Employee Benefit Plans

Pension Plans

The Company sponsors two qualified defined benefit pension plans, the TWC Pension Plan and the TWC Union Pension Plan, that provide pension benefits to a majority of Legacy TWC employees who were employed by TWC before the Transactions. The Company also provides a nonqualified defined benefit pension plan for certain employees under the TWC Excess Pension Plan.

Changes in the projected benefit obligation, fair value of plan assets and funded status of the pension plans from January 1 through December 31 are presented below:



	2018			2017
Projected benefit obligation at beginning of year	$	3,569		$	3,260
Interest cost	128			133
Actuarial (gain) loss	(438		)	406
Settlement	(169		)	(185		)
Benefits paid	(49		)	(45		)
Projected benefit obligation at end of year	$	3,041		$	3,569

Accumulated benefit obligation at end of year	$	3,041		$	3,569

Fair value of plan assets at beginning of year	$	3,273		$	2,946
Actual return on plan assets	(118		)	539
Employer contributions	6			18
Settlement	(169		)	(185		)
Benefits paid	(49		)	(45		)
Fair value of plan assets at end of year	$	2,943		$	3,273

Funded status	$	(98	)	$	(296	)

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the qualified pension plans and the nonqualified pension plan as of December 31, 2018 and 2017 consisted of the following:



	Qualified Pension Plans				Nonqualified Pension Plan
	December 31,				December 31,
	2018		2017		2018		2017
Projected benefit obligation	$	3,007	$	3,528	$	34	$	41
Accumulated benefit obligation	$	3,007	$	3,528	$	34	$	41
Fair value of plan assets	$	2,943	$	3,273	$	—	$	—

Pretax amounts recognized in the consolidated balance sheet as of December 31, 2018 and 2017 consisted of the following:



	December 31,
	2018			2017
Noncurrent asset	$	1		$	1
Current liability	(4		)	(5		)
Long-term liability	(95		)	(292		)
Net amounts recognized in consolidated balance sheet	$	(98	)	$	(296	)

The components of net periodic benefit for the years ended December 31, 2018, 2017 and 2016 consisted of the following:



	Year Ended December 31,
	2018			2017			2016
Service cost	$	—		$	—		$	(86	)
Interest cost	(128		)	(133		)	(87		)
Expected return on plan assets	198			189			116
Pension curtailment gain	—			—			675
Remeasurement gain (loss)	122			(55		)	195
Net periodic pension benefit	$	192		$	1		$	813

During the years ended December 31, 2018 and 2017, settlements for lump-sum distributions to qualified and nonqualified pension plan participants exceeded the estimated annual interest cost of the plans. As a result, the pension liability and pension asset values were reassessed as of September 30, 2018 and 2017 utilizing remeasurement date assumptions in accordance with the Company's mark-to-market pension accounting policy to record gains and losses in the period in which a remeasurement event occurs.

The $122 million remeasurement gain recorded during the year ended December 31, 2018 was primarily driven by the effects of an increase of the discount rate from 3.68% at December 31, 2017 to 4.37% at December 31, 2018. This was partially offset by a loss to record pension assets to fair value at December 31, 2018. Approximately $187 million of the remeasurement gain was recorded for the interim remeasurement event as of September 30, 2018 and was offset by a $65 million loss recorded for the annual remeasurement as of December 31, 2018.

The $55 million remeasurement loss recorded during the year ended December 31, 2017 was primarily driven by the adoption of the revised lump sum conversion mortality tables published by the IRS effective January 1, 2018, and the effects of a decrease of the discount rate from 4.20% at December 31, 2016 to 3.68% at December 31, 2017, partially offset by a gain to record pension assets to fair value. Approximately $30 million of the remeasurement loss was recorded for the interim remeasurement event as of September 30, 2017 and $25 million was recorded for the annual remeasurement as of December 31, 2017.

The $195 million remeasurement gain recorded during the year ended December 31, 2016 was primarily driven by the effects of an increase of the discount rate from 3.99% at the closing date of the TWC Transaction to 4.20% at December 31, 2016 and a gain to record pension assets at December 31, 2016 fair values.

The discount rates used to determine benefit obligations as of December 31, 2018 and 2017 were 4.37% and 3.68%, respectively. The Company utilized the RP 2015/MP2015 mortality tables published by the Society of Actuaries to measure the benefit obligations as of December 31, 2018 and 2017.

Weighted average assumptions used to determine net periodic benefit costs for the years ended December 31, 2018, 2017 and 2016 consisted of the following:



	Year ended December 31,
	2018		2017		2016
Expected long-term rate of return on plan assets^(a)	5.75	%	6.50	%	6.50	%
Discount rate ^(b)	4.24	%	3.88	%	3.72	%
Rate of compensation increase^(c)	—	%	—	%	—	%


^(a)	The expected long-term rate of return on plan assets decreased in 2018 consistent with the derisking shift to increase the fixed income, liability-matching investment allocation.

^(b)

The discount rate used to determine net periodic pension benefit was 3.68% from January 1, 2018 through remeasurement date (September 30, 2018), and was 4.24% from remeasurement date through December 31, 2018. The discount rate used to determine net periodic pension benefit was 4.20% from January 1, 2017 through remeasurement date (September 30, 2017), and was 3.88% from remeasurement date through December 31, 2017. The discount rate used to determine net periodic pension benefit was 3.99% from the closing date of the TWC Transaction through remeasurement date (June 30, 2016), and was 3.72% from remeasurement date through December 31, 2016.


^(c)	The rate of compensation increase used to determine net periodic pension benefit was 4.25% from the closing date of the TWC Transaction through remeasurement date (June 30, 2016), and 0% thereafter. See “Pension Plan Curtailment Amendment” below for further discussion.

In developing the expected long-term rate of return on plan assets, the Company considered the pension portfolio’s composition, past average rate of earnings and the Company’s future asset allocation targets. The weighted average expected long-term rate of return on plan assets and discount rate used to determine net periodic pension benefit for the year ended December 31, 2019 are expected to be 5.75% and 4.37%, respectively. The Company determined the discount rates used to determine benefit obligations and net periodic pension benefit based on the yield of a large population of high quality corporate bonds with cash flows sufficient in timing and amount to settle projected future defined benefit payments.

Pension Plan Curtailment Amendment

Following the closing of the TWC Transaction, Charter amended the pension plans to freeze future benefit accruals to current active plan participants as of August 31, 2016. Effective September 1, 2016, no future compensation increases or future service will be credited to participants of the pension plans and new hires are not eligible to participate in the plans. Upon announcement and approval of the plan amendment, the assumptions underlying the pension liability and pension asset values were reassessed utilizing remeasurement date assumptions in accordance with Charter’s mark-to-market pension accounting policy to record gains and losses in the period in which a remeasurement event occurs. The $675 million curtailment gain recorded during the year ended December 31, 2016 was primarily driven by the reduction of the compensation rate assumption to 0% in accordance with the terms of the plan amendment, reflecting the pension liability at its accumulated benefit obligation instead of its projected benefit obligation at the remeasurement date.

Pension Plan Assets

The assets of the qualified pension plans are held in a master trust in which the qualified pension plans are the only participating plans (the “Master Trust”). The investment policy for the qualified pension plans is to manage the assets of the Master Trust with the objective to provide for pension liabilities to be met, maintaining retirement income security for the participants of the plans and their beneficiaries. The investment portfolio is a mix of pooled funds invested in fixed income securities, equity securities and certain alternative investments with the objective of matching plan liability performance, diversifying risk and achieving a target investment return.

The pension plan’s Investment Committee establishes risk mitigation policies and regularly monitors investment performance, investment allocation policies, and the execution of these strategies. The Investment Committee engages a third-party investment firm with responsibility of executing the directives of the Investment Committee, monitoring the performance of individual investment managers of the Master Trust, and making adjustments and changes within defined parameters when necessary. On a periodic basis, the Investment Committee conducts a broad strategic review of its portfolio construction and investment allocation policies. Neither the Company, the Investment Committee, nor the third-party investment firm manages any assets internally.

Pension assets are managed in a balanced portfolio comprised of two major components: a return-seeking portion and a liability-matching portion. The expected role of return-seeking investments is to achieve a reasonable long-term growth of pension assets with a prudent level of risk using asset diversity in order to balance return and volatility, while the role of liability-matching investments is to provide a partial economic hedge against liability performance associated with changes in interest rates.

The Company uses an investment strategy referred to as a de-risking glide path to increase the fixed income allocation as the funded status of the qualified pension plans improves. As the qualified pension plans reach set funded status milestones, the assets will be rebalanced to shift more assets from equity to fixed income. Based on the progress with this strategy, the target investment allocation for pension fund assets is permitted to vary within specified ranges subject to Investment Committee approval for return-seeking securities and liability-matching securities. The target and actual investment allocation of the qualified pension plans by asset category consisted of the following:



	December 31, 2018				December 31, 2017
	Target		Actual		Target		Actual
	Allocation		Allocation		Allocation		Allocation
Return-seeking securities	60.0	%	54.6	%	75.0	%	73.1	%
Liability-matching securities	40.0	%	45.1	%	25.0	%	26.7	%
Other investments	—	%	0.3	%	—	%	0.2	%

The following tables set forth the investment assets of the qualified pension plans by level within the fair value hierarchy as of December 31, 2018 and 2017:



	December 31, 2018
	Fair Value		Level 1		Level 2
Cash	$	4	$	4	$	—
Commingled bond funds^(a)	1,270		—		1,270
Commingled equity funds^(a)	952		—		952
Collective trust funds^(b)	113		—		113
Total investment assets	2,339		$	4	$	2,335
Accrued investment income and other receivables	11
Investments measured at net asset value^(c)	593
Fair value of plan assets	$	2,943



	December 31, 2017
	Fair Value		Level 1		Level 2
Cash	$	3	$	3	$	—
Commingled bond funds^(a)	796		—		796
Commingled equity funds^(a)	2,368		—		2,368
Collective trust funds^(b)	68		—		68
Total investment assets	3,235		$	3	$	3,232
Accrued investment income and other receivables	34
Investments measured at net asset value^(c)	4
Fair value of plan assets	$	3,273

^(a)

Commingled funds include bond funds with corporate and U.S. treasury debt securities and equity funds with global equity index, infrastructure and real estate securities that have a readily determinable fair value and are valued using the net assets provided by the administrator of the fund. The value of each fund is based on the fair value of underlying securities in the portfolio, which represents the amount that the fund might reasonably expect to receive for the securities upon a sale, less liabilities, and then divided by the number of units outstanding. Equity securities within the funds are valued using observable inputs on either a daily or weekly basis and the resulting per share value serves as a basis for current redemption value. Debt securities within the funds are valued based on observable prices from the new issue market, benchmark quotes, secondary trading and dealer quotes.

^(b)

Collective trust funds consist of short-term investment strategies comprised of instruments issued or fully guaranteed by the U.S. government and/or its agencies and multi-strategy funds, which are valued using the net assets provided by the administrator of the fund. The value of each fund is based on the readily determinable fair value of the underlying assets owned by the fund, less liabilities, and then divided by the number of units outstanding.


^(c)	As a practical expedient, certain investment classes which hold securities that are not readily available for redemption and are measured at fair value using the net asset value ("NAV") per share (or its equivalent) have not been classified in the fair value hierarchy.

Investments Measured at Net Asset Value per Share Practical Expedient

The following table summarizes the investment classes for which fair value is measured using the NAV per share (or its equivalent) practical expedient as of December 31, 2018. These investment classes are not readily available for redemption. The NAV of each fund is based on the fair value of underlying assets in the portfolio. Certain investments report NAV per share on a month or quarter lag. There are no material unfunded commitments with respect to these investment classes.



	December 31, 2018
	Fair Value		Redemption Frequency (if currently eligible)	Redemption Notice Period
Alternative funds^(a)	$	301	weekly, monthly	1-180 days
Fixed income funds^(b)	164		daily, monthly	10-40 days
Real estate funds^(c)	128		quarterly	45-90 days
Investments measured at NAV	$	593

^(a)

The alternative fund investment class includes funds with various securities selected to provide complimentary sources of return with our equity and bond portfolios that better manage risk. The Company’s alternative fund investments include holdings such as public equities, exchange traded derivatives, and corporate bonds, among others. A portion of the alternative funds cannot be redeemed until the one year anniversary of the purchase date.


^(b)	This investment class includes funds that invest in residential and commercial mortgages, as well as global sovereign securities.


^(c)	This investment class includes real estate funds that are not publicly traded and invest primarily in unlisted direct core real estate, including super-regional malls, shopping centers, and commercial real estate (e.g. education, healthcare and storage).

Pension Plan Contributions

The Company made no cash contributions to the qualified pension plans during the years ended December 31, 2018, 2017 and 2016; however, the Company may make discretionary cash contributions to the qualified pension plans in the future. Such contributions will be dependent on a variety of factors, including current and expected interest rates, asset performance, the funded status of the qualified pension plans and management’s judgment. For the nonqualified unfunded pension plan, the Company will continue to make contributions during 2019 to the extent benefits are paid.

Benefit payments for the pension plans are expected to be $161 million in 2019, $166 million in 2020, $170 million in 2021, $172 million in 2022, $174 million in 2023 and $866 million in 2024 to 2028.

Multiemployer Plans

The Company contributes to multiemployer plans under the terms of collective-bargaining agreements that cover its union-represented employees. Such multiemployer plans provide medical, pension and retirement savings benefits to active employees and retirees. The Company made contributions to multiemployer plans of $9 million, $18 million and $31 million for the years ended December 31, 2018, 2017 and 2016, respectively.

The risks of participating in multiemployer pension plans are different from single-employer pension plans in the following aspects: (a) assets contributed to a multiemployer pension plan by one employer may be used to provide benefits to employees of other participating employers, (b) if a participating employer stops contributing to the multiemployer pension plan, the unfunded obligations of the plan may be borne by the remaining participating employers and (c) if the Company chooses to stop participating in any of the multiemployer pension plans, it may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The Company records withdrawal liabilities as other long-term liabilities in the consolidated balance sheets. As of December 31, 2018 and 2017, other long-term liabilities includes approximately $104 million and $83 million, respectively, related to the Company's withdrawal from a multiemployer pension plan.

The multiemployer pension plan to which the Company has contributed received a Pension Protection Act “green” zone status in 2017. The zone status is based on the most recent information the Company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the green zone are at least 80% funded.

Defined Contribution Benefit Plans

The Company’s employees may participate in the Charter Communications, Inc. 401(k) Savings Plan (the “401(k) Plan”). Employees that qualify for participation can contribute up to 50% of their salary, on a pre-tax basis, subject to a maximum contribution limit as determined by the Internal Revenue Service. The Company’s matching contribution is discretionary and is equal to 100% of the amount of the salary reduction the participant elects to defer (up to 6% of the participant’s eligible compensation), excluding any catch-up contributions and is paid by the Company on a per pay period basis. The Company made contributions to the 401(k) plan totaling $290 million, $274 million and $147 million for the years ended December 31, 2018, 2017 and 2016, respectively.

For employees who are not eligible to participate in the Company’s long-term incentive plan and who are not covered by a collective bargaining agreement, the Company offers a contribution to the Retirement Accumulation Plan ("RAP"), equal to 3% of eligible pay. The Company made contributions to the RAP totaling $151 million, $139 million and $48 million for the years ended December 31, 2018, 2017 and 2016, respectively.