Pensions and Other Postretirement Benefits

9 Months Ended

Sep. 30, 2012

Pensions and Other Postretirement Benefits

15.     Pensions 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 HUSI.:

	Three Months  Ended September 30,						Nine Months  Ended September 30,
	2012			2011			2012			2011
	(in millions)
Service cost – benefits earned during the period	$	3		$	4		$	11		$	12
Interest cost on projected benefit obligation		15			20			52			57
Expected return on assets		(25	)		(22	)		(66	)		(63	)
Recognized losses		16			9			34			27
Curtailment benefit recognized		(29	)		-			(31	)		-
Amortization of prior service cost		(2	)		(2	)		(4	)		(4	)
Net periodic pension cost (income)	$	(22	)	$	9		$	(4	)	$	29

Pension expense declined in 2012 due largely to the recognition of a $27 million curtailment benefit 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. Also contributing to the decrease in pension expense was higher expected returns on plan assets driven by higher asset levels, including additional contributions to the Plan during 2012 and 2011, as well as lower interest cost as a result of a decrease in the number of active participants in the Plan.

Components of the net periodic benefit cost for our postretirement 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	$	1	$	-	$	1	$	-
Interest cost		-		1		2	$	3
Amortization of transition obligation		1		1		2		2
Net periodic postretirement benefit cost	$	2	$	2	$	5	$	5