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RETIREMENT MEDICAL PLANS
 12 Months Ended
Sep. 30, 2019
Defined Benefit Plan, Postretirement Medical Plan with Prescription Drug Benefits [Abstract]  
RETIREMENT MEDICAL PLANS RETIREMENT MEDICAL PLANS

The company has retirement medical plans that cover certain of its U.S. and non-U.S. employees, including certain employees of divested businesses, and provide for medical payments to eligible employees and dependents upon retirement. These plans are unfunded.

On September 8, 2017, the company determined to modify the benefits provided to certain former union employee retirees. Under these modifications, which may be amended at the company’s discretion at any time, the company expects to provide (i) each retiree over the age of 65 with a defined contribution of $4,000 annually and (ii) each retiree under the age of 65 with a level of benefits generally equivalent to those currently provided to the company’s active employees, in each case and as currently contemplated, for a period of seven years. These benefit modifications generated a $315 million prior service credit in September 2017, which will be amortized over the retirees’ average life expectancy, which is currently estimated to be 9 years.

On September 23, 2019, the Company notified certain medical plan participants that it will amend the benefits provided to these former union employee retirees. Under these modifications, which may be amended at the company’s discretion at any time, the company reduced the defined contribution to $3,000 in 2020, decreasing by $600 each year thereafter until 2024. These benefit modifications generated a $15 million prior service credit in September 2019, which will be amortized over the retirees’ average life expectancy, which is currently estimated to be 9 years.

The mortality assumptions for participants in the company’s U.S. plans incorporates future mortality improvements from tables published by the Society of Actuaries ("SOA"). The company reviewed the new SOA mortality and mortality improvement tables and utilized an actuary to conduct a study based on the company’s plan participants. The company determined that the best representation of the plans' mortality is to utilize the new SOA mortality and mortality improvement tables as the reference table for credibility-weighted mortality rates, blended with company-specific mortality based on the study conducted by the actuary. . The company considers improvement scales released annually by the SOA

The company’s retiree medical obligations were measured as of September 30, 2019, 2018, and 2017. The following are the assumptions used in the measurement of the accumulated postretirement benefit obligation ("APBO") and retiree medical expense:
 
 
2019
 
2018
 
2017
Discount rate
2.98
%
 
4.05
%
 
3.32
%
Health care cost trend rate
6.36
%
 
6.18
%
 
6.52
%
Ultimate health care trend rate
4.69
%
 
4.63
%
 
4.65
%
Year ultimate rate is reached
2028

 
2024

 
2024



The assumptions noted above are used to calculate the APBO for each fiscal year end and retiree medical expense for the subsequent fiscal year.
 
The discount rate is used to calculate the present value of the APBO. This rate is determined based on high-quality fixed income investments that match the duration of expected retiree medical benefits. The company has used the corporate AA/Aa bond rate for this assumption. The health care cost trend rate represents the company’s expected annual rates of change in the cost of health care benefits. The company’s projection for fiscal year 2020 health care cost trend rate is 6.36 percent.
 
The APBO as of the September 30, 2019 and 2018 measurement dates are summarized as follows (in millions):
 
 
2019
 
2018
Retirees
$
67

 
$
86

Employees eligible to retire
—

 
—

     Total
$
67

 
$
86


The following reconciles the change in APBO and the amounts included in the Consolidated Balance Sheet for years ended September 30, 2019 and 2018, respectively (in millions):
 
 
2019
 
2018
APBO — beginning of year
$
86

 
$
104

Interest cost
3

 
3

Actuarial (gain) loss
4

 
(5
)
Plan amendment
(15
)
 
—

Foreign currency rate changes
—

 
(1
)
Benefit payments (1)
(11
)
 
(15
)
APBO — end of year
67

 
86

Retiree medical liability
$
67

 
$
86


(1) 
Net of subsidies and rebates available under Employer Group Waiver Plan ("EGWP").

Actuarial losses(gains) relate to changes in the discount rate and other actuarial assumptions. In accordance with ASC Topic 715, "Compensation – Retirement Benefits", a portion of the actuarial losses is not subject to amortization. The actuarial losses that are subject to amortization are generally amortized over the average lifetime of inactive participants of approximately 9 years.
 
The retiree medical liability is included in the Consolidated Balance Sheet as follows (in millions):
 
 
September 30,
 
2019
 
2018
Current — included in compensation and benefits
$
11

 
$
13

Long-term — included in retirement benefits
56

 
73

Retiree medical liability
$
67

 
$
86


The following table summarizes the amounts included in AOCL net of tax related to retiree medical liabilities as of September 30, 2019 and 2018 and changes recognized in Other Comprehensive Income (Loss) net of tax for the years ended September 30, 2019 and 2018.
 
 
Net Actuarial
Loss
 
Prior
Service
Cost
(Benefit)
 
Total
Balance at September 30, 2018
$
76

 
$
(178
)
 
$
(102
)
Net actuarial loss for the year
4

 
—

 
4

Recognized prior service costs due to plan amendment

—

 
(15
)
 
(15
)
Amortization for the year
(15
)
 
35

 
20

       Deferred tax impact
5

 
(7
)
 
(2
)
Balance at September 30, 2019
$
70

 
$
(165
)
 
$
(95
)
 
 
 
 
 
 
Balance at September 30, 2017
$
92

 
$
(203
)
 
$
(111
)
Net actuarial gain for the year
(5
)
 
—

 
(5
)
Amortization for the year
(17
)
 
35

 
18

Deferred tax impact
6

 
(10
)
 
(4
)
Balance at September 30, 2018
$
76

 
$
(178
)
 
$
(102
)

The net actuarial loss and prior service benefit that are estimated to be amortized from AOCL into net periodic retiree medical income in fiscal year 2020 are $14 million and $36 million, respectively.
 
The components of retiree medical expense for the years ended September 30 are as follows (in millions):

 
2019
 
2018
 
2017
Service cost
$
—

 
$
—

 
$
—

Interest cost
3

 
3

 
14

Amortization of:
 
 
 
 
 
Prior service benefit
(35
)
 
(35
)
 
(5
)
Actuarial losses
15

 
17

 
15

Retiree medical (income) expense
$
(17
)
 
$
(15
)
 
$
24


 
A one-percentage point change in the assumed health care cost trend rate for all years to, and including, the ultimate rate would have the following effects (in millions):
 
 
2019
 
2018
Effect on total service and interest cost
 
 
 
1% Increase
$
—

 
$
—

1% Decrease
—

 
—

Effect on APBO
 
 
 
1% Increase
5

 
4

1% Decrease
(4
)
 
(4
)


     The company expects future benefit payments as follows (in millions):
 
 
Gross
Benefit
Payments
 
Gross
Receipts (1)
Fiscal 2020
$
11

 
$
—

Fiscal 2021
9

 
—

Fiscal 2022
8

 
—

Fiscal 2023
6

 
—

Fiscal 2024
5

 
—

Fiscal 2025 – 2029
14

 
1


(1) 
Consists of subsidies and rebates available under EGWP.