3		Dec. 31, 2014		Current Period Unrealized Gains (Losses)
	(in millions)
Asset-backed securities	$	20	$	—	$	—	$	1	$	(1	)	$	—	$	—	$	20	$	—
Foreign debt securities	11		—		—		3		(5		)	—		—		9		—
Total assets	$	31	$	—	$	—	$	4	$	(6	)	$	—	$	—	$	29	$	—



			Total Gains and (Losses) Included in																	Current Period UnrealizedGains (Losses)
	Jan 1, 2013		Income		Other Comp. Income			Purchases		Settlement			Transfers Into Level 3		Transfers Out of Level 3			Dec. 31, 2013		Current Period UnrealizedGains (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

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 America Pension Plan:



	2014			2013
	(in millions)
Projected benefit obligation at beginning of year	$	3,892		$	4,374
Service cost	16			11
Interest cost	177			176
Actuarial losses (gains)	465			(496		)
Benefits paid	(185		)	(173		)
Projected benefit obligation at end of year	$	4,365		$	3,892

Schedule of Expected Benefit Payments

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



	HSBC North America
	(in millions)
2015	$	169
2016	172
2017	175
2018	177
2019	181
2020-2024	962

Schedule of Accumulated and Projected Benefit Obligations

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



	2014			2013
	(in millions)
Accumulated benefit obligation at beginning of year	$	59		$	70
Service cost	—			1
Interest cost	3			2
Actuarial losses (gains)	5			(8		)
Benefits paid	(5		)	(6		)
Accumulated benefit obligation at end of year	$	62		$	59

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,	2014			2013		2012
	(in millions)
Service cost – benefits earned during the period	$	—		$	1	$	1
Interest cost on accumulated benefit obligation	3			2		3
Amortization of net actuarial gain	(1		)	—		—
Amortization of transition obligation	—			—		2
Net periodic postretirement benefit cost	$	2		$	3	$	6

Schedule of Assumptions Used

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



	2014		2013		2012
Discount rate	4.35	%	3.35	%	4.25	%
Salary increase assumption	2.75		2.75		2.75

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



	2014		2013		2012
Discount rate	3.60	%	4.35	%	3.35	%
Salary increase assumption	3.00		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)
2015	$	5
2016	6
2017	6
2018	6
2019	6
2020-2024	27

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

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		)