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Pension and Other Benefit Programs

3 Months Ended

12 Months Ended

Dec. 29, 2018

Sep. 29, 2018

The components of net periodic benefit cost are as follows:



	Pension Plans						Postretirement Medical Plans
	Quarter Ended						Quarter Ended
	December 29, 2018			December 30, 2017			December 29, 2018			December 30, 2017
Service costs	$	83		$	88		$	2		$	3
Other costs (benefits):
Interest costs	145			123			16			15
Expected return on plan assets	(239		)	(225		)	(14		)	(13		)
Amortization of prior-year service costs	3			3			—			—
Recognized net actuarial loss	64			87			—			3
Total other costs (benefits)	(27		)	(12		)	2			5
Net periodic benefit cost	$	56		$	76		$	4		$	8

On September 30, 2018, the Company adopted a FASB standard on the presentation of the components of net periodic pension and postretirement benefit cost (“net periodic benefit cost”). This standard requires the Company to present the service cost component of net periodic benefit cost in the same line items on the statement of operations as other compensation costs of the related employees (i.e. “Costs and expense” in the Condensed Consolidated Statement of Income). All of the other components of net periodic benefit cost (“other costs / benefits”) are presented as a component of “Interest expense, net” in the Condensed Consolidated Statement of Income (see Note 5). The other costs / benefits in fiscal 2018 were not material and are reported in Costs and expenses.

During the quarter ended December 29, 2018, the Company did not make material contributions to its pension and postretirement medical plans. The Company expects total pension and postretirement medical plan contributions in fiscal 2019 of approximately $600 million to $700 million. However, final funding amounts for fiscal 2019 will be assessed based on our January 1, 2019 funding actuarial valuation, which will be available in the fourth quarter of fiscal 2019.

Pension and Other Benefit Programs

The Company maintains pension and postretirement medical benefit plans covering certain of its employees not covered by union or industry-wide plans. The Company’s defined benefit pension plans cover employees hired prior to January 1, 2012. For employees hired after this date, the Company has a defined contribution plan. Benefits under these pension plans are generally based on years of service and/or compensation and generally require 3 years of vesting service. Employees generally hired after January 1, 1987 for certain of our media businesses and other employees generally hired after January 1, 1994 are not eligible for postretirement medical benefits.

Defined Benefit Plans

The Company measures the actuarial value of its benefit obligations and plan assets for its defined benefit pension and postretirement medical benefit plans at September 30 and adjusts for any plan contributions or significant events between September 30 and our fiscal year end.

The following chart summarizes the benefit obligations, assets, funded status and balance sheet impacts associated with the defined benefit pension and postretirement medical benefit plans:



	Pension Plans						Postretirement Medical Plans
	September 29, 2018			September 30, 2017			September 29, 2018			September 30, 2017
Projected benefit obligations
Beginning obligations	$	(14,532	)	$	(14,480	)	$	(1,746	)	$	(1,759	)
Service cost	(350		)	(368		)	(10		)	(11		)
Interest cost	(489		)	(447		)	(60		)	(56		)
Actuarial gain	416			343			166			42
Plan amendments and other	(12		)	(22		)	(10		)	(9		)
Benefits paid	467			442			51			47
Ending obligations	$	(14,500	)	$	(14,532	)	$	(1,609	)	$	(1,746	)
Fair value of plans’ assets
Beginning fair value	$	12,325		$	10,401		$	696		$	614
Actual return on plan assets	579			1,056			34			61
Contributions	335			1,348			45			61
Benefits paid	(467		)	(442		)	(51		)	(47		)
Expenses and other	(44		)	(38		)	7			7
Ending fair value	$	12,728		$	12,325		$	731		$	696

Underfunded status of the plans	$	(1,772	)	$	(2,207	)	$	(878	)	$	(1,050	)
Amounts recognized in the balance sheet
Non-current assets	$	113		$	70		$	—		$	—
Current liabilities	(51		)	(46		)	—			—
Non-current liabilities	(1,834		)	(2,231		)	(878		)	(1,050		)
	$	(1,772	)	$	(2,207	)	$	(878	)	$	(1,050	)

The components of net periodic benefit cost are as follows:



	Pension Plans									Postretirement Medical Plans
	2018			2017			2016			2018			2017			2016
Service cost	$	350		$	368		$	318		$	10		$	11		$	11
Interest cost	489			447			458			60			56			61
Expected return on plan assets	(901		)	(874		)	(747		)	(53		)	(49		)	(45		)
Amortization of prior year service costs	13			12			14			—			—			(1		)
Recognized net actuarial loss	348			405			242			14			17			8
Net periodic benefit cost	$	299		$	358		$	285		$	31		$	35		$	34

In fiscal 2019, we expect pension and postretirement medical costs to decrease by $87 million to $243 million due to a decrease in the amount of deferred net actuarial losses that will be recognized in fiscal 2019 compared to fiscal 2018. Starting in fiscal 2019, the Company will be adopting new accounting guidance that requires the presentation of components of net periodic benefit costs, other than service cost, in an income statement line item outside of a subtotal of income from operations (see Note 18 for further details).



Key assumptions are as follows:
	Pension Plans						Postretirement Medical Plans
	2018		2017		2016		2018		2017		2016
Discount rate used to determine the fiscal year end benefit obligation	4.31	%	3.88	%	3.73	%	4.31	%	3.88	%	3.73	%
Discount rate used to determine the interest cost component of net periodic benefit cost	3.46	%	3.18	%	3.81	%	3.49	%	3.18	%	3.81	%
Rate of return on plan assets	7.50	%	7.50	%	7.50	%	7.50	%	7.50	%	7.50	%
Weighted average rate of compensation increase to determine the fiscal year end benefit obligation	3.20	%	2.90	%	3.00	%	n/a		n/a		n/a
Year 1 increase in cost of benefits	n/a		n/a		n/a		7.00	%	7.00	%	7.00	%
Rate of increase to which the cost of benefits is assumed to decline (the ultimate trend rate)	n/a		n/a		n/a		4.25	%	4.25	%	4.25	%
Year that the rate reaches the ultimate trend rate	n/a		n/a		n/a		2032		2031		2030

Assumed mortality is also a key assumption in determining benefit obligations.

AOCI, before tax, as of September 29, 2018 consists of the following amounts that have not yet been recognized in net periodic benefit cost:



	Pension Plans			Postretirement Medical Plans			Total
Prior service cost	$	(52	)	$	—		$	(52	)
Net actuarial loss	(4,184		)	(36		)	(4,220		)
Total amounts included in AOCI	(4,236		)	(36		)	(4,272		)
Prepaid / (accrued) pension cost	2,464			(842		)	1,622
Net balance sheet liability	$	(1,772	)	$	(878	)	$	(2,650	)

Amounts included in AOCI, before tax, as of September 29, 2018 that are expected to be recognized as components of net periodic benefit cost during fiscal 2019 are:



	Pension Plans			Postretirement Medical Plans		Total
Prior service cost	$	(12	)	$	—	$	(12	)
Net actuarial loss	(260		)	—		(260		)
Total	$	(272	)	$	—	$	(272	)

Plan Funded Status

The projected benefit obligation, accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $1.1 billion, $1.0 billion and $3 million, respectively, as of September 29, 2018 and $8.5 billion, $7.7 billion and $6.4 billion, respectively, as of September 30, 2017.

For pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and aggregate fair value of plan assets were $12.0 billion and $10.1 billion, respectively, as of September 29, 2018 and $12.8 billion and $10.5 billion respectively, as of September 30, 2017.

The Company’s total accumulated pension benefit obligations at September 29, 2018 and September 30, 2017 were $13.3 billion and $13.4 billion, respectively. Approximately 99% was vested as of both dates.

The accumulated postretirement medical benefit obligations and fair value of plan assets for postretirement medical plans with accumulated postretirement medical benefit obligations in excess of plan assets were $1.6 billion and $0.7 billion, respectively, at September 29, 2018 and $1.7 billion and $0.7 billion, respectively, at September 30, 2017.

Plan Assets

A significant portion of the assets of the Company’s defined benefit plans are managed in a third-party master trust. The investment policy and allocation of the assets in the master trust were approved by the Company’s Investment and Administrative Committee, which has oversight responsibility for the Company’s retirement plans. The investment policy ranges for the major asset classes are as follows:



Asset Class	Minimum		Maximum

Equity investments	30	%	60	%
Fixed income investments	20	%	40	%
Alternative investments	10	%	30	%
Cash & money market funds	0	%	10	%

The primary investment objective for the assets within the master trust is the prudent and cost effective management of assets to satisfy benefit obligations to plan participants. Financial risks are managed through diversification of plan assets, selection of investment managers and through the investment guidelines incorporated in investment management agreements. Investments are monitored to assess whether returns are commensurate with risks taken.

The long-term asset allocation policy for the master trust was established taking into consideration a variety of factors that include, but are not limited to, the average age of participants, the number of retirees, the duration of liabilities and the expected payout ratio. Liquidity needs of the master trust are generally managed using cash generated by investments or by liquidating securities.

Assets are generally managed by external investment managers pursuant to investment management agreements that establish permitted securities and risk controls commensurate with the account’s investment strategy. Some agreements permit the use of derivative securities (futures, options, interest rate swaps, credit default swaps) that enable investment managers to enhance returns and manage exposures within their accounts.

Fair Value Measurements of Plan Assets

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and is generally classified in one of the following categories of the fair value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

Investments that are valued using the net asset value (NAV) (or its equivalent) practical expedient are excluded from the fair value hierarchy disclosure.

The following is a description of the valuation methodologies used for assets reported at fair value. The methodologies used at September 29, 2018 and September 30, 2017 are the same.

Level 1 investments are valued based on reported market prices on the last trading day of the fiscal year. Investments in common and preferred stocks are valued based on an exchange-listed price or a broker’s quote in an active market. Investments in U.S. Treasury securities are valued based on a broker’s quote in an active market.

Level 2 investments in government and federal agency bonds, corporate bonds and mortgage-backed securities (MBS) and asset-backed securities are valued using a broker’s quote in a non-active market or an evaluated price based on a compilation of reported market information, such as benchmark yield curves, credit spreads and estimated default rates. Derivative financial instruments are valued based on models that incorporate observable inputs for the underlying securities, such as interest rates or foreign currency exchange rates.

The Company’s defined benefit plan assets are summarized by level in the following tables:



	As of September 29, 2018
Description	Level 1		Level 2			Total		Plan Asset Mix

Cash	$	57	$	—		$	57	—	%
Common and preferred stocks⁽¹⁾	3,023		—			3,023		22	%
Mutual funds	800					800		6	%
Government and federal agency bonds, notes and MBS	2,019		488			2,507		19	%
Corporate bonds	—		573			573		4	%
Other mortgage- and asset-backed securities	—		86			86		1	%
Derivatives and other, net	3		(1		)	2		—	%
Total investments in the fair value hierarchy	$	5,902	$	1,146		$	7,048

Assets valued at NAV as a practical expedient:
Common collective funds						2,778		21	%
Alternative investments						2,363		18	%
Money market funds and other						1,270		9	%
Total investments at fair value						$	13,459	100	%



	As of September 30, 2017
Description	Level 1		Level 2		Total		Plan Asset Mix

Cash	$	88	$	—	$	88	1	%
Common and preferred stocks⁽¹⁾	2,974		—		2,974		23	%
Mutual funds	771		—		771		6	%
Government and federal agency bonds, notes and MBS	1,870		548		2,418		19	%
Corporate bonds	—		579		579		4	%
Other mortgage- and asset-backed securities	—		99		99		1	%
Derivatives and other, net	—		14		14		—	%
Total investments in the fair value hierarchy	$	5,703	$	1,240	$	6,943

Assets valued at NAV as a practical expedient:
Common collective funds					2,727		21	%
Alternative investments					2,201		17	%
Money market funds and other					1,150		9	%
Total investments at fair value					$	13,021	100	%


⁽¹⁾	Includes 2.8 million shares of Company common stock valued at $332 million (2% of total plan assets) and 2.9 million shares valued at $282 million (2% of total plan assets) at September 29, 2018 and September 30, 2017, respectively.

Uncalled Capital Commitments

Alternative investments held by the master trust include interests in funds that have rights to make capital calls to the investors. In such cases, the master trust would be contractually obligated to make a cash contribution at the time of the capital call. At September 29, 2018, the total committed capital still uncalled and unpaid was $1.0 billion.

Plan Contributions

During fiscal 2018, the Company made contributions to its pension and postretirement medical plans totaling $380 million. At November 21, 2018, the Company expected to make approximately $250 million to $300 million of pension and postretirement medical plan contributions in fiscal 2019. Final minimum funding requirements for fiscal 2019 will be

determined based on a January 1, 2019 funding actuarial valuation, which is expected to be received during the fourth quarter of fiscal 2019.

Estimated Future Benefit Payments

The following table presents estimated future benefit payments for the next ten fiscal years:



	Pension Plans		Postretirement Medical Plans⁽¹⁾
2019	$	534	$	51
2020	544		54
2021	579		58
2022	618		63
2023	656		68
2024 – 2028	3,827		404


⁽¹⁾	Estimated future benefit payments are net of expected Medicare subsidy receipts of $80 million.

Assumptions

Assumptions, such as discount rates, long-term rate of return on plan assets and the healthcare cost trend rate, have a significant effect on the amounts reported for net periodic benefit cost as well as the related benefit obligations.

Discount Rate — The assumed discount rate for pension and postretirement medical plans reflects the market rates for high-quality corporate bonds currently available. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves. The Company measures service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows.

Long-term rate of return on plan assets — The long-term rate of return on plan assets represents an estimate of long-term returns on an investment portfolio consisting of a mixture of equities, fixed income and alternative investments. When determining the long-term rate of return on plan assets, the Company considers long-term rates of return on the asset classes (both historical and forecasted) in which the Company expects the pension funds to be invested. The following long-term rates of return by asset class were considered in setting the long-term rate of return on plan assets assumption:



Equity Securities	7	%	to	11	%
Debt Securities	3	%	to	5	%
Alternative Investments	7	%	to	12	%

Healthcare cost trend rate — The Company reviews external data and its own historical trends for healthcare costs to determine the healthcare cost trend rates for the postretirement medical benefit plans. The 2018 actuarial valuation assumed a 7.00% annual rate of increase in the per capita cost of covered healthcare claims with the rate decreasing in even increments over fourteen years until reaching 4.25%.

Sensitivity — A one percentage point (ppt) change in the key assumptions would have the following effects on the projected benefit obligations for pension and postretirement medical plans as of September 29, 2018 and on cost for fiscal 2019:



	Discount Rate						Expected Long-Term Rate of Return On Assets			Assumed Healthcare Cost Trend Rate
Increase/(decrease)	Benefit Expense			Projected Benefit Obligations			Benefit Expense			Net Periodic Postretirement Medical Cost			Projected Benefit Obligations
1 ppt decrease	$	241		$	2,680		$	135		$	(23	)	$	(213	)
1 ppt increase	(229		)	(2,275		)	(135		)	30			283

Multiemployer Benefit Plans

The Company participates in a number of multiemployer pension plans under union and industry-wide collective bargaining agreements that cover our union-represented employees and expenses its contributions to these plans as incurred. These plans generally provide for retirement, death and/or termination benefits for eligible employees within the applicable

collective bargaining units, based on specific eligibility/participation requirements, vesting periods and benefit formulas. The risks of participating in these multiemployer plans are different from single-employer plans. For example:


•	Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.


•	If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the plan may become the obligation of the remaining participating employers.


•	If the Company chooses to stop participating in these multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan.

The Company also participates in several multiemployer health and welfare plans that cover both active and retired employees. Health care benefits are provided to participants who meet certain eligibility requirements under the applicable collective bargaining unit.

The following table sets forth our contributions to multiemployer pension and health and welfare benefit plans that were expensed during the fiscal years 2018, 2017 and 2016, respectively:



	2018		2017		2016
Pension plans	$	144	$	127	$	126
Health & welfare plans	172		160		167
Total contributions	$	316	$	287	$	293

Defined Contribution Plans

The Company has defined contribution retirement plans for domestic employees who began service after December 31, 2011 and are not eligible to participate in the defined benefit pension plans. In general, the Company contributes from 3% to 9% of an employee’s compensation depending on the employee’s age and years of service with the Company up to plan limits. The Company has savings and investment plans that allow eligible employees to contribute up to 50% of their salary through payroll deductions depending on the plan in which the employee participates. The Company matches 50% of the employee’s contribution up to plan limits. In fiscal years 2018, 2017 and 2016, the costs of these defined contribution plans were $162 million, $143 million and $131 million, respectively. The Company also has defined contribution retirement plans for employees in our international operations. The costs of these defined contribution plans were $21 million, $20 million and $19 million in fiscal years 2018, 2017 and 2016, respectively.