The information below provides detail concerning the Company’s benefit obligations under the defined benefit and postretirement benefit plans it sponsors.

Defined benefit plans provide pre-determined benefits to employees that are distributed upon retirement. Cabot is making all sponsor required contributions to these plans. The accumulated benefit obligation was $157 million for the U.S. defined benefit plans and $205 million for the foreign plans as of September 30, 2019 and $143 million for the U.S. defined benefit plans and $349 million for the foreign plans as of September 30, 2018.

In addition to benefits provided under the defined benefit and postretirement benefit plans, the Company provides benefits under defined contribution plans. Cabot recognized expenses related to these plans of $20 million in fiscal 2019, $19 million in fiscal 2018 and $18 million in fiscal 2017.

The following provides information about projected benefit obligations, plan assets, the funded status and weighted-average assumptions of the defined benefit pension and postretirement benefit plans:

	Years Ended September 30
	2019						2018						2019						2018
	Pension Benefits												Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
	(In millions)
Change in Benefit Obligations:
Benefit obligation at beginning of year	$	143		$	373		$	160		$	376		$	29		$	19		$	33		$	20
Service cost		1			7			1			9			—			—			—			—
Interest cost		5			5			5			7			1			1			1			1
Plan participants’ contribution		—			1			—			2			—			—			—			—
Foreign currency exchange rate changes		—			(13	)		—			(7	)		—			(1	)		—			(1	)
(Gain) Loss from changes in actuarial assumptions and plan experience		21			—			(10	)		2			1			2			(2	)		—
Benefits paid		(11	)		(7	)		(7	)		(13	)		(3	)		(1	)		(3	)		(1	)
Settlements or curtailments		(1	)		(134	)		(5	)		(2	)		—			—			—			—
Divestiture of Specialty Fluids		—			(13	)		—			—			—			—			—			—
Other		(1	)		1			(1	)		(1	)		—			—			—			—
Benefit obligation at end of year	$	157		$	220		$	143		$	373		$	28		$	20		$	29		$	19

	Years Ended September 30
	2019						2018						2019						2018
	Pension Benefits												Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
	(In millions)
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	149		$	323		$	156		$	318		$	—		$	—		$	—		$	—
Actual return on plan assets		14			17			4			17			—			—			—			—
Employer contribution		1			7			1			9			3			1			3			1
Plan participants’ contribution		—			1			—			2			—			—			—			—
Foreign currency exchange rate changes		—			(11	)		—			(7	)		—			—			—			—
Benefits paid		(11	)		(7	)		(7	)		(13	)		(3	)		(1	)		(3	)		(1	)
Settlements		(1	)		(124	)		(4	)		(2	)		—			—			—			—
Divestiture		—			(10	)		—			—			—			—			—			—
Expenses paid from assets		(1	)		(1	)		(1	)		(1	)		—			—			—			—
Fair value of plan assets at end of year	$	151		$	195		$	149		$	323		$	—		$	—		$	—		$	—
Funded status	$	(6	)	$	(25	)	$	6		$	(50	)	$	(28	)	$	(20	)	$	(29	)	$	(19	)
Recognized asset (liability)	$	(6	)	$	(25	)	$	6		$	(50	)	$	(28	)	$	(20	)	$	(29	)	$	(19	)

The following assumptions were used to determine the pension benefit obligations and periodic benefit costs as of and for the years ended September 30:

	2019						2018						2017
	Pension Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
Actuarial assumptions as of the year-end measurement date:
Discount rate		2.6	%		1.8	%		4.2	%		2.4	%		3.6	%		2.4	%
Rate of increase in compensation	N/A				3.0	%	N/A				2.7	%	N/A				2.7	%
Actuarial assumptions used to determine net periodic benefit cost during the year:
Discount rate - benefit obligation		4.2	%		2.4	%		3.6	%		2.4	%		3.4	%		1.8	%
Discount rate - service cost	N/A				2.5	%	N/A				2.4	%	N/A				1.8	%
Discount rate - interest cost		3.9	%		2.1	%		3.0	%		2.0	%		2.7	%		1.5	%
Expected long-term rate of return on plan assets		6.3	%		4.9	%		6.8	%		4.9	%		6.8	%		4.7	%
Rate of increase in compensation	N/A				2.7	%	N/A				2.7	%	N/A				2.8	%

The following assumptions were used to determine the postretirement benefit obligations and net costs as of and for the years ended September 30:

	2019						2018						2017
	Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
Actuarial assumptions as of the year-end measurement date:
Discount rate		2.9	%		2.4	%		4.1	%		3.2	%		3.4	%		3.1	%
Initial health care cost trend rate		6.5	%		6.9	%		7.0	%		7.0	%		7.0	%		7.1	%
Actuarial assumptions used to determine net cost during the year:
Discount rate - benefit obligation		4.1	%		3.2	%		3.4	%		3.1	%		3.0	%		2.8	%
Discount rate - service cost		4.0	%		3.5	%		3.1	%		3.6	%		2.6	%		3.2	%
Discount rate - interest cost		3.7	%		3.1	%		2.8	%		3.0	%		2.4	%		2.6	%
Initial health care cost trend rate		7.0	%		7.0	%		7.0	%		7.1	%		7.0	%		6.1	%

Cabot uses discount rates as of September 30, the plans’ measurement date, to determine future benefit obligations under its U.S. and foreign defined benefit plans. The discount rates for the defined benefit plans in Canada, the Eurozone, Japan, Mexico, Switzerland, the United Arab Emirates, the United Kingdom and the U.S. are derived from yield curves that reflect high quality corporate bond yield or swap rate information in each region and reflect the characteristics of Cabot’s employee benefit plans. The discount rates for the defined benefit plans in the Czech Republic and Indonesia are based on government bond indices that best reflect the durations of the plans, adjusted for credit spreads presented in selected AA corporate bond indices. The rates utilized are selected because they represent long-term, high quality, fixed income benchmarks that approximate the long-term nature of Cabot’s pension obligations and related payouts.

Amounts recognized in the Consolidated Balance Sheets at September 30, 2019 and 2018 related to the Company's defined benefit pension and postretirement benefit plans were as follows:

	September 30
	2019						2018						2019						2018
	Pension Benefits												Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
	(In millions)
Noncurrent assets	$	—		$	19		$	10		$	21		$	—		$	—		$	—		$	—
Current liabilities	$	(3	)	$	(1	)	$	—		$	(1	)	$	(3	)	$	—		$	(3	)	$	(1	)
Noncurrent liabilities	$	(3	)	$	(43	)	$	(4	)	$	(70	)	$	(25	)	$	(20	)	$	(26	)	$	(18	)

Amounts recognized in AOCI at September 30, 2019 and 2018 related to the Company's defined benefit pension and postretirement benefit plans were as follows:

	September 30
	2019				2018						2019					2018
	Pension Benefits										Postretirement Benefits
	U.S.		Foreign		U.S.			Foreign			U.S.			Foreign		U.S.			Foreign
	(In millions)
Net actuarial (gain) loss	$	13	$	36	$	(1	)	$	49		$	(6	)	$	6	$	(7	)	$	4
Net prior service credit		—		—		—			(1	)		—			—		(2	)		—
Balance in accumulated other comprehensive income (loss), pretax	$	13	$	36	$	(1	)	$	48		$	(6	)	$	6	$	(9	)	$	4

In fiscal 2020, the Company expects an estimated net loss of $3 million will be amortized from AOCI to net periodic benefit cost. In addition, the Company expects no prior service credits for other postretirement benefits will be amortized from AOCI to net periodic benefit costs in fiscal 2020.

The Company expects that the following benefit payments will be made to plan participants in the years from 2020 to 2029:

	Pension Benefits				Postretirement Benefits
Years Ending September 30	U.S.		Foreign		U.S.		Foreign
	(In millions)
2020⁽¹⁾	$	158	$	9	$	3	$	1
2021	$	—	$	12	$	3	$	1
2022	$	—	$	10	$	3	$	1
2023	$	—	$	10	$	3	$	1
2024	$	—	$	11	$	3	$	1
2025 - 2029	$	1	$	55	$	10	$	4

Postretirement medical benefits are unfunded and impact Cabot’s cash flows as benefits become due, which is expected to be $4 million in fiscal 2020. The Company expects to contribute $10 million to its pension plans in fiscal 2020.

Net periodic defined benefit pension and other postretirement benefit costs include the following components:

	Years Ended September 30
	2019						2018						2017						2019					2018					2017
	Pension Benefits																		Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign		U.S.			Foreign		U.S.			Foreign
	(In millions)
Service cost	$	1		$	7		$	1		$	9		$	1		$	10		$	—		$	—	$	—		$	—	$	—		$	—
Interest cost		5			5			5			7			4			6			1			1		1			1		1			1
Expected return on plan assets		(9	)		(10	)		(10	)		(15	)		(9	)		(14	)		—			—		—			—		—			—
Amortization of prior service cost		—			2			—			—			—			—			(2	)		—		(3	)		—		(3	)		—
Net losses		—			2			—			3			—			5			(1	)		—		(1	)		—		—			—
Settlements or Curtailments cost		—			(7	)		—			—			—			—			—			—		—			—		—			—
Net periodic (benefit) cost	$	(3	)	$	(1	)	$	(4	)	$	4		$	(4	)	$	7		$	(2	)	$	1	$	(3	)	$	1	$	(2	)	$	1

Other changes in plan assets and benefit obligations recognized in Other comprehensive income (loss) are as follows:

	Years Ended September 30
	2019					2018						2017						2019				2018						2017
	Pension Benefits																	Postretirement Benefits
	U.S.		Foreign			U.S.			Foreign			U.S.			Foreign			U.S.		Foreign		U.S.			Foreign			U.S.			Foreign
	(In millions)
Net (gains) losses	$	14	$	(16	)	$	(4	)	$	—		$	(9	)	$	(35	)	$	—	$	2	$	(2	)	$	(1	)	$	(3	)	$	(1	)
Prior service (credit) cost		—		3			—			—			—			—			—		—		—			—			—			—
Amortization of prior service credit		—		(2	)		—			—			—			—			2		—		3			—			3			—
Amortization of prior unrecognized loss		—		(2	)		—			(3	)		—			(5	)		1		—		1			—			—			—
Loss on divestiture		—		(2	)		—			—			—			—			—		—		—			—			—			—
Gain on settlements		—		7			—			—			—			—			—		—		—			—			—			—
Other		—		—			—			—			—			—			—		—		—			—			—			—
Net changes recognized in Total other comprehensive (income) loss ⁽¹⁾	$	14	$	(12	)	$	(4	)	$	(3	)	$	(9	)	$	(40	)	$	3	$	2	$	2		$	(1	)	$	—		$	(1	)

In the third quarter of fiscal 2019, the Company adjusted the assumptions in its U.K. plan to calculate accrued benefits for a portion of the plan’s participants. As a result of this change, a prior service cost of $2 million was recorded in Other income (expense) in the Consolidated Statement of Operations.

In fiscal 2019, the Company transferred the defined benefit obligations and pension plan assets in one of its foreign defined benefit plans to a multi-employer plan. This action moved the administrative, asset custodial, asset investment, actuarial, communication and benefit payment obligations to the multi-employer fund administrator. As a result of the transfer, there was a $30 million reduction in net pension obligations associated with the plan, and a pre-tax gain of $7 million was recorded in Other income (expense) in the Consolidated Statement of Operations. In addition, as part of the transfer the Company recorded a $3 million charge in fiscal 2019 for the Company’s agreement to fund the actuarial loss gap between the terminated plan and the multi-employer plan, which will be paid over the next five years. This charge is included Other income (expense) in the Consolidated Statement of Operations and the liability is included in Accounts payable and accrued liabilities and Other liabilities on the Consolidated Balance Sheet.

The Company recognized net losses of less than $1 million in fiscal 2018 and 2017 due to curtailments and settlements of certain employee benefit plans.

In fiscal 2019, the Company’s Board of Directors approved a resolution to terminate the U.S. pension plan. The Company commenced the U.S. plan termination process during the third quarter of 2019 and expects to complete the transfer of the U.S. plan’s assets in fiscal year 2020 pending an Internal Revenue Service (“IRS”) determination letter. The pension liability will be settled in either a lump-sum payment or a purchased annuity. Upon settlement of the plan, the Company will recognize a loss associated with the release of approximately $13 million from Accumulated other comprehensive income (loss) in the Consolidated Balance Sheet to Other income (expense) in the Consolidated Statement of Operations.

Measurement of postretirement benefit expense is based on actuarial assumptions used to value the postretirement benefit liability at the beginning of the year. Assumed health care cost trend rates have an effect on the amounts reported for the health care plans. The fiscal 2019 weighted-average assumed health care cost trend rate is 6.5% for U.S. plans and 6.9 % for foreign plans. A one percentage point change in the 2019 assumed health care cost trend rate would have an immaterial impact to the aggregate of the service and interest cost components of the net periodic postretirement benefit and would have a less than $1 million impact to U.S. plans and $3 million impact to foreign plans postretirement benefit obligation.

The Company’s defined benefit pension plans weighted-average asset allocations at September 30, 2019 and 2018 by asset category, are as follows:

To develop the expected long-term rate of return on plan assets assumption, the Company used a capital asset pricing model. The model considers the current level of expected returns on risk-free investments comprised of government bonds, the historical level of the risk premium associated with the other asset classes in which the portfolio is invested, and the expectations for future returns for each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return for each plan.

Cabot’s investment strategy for each of its defined benefit plans in the U.S. and abroad is generally based on a set of investment objectives and policies that cover time horizons and risk tolerance levels consistent with plan liabilities. Periodic studies are performed to determine the asset mix that will meet pension obligations at a reasonable cost to the Company. The assets of the defined benefit plans are comprised principally of investments in equity and high quality fixed income securities, which are broadly diversified across the capitalization and style spectrum and are managed using both active and passive strategies. The weighted average target asset allocation for the U.S. plans is 32% in cash equivalents and 68% in fixed income and for the foreign plans is 41%

in equity, 49% in fixed income, 6% in real estate and 4% in cash and other securities. The target allocation of the U.S. Pension plan has changed as a result of the anticipated plan settlement discussed in the U.S. Plan Termination section above.

For pension plan assets classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.

For pension plan assets classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.

The fair value of the Company’s pension plan assets at September 30, 2019 and 2018 by asset category is as follows:

	September 30
	2019						2018
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Total
	(In millions)
Cash	$	2	$	—	$	2	$	3	$	—	$	3
Direct investments:
U.S government bonds		—		—		—		17		13		30
U.S. corporate bonds		—		—		—		—		74		74
Non-U.S. equities		3		—		3		—		—		—
Non-U.S. government bonds		2		—		2		—		—		—
Non-U.S. corporate bonds		3		—		3		—		—		—
Mortgage backed securities		—		1		1		—		—		—
Other fixed income		1		—		1		—		—		—
Total direct investments		9		1		10		17		87		104
Investment funds:
Equity funds⁽¹⁾		—		74		74		44		126		170
Fixed income funds⁽²⁾		104		90		194		—		169		169
Real estate funds⁽³⁾		—		12		12		—		9		9
Cash equivalent funds		48		—		48		1		—		1
Total investment funds		152		176		328		45		304		349
Alternative investments:
Insurance contracts⁽⁴⁾		—		5		5		—		16		16
Other alternative investments		1		—		1		—		—		—
Total alternative investments		1		5		6		—		16		16
Total pension plan assets	$	164	$	182	$	346	$	65	$	407	$	472