NOTE 5—EMPLOYEE BENEFIT PLANS

Defined Benefit Pension and Other Postretirement Benefit Plans. The Company’s net periodic benefit cost includes the following components (in millions):


	Pension Benefits						Other Postretirement Benefits
	Three Months Ended September 30,						Three Months Ended September 30,
	2013			2012			2013			2012
Service cost	$	29		$	25		$	14		$	11
Interest cost		48			45			29			30
Expected return on plan assets		(41	)		(33	)		(1	)		—
Amortization of unrecognized loss and prior service cost		8			4			2			—
Curtailment loss		—			—			—			—
Settlement gain		(1	)		—			—			—

Total	$	43		$	41		$	44		$	41


	Pension Benefits						Other Postretirement Benefits
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Service cost	$	94		$	75		$	42		$	37
Interest cost		142			137			85			93
Expected return on plan assets		(121	)		(103	)		(2	)		(2	)
Amortization of unrecognized (gain) loss and prior service cost		41			15			7			(2	)
Curtailment loss		2			—			—			—
Settlement gain		(2	)		—			—			—

Total	$	156		$	124		$	132		$	126

During the three and nine months ended September 30, 2013, the Company contributed $122 million and $201 million, respectively, to its tax-qualified defined benefit pension plans.

Curtailments, Settlements and Plan Remeasurements. During June 2013, the Company announced it would freeze benefits for management and administrative employees under one of its defined benefit pension plans, effective December 31, 2013. As a result, the Company recognized a $2 million curtailment loss in earnings in second quarter 2013. The Company also recognized a settlement gain of $1 million in earnings resulting from certain lump-sum payments under a separate defined benefit pension plan in second quarter 2013.

As a result of the freeze of benefits for management and administrative employees and the settlements from the lump-sum payments, the Company remeasured the assets and liabilities of the two plans in second quarter 2013. In addition, due to additional lump-sum payments, the Company remeasured the assets and liabilities of the defined benefit pension plan and recognized a settlement gain of $1 million in third quarter 2013. The Company remeasured this plan’s liabilities using a discount rate of 4.59% in the second quarter and 5.13% in the third quarter compared to the year-end 2012 discount rate of 4.20%. During the nine months ended September 30, 2013, as a result of the remeasurements, curtailment and settlements, the projected benefit obligation of the plans decreased by $522 million and Other comprehensive loss decreased by an actuarial gain of $41 million and $483 million for the three and nine months ended September 30, 2013, respectively. These items will also result in a decrease of approximately $13 million in the expected net periodic benefit cost for the remainder of 2013. The Company recognizes the earnings impacts of its pension plans in Salaries and related costs in the statements of consolidated operations.

Share-Based Compensation. In February 2013, UAL granted share-based compensation awards pursuant to the United Continental Holdings, Inc. 2008 Incentive Compensation Plan. These share-based compensation awards include approximately 0.5 million shares of restricted stock and 0.5 million restricted stock units (“RSUs”) that vest pro-rata over three years on the anniversary of the grant date. The time-vested RSUs are cash-settled based on the 20-day average closing price of UAL common stock immediately prior to the vesting date. In addition, the Company granted 1.3 million performance-based RSUs that will vest based on the Company’s return on invested capital for the three years ending December 31, 2015. If this performance condition is achieved, cash payments will be made after the end of the performance period based on the 20-day average closing price of UAL common stock immediately prior to the vesting date. The Company accounts for the RSUs as liability awards. The table below presents information related to share-based compensation (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Share-based compensation expense (a)	$	32	$	18	$	72	$	44



	September 30, 2013		December 31, 2012
Unrecognized share-based compensation	$	55	$	33

(a)

Includes $(2) million and $9 million of (benefit) expense recognized in merger integration-related costs for the three and nine months ended September 30, 2013, respectively. Includes $0 and $7 million of expense recognized in merger integration-related costs for the three and nine months ended September 30, 2012, respectively.

Profit Sharing Plans. A majority of all employees participate in profit sharing plans, which pay 15% of total pre-tax earnings, excluding special items and share-based compensation expense, to eligible employees when pre-tax profit, excluding special items, profit sharing expense and share-based compensation program expense, exceeds $10 million. Eligible U.S. co-workers in each participating work group receive a profit sharing payout using a formula based on the ratio of each qualified co-worker’s annual eligible earnings to the eligible earnings of all qualified co-workers in all domestic workgroups. The international profit sharing plan pays eligible non-U.S. co-workers the same percentage of eligible pay that is calculated under the U.S. profit sharing plan. Profit sharing expense is recorded as a component of salaries and related costs in the consolidated statements of operations. Our profit sharing plan will change in 2014. Beginning with 2014, pilots’ share of profit sharing payments will be limited to an amount that is their pro-rata share of 10% of the Company’s profit up to a pre-tax margin of 6.9% and their pro-rata share of 20% of the Company’s profit in excess of a pre-tax margin of 6.9%. The profit sharing plan is otherwise unchanged.