Postretirement Plans

12 Months Ended

Dec. 31, 2020

Retirement Benefits, Description [Abstract]

Postretirement Plans

Postretirement Plans

Many of our employees have earned benefits under defined benefit pension plans. Nonunion and the majority of union employees that had participated in defined benefit pension plans transitioned to a company-funded defined contribution retirement savings plan in 2016. Additional union employees transitioned to company-funded defined contribution retirement savings plans effective January 1, 2019.

We fund our major pension plans through trusts. Pension assets are placed in trust solely for the benefit of the plans’ participants, and are structured to maintain liquidity that is sufficient to pay benefit obligations as well as to keep pace over the long-term with the growth of obligations for future benefit payments.

We also have other postretirement benefits (OPB) other than pensions which consist principally of health care coverage for eligible retirees and qualifying dependents, and to a lesser extent, life insurance to certain groups of retirees. Retiree health care is provided principally until age 65 for approximately two-thirds of those participants who are eligible for health care coverage. Certain employee groups, including employees covered by most United Auto Workers bargaining agreements, are provided lifetime health care coverage. The funded status of the plans is measured as the difference between the plan assets at fair value and the projected benefit obligation (PBO). We have recognized the aggregate of all overfunded plans in Other assets, and the aggregate of all underfunded plans in either Accrued retiree health care or Accrued pension plan liability, net. The portion of the amount by which the actuarial present value of benefits included in the PBO exceeds the fair value of plan assets, payable in the next 12 months, is reflected in Accrued liabilities.

The components of net periodic benefit (income)/cost were as follows:

	Pension			Other Postretirement Benefits
Years ended December 31,	2020	2019	2018	2020	2019	2018
Service cost	$3	$2	$430	$89	$77	$94
Interest cost	2,455	2,925	2,781	130	196	194
Expected return on plan assets	(3,756)	(3,863)	(4,009)	(9)	(8)	(8)
Amortization of prior service credits	(80)	(79)	(56)	(38)	(35)	(126)
Recognized net actuarial loss/(gain)	1,032	643	1,130	(63)	(46)	(10)
Settlement/curtailment loss/(gain)	9		44	(4)
Net periodic benefit (income)/cost	($337)	($372)	$320	$105	$184	$144
Net periodic benefit cost included in (Loss)/earnings from operations	$3	$313	$313	$91	$88	$84
Net periodic benefit (income)/cost included in Other income, net	(340)	(374)	(143)	16	107	101
Net periodic benefit (income)/cost included in (Loss)/earnings before income taxes	($337)	($61)	$170	$107	$195	$185

The following tables show changes in the benefit obligation, plan assets and funded status of both pensions and OPB for the years ended December 31, 2020 and 2019. Benefit obligation balances presented below reflect the PBO for our pension plans, and accumulated postretirement benefit obligations (APBO) for our OPB plans.

	Pension		Other Postretirement Benefits
	2020	2019	2020	2019
Change in benefit obligation
Beginning balance	$77,645	$71,424	$5,080	$5,114
Service cost	3	2	89	77
Interest cost	2,455	2,925	130	196
Amendments			(29)	1
Actuarial loss/(gain)	7,759	8,695	(218)	127
Settlement/curtailment/other	(68)	(756)	55
Gross benefits paid	(5,386)	(4,658)	(450)	(474)
Subsidies			36	36
Exchange rate adjustment	7	13		3
Ending balance	$82,415	$77,645	$4,693	$5,080
Change in plan assets
Beginning balance at fair value	$61,711	$56,102	$149	$132
Actual return on plan assets	9,275	10,851	21	26
Company contribution	3,013	16		1
Plan participants’ contributions			6	6
Settlement payments	(68)	(756)
Benefits paid	(5,241)	(4,514)	(16)	(16)
Exchange rate adjustment	6	12
Ending balance at fair value	$68,696	$61,711	$160	$149
Amounts recognized in statement of financial position at December 31 consist of:
Other assets	$837	$484
Accrued liabilities	(148)	(142)	($396)	($391)
Accrued retiree health care			(4,137)	(4,540)
Accrued pension plan liability, net	(14,408)	(16,276)
Net amount recognized	($13,719)	($15,934)	($4,533)	($4,931)

Amounts recognized in Accumulated other comprehensive loss at December 31 were as follows:

	Pension		Other Postretirement Benefits
	2020	2019	2020	2019
Net actuarial loss/(gain)	$24,324	$23,124	($735)	($625)
Prior service credits	(1,387)	(1,467)	(110)	(122)
Total recognized in Accumulated other comprehensive loss	$22,937	$21,657	($845)	($747)

The accumulated benefit obligation (ABO) for all pension plans was $80,694 and $75,787 at December 31, 2020 and 2019. Key information for our plans with ABO and PBO in excess of plan assets as of December 31 was as follows:

	2020	2019
Accumulated benefit obligation	$74,337	$70,466
Fair value of plan assets	61,502	55,907

	2020	2019
Projected benefit obligation	$76,057	$72,325
Fair value of plan assets	61,502	55,907

Assumptions

The following assumptions, which are the weighted average for all plans, are used to calculate the benefit obligation at December 31 of each year and the net periodic benefit cost for the subsequent year.

December 31,	2020		2019		2018
Discount rate:
Pension	2.50	%	3.30	%	4.20	%
Other postretirement benefits	2.00	%	3.00	%	4.00	%
Expected return on plan assets	6.50	%	6.80	%	6.80	%
Rate of compensation increase	4.30	%	4.30	%	5.30	%
Interest crediting rates for cash balance plans	5.00	%	5.15	%	5.15	%

The discount rate for each plan is determined based on the plans’ expected future benefit payments using a yield curve developed from high quality bonds that are rated as Aa or better by at least half of the four rating agencies utilized as of the measurement date. The yield curve is fitted to yields developed from bonds at various maturity points. Bonds with the ten percent highest and the ten percent lowest yields are omitted. The present value of each plan’s benefits is calculated by applying the discount rates to projected benefit cash flows.

The pension fund’s expected return on plan assets assumption is derived from a review of actual historical returns achieved by the pension trust and anticipated future long-term performance of individual asset classes. While consideration is given to historical returns, the assumption represents a long-term, prospective return. The expected return on plan assets component of the net periodic benefit cost for the upcoming plan year is determined based on the expected return on plan assets assumption and the market-related value of plan assets (MRVA). Since our adoption of the accounting standard for pensions in 1987, we have determined the MRVA based on a five-year moving average of plan assets. As of December 31, 2020, the MRVA was approximately $6,805 less than the fair market value of assets.

Assumed health care cost trend rates were as follows:

December 31,	2020		2019		2018
Health care cost trend rate assumed next year	4.50	%	5.00	%	5.50	%
Ultimate trend rate	4.50	%	4.50	%	4.50	%
Year that trend reached ultimate rate	2021		2021		2021

Plan Assets

Investment Strategy The overall objective of our pension assets is to earn a rate of return over time to satisfy the benefit obligations of the pension plans and to maintain sufficient liquidity to pay benefits and address other cash requirements of the pension fund. Specific investment objectives for our long-term investment strategy include reducing the volatility of pension assets relative to pension liabilities, achieving a competitive total investment return, achieving diversification between and within asset classes and managing other risks. Investment objectives for each asset class are determined based on specific risks and investment opportunities identified.

We periodically update our long-term, strategic asset allocations. We use various analytics to determine the optimal asset mix and consider plan liability characteristics, liquidity characteristics, funding requirements, expected rates of return and the distribution of returns. We identify investment benchmarks to evaluate performance for the asset classes in the strategic asset allocation that are market-based and investable where possible. Actual allocations to each asset class vary from target allocations due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully implement investment allocation positions, and the timing of benefit payments and contributions. Short-term investments and exchange-traded derivatives are used to rebalance the actual asset allocation to the target asset allocation. The asset allocation is monitored and rebalanced frequently. The actual and target allocations by asset class for the pension assets at December 31 were as follows:

	Actual Allocations				Target Allocations
Asset Class	2020		2019		2020		2019
Fixed income	49	%	49	%	49	%	47	%
Global equity	30		29		29		29
Private equity	6		5		5		5
Real estate and real assets	7		8		9		9
Hedge funds	8		9		8		10
Total	100	%	100	%	100	%	100	%

Fixed income securities are invested primarily in a diversified portfolio of long duration instruments as well as Emerging Market, Structured, High Yield and Private Debt. Global equity securities are invested in a diversified portfolio of U.S. and non-U.S. companies, across various industries and market capitalizations.

Private equity investment vehicles are primarily limited partnerships (LPs) that mainly invest in U.S. and non-U.S. leveraged buyout, venture capital and special situation strategies. Real estate and real assets include global private investments that may be held through investments in a limited partnership (LP) or other fund structures and publicly traded investments (such as Real Estate Investment Trusts (REITs) in the case of real estate). Real estate includes, but is not limited to, investments in office, retail, apartment and industrial properties. Real assets include, but are not limited to, investments in natural resources (such as energy, farmland and timber), commodities and infrastructure.

Hedge fund investments seek to capitalize on inefficiencies identified across and within different asset classes or markets. Hedge fund strategy types include, but are not limited to directional, event driven, relative value, long-short and multi-strategy.

Investment managers are retained for explicit investment roles specified by contractual investment guidelines. Certain investment managers are authorized to use derivatives, such as equity or bond futures, swaps, options and currency futures or forwards. Derivatives are used to achieve the desired market exposure of a security or an index, transfer value-added performance between asset classes,

achieve the desired currency exposure, adjust portfolio duration or rebalance the total portfolio to the target asset allocation.

As a percentage of total pension assets, derivative net notional amounts were 8.3% and 4.3% for fixed income, including to-be-announced mortgage-backed securities and treasury forwards, and 0.4% and 3.6% for global equity and commodities at December 31, 2020 and 2019.

In November 2020, the Company contributed $3,000 of our common stock to the pension fund. An independent fiduciary was retained to manage and liquidate the stock over time at its discretion. Plan assets included $3,298 and $0 of our common stock as of December 31, 2020 and 2019.

Risk Management In managing the pension assets, we review and manage risk associated with funded status risk, interest rate risk, market risk, counterparty risk, liquidity risk and operational risk. Liability matching and asset class diversification are central to our risk management approach and are integral to the overall investment strategy. Further, asset classes are constructed to achieve diversification by investment strategy, by investment manager, by industry or sector and by holding. Investment manager guidelines for publicly traded assets are specified and are monitored regularly through the custodian. Credit parameters for counterparties have been established for managers permitted to trade over-the-counter derivatives. Valuation is governed through several types of procedures, including reviews of manager valuation policies, custodian valuation processes, pricing vendor practices, pricing reconciliation, and periodic, security-specific valuation testing.

Fair Value Measurements The following table presents our plan assets using the fair value hierarchy as of December 31, 2020 and 2019. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant unobservable inputs.

	December 31, 2020				December 31, 2019
	Total	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3
Fixed income securities:
Corporate	$20,841		$20,801	$40	$19,341		$19,336	$5
U.S. government and agencies	5,170		5,168	2	5,759		5,759
Mortgage backed and asset backed	786		666	120	1,181		720	461
Municipal	1,176		1,104	72	1,317		1,317
Sovereign	1,040		1,038	2	1,076		1,076
Other	19	$18	1		55	$7	48
Derivatives:
Assets	6		6
Liabilities	(17)		(17)		(143)		(143)
Cash equivalents and other short-term investments	1,081		1,081		769		769
Equity securities:
U.S. common and preferred stock	5,013	5,013			4,866	4,866
Non-U.S. common and preferred stock	5,577	5,575		2	5,529	5,527		2
Boeing company stock	3,298	3,298
Derivatives:
Assets	10		10		6		6
Liabilities	(9)		(9)		(5)		(5)
Private equity
Real estate and real assets:
Real estate	351	351			454	454
Real assets	786	723	61	2	810	649	157	4
Derivatives:
Assets	6		6		5	1	4
Liabilities	(2)		(2)		(2)		(2)
Total	$45,132	$14,978	$29,914	$240	$41,018	$11,504	$29,042	$472
Fixed income common/collective/pooled funds	$2,345				$959
Fixed income other	604				512
Equity common/collective pooled funds	6,947				6,301
Private equity	4,013				3,184
Real estate and real assets	3,359				3,605
Hedge funds	5,745				5,688
Total investments measured at NAV as a practical expedient	$23,013				$20,249
Cash	$267				$207
Receivables	992				383
Payables	(708)				(146)
Total	$68,696				$61,711

Fixed income securities are primarily valued upon a market approach, using matrix pricing and considering a security’s relationship to other securities for which quoted prices in an active market may be available, or an income approach, converting future cash flows to a single present value amount. Inputs used in developing fair value estimates include reported trades, broker quotes, benchmark yields, and base spreads.

Common/collective/pooled funds are typically common or collective trusts valued at their net asset values (NAVs) that are calculated by the investment manager or sponsor of the fund and have daily or monthly liquidity. Derivatives included in the table above are over-the-counter and are primarily valued using an income approach with inputs that include benchmark yields, swap curves, cash flow analysis, rating agency data and interdealer broker rates. Exchange-traded derivative positions are reported in accordance with changes in daily variation margin which is settled daily and therefore reflected in the payables and receivables portion of the table.

Cash equivalents and other short-term investments (which are used to pay benefits) are held in a separate account which consists of a commingled fund (with daily liquidity) and separately held short-term securities and cash equivalents. All of the investments in this cash vehicle are valued daily using a market approach with inputs that include quoted market prices for similar instruments. In the event a market price is not available for instruments with an original maturity of one year or less, amortized cost is used as a proxy for fair value. Common and preferred stock equity securities are primarily valued using a market approach based on the quoted market prices of identical instruments.

Private equity and private debt NAV valuations are based on the valuation of the underlying investments, which include inputs such as cost, operating results, discounted future cash flows and market based comparable data. For those investments reported on a one-quarter lagged basis (primarily LPs) we use NAVs, adjusted for subsequent cash flows and significant events.

Real estate and real asset NAV valuations are based on valuation of the underlying investments, which include inputs such as cost, discounted future cash flows, independent appraisals and market based comparable data. For those investments reported on a one-quarter lagged basis (primarily LPs) NAVs are adjusted for subsequent cash flows and significant events. Publicly traded REITs and infrastructure stocks are valued using a market approach based on quoted market prices of identical instruments. Exchange-traded commodities futures positions are reported in accordance with changes in daily variation margin which is settled daily and therefore reflected in the payables and receivables portion of the table.

Hedge fund NAVs are generally based on the valuation of the underlying investments. This is primarily done by applying a market or income valuation methodology depending on the specific type of security or instrument held.

Investments in private equity, private debt, real estate, real assets, and hedge funds are primarily calculated and reported by the General Partner (GP), fund manager or third party administrator. Additionally, some investments in fixed income and equity are made via commingled vehicles and are valued in a similar fashion. Pension assets invested in commingled and limited partnership structures rely on the NAV of these investments as the practical expedient for the valuations.

The following tables present a reconciliation of Level 3 assets held during the years ended December 31, 2020 and 2019. Transfers into and out of Level 3 are reported at the beginning-of-year values.

	January 1 2020 Balance	Net Realized and Unrealized Gains/(Losses)	Net Purchases, Issuances and Settlements	Net Transfers Into/(Out of) Level 3	December 31 2020 Balance
Fixed income securities:
Corporate	$5	$1	$18	$16	$40
U.S. government and agencies				2	2
Mortgage backed and    asset backed	461	(1)	(93)	(247)	120
Municipal		3	2	67	72
Sovereign		(1)	2	1	2
Equity securities:
Non-U.S. common and preferred stock	2				2
Real assets	4			(2)	2
Total	$472	$2	($71)	($163)	$240

	January 1 2019 Balance	Net Realized and Unrealized Gains	Net Purchases, Issuances and Settlements	Net Transfers Into Level 3	December 31 2019 Balance
Fixed income securities:
Corporate	$2		$3		$5
Mortgage backed and asset backed	312	$11	137	$1	461
Equity securities:
Non-U.S. common and preferred stock			1	1	2
Real assets	4				4
Total	$318	$11	$141	$2	$472

For the year ended December 31, 2020, the changes in unrealized gains/(losses) for Level 3 assets still held at December 31, 2020 were $2 for corporate, $1 for mortgage backed and asset backed fixed income securities, $3 for municipal bonds and ($1) for sovereign. For the year ended December 31, 2019, the changes in unrealized gains/(losses) for Level 3 assets still held at December 31, 2019 were $10 for mortgage backed and asset backed fixed income securities and ($1) for non-U.S. common and preferred stock equity securities.

OPB Plan Assets The majority of OPB plan assets are invested in a balanced index fund which is comprised of approximately 60% equities and 40% debt securities. The index fund is valued using a market approach based on the quoted market price of an identical instrument (Level 1). The expected rate of return on these assets does not have a material effect on the net periodic benefit cost.

Cash Flows

Contributions Required pension contributions under the Employee Retirement Income Security Act (ERISA), as well as rules governing funding of our non-US pension plans, are not expected to be significant in 2021. During the fourth quarter of 2020, we contributed $3,000 in common stock to the pension fund. We do not expect to make discretionary contributions to our pension plans in 2021.

Estimated Future Benefit Payments The table below reflects the total pension benefits expected to be paid from the plans or from our assets, including both our share of the benefit cost and the participants’ share of the cost, which is funded by participant contributions. OPB payments reflect our portion only.

Year(s)	2021	2022	2023	2024	2025	2026-2030
Pensions	$4,959	$4,825	$4,720	$4,657	$4,581	$21,383
Other postretirement benefits:
Gross benefits paid	462	452	435	415	394	1,606
Subsidies	(32)	(32)	(32)	(31)	(30)	(139)
Net other postretirement benefits	$430	$420	$403	$384	$364	$1,467

Termination Provisions

Certain of the pension plans provide that, in the event there is a change in control of the Company which is not approved by the Board of Directors and the plans are terminated within five years thereafter, the assets in the plan first will be used to provide the level of retirement benefits required by ERISA, and then any surplus will be used to fund a trust to continue present and future payments under the postretirement medical and life insurance benefits in our group insurance benefit programs.

Should we terminate certain pension plans under conditions in which the plan’s assets exceed that plan’s obligations, the U.S. government will be entitled to a fair allocation of any of the plan’s assets based on plan contributions that were reimbursed under U.S. government contracts.

Defined Contribution Plans

We provide certain defined contribution plans to all eligible employees. The principal plans are the Company-sponsored 401(k) plans. The expense for these defined contribution plans was $1,351, $1,533 and $1,480 in 2020, 2019 and 2018, respectively.