Employee Benefit Plans

Pension and Postretirement Plans. We sponsor both funded and unfunded domestic and foreign defined pension and other postretirement benefit plans, and defined contribution plans. Contributions to our plans were as follows:



	Quarter Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2016		2015		2016		2015
Defined benefit plans	$	18	$	23	$	125	$	93
Defined contribution plans	79		82		235		264

There were no contributions to our domestic defined benefit pension plans in the quarters and nine months ended September 30, 2016 and 2015. The following table illustrates the components of net periodic benefit cost for our defined pension and other postretirement benefit plans:



	Pension Benefits Quarter Ended September 30,						Other Postretirement Benefits Quarter Ended September 30,
(Dollars in millions)	2016			2015			2016			2015
Service cost	$	96		$	124		$	1		$	1
Interest cost	302			350			9			8
Expected return on plan assets	(554		)	(566		)	—			—
Amortization of prior service credit	(7		)	(3		)	—			—
Recognized actuarial net loss (gain)	135			220			(1		)	(1		)
Net settlement and curtailment loss	3			128			—			—
Total net periodic benefit (income) cost	$	(25	)	$	253		$	9		$	8



	Pension Benefits Nine Months Ended September 30,						Other Postretirement Benefits Nine Months Ended September 30,
(Dollars in millions)	2016			2015			2016			2015
Service cost	$	287		$	373		$	3		$	3
Interest cost	908			1,051			25			24
Expected return on plan assets	(1,669		)	(1,700		)	—			—
Amortization of prior service credit	(22		)	(8		)	—			—
Recognized actuarial net loss (gain)	406			662			(3		)	(3		)
Net settlement and curtailment loss	18			137			—			—
Total net periodic benefit (income) cost	$	(72	)	$	515		$	25		$	24

Net settlements and curtailment losses for pension benefits include curtailment losses of approximately $110 million related to, and recorded in, discontinued operations for the quarter and nine months ended September 30, 2015. Total net periodic benefit cost in the table above includes approximately $25 million and $74 million related to, and recorded in, discontinued operations for the quarter and nine months ended September 30, 2015, respectively.

In 2015, we changed the approach we use to estimate the service and interest components of net periodic pension cost for our significant pension plans. Historically, we estimated the service and interest cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. We elected to utilize a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant projected cash flows. We made this change to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. This change does not affect the measurement of our total benefit obligations. The discount rates used to measure service cost and interest cost during 2016 are 3.9% and 3.5%, respectively. The previous method would have used a discount rate for both service and interest costs of 4.1%. This change decreases the service and interest cost components of our annual net periodic pension cost by approximately $215 million for 2016. We have accounted for this change as a change in accounting estimate and, accordingly, have accounted for it prospectively, effective January 1, 2016.

As part of our long-term strategy to de-risk our defined benefit pension plans, we entered into an agreement to purchase a group annuity contract to transfer approximately $775 million of our outstanding pension benefit obligations related to certain U.S. retirees or beneficiaries, which was finalized on October 12, 2016. We have also offered certain former U.S. employees or beneficiaries with a vested pension benefit an option to take a one-time lump sum distribution in lieu of future monthly pension payments, which is expected to reduce our pension benefit obligations by approximately $995 million by the end of 2016. These transactions are expected to reduce the assets of our defined benefit pension plans by approximately $1.5 billion. As a result of these transactions, we expect to recognize a one-time pre-tax pension settlement charge in the range of $400 million to $530 million in the fourth quarter of 2016.