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Pension and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract]  
Pension and Other Postretirement Benefits
Pension and Other Postretirement Benefits
We maintain five funded pension plans—three in North America (one U.S. plan and two Canadian plans) and two in the United Kingdom (CF Fertilisers UK plans acquired by us as a result of our July 31, 2015 acquisition of the remaining 50% equity interest in CF Fertilisers UK not previously owned by us). One of our Canadian plans is closed to new employees and the two United Kingdom plans are closed to new employees and future accruals. We also provide group medical insurance benefits to certain retirees in North America. The specific medical benefits provided to retirees vary by group and location.
Our plan assets, benefit obligations, funded status and amounts recognized on the consolidated balance sheets for our North America and United Kingdom plans as of the December 31 measurement date are as follows:
 
Pension Plans
 
Retiree Medical Plans
 
North America
 
United Kingdom
 
North America
 
December 31,
 
December 31,
 
December 31,
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Change in plan assets
 

 
 

 
 
 
 
 
 

 
 

Fair value of plan assets as of January 1
$
627

 
$
665

 
$
414

 
$
—

 
$
—

 
$
—

Acquisition of CF Fertilisers UK plans
—

 
—

 
—

 
442

 
—

 
—

Return on plan assets
39

 
3

 
21

 
(4
)
 
—

 
—

Employer contributions
4

 
19

 
19

 
9

 
4

 
4

Plan participant contributions
—

 
—

 
—

 
—

 
1

 
1

Benefit payments
(38
)
 
(38
)
 
(19
)
 
(8
)
 
(5
)
 
(5
)
Foreign currency translation
4

 
(22
)
 
(69
)
 
(25
)
 
—

 
—

Fair value of plan assets as of December 31
636

 
627

 
366

 
414

 
—

 
—

Change in benefit obligation
 

 
 

 
 

 
 

 
 

 
 

Benefit obligation as of January 1
(736
)
 
(788
)
 
(563
)
 
—

 
(56
)
 
(63
)
Acquisition of CF Fertilisers UK plans
—

 
—

 
—

 
(618
)
 
—

 
—

Service cost
(14
)
 
(14
)
 
—

 
—

 
—

 
—

Interest cost
(31
)
 
(30
)
 
(19
)
 
(9
)
 
(2
)
 
(2
)
Benefit payments
38

 
38

 
19

 
8

 
5

 
5

Foreign currency translation
(3
)
 
21

 
99

 
34

 
—

 
1

Plan participant contributions
—

 
—

 
—

 
—

 
(1
)
 
(1
)
Change in assumptions and other
(13
)
 
37

 
(95
)
 
22

 
2

 
4

Benefit obligation as of December 31
(759
)
 
(736
)
 
(559
)
 
(563
)
 
(52
)
 
(56
)
Funded status as of year end
$
(123
)
 
$
(109
)
 
$
(193
)
 
$
(149
)
 
$
(52
)
 
$
(56
)

In the table above, the line titled "change in assumptions and other" for our pension plans primarily reflects the impact of changes in discount rates and the adoption of new mortality assumptions.
Amounts recognized on the consolidated balance sheets consist of the following:
 
Pension Plans
 
Retiree Medical Plans
 
North America
 
United Kingdom
 
North America
 
December 31,
 
December 31,
 
December 31,
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Other assets
$
7

 
$
9

 
$
—

 
$
—

 
$
—

 
$
—

Accrued expenses
—

 
—

 
—

 
—

 
(5
)
 
(5
)
Other liabilities
(130
)
 
(118
)
 
(193
)
 
(149
)
 
(47
)
 
(51
)
 
$
(123
)
 
$
(109
)
 
$
(193
)
 
$
(149
)
 
$
(52
)
 
$
(56
)

Pre-tax amounts recognized in accumulated other comprehensive loss consist of the following:
 
Pension Plans
 
Retiree Medical Plans
 
North America
 
United Kingdom
 
North America
 
December 31,
 
December 31,
 
December 31,
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Prior service cost (benefit)
$
1

 
$
1

 
$
—

 
$
—

 
$
(4
)
 
$
(4
)
Net actuarial loss (gain)
91

 
88

 
80

 
(8
)
 
7

 
8

 
$
92

 
$
89

 
$
80

 
$
(8
)
 
$
3

 
$
4


Net periodic benefit cost (income) and other amounts recognized in accumulated other comprehensive loss for the years ended December 31 included the following:
 
Pension Plans
 
Retiree Medical Plans
 
North America
 
United Kingdom
 
North America
 
2016
 
2015
 
2014
 
2016
 
2015
 
2016
 
2015
 
2014
 
(in millions)
Service cost
$
14

 
$
14

 
$
13

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Interest cost
31

 
30

 
35

 
19

 
9

 
2

 
2

 
3

Expected return on plan assets
(30
)
 
(28
)
 
(36
)
 
(20
)
 
(9
)
 
—

 
—

 
—

Settlement charge
—

 
—

 
10

 
—

 
—

 
—

 
—

 
—

Curtailment loss
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2

Amortization of prior service cost (benefit)
—

 
—

 
—

 
—

 
—

 
(1
)
 
(1
)
 
(1
)
Amortization of actuarial loss (gain)
1

 
6

 
2

 
—

 
—

 
(1
)
 
1

 
—

Net periodic benefit cost (income)
16

 
22

 
24

 
(1
)
 
—

 
—

 
2

 
4

Net actuarial (gain) loss
4

 
(11
)
 
78

 
94

 
(8
)
 
(2
)
 
(4
)
 
4

Prior service cost
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(7
)
Curtailment effects
—

 
—

 
(14
)
 
—

 
—

 
—

 
—

 
—

Settlement effects
—

 
—

 
(10
)
 
—

 
—

 
—

 
—

 
—

Amortization of prior service benefit
—

 
—

 
—

 
—

 
—

 
1

 
1

 
1

Amortization of actuarial loss
(1
)
 
(6
)
 
(2
)
 
—

 
—

 
—

 
(1
)
 
(1
)
Total recognized in accumulated other comprehensive loss
3

 
(17
)
 
52

 
94

 
(8
)
 
(1
)
 
(4
)
 
(3
)
Total recognized in net periodic benefit cost (income) and accumulated other comprehensive loss
$
19

 
$
5

 
$
76

 
$
93

 
$
(8
)
 
$
(1
)
 
$
(2
)
 
$
1


In March 2014, as a result of a reduction in plan participants due to the sale of our phosphate business, we recognized:
•
a curtailment gain for our U.S. pension plan, which resulted in a reduction of $14 million in our pension benefit obligation (PBO) and a corresponding increase in other comprehensive income;
•
a decrease of $7 million in our U.S. retiree medical benefit obligation due to a plan amendment, with a corresponding increase in other comprehensive income (included in "prior service cost" in the table above); and
•
a $2 million curtailment loss related to terminated vested participants in our U.S. retiree medical plan.
In August 2014, we communicated to certain terminated vested participants in our U.S. pension plan an option to receive a lump sum payment for their accrued benefits. For participants who elected this option, benefit payments of $91 million were made in December 2014 and we incurred a settlement charge of approximately $10 million, with a corresponding reduction in accumulated other comprehensive loss. Of the $10 million settlement charge, $9 million was reported in cost of sales and $1 million was reported in selling, general and administrative expenses on our consolidated statement of operations for the year ended December 31, 2014.
Amounts that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2017 are as follows:
 
Pension Plans
 
Retiree Medical Plans
 
North America
 
United Kingdom
 
North America
 
(in millions)
Prior service cost (benefit)
$
—

 
$
—

 
$
(1
)
Net actuarial loss (gain)
1

 
1

 
(1
)

The accumulated benefit obligation (ABO) in aggregate for the defined benefit pension plans in North America was approximately $712 million and $688 million as of December 31, 2016 and December 31, 2015, respectively. The ABO in aggregate for the defined benefit pension plans in the United Kingdom was approximately $559 million and $563 million as of December 31, 2016 and December 31, 2015.

The following table presents aggregated information for those individual defined benefit pension plans with an ABO in excess of plan assets as of December 31:
 
North America
 
United Kingdom
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Accumulated benefit obligation
$
(599
)
 
$
(586
)
 
$
(559
)
 
$
(563
)
Fair value of plan assets
508

 
506

 
366

 
414


The following table presents aggregated information for those individual defined benefit pension plans with a PBO in excess of plan assets as of December 31:
 
North America
 
United Kingdom
 
2016
 
2015
 
2016
 
2015
 
(in millions)
Projected benefit obligation
$
(699
)
 
$
(679
)
 
$
(559
)
 
$
(563
)
Fair value of plan assets
568

 
561

 
366

 
414

 
 
 
 
 
 
 
 
 
 
 
 
Our pension funding policy in North America is to contribute amounts sufficient to meet minimum legal funding requirements plus discretionary amounts that we may deem to be appropriate. Actual contributions may vary from estimated amounts depending on changes in assumptions, actual returns on plan assets, changes in regulatory requirements and funding decisions.
In accordance with United Kingdom pension legislation, our United Kingdom pension funding policy is to contribute amounts sufficient to meet the funding level target agreed between the employer and the trustees of the United Kingdom plans.  Actual contributions are usually agreed with the plan trustees in connection with each triennial valuation and may vary following each such review depending on changes in assumptions, actual returns on plan assets, changes in regulatory requirements and funding decisions.
Our consolidated pension funding contributions for 2017 are estimated to be approximately $4 million for the North America plans and $18 million for the United Kingdom plans.
The expected future benefit payments for our pension and retiree medical plans are as follows:
 
Pension Plans
 
Retiree Medical Plans
 
North America
 
United Kingdom
 
North America
 
(in millions)
2017
$
42

 
$
18

 
$
5

2018
43

 
18

 
5

2019
45

 
19

 
4

2020
46

 
19

 
4

2021
47

 
20

 
4

2022-2026
246

 
107

 
15


The following assumptions were used in determining the benefit obligations and expense:
 
Pension Plans
 
Retiree Medical Plans
 
North America
 
United Kingdom
North America
 
2016
 
2015
 
2014
 
2016
 
2015
 
2016
 
2015
 
2014
Weighted-average discount rate—obligation
4.0
%
 
4.3
%
 
4.0
%
 
2.8
%
 
3.8
%
 
3.8
%
 
3.9
%
 
3.6
%
Weighted-average discount rate—expense
4.3
%
 
4.0
%
 
4.8
%
 
3.8
%
 
3.7
%
 
3.9
%
 
3.6
%
 
4.2
%
Weighted-average rate of increase in future compensation
4.3
%
 
4.3
%
 
4.3
%
 
n/a

 
n/a

 
n/a

 
n/a

 
n/a

Weighted-average expected long-term rate of return on assets—expense
4.9
%
 
4.8
%
 
5.5
%
 
5.2
%
 
5.4
%
 
n/a

 
n/a

 
n/a

Weighted-average retail price index—obligation
n/a


n/a


n/a


3.3
%
 
3.1
%
 
n/a

 
n/a

 
n/a

Weighted-average retail price index—expense
n/a


n/a


n/a


3.1
%
 
3.1
%
 
n/a

 
n/a

 
n/a


The discount rates for all plans are developed by plan using spot rates derived from a yield curve of high quality (AA rated or better) fixed income debt securities as of the year-end measurement date to calculate discounted cash flows (the projected benefit obligation) and solving for a single equivalent discount rate that produces the same projected benefit obligation. In determining our benefit obligation, we use the actuarial present value of the vested benefits to which each eligible employee is currently entitled, based on the employee’s expected date of separation or retirement.
For our North America plans, the expected long-term rate of return on assets is based on analysis of historical rates of return achieved by equity and non-equity investments and current market characteristics, adjusted for estimated plan expenses and weighted by target asset allocation percentages. As of January 1, 2017, our weighted-average expected long-term rate of return on assets is 4.2%.
For our United Kingdom plans, the expected long-term rate of return on assets is based on the expected long-term performance of the underlying investments, adjusted for investment managers' fees. As of January 1, 2017, our weighted-average expected long-term rate of return on assets is 4.6%.
The retail price index for the United Kingdom plans is developed using the Bank of England implied retail price inflation curve, which is based on the difference between yields on fixed interest government bonds and index-linked government bonds.
For the measurement of the benefit obligation at December 31, 2016 for our primary (U.S.) retiree medical benefit plans, the assumed health care cost trend rates, for pre-65 retirees, start with a 7.0% increase in 2017, followed by a gradual decline in increases to 4.5% for 2024 and thereafter. For post-65 retirees, the assumed health care cost trend rates start with a 8.5% increase in 2017, followed by a gradual decline in increases to 4.5% for 2024 and thereafter. For the measurement of the benefit obligation at December 31, 2015 for our primary (U.S.) retiree medical benefit plans, the assumed health care cost trend rates, for pre-65 retirees, start with a 7.25% increase in 2016, followed by a gradual decline in increases to 4.5% for 2024 and thereafter. For post-65 retirees, the assumed health care cost trend rates start with a 9.0% increase in 2016, followed by a gradual decline in increases to 4.5% for 2024 and thereafter.
A one-percentage point change in the assumed health care cost trend rate of our primary (U.S.) retiree medical benefit plans as of December 31, 2016 would have the following effects on our retiree medical benefit plans:
 
One-Percentage-Point
 
Increase
 
Decrease
 
(in millions)
Effect on total service and interest cost for 2016
$
—

 
$
—

Effect on benefit obligation as of December 31, 2016
6

 
(5
)


The objectives of the investment policies governing the pension plans are to administer the assets of the plans for the benefit of the participants in compliance with all laws and regulations, and to establish an asset mix that provides for diversification and considers the risk of various different asset classes with the purpose of generating favorable investment returns. The investment policies consider circumstances such as participant demographics, time horizon to retirement and liquidity needs, and provide guidelines for asset allocation, planning horizon, general portfolio issues and investment manager evaluation criteria. The investment strategies for the plans, including target asset allocations and investment vehicles, are subject to change within the guidelines of the policies.
The target asset allocation for our U.S. pension plan is 80% non-equity and 20% equity, which has been determined based on analysis of actual historical rates of return and plan needs and circumstances. The equity investments are tailored to exceed the growth of the benefit obligation and are a combination of U.S. and non-U.S. total stock market index mutual funds. The non-equity investments consist primarily of investments in debt securities and money market instruments that are selected based on investment quality and duration to mitigate volatility of the funded status and annual required contributions. The non-equity investments have a duration profile that is similar to the benefit obligation in order to mitigate the impact of interest rate changes on the funded status. This investment strategy is achieved through the use of mutual funds and individual securities.
The target asset allocation for the CF Canadian plan is 60% non-equity and 40% equity, and for the Terra Canadian plan is 75% non-equity and 25% equity. The equity investments are passively managed portfolios that diversify assets across multiple securities, economic sectors and countries. The non-equity investments are high quality passively managed portfolios that diversify assets across economic sectors, countries and maturity spectrums. This investment strategy is achieved through the use of mutual funds.
The pension assets in the United Kingdom plans are each administered by a Board of Trustees consisting of employer nominated trustees, member nominated trustees and an independent trustee. Trustees may be appointed or removed by CF Fertilisers UK, provided CF Fertilisers UK fulfills its obligation to have at least one third of the Board of Trustees as member nominated. It is the responsibility of the trustees to ensure prudent management and investment of the assets in the plans. The trustees meet on a quarterly basis to review and discuss fund performance and other administrative matters.
The trustees’ investment objectives are to hold assets that will achieve returns in excess of expected returns used in the valuation of each plan’s liability without exposing the plans to unacceptable risk. This is accomplished through the asset allocation strategy of each plan. For both plans, if the asset allocation moves more than plus or minus 5% from the benchmark allocation, the trustees may decide to amend the asset allocation. At a minimum, the trustees review the investment strategy at every triennial actuarial valuation to ensure that the strategy remains consistent with its funding principles. The trustees may review the strategy more frequently if opportunities arise to reduce risk within the investments without jeopardizing the funding position.
Assets of the United Kingdom plans are invested in externally managed pooled funds. The target asset allocation for the United Kingdom Terra plan is 55% actively managed target return funds, 30% actively and passively managed bond and gilt funds and 15% actively managed property funds. The target asset allocation for the United Kingdom Kemira plan is 50% actively managed target return funds, 45% actively and passively managed bond and gilt funds and 5% in an actively managed property fund. The target return funds diversify assets across multiple asset classes (which may include, among others, traditional equities and bonds) and may use derivatives. The bond and gilt funds generally invest in fixed income debt securities including government bonds, gilts, high yield and emerging market bonds, and investment grade corporate bonds and may use derivatives. The property funds are invested predominately in freehold and leasehold property.

The fair values of our pension plan assets as of December 31, 2016 and 2015, by major asset class, are as follows:
 
North America
 
December 31, 2016
 
Total Fair
Value
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(in millions)
Cash and cash equivalents(1)
$
39

 
$
6

 
$
33

 
$
—

Equity mutual funds
 

 
 

 
 

 
 

Index equity(2)
112

 
112

 
—

 
—

Pooled equity(3)
41

 
—

 
41

 
—

Fixed income
 

 
 

 
 

 
 

U.S. Treasury bonds and notes(4)
14

 
14

 
—

 
—

Pooled mutual funds(5)
86

 
—

 
86

 
—

Corporate bonds and notes(6)
329

 
—

 
329

 
—

Government and agency securities(7)
15

 
—

 
15

 
—

Other(8)
1

 
—

 
1

 
—

Total assets at fair value by fair value levels
$
637

 
$
132

 
$
505

 
$
—

Accruals and payables—net
(1
)
 
 
 
 
 
 
Total assets
$
636

 
 

 
 

 
 

 
United Kingdom
 
December 31, 2016
 
Total Fair
Value
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(in millions)
Cash
$
3

 
$
3

 
$
—

 
$
—

Pooled target return funds(9)
185

 
—

 
185

 
—

Fixed income
 
 
 
 
 
 
—

Pooled UK government index-linked securities(10)
28

 
—

 
28

 
—

Pooled global fixed income funds(11)
114

 
—

 
114

 
—

Total assets at fair value by fair value levels
$
330

 
$
3

 
$
327

 
$
—

Assets measured at NAV as a practical expedient
 
 
 
 
 
 
 
Pooled property funds(12)
36

 
 
 
 
 
 
Total assets measured at NAV as a practical expedient
36

 
 
 
 
 
 
Total assets at fair value
366

 
 
 
 
 
 
Accruals and payables—net
—

 
 
 
 
 
 
Total assets
$
366

 
 
 
 
 
 
 
North America
 
December 31, 2015
 
Total Fair
Value
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(in millions)
Cash and cash equivalents(1)
$
32

 
$
32

 
$
—

 
$
—

Equity mutual funds
 

 
 

 
 

 
 

Index equity(2)
103

 
103

 
—

 
—

Pooled equity(3)
39

 
—

 
39

 
—

Fixed income
 

 
 

 
 

 
 

U.S. Treasury bonds and notes(4)
11

 
11

 
—

 
—

Pooled mutual funds(5)
82

 
—

 
82

 
—

Corporate bonds and notes(6)
338

 
—

 
338

 
—

Government and agency securities(7)
21

 
—

 
21

 
—

    Other(8)
2

 
—

 
2

 
—

Total assets at fair value by fair value levels
$
628

 
$
146

 
$
482

 
$
—

Accruals and payables—net
(1
)
 
 

 
 

 
 

Total assets
$
627

 
 

 
 

 
 


 
United Kingdom
 
December 31, 2015
 
Total Fair
Value
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(in millions)
Cash
$
3

 
$
3

 
$
—

 
$
—

Pooled target return funds(9)
216

 
—

 
216

 
—

Fixed income
 

 
 

 
 

 
 

Pooled UK government index-linked securities(10)
26

 
—

 
26

 
—

Pooled global fixed income funds(11)
127

 
—

 
127

 
—

Total assets at fair value by fair value levels
$
372

 
$
3

 
$
369

 
$
—

Assets measured at NAV as a practical expedient
 
 
 
 
 
 
 
Pooled property funds(12)
42

 
 
 
 
 
 
Total assets measured at NAV as a practical expedient
42

 
 
 
 
 
 
Total assets at fair value
414

 
 
 
 
 
 
Accruals and payables—net
—

 
 
 
 
 
 
Total assets
$
414

 
 
 
 
 
 

_______________________________________________________________________________
(1) 
Cash and cash equivalents are primarily repurchase agreements, short-term money market funds, and short-term federal home loan discount notes.
(2) 
The index equity funds are mutual funds that utilize a passively managed investment approach designed to track specific equity indices. They are valued at quoted market prices in an active market, which represent the net asset values of the shares held by the plan.
(3) 
The equity pooled mutual funds consist of pooled funds that invest in common stock and other equity securities that are traded on U.S., Canadian, and foreign markets.
(4) 
U.S. Treasury bonds and notes are valued based on quoted market prices in an active market.
(5) 
The fixed income pooled mutual funds invest in investment-grade corporate debt, various governmental debt obligations, and mortgage-backed securities with varying maturities.
(6) 
Corporate bonds and notes, including private placement securities, are valued by institutional bond pricing services, which gather information from market sources and integrate credit information, observed market movements and sector news into their pricing applications and models.
(7) 
Government and agency securities consist of municipal bonds that are valued by institutional bond pricing services, which gather information on current trading activity, market movements, trends, and specific data on specialty issues.
(8) 
Other includes primarily mortgage-backed and asset-backed securities, which are valued by institutional pricing services, which gather information from market sources and integrate credit information, observed market movements and sector news into their pricing applications and models.
(9) 
Pooled target return funds invest in a broad array of asset classes and a range of diversifiers including the use of derivatives. The funds are valued at net asset value (NAV) as determined by the fund managers based on the value of the underlying net assets of the fund.
(10) 
Pooled United Kingdom government index-linked funds invest primarily in United Kingdom government index-linked gilt securities. The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund.
(11) 
Pooled global fixed income funds invest primarily in government bonds, investment grade corporate bonds, high yield and emerging market bonds and can make use of derivatives. The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund.
(12) 
Pooled property funds invest primarily in freehold and leasehold property in the United Kingdom. The funds are valued using NAV as a practical expedient. NAV is determined by the fund managers based on the value of the underlying net assets of the fund.
We have defined contribution plans covering substantially all employees in North America and the United Kingdom. In North America, depending on the specific provisions of each plan, qualified employees receive company contributions based on a percentage of base salary, matching of employee contributions up to specified limits, or a combination of both. Qualified employees in the United Kingdom receive company contributions based on a percentage of base salary that are greater than employee contributions up to specified limits. In 2016, 2015 and 2014, we recognized expense related to company contributions to the defined contribution plans of $16 million, $14 million, and $12 million, respectively.
In addition to our qualified defined benefit pension plans, we also maintain certain nonqualified supplemental pension plans for highly compensated employees as defined under federal law. The amounts recognized in accrued expenses and other liabilities in our consolidated balance sheets for these plans were $3 million and $17 million as of December 31, 2016 and $3 million and $19 million as of December 31, 2015, respectively. We recognized expense for these plans of $3 million, $2 million and $5 million in 2016, 2015 and 2014, respectively. The expense recognized in 2016 and 2014 includes settlement charges of $1 million and $3 million, respectively.