PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The components of net periodic benefit costs (credits) are:



	PENSION
	QUARTER ENDED						YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2014			SEPTEMBER 2013			SEPTEMBER 2014			SEPTEMBER 2013
Service cost⁽¹⁾	$	13		$	16		$	40		$	48
Interest cost	67			61			205			183
Expected return on plan assets	(117		)	(109		)	(349		)	(329		)
Amortization of actuarial loss	33			55			94			166
Amortization of prior service cost	1			2			4			5
Loss due to curtailment and special termination benefits⁽²⁾	9			—			9			—
Total net periodic benefit cost (credit)	$	6		$	25		$	3		$	73


(1)	Service cost includes $2 million for year-to-date ended 2014 and $1 million and $4 million for quarter and year-to-date ended 2013 for employees that were part of the Real Estate Divestiture. These charges are included in our results of discontinued operations.


(2)	The 2014 curtailment and special termination benefits are related to involuntary terminations, due to restructuring activities, as well as the Real Estate Divestiture.



	OTHER POSTRETIREMENT BENEFITS
	QUARTER ENDED						YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2014			SEPTEMBER 2013			SEPTEMBER 2014			SEPTEMBER 2013
Service cost	$	—		$	—		$	—		$	1
Interest cost	3			3			8			9
Amortization of actuarial loss	3			4			9			11
Amortization of prior service credit	(25		)	(5		)	(120		)	(17		)
Other	—			—			(4		)	2
Total net periodic benefit cost (credit)	$	(19	)	$	2		$	(107	)	$	6

During fourth quarter 2013, we decided to eliminate post-Medicare health funding for certain salaried retirees after 2014. As a result, we were ratably amortizing a total pretax gain of approximately $180 million throughout 2014. In third quarter 2014 we recorded a refinement to the prior amount. We recognized a pretax gain of $23 million in third quarter 2014 and $113 million in the first three quarters of 2014 from this plan amendment. We expect to record a similar amount in fourth quarter 2014. This gain is included in "Other operating income, net" in our Consolidated Statement of Operations and reflected in the amortization of prior service credit in the table above.

VALUATION OF PENSION PLAN ASSETS AND OBLIGATION

We estimate the fair value of pension plan assets based upon the information available during the year-end reporting process. In some cases, primarily private equity funds, the information available consists of net asset values as of an interim date, cash flows between the interim date and the end of the year and market events. We revised the year-end estimated fair value of pension plan assets to incorporate year-end net asset values reflected in audited financial statements received after we have filed our Annual Report on Form 10-K. During second quarter 2014, we recorded an increase in the fair value of the pension assets of $53 million. We also revised our census data that is used to estimate our projected benefit obligation. During second quarter 2014, we recorded an increase to the projected benefit obligation of $19 million. The net effect was a $34 million increase in the funded status.

Our pension plans are typically remeasured as of fiscal year-end unless a significant event occurs that requires remeasurement. As a result of the Real Estate Divestiture as well as our selling, general and administrative cost reduction initiative, we remeasured our U.S. qualified pension plans during third quarter 2014.

The net effect of the remeasurement was as follows:

•

We recognized a $9 million charge in third quarter 2014 for curtailments and special termination benefits. Of this amount, $6 million is included in the net gain on the Real Estate Divestiture and is presented in "Earnings from discontinued operations, net of income taxes" in our Consolidated Statement of Operations. The remaining $3 million is included in "Charges for restructuring, closures and impairments" in our Consolidated Statement of Operations.

•

The funded status of our U.S. qualified pension plans was reduced by $291 million primarily as a result of a decline in the discount rate used to calculate the projected benefit obligation. The discount rate used to remeasure the pension plans’ liabilities was changed from a rate of 4.9 percent at December 31, 2013 to rates reflective of current bond rates on the remeasurement date. A discount rate of 4.4 percent was used as of July 7, 2014. There was no change to the expected rate of return assumption. The decrease in funded status resulted in a $142 million decrease in "Other assets" and a $149 million increase in "Deferred pension and other postretirement benefits" in our Consolidated Balance Sheet.


•	Deferred tax liabilities decreased $108 million.


•	Total equity decreased $183 million for changes in "Cumulative other comprehensive loss", reflecting the net effect of the items discussed above. Amounts deferred in cumulative other comprehensive loss will be amortized into net periodic pension cost (credits) in future periods.

EXPECTED CONTRIBUTIONS AND BENEFIT PAYMENTS

In 2014 we expect to:


•	make approximately $44 million of required contributions to our Canadian registered pension plan;


•	make $3 million of required contributions or benefit payments to our Canadian nonregistered pension plans;


•	make benefit payments of $20 million for our U.S. nonqualified pension plans; and


•	make benefit payments of $35 million for our U.S. and Canadian other postretirement plans.

We do not anticipate making a contribution to our U.S. qualified pension plan for 2014.