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 2016			SEPTEMBER 2015			SEPTEMBER 2016			SEPTEMBER 2015
Service cost⁽¹⁾	$	13		$	14		$	37		$	42
Interest cost	70			65			207			198
Expected return on plan assets	(125		)	(115		)	(371		)	(354		)
Amortization of actuarial loss	39			44			117			135
Amortization of prior service cost	1			1			3			3
Accelerated pension costs included in Plum Creek merger-related costs (Note 15)	—			—			5			—
Total net periodic benefit cost (credit) - pension	$	(2	)	$	9		$	(2	)	$	24


(1)	Service cost includes $3 million and $5 million for quarters ended September 30, 2016, and September 30, 2015, respectively, and $10 million and $13 million for the year-to-date periods ended September 30, 2016, and September 30, 2015, respectively for employees of our Cellulose Fibers segment. These charges are included in our results of discontinued operations.



	OTHER POSTRETIREMENT BENEFITS
	QUARTER ENDED						YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2016			SEPTEMBER 2015			SEPTEMBER 2016			SEPTEMBER 2015
Interest cost	$	2		$	2		$	7		$	7
Amortization of actuarial loss	2			2			6			7
Amortization of prior service credit	(2		)	(2		)	(6		)	(6		)
Total net periodic benefit cost - other postretirement benefits	$	2		$	2		$	7		$	8

ASSUMED PLANS FROM MERGER WITH PLUM CREEK

Upon our merger with Plum Creek, we assumed one qualified pension plan and two nonqualified pension plans. All active participants in these plans became fully vested and the plans were frozen as of February 19, 2016. The cumulative funded status of the assumed plans as of February 19, 2016, was a net liability of $62 million.

The expected return on assets for the qualified plan assumed is 7 percent. Assets of $47 million related to the nonqualified plans are held in a grantor trust and are subject to the claims of creditors in the event of bankruptcy. As a result, these are not considered plan assets and have not been netted against the nonqualified pension liability. These assets are included in "Other assets" in our Consolidated Balance Sheet.

During first quarter 2016, we recognized $5 million of pension benefit costs from change in control provisions for certain Plum Creek executives. These enhanced pension benefits were triggered by changes in control and retention decisions made after the completion of the merger (see Note 15: Charges for Integration and Restructuring, Closures and Impairments). We did not recognize any additional costs for change in control provisions during the second or third quarters of 2016.

During third quarter 2016, we made $37 million of nonqualified pension benefits payments, which included a portion of the enhanced benefits triggered by change in control provisions. These were paid using proceeds from sales of assets held in grantor trusts.

FAIR VALUE 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 updated the year-end estimated fair value of pension plan assets to incorporate year-end net asset values reflected in financial statements received after we have filed our Annual Report on Form 10-K. During second quarter 2016, we recorded an increase in the fair value of the pension assets of $7 million, or less than 1 percent. We also updated our census data that is used to estimate our projected benefit obligation for pension and other postretirement benefit plans. As a result of that update, during second quarter 2016, we recorded an increase to the projected benefit obligation of $1 million, or less than 1 percent. The net effect was a $6 million increase in the funded status.

Consistent with accounting for the merger as the acquirer in a business combination (see Note 4: Merger with Plum Creek), pension assets and benefit obligations for plans assumed from Plum Creek were re-measured to reflect their fair value as of the merger date. This included updating asset values, updating discount rates to reflect market conditions as of the date of the merger, and freezing benefit accruals. The fair value of these items as of February 19, 2016, were as follows:


•	$137 million qualified pension plan assets;


•	$149 million qualified pension plan projected benefit obligation; and


•	$50 million nonqualified pension plan projected benefit obligation.

No adjustments were made to the fair value of assets or projected benefit obligations of plans assumed from Plum Creek during the second or third quarter.

EXPECTED CONTRIBUTIONS AND BENEFIT PAYMENTS

In 2016 we expect to:


•	be required to contribute approximately $17 million for our Canadian registered plan;


•	be required to contribute or make benefit payments for our Canadian nonregistered plans of $3 million;


•	make benefit payments of $57 million for our U.S. nonqualified pension plans, including $38 million of benefit payments for plans assumed from Plum Creek to be paid out of assets held in grantor trusts; and


•	make benefit payments of $22 million for our U.S. and Canadian other postretirement plans.

We do not anticipate making a contribution to our U.S. qualified pension plans for 2016.