Retirement Benefit Liabilities

Retirement benefit liabilities consisted of the following (in millions):



	March 31, 2017			September 30, 2016
Retiree medical liability	$	438		$	447
Pension liability	267			283
Other	14			13
Subtotal	719			743
Less: current portion (included in compensation and benefits, Note 16)	(39		)	(40		)
Retirement benefits	$	680		$	703

The components of net periodic pension and retiree medical expense included in continuing operations for the three months ended March 31 are as follows (in millions):



	2017					2016
	Pension			Retiree Medical		Pension			Retiree Medical
Interest cost	$	13		$	3	$	27		$	5
Assumed return on plan assets	(24		)	—		(25		)	—
Amortization of prior service costs	—			—		—			—
Recognized actuarial loss	8			3		6			3
Total expense (income)	$	(3	)	$	6	$	8		$	8

The components of net periodic pension and retiree medical expense included in continuing operations for the six months ended March 31 are as follows (in millions):



	2017						2016
	Pension			Retiree Medical			Pension			Retiree Medical
Interest cost	$	26		$	7		$	33		$	9
Assumed return on plan assets	(47		)	—			(50		)	—
Amortization of prior service costs	—			(1		)	—			—
Recognized actuarial loss	15			7			12			6
Total expense (income)	$	(6	)	$	13		$	(5	)	$	15

In fiscal years 2002 and 2004, the company approved amendments to certain retiree medical plans, including health benefits for retirees (and their surviving spouses) who were formerly United Auto Workers (“UAW”) members at ten former Rockwell International (“Rockwell”) plants. Certain of these plan amendments were challenged in lawsuits that were filed in the United States District Court for the Eastern District of Michigan (“District Court”) alleging the changes breached the terms of various collective bargaining agreements (“CBAs”) entered into by Rockwell and the UAW for facilities that have either been closed or sold and alleging a companion claim under the Employee Retirement Income Security Act of 1974 (“ERISA”). The two class actions lawsuits that were filed in 2004 (Cole v. ArvinMeritor, et al. and Faust v. ArvinMeritor, et al.) by the UAW and retirees and surviving spouses claimed that the health benefits were vested for life through the negotiated CBAs. These actions were subsequently consolidated.

On December 22, 2005, the District Court issued a preliminary injunction enjoining the company from implementing changes to retiree health benefits and ordered the company to reinstate and resume paying the full cost of health benefits for the UAW retirees at the levels existing prior to the changes made in 2002 and 2004. In 2006, the District Court granted a motion by the UAW for summary judgment and granted the UAW’s request to make the terms of the preliminary injunction permanent (the “injunction”). The company accounted for the injunction as a rescission of the 2002 and 2004 plan amendments and began recording the impact of the injunction in March 2006. In addition, the injunction ordered the defendants to reimburse the plaintiffs for out-of-pocket expenses incurred since the date of the earlier benefit modifications. The company has recorded a $2 million reserve at March 31, 2017 and September 30, 2016, as the best estimate of its liability for these retroactive benefits. In 2007, the company appealed the District Court’s order to the U.S. Court of Appeals for the Sixth Circuit. The Sixth Circuit ruled to affirm the District Court’s ruling and the company moved for an en banc rehearing. This motion was held in abeyance while the parties attempted to settle the case. In July, 2016 the company moved for re-hearing based on a January 2015 U.S. Supreme Court decision on the subject matter and a subsequent Sixth Circuit ruling in a separate case on the same subject matter. The court granted the re-hearing and in April 2017, the Sixth Circuit issued its decision, reversing the District Court’s decision and finding that the retiree medical benefits were not vested for life through the CBAs. The company expects the plaintiffs to appeal for either a re-hearing en banc with the Sixth Circuit or the Supreme Court, or both.