Pension and Other Postretirement Benefits

12 Months Ended

Dec. 31, 2023

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefits

Pension and Other Postretirement Benefits

Defined Benefit Pension Plan Certain employees are eligible to participate in the HSBC North America qualified defined benefit pension plan (either the "HSBC North America Pension Plan" or the "Plan") which facilitates a unified employee benefit policy and unified employee benefit plan administration for HSBC companies operating in the United States. Future benefit accruals for legacy participants under the final average pay formula and future contributions under the cash balance formula were previously discontinued and, as a result, the Plan is frozen.

The following table reflects the portion of pension (income) expense and its related components of the combined HSBC North America Pension Plan which has been allocated to us and is recorded in our consolidated statement of income. We have not been allocated any portion of the Plan's net pension asset.

Year Ended December 31,	2023		2022		2021
	(in millions)
Interest cost on projected benefit obligation	$	57	$	52	$	42
Expected return on plan assets	(65)		(56)		(58)
Amortization of net actuarial loss	5		3		—
Administrative costs	3		3		3
Pension (income) expense	$	—	$	2	$	(13)

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

	2023	2022	2021
Discount rate(1)	5.00% / 4.80% / 5.00% / 5.65%	2.85% / 3.55% / 4.60% / 4.75%	2.45% / 3.10% / 2.70% / 2.80%
Expected long-term rate of return on Plan assets(2)	5.25	4.75	3.50

(1)Since the Plan is measured on a quarterly basis, pension (income) expense for the Plan is calculated each quarter based on the preceding quarter-end rate. Shown are the discount rates used to determine pension (income) expense for each respective quarter (i.e., first quarter / second quarter / third quarter / fourth quarter).

(2)In 2022, as a result of significantly increasing yields on fixed income securities and subsequent increases in longer term capital market returns, HSBC North America decided to increase its expected long-term rate of return on Plan assets assumption to 4.00 percent during the third quarter of 2022 and 4.75 percent during the fourth quarter of 2022. The expected long-term rate of return on Plan assets assumption used during the first half of 2022 was 3.50 percent.

Defined Contribution and Other Supplemental Retirement Plans  Substantially all of our employees participate in a 401(k) plan. Employer contributions to the plan are based on employee contributions. Total expense recognized for this plan was $19 million, $21 million and $26 million in 2023, 2022 and 2021, respectively.

Certain employees are participants in various defined contribution and other non-qualified supplemental retirement plans all of which have been frozen. Total expense recognized for these plans was immaterial in 2023, 2022 and 2021, respectively.

Postretirement Plans Other Than Pensions  Certain employees also participate in plans which provide medical and life insurance benefits to retirees and eligible dependents. These plans cover all eligible employees who meet certain age and vested

service requirements. We have instituted dollar limits on payments under the plans to control the cost of future medical benefits. Net periodic postretirement benefit cost was immaterial in 2023, 2022 and 2021, respectively.

Our postretirement benefit plans are funded on a pay-as-you-go basis. The funded status of our postretirement benefit plans was a liability of $23 million and $31 million at December 31, 2023 and 2022, respectively. We currently estimate that we will pay benefits of approximately $3 million relating to our postretirement benefit plans in 2024.

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

	2023		2022		2021
Discount rate	4.80	%	4.95	%	2.70	%
Salary increase assumption	3.00		3.00		3.00

For measurement purposes, 7.7 percent (pre-age 65) and, as it relates to the postretirement benefit plans which were not amended to eliminate future health cost increases, 9.0 percent (post-age 65) annual rates of increase in the per capita costs of covered health care benefits were assumed for 2023. These rates are assumed to decrease gradually reaching the ultimate rate of 4.5 percent in 2033, and remain at that level thereafter.