Pension and Other Benefit Programs

Defined Benefit Pension Plan

We have a pension plan covering certain of our U.S. operations. The benefit accrual for the pension plan is frozen. Retirement benefits are derived from a formula, which is based on length of service and compensation. Based on this calculation, we may contribute to our pension plan to the extent such contributions may be deducted for income tax purposes.

During the year ended December 31, 2017, in connection with our de-risking strategy, we contributed $136 million to our pension plan. At the same time, we changed the plan’s target allocation from 65% equity securities and 35% fixed income securities, to 5% equity securities and 95% fixed income securities. The fixed income allocation includes corporate bonds of companies from diversified industries and U.S. government bonds. As a result of this contribution and change in investment policy, we anticipate that there will be less need for pension contributions in future years, and the pension plan will not be required to pay the Pension Benefit Guaranty Corporation variable rate premiums. Income is expected to be lower than it was in prior periods because the expected return on plan assets is lower.

During the years ended December 31, 2016 and 2015, we contributed $10 million each year to our pension plan. During the year ended December 31, 2018, we do not expect to make contributions to the pension plan. We will continue to monitor the plan’s funded status, and we will consider modifying the plan’s investment policy based on the actuarial and funding characteristics of the retirement plan, the demographic profile of plan participants, and our business objectives. Our long-term objective is to keep the plan at or near full funding, while minimizing the risk inherent in pension plans.

Based on the valuation techniques described in Note 16, the fair values of our pension plan assets as of December 31, 2017, by asset category, are as follows (in millions):



	Fair Value Measurements
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash	$	164	$	—	$	—	$	164
Equity securities:
U.S. large-cap	—		30		—		30
U.S. small-cap	—		8		—		8
International	—		15		—		15
Fixed income securities	335		314		3		652
Total	$	499	$	367	$	3	$	869

The fair values of our pension plan assets as of December 31, 2016, by asset category, are as follows (in millions):



	Fair Value Measurements
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash	$	21	$	—	$	—	$	21
Equity securities:
U.S. large-cap	—		247		—		247
U.S. small-cap	—		68		—		68
International	—		134		—		134
Fixed income securities	106		102		3		211
Total	$	127	$	551	$	3	$	681

The measurement dates for the pension plan are December 31, 2017 and 2016. The following table provides a summary of the changes in the pension plan’s benefit obligations and the fair value of assets as of December 31, 2017 and 2016 and a statement of funded status of the pension plan as of December 31, 2017 and 2016 (in millions):



	As of December 31,
	2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	853		$	861
Interest cost	27			27
Actuarial loss	44			14
Benefits paid	(49		)	(49		)
Benefit obligation at year end	$	875		$	853
Change in plan assets:
Fair value of plan assets at beginning of year	$	681		$	666
Actual return on plan assets	101			54
Contributions	136			10
Benefits paid	(49		)	(49		)
Fair value of plan assets at end of year	$	869		$	681
Funded status	$	(6	)	$	(172	)
Accumulated benefit obligation	$	875		$	853
Amounts recognized in the accompanying consolidated balance sheets:
Accrued employee benefits	$	(6	)	$	(172	)

The components of the pension plan expense (benefit) in the accompanying consolidated statements of income are set forth below for the years ended December 31, 2017, 2016 and 2015 (in millions):



	Year Ended December 31,
	2017			2016			2015
Interest cost	$	27		$	27		$	34
Estimated return on plan assets	(44		)	(44		)	(46		)
Amortization of loss	2			1			2
Aggregate pension benefit	$	(15	)	$	(16	)	$	(10	)

We use a market-related value of plan assets when determining the estimated return on plan assets. Gains/losses on plan assets are amortized over a four year period and accumulate in other comprehensive income. We recognize deferred gains and losses in future net income based on a “corridor” approach, where the corridor is equal to 10% of the greater of the benefit obligation or the market-related value of plan assets at the beginning of the year.

The following table shows the projected payments for the pension plan based on actuarial assumptions (in millions):



2018	$	50
2019	50
2020	49
2021	49
2022	49
Next 5 years	247

Supplemental Executive Retirement Plan

We have a U.S. nonqualified supplemental executive retirement plan, or SERP, which provides supplemental retirement benefits for certain employees. The future benefit accrual of the SERP plan is frozen. To provide for the future payments of these benefits, we have purchased insurance on the lives of certain of the participants through company-owned policies. As of December 31, 2017 and 2016, the cash surrender value of such policies was $55 million and $53 million, respectively, and is included in other non-current assets in the accompanying consolidated balance sheets. We also acquired a SERP through the NGX acquisition. The following table provides a summary of the changes in the SERP benefit obligations (in millions):



	As of December 31,
	2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	54		$	61
Interest cost	1			1
Actuarial loss	2			1
Benefits paid	(8		)	(9		)
Benefit obligation at year end	$	49		$	54
Funded status	$	(49	)	$	(54	)
Amounts recognized in the accompanying consolidated balance sheets:
Other current liabilities	$	(7	)	$	(8	)
Accrued employee benefits	(42		)	(46		)

SERP plan expense in the accompanying consolidated statements of income was $1 million, $1 million and $2 million for the years ended December 31, 2017, 2016 and 2015, respectively, and primarily consisted of interest cost. The following table shows the projected payments for the SERP plan based on the actuarial assumptions (in millions):



Projected SERP Plan Payments
2018	$	7
2019	5
2020	5
2021	5
2022	5
Next 5 years	15

Pension and SERP Plans Assumptions

The weighted-average assumptions used to develop the actuarial present value of the projected benefit obligation and net periodic pension/SERP costs for years ended December 31, 2017, 2016 and 2015 are set forth below:



	Year Ended December 31,
	2017	2016	2015
Weighted-average discount rate for determining benefit obligations (pension/SERP plans)	3.4%/3.1%	3.9%/3.4%	4.0%/3.4%
Weighted-average discount rate for determining interest costs (pension/SERP plans)	3.2%/2.6%	3.3%/2.5%	3.8%/3.2%
Expected long-term rate of return on plan assets (pension/SERP plans)	6.5%/N/A	6.5%/N/A	6.5%/N/A
Rate of compensation increase	N/A	N/A	N/A

The assumed discount rate reflects the market rates for high-quality corporate bonds currently available. The discount rate was determined by considering the average of pension yield curves constructed on a large population of high quality corporate bonds. The resulting discount rates reflect the matching of plan liability cash flows to yield curves. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class as well as the target asset allocation of the pension portfolio.

The determination of the interest cost component utilizes a full yield curve approach by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to each year’s discounted cash flow.

Post-retirement Benefit Plans

Our defined benefit plans provide certain health care and life insurance benefits for certain eligible retired NYSE U.S. employees. These post-retirement benefit plans, which may be modified in accordance with their terms, are fully frozen. The net periodic post-retirement benefit costs were $5 million, $7 million and $8 million for the years ended December 31, 2017, 2016 and 2015, respectively. The defined benefit plans are unfunded and we currently do not expect to fund the post-retirement benefit plans. The weighted-average discount rate for determining the benefit obligation as of December 31, 2017 and 2016 is 3.4% and 3.9%, respectively. The weighted-average discount rate for determining the interest cost as of December 31, 2017 and 2016 is 3.2% and 3.3%, respectively. The following table shows the actuarial determined benefit obligation, interest costs, employee contributions, actuarial (gain) loss, benefits paid during the periods and the accrued employee benefits (in millions):



	As of December 31,
	2017			2016
Benefit obligation at the end of year	$	179		$	200
Interest cost	5			7
Actuarial gain	(16		)	(20		)
Employee contributions	3			3
Benefits paid	(14		)	(14		)
Amounts recognized in the accompanying consolidated balance sheets:
Other current liabilities	$	(11	)	$	(11	)
Accrued employee benefits	(168		)	(189		)

The following table shows the payments projected for our post-retirement benefit plans (net of expected Medicare subsidy receipts of $10 million in aggregate over the next ten fiscal years) based on actuarial assumptions (in millions):



2018	$	11
2019	11
2020	11
2021	11
2022	11
Next 5 years	54

For measurement purposes, we assumed a 7.7% annual rate of increase in the per capita cost of covered health care benefits in 2017 which will decrease on a graduated basis to 4.5% in the year 2038 and thereafter. The following table shows the effect of a one-percentage-point increase and decrease in assumed health care cost trend rates (in millions):



Assumed Health Care Cost Trend Rate	1% Increase		1% Decrease
Effect of post-retirement benefit obligation	$	20	$	(17	)
Effect on total of service and interest cost components	1		(1		)

Accumulated Other Comprehensive Loss

The accumulated other comprehensive loss, after tax, as of December 31, 2017, consisted of the following amounts that have not yet been recognized in net periodic benefit cost (in millions):



	Pension Plans		SERP Plans		Post-retirement Benefit Plans			Total
Unrecognized net actuarial losses (gains), after tax	$	93	$	4	$	(8	)	$	89

The amount of prior actuarial loss included in accumulated other comprehensive income related to the pension, SERP and postretirement plans as of December 31, 2017, which are expected to be recognized in net periodic benefit cost in the coming year, is estimated to be (in millions):



	Pension Plans		SERP Plans		Post-retirement Benefit Plans		Total
Loss recognition	$	4	$	—	$	—	$	4

Other Benefit Plans and Defined Contribution Plans

Our U.S. employees are eligible to participate in 401(k) and profit sharing plans and our non-U.S. employees are eligible to participate in defined contribution pension plans. Total contributions under the 401(k), profit sharing and defined contribution pension plans were $38 million, $31 million and $21 million for the years ended December 31, 2017, 2016 and 2015, respectively. No discretionary or profit sharing contributions were made during the years ended December 31, 2017, 2016 or 2015.