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PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS (Tables)
 12 Months Ended
Dec. 31, 2021
Funded Status of Our Plans

The funded status of the plans we sponsor is determined by comparing the projected benefit obligation with the fair value of plan assets at the end of the year. The following table demonstrates how our plans' funded status is reflected on our Consolidated Balance Sheet.

 

DOLLAR AMOUNTS IN MILLIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PENSION

 

 

OPEB

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Projected benefit obligation at beginning of year

 

$

3,971

 

 

$

4,260

 

 

$

149

 

 

$

151

 

Service cost

 

 

42

 

 

 

36

 

 

 

—

 

 

 

—

 

Interest cost

 

 

98

 

 

 

139

 

 

 

3

 

 

 

4

 

Actuarial (gains) losses(1)

 

 

(206

)

 

 

540

 

 

 

(9

)

 

 

5

 

Plan participants’ contributions

 

 

—

 

 

 

—

 

 

 

2

 

 

 

2

 

Benefits paid, including lump sum and annuity transfers

 

 

(199

)

 

 

(1,025

)

 

 

(13

)

 

 

(14

)

Other, including foreign currency translation

 

 

2

 

 

 

21

 

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected benefit obligation at end of year

 

$

3,708

 

 

$

3,971

 

 

$

131

 

 

$

149

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of year (estimated)

 

$

3,230

 

 

$

3,719

 

 

$

15

 

 

$

19

 

Actual return on plan assets(2)

 

 

336

 

 

 

490

 

 

 

—

 

 

 

—

 

Employer contributions and benefit payments

 

 

50

 

 

 

21

 

 

 

9

 

 

 

8

 

Plan participants’ contributions

 

 

—

 

 

 

—

 

 

 

2

 

 

 

2

 

Benefits paid, including lump sum and annuity transfers

 

 

(199

)

 

 

(1,025

)

 

 

(13

)

 

 

(14

)

Other, including foreign currency translation

 

 

1

 

 

 

25

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at end of year (estimated)

 

$

3,418

 

 

$

3,230

 

 

$

13

 

 

$

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Presentation on our Consolidated Balance Sheet:(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent assets

 

$

52

 

 

$

58

 

 

$

—

 

 

$

—

 

Current liabilities

 

 

(16

)

 

 

(17

)

 

 

(7

)

 

 

(8

)

Noncurrent liabilities

 

 

(326

)

 

 

(782

)

 

 

(111

)

 

 

(126

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funded status(4)

 

$

(290

)

 

$

(741

)

 

$

(118

)

 

$

(134

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated benefit obligation at end of year

 

$

3,601

 

 

$

3,855

 

 

N/A

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial Assumptions Used in Estimating Our Pension and OPEB Benefit Obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate(5)

 

2.90 - 3.10%

 

 

2.50%

 

 

2.60 - 3.00%

 

 

2.10 - 2.40%

 

Rate of compensation increase(6)

 

2.00 - 13.00%

 

 

2.00 - 13.00%

 

 

N/A

 

 

N/A

 

Lump sum or installment distributions election(7)

 

60.00%

 

 

60.00%

 

 

N/A

 

 

N/A

 

Healthcare cost trend rate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assumed for next year(8)

 

N/A

 

 

N/A

 

 

4.50 - 6.20%

 

 

4.50 - 6.80%

 

Ultimate(8)

 

N/A

 

 

N/A

 

 

4.00 - 4.50%

 

 

4.00 - 4.50%

 

Year when rate will reach ultimate(8)

 

N/A

 

 

N/A

 

 

2037 - 2040

 

 

2037 - 2040

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Actuarial (gains) losses are primarily due to year over year changes in discount rates.

(2)

Includes adjustments for final fair value of plan assets.

(3)

Assets and liabilities on our Consolidated Balance Sheet are different from the cumulative income or expense that we have recorded associated with the plans. The differences are actuarial gains and losses and prior service costs and credits that are deferred and amortized into periodic benefit costs in future periods. Unamortized amounts are recorded in "Accumulated Other Comprehensive Loss", which is a component of total equity on our Consolidated Balance Sheet. The "Accumulated Other Comprehensive Loss" section of Note 15: Shareholders’ Interest details changes in these amounts by component.

(4)

For pension plans with a projected benefit obligation exceeding plan assets, the projected benefit obligation and fair value of plan assets were $2.9 billion and $2.5 billion at December 31, 2021, respectively, and $3.1 billion and $2.3 billion at December 31, 2020, respectively. For pension plans with an accumulated benefit obligation exceeding plan assets, the accumulated benefit obligation and fair value of plan assets were $2.8 billion and $2.5 billion at December 31, 2021, respectively, and $3.0 billion and $2.3 billion at December 31, 2020, respectively.

(5)

For the U.S. defined benefit plans, the discount rate assumption was 2.9% and 2.5% for 2021 and 2020, respectively. For the Canadian defined benefit plans, the discount rate assumption was 3.1% and 2.5% for 2021 and 2020, respectively. For U.S. OPEB plans, the discount rate assumption was 2.6% and 2.1% for 2021 and 2020, respectively. For Canadian OPEB plans, the discount rate assumption was 3.0% and 2.4% for 2021 and 2020, respectively. For lump sum distributions (for U.S. qualified salaried and nonqualified plans only), the discount rate assumption was based on the PPA Phased Table: Interest and mortality assumptions as mandated by the Pension Protection Act of 2006.

(6)

For the U.S. defined benefit plans, the rate of compensation increase assumption for both 2021 and 2020 was between 2.00% - 13.00% for salaried and hourly participants and was decreasing with participant age. For the Canadian defined benefit plans, the rate of compensation increase assumption for both 2021 and 2020 was 3.25% and 3.00% for salaried and hourly participants, respectively.

(7)

U.S. qualified salaried and nonqualified plans only.

(8)

For U.S. OPEB plans, the healthcare cost trend rate assumption for the next year for Pre-Medicare was 6.20% and 6.80% for 2021 and 2020, respectively. The healthcare cost trend rate assumption for Health Reimbursement Account (HRA) was 4.50% for both 2021 and 2020. The ultimate healthcare cost trend rate was 4.50% and the assumption for the year the ultimate healthcare cost trend rate is reached was 2037 in both 2021 and 2020. For Canadian OPEB plans, the healthcare cost trend rate was 5.30% for both 2021 and 2020. The ultimate healthcare cost trend rate was 4.00% and the assumption for the year the ultimate healthcare cost trend rate is reached was 2040 for both 2021 and 2020.
Schedules of Allocation of Our Plans' Assets

The net pension plan assets, when categorized in accordance with this fair value hierarchy, are as follows.

 

DOLLAR AMOUNTS IN MILLIONS

2021

 

2020

 

 

 

LEVEL 1

 

 

LEVEL 2

 

 

LEVEL 3

 

 

TOTAL

 

 

LEVEL 1

 

 

LEVEL 2

 

 

LEVEL 3

 

 

TOTAL

 

Pension trust investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and short-term investments

 

$

412

 

 

$

—

 

 

$

—

 

 

$

412

 

 

$

117

 

 

$

—

 

 

$

—

 

 

$

117

 

Fixed income investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

—

 

 

 

1,380

 

 

 

—

 

 

 

1,380

 

 

 

—

 

 

 

985

 

 

 

—

 

 

 

985

 

Government

 

 

—

 

 

 

721

 

 

 

—

 

 

 

721

 

 

 

—

 

 

 

1,021

 

 

 

—

 

 

 

1,021

 

Repurchase agreements

 

 

—

 

 

 

(43

)

 

 

—

 

 

 

(43

)

 

 

—

 

 

 

(90

)

 

 

—

 

 

 

(90

)

Hedge funds and related investments(1)

 

 

—

 

 

 

—

 

 

 

10

 

 

 

10

 

 

 

—

 

 

 

—

 

 

 

4

 

 

 

4

 

Private equity and related investments(1)

 

 

—

 

 

 

—

 

 

 

104

 

 

 

104

 

 

 

—

 

 

 

—

 

 

 

68

 

 

 

68

 

Derivative instruments(2)

 

 

—

 

 

 

5

 

 

 

—

 

 

 

5

 

 

 

—

 

 

 

8

 

 

 

—

 

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total pension trust investments measured at fair value(1)

 

 

412

 

 

 

2,063

 

 

 

114

 

 

 

2,589

 

 

 

117

 

 

 

1,924

 

 

 

72

 

 

 

2,113

 

Canadian nonregistered plan assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and short-term investments

 

 

5

 

 

—

 

 

—

 

 

 

5

 

 

 

5

 

 

 

—

 

 

 

—

 

 

 

5

 

Public equity investments

 

 

6

 

 

—

 

 

—

 

 

 

6

 

 

 

5

 

 

 

—

 

 

 

—

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Canadian nonregistered plan assets measured at fair value

 

 

11

 

 

—

 

 

—

 

 

 

11

 

 

 

10

 

 

 

—

 

 

 

—

 

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total plan assets measured at fair value(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

December 31, 2021 and 2020 exclude $856 million and $1,116 million of hedge fund and private equity investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient, which are not required to be classified in the fair value hierarchy. Additionally, December 31, 2021 and 2020 exclude $38 million and $9 million of accrued liabilities, respectively.

(2)

Derivative instruments include futures contracts. The fair value and aggregate notional value of these contracts were $5 million and $1,126 million at December 31, 2021, respectively, and $8 million and $449 million at December 31, 2020, respectively.
Reconciliation of Pension Plan Assets Measured at Level 3 Fair Value

A reconciliation of the beginning and ending balances of the pension plan assets measured at fair value using significant unobservable inputs (Level 3) is presented below:

 

DOLLAR AMOUNTS IN MILLIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

Beginning Balance

 

 

Realized

Gain (Loss)

 

 

Unrealized

Gain (Loss)

 

 

Purchases, Sales,

Settlements, Net

 

 

Transfers

In (Out), Net

 

 

Ending Balance

 

Hedge funds and related investments

 

$

4

 

 

$

—

 

 

$

—

 

 

$

(1

)

 

$

7

 

 

$

10

 

Private equity and related investments

 

 

68

 

 

 

—

 

 

 

11

 

 

 

(4

)

 

 

29

 

 

 

104

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

72

 

 

$

—

 

 

$

11

 

 

$

(5

)

 

$

36

 

 

$

114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

Beginning Balance

 

 

Realized

Gain (Loss)

 

 

Unrealized

Gain (Loss)

 

 

Purchases, Sales,

Settlements, Net

 

 

Transfers

In (Out), Net

 

 

Ending Balance

 

Hedge funds and related investments

 

$

13

 

 

$

3

 

 

$

(4

)

 

$

(9

)

 

$

1

 

 

$

4

 

Private equity and related investments

 

 

86

 

 

 

—

 

 

 

(1

)

 

 

(9

)

 

 

(8

)

 

 

68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

99

 

 

$

3

 

 

$

(5

)

 

$

(18

)

 

$

(7

)

 

$

72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Net Periodic Benefit Cost

Our net periodic benefit cost and the assumptions used to estimate it are shown in the following table.

 

DOLLAR AMOUNTS IN MILLIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PENSION

 

 

OPEB

 

 

 

2021

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

2019

 

Net periodic benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

42

 

 

$

36

 

 

$

32

 

 

$

—

 

 

$

—

 

 

$

—

 

Interest cost

 

 

98

 

 

 

139

 

 

 

160

 

 

 

3

 

 

 

4

 

 

 

6

 

Expected return on plan assets

 

 

(204

)

 

 

(234

)

 

 

(223

)

 

 

—

 

 

 

—

 

 

 

—

 

Amortization of actuarial loss

 

 

115

 

 

 

122

 

 

 

112

 

 

 

5

 

 

 

4

 

 

 

7

 

Amortization of prior service cost (credit)

 

 

3

 

 

 

3

 

 

 

4

 

 

 

(1

)

 

 

(1

)

 

 

(5

)

Settlement charges

 

 

—

 

 

 

253

 

 

 

455

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net periodic benefit cost

 

$

54

 

 

$

319

 

 

$

540

 

 

$

7

 

 

$

7

 

 

$

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial Assumptions Used in Estimating Our Pension and OPEB Net Periodic Benefit Cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate(1)(2)

 

2.50%

 

 

3.10 - 3.40%

 

 

3.70 - 4.40%

 

 

2.10 - 2.40%

 

 

3.00%

 

 

3.70 - 4.20%

 

Expected return on assets(3)

 

6.00%

 

 

6.50%

 

 

7.00%

 

 

N/A

 

 

N/A

 

 

N/A

 

Rate of compensation increase(4)

 

2.00 - 13.00%

 

 

2.00 - 13.00%

 

 

2.00 - 13.00%

 

 

N/A

 

 

N/A

 

 

N/A

 

Lump sum or installment distributions election(5)

 

60.00%

 

 

60.00%

 

 

60.00%

 

 

N/A

 

 

N/A

 

 

N/A

 

Weighted healthcare cost trend rate(6)

 

N/A

 

 

N/A

 

 

N/A

 

 

4.50 - 6.80%

 

 

4.50 - 7.30%

 

 

4.50 - 7.80%

 

 

(1)

For the U.S. defined benefit plans, the discount rate assumption was 2.50%, 3.40% and 4.30% for 2021, 2020 and 2019, respectively. For the Canadian defined benefit plans, the discount rate assumption was 2.50%, 3.10% and 3.70% for 2021, 2020 and 2019, respectively. For U.S. OPEB plans, the discount rate assumption was 2.10%, 3.00% and 4.20%, for 2021, 2020 and 2019, respectively. For Canadian OPEB plans, the discount rate assumption was 2.40%, 3.00% and 3.70% for 2021, 2020 and 2019, respectively. For lump sum distributions (for U.S. qualified salaried and nonqualified plans only), the discount rate assumption was based on the PPA Phased Table: Interest and mortality assumptions as mandated by the Pension Protection Act of 2006.

(2)

The discount rate used to estimate our net periodic benefit cost for January 2019 was 4.40%. Due to the remeasurement triggered by the 2019 Retiree Annuity Purchase, the discount rate was updated to 4.30% for the remainder of the year.

(3)

Determining our expected return requires a high degree of judgment. We consider actual pension fund asset performance over multiple years, and current and expected valuation levels in the global equity and credit markets. Historical fund returns are used as a base and we place added weight on more recent pension plan asset performance. As discussed in the “Our Investment Policies and Strategies” and “U.S. and Canadian Pension Trusts” sections above, fixed income securities continue to make up a larger portion of our plan assets. As a result, we reduced our assumption of long-term rate of return on plan assets to 5.00% for the year ending December 31, 2022.

(4)

For the U.S. defined benefit plans, the rate of compensation increase assumption for 2021, 2020 and 2019 was between 2.00% - 13.00% for salaried and hourly participants and was decreasing with participant age. For the Canadian defined benefit plans, the rate of compensation increase assumption for salaried participants was 3.25% for 2021, 2020 and 2019. The rate of compensation increase assumption for hourly participants was 3.00% for 2021, 2020 and 2019.

(5)

U.S. qualified salaried and nonqualified plans only.

(6)

For OPEB plans during 2021, the assumed weighted healthcare cost trend rate was 6.8%, 4.5% and 5.3% for U.S. Pre-Medicare participants, U.S. HRA participants and Canadian OPEB plans, respectively.
Estimated Projected Benefit Payments for the Next 10 Years

Estimated Projected Benefit Payments for the Next 10 Years

 

DOLLAR AMOUNTS IN MILLIONS

 

 

 

 

 

 

 

 

 

 

PENSION

 

 

OPEB

 

2022

 

$

189

 

 

$

12

 

2023

 

$

193

 

 

$

11

 

2024

 

$

194

 

 

$

11

 

2025

 

$

192

 

 

$

10

 

2026

 

$

195

 

 

$

9

 

2027-2031

 

$

986

 

 

$

41

 

 
Qualified and Registered Plans  
Schedules of Allocation of Our Plans' Assets

Assets within our U.S. and Canadian pension trusts were invested as follows:

 

 

 

DECEMBER 31,

2021

 

 

DECEMBER 31,

2020

 

Cash and short-term investments(1)

 

12.1%

 

 

3.6%

 

Fixed income investments:(2)

 

 

 

 

 

 

 

 

Corporate

 

 

40.5

 

 

 

30.6

 

Government

 

 

21.2

 

 

 

31.8

 

Repurchase agreements

 

 

(1.3

)

 

 

(2.8

)

Hedge funds and related investments(3)(4)

 

 

3.6

 

 

 

6.9

 

Private equity and related investments(4)(5)

 

 

24.9

 

 

 

30.0

 

Derivative instruments, net(6)

 

 

0.1

 

 

 

0.2

 

Accrued liabilities

 

 

(1.1

)

 

 

(0.3

)

 

 

 

 

 

 

 

 

 

Total

 

100.0%

 

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

(1)

Cash and short-term investments are valued at cost, which approximates market. The increased cash holding at year-end 2021 was a result of the 2021 Secondary Sale transaction timing. Refer to “U.S. and Canadian Pension Trusts” above for further information.

(2)

Fixed income investments include publicly traded corporate and government issued debt. These bonds have varying maturities, credit quality and sector exposure and are selected to align with the duration of our plan liabilities. Additionally, our fixed income portfolio includes repurchase agreements, which represent short-term borrowings to hedge against interest rate risk. We have an obligation to return the cash related to these borrowings in accordance with the agreements, which are collateralized by our government bonds. Fixed income investments are valued at exit prices quoted in active or non-active markets or based on observable inputs.

(3)

Hedge funds and related investments are privately-offered managed pools primarily structured as limited liability entities. General members or partners of these limited liability entities serve as portfolio managers and are thus responsible for the fund’s underlying investment decisions. Underlying investments within these funds may include long and short public and private equities, corporate, mortgage and sovereign debt, options, swaps, forwards and other derivative positions. These funds have varying degrees of leverage, liquidity and redemption provisions.

(4)

These investments are primarily valued based on the NAVs of the funds. These values represent the per-unit price at which new investors are permitted to invest and existing investors are permitted to exit. When NAVs as of the end of the year have not been received, we estimate fair value by adjusting the most recently reported NAVs for market events and cash flows between the interim date and the end of the year.

(5)

Private equity and related investments are investments in private equity, mezzanine, distressed, co-investments and other structures. Private equity funds generally participate in buyout and venture capital strategies through unlisted equity and debt instruments. These funds may also borrow at the underlying entity level. Mezzanine and distressed funds generally invest in the debt of public or private companies with additional participation through warrants or other equity options.

(6)

Derivative instruments have historically been comprised of swaps, futures, forwards or options. Consistent with our shift in asset strategy, our positions in derivative instruments have been significantly reduced. At December 31, 2021, only a small amount of futures remain in our portfolio. Derivative instruments are valued based upon valuation statements received from each derivative’s counterparty.