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Note 13 - Employee Retirement Plans
 12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Pension and Other Postretirement Benefits Disclosure [Text Block]
13.
Employee Retirement Plans
 
Defined Benefit Plans
 
We have defined benefit pension plans covering certain domestic and international employees. Our funding policy has been to contribute, as necessary, an amount in excess of the minimum requirements in order to achieve the Company’s long-term funding targets. In
2016,
we made voluntary cash contributions of
$73
million to our domestic defined benefit pension plan and
$16
million to our international pension plans. In
2015,
we made voluntary cash contributions of
$65
million to our domestic defined benefit pension plan and
$35
million to our international pension plans. We are not subject to any mandatory contributions in
2017,
and do
not
anticipate making voluntary cash contributions to our U.S. qualified pension plan. We anticipate contributing up to
$23
million to our international pension plans in
2017.
 
Corning offers postretirement plans that provide health care and life insurance benefits for retirees and eligible dependents. Certain employees
may
become eligible for such postretirement benefits upon reaching retirement age and service requirements. For current retirees (including surviving spouses) and active employees eligible for the salaried retiree medical program, we have placed a “cap” on the amount we will contribute toward retiree medical coverage in the future. The cap is equal to
120%
of our
2005
contributions toward retiree medical benefits. Once our contributions toward salaried retiree medical costs reach this cap, impacted retirees will have to pay the excess amount in addition to their regular contributions for coverage. This cap was attained for post-
65
retirees in
2008
and has impacted their contribution rate in
2009
and going forward. The pre-
65
retirees triggered the cap in
2010,
which has impacted their contribution rate in
2011
and going forward. Furthermore, employees hired or rehired on or after
January
1,
2007
will be eligible for Corning retiree medical benefits upon retirement; however, these employees will pay
100%
of the cost.
 
Obligations and Funded Status
The change in benefit obligation and funded status of our employee retirement plans follows (in millions):
   
Total
pension benefits
    
Domestic
pension benefits
    
International
pension benefits
  
December 31,
 
2016
 
  
2015
  
 
2016
 
  
2015
  
 
2016
 
  
2015
  
                                                 
Change in benefit obligation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefit obligation at beginning of year
 
$
3,715
 
   $
3,809
  
 
$
3,161
 
   $
3,222
  
 
$
554
 
   $
587
  
Service cost
 
 
85
 
    
90
  
 
 
61
 
    
64
  
 
 
24
 
    
26
  
Interest cost
 
 
124
 
    
144
  
 
 
111
 
    
126
  
 
 
13
 
    
18
  
Plan participants’ contributions
 
 
1
 
    
1
  
 
 
1
 
    
1
      
 
      
 
  
Actuarial loss (gain)
 
 
229
 
    
(95
 )
 
 
145
 
    
(87
 )
 
 
84
 
    
(8
 )
Other
 
 
(3
)
    
(8
 )
 
 
1
 
 
 
 
 
 
 
(4
)
    
(8
 )
Benefits paid
 
 
(210
)
    
(188
 )
 
 
(191
)
    
(165
 )
 
 
(19
)
    
(23
 )
Foreign currency translation
 
 
(54
)
    
(38
 )
 
 
 
 
 
 
 
 
 
 
(54
)
    
(38
 )
Benefit obligation at end of year
 
$
3,887
 
   $
3,715
  
 
$
3,289
 
   $
3,161
  
 
$
598
 
   $
554
  
                                                 
Change in plan assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
 
$
3,058
 
   $
3,263
  
 
$
2,616
 
   $
2,814
  
 
$
442
 
   $
449
  
Actual gain (loss) on plan assets
 
 
310
 
    
(108
 )
 
 
235
 
    
(111
 )
 
 
75
 
    
3
  
Employer contributions
 
 
125
 
    
116
  
 
 
104
 
    
77
  
 
 
21
 
    
39
  
Plan participants’ contributions
 
 
1
 
    
1
  
 
 
1
 
    
1
      
 
      
 
  
Benefits paid
 
 
(210
)
    
(188
 )
 
 
(191
)
    
(165
 )
 
 
(19
)
    
(23
 )
Foreign currency translation
 
 
(59
)
    
(26
 )
 
 
 
 
 
 
 
 
 
 
(59
)
    
(26
 )
Fair value of plan assets at end of year
 
$
3,225
 
   $
3,058
  
 
$
2,765
 
   $
2,616
  
 
$
460
 
   $
442
  
                                                 
Funded status at end of year
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets
 
$
3,225
 
   $
3,058
  
 
$
2,765
 
   $
2,616
  
 
$
460
 
   $
442
  
Benefit obligations
 
 
(3,887
)
    
(3,715
 )
 
 
(3,289
)
    
(3,161
 )
 
 
(598
)
    
(554
 )
Funded status of plans
 
$
(662
)
   $
(657
 )
 
$
(524
)
   $
(545
 )
 
$
(138
)
   $
(112
 )
                                                 
Amounts recognized in the consolidated balance sheets consist of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncurrent asset
 
$
35
 
   $
50
  
 
 
 
 
 
 
 
 
 
$
35
 
   $
50
  
Current liability
 
 
(18
)
    
(35
 )
 
$
(13
)
   $
(30
 )
 
 
(5
)
    
(5
 )
Noncurrent liability
 
 
(679
)
    
(672
 )
 
 
(511
)
    
(515
 )
 
 
(168
)
    
(157
 )
Recognized liability
 
$
(662
)
   $
(657
 )
 
$
(524
)
   $
(545
 )
 
$
(138
)
   $
(112
 )
                                                 
Amounts recognized in accumulated other comprehensive income consist of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net actuarial loss
 
$
348
 
   $
332
  
 
$
311
 
   $
305
  
 
$
37
 
   $
27
  
Prior service cost (credit)
 
 
30
 
    
35
  
 
 
31
 
    
37
  
 
 
(1
)
    
(2
 )
Amount recognized at end of year
 
$
378
 
   $
367
  
 
$
342
 
   $
342
  
 
$
36
 
   $
25
  
 
The accumulated benefit obligation for defined benefit pension plans was
$3.6
billion and
$3.5
billion at
December
31,
2016
and
2015,
respectively.
 
   
Postretirement benefits
  
December 31,
 
2016
 
  
2015
  
                 
Change in benefit obligation
 
 
 
 
 
 
 
 
Benefit obligation at beginning of year
 
$
763
 
   $
862
  
Service cost
 
 
9
 
    
13
  
Interest cost
 
 
26
 
    
33
  
Plan participants’ contributions
 
 
8
 
    
7
  
Actuarial loss (gain)
 
 
16
 
    
(97
 )
Other
 
 
2
 
    
4
  
Benefits paid
 
 
(50
)
    
(61
 )
Medicare subsidy received
 
 
2
 
    
2
  
Benefit obligation at end of year
 
$
776
 
   $
763
  
                 
Funded status at end of year
 
 
 
 
 
 
 
 
Fair value of plan assets
 
$
0
 
   $
0
  
Benefit obligations
 
 
(776
)
    
(763
 )
Funded status of plans
 
$
(776
)
   $
(763
 )
                 
Amounts recognized in the consolidated balance sheets consist of:
 
 
 
 
 
 
 
 
Current liability
 
$
(39
)
   $
(45
 )
Noncurrent liability
 
 
(737
)
    
(718
 )
Recognized liability
 
$
(776
)
   $
(763
 )
                 
Amounts recognized in accumulated other comprehensive income consist of:
 
 
 
 
 
 
 
 
Net actuarial loss
 
$
50
 
   $
33
  
Prior service credit
 
 
(15
)
    
(19
 )
Amount recognized at end of year
 
$
35
 
   $
14
  
 
The following information is presented for pension plans where the projected benefit obligation as of
December
31,
2016
and
2015
exceeded the fair value of plan assets (in millions):
   
December 31,
  
 
 
2016
 
  
2015
  
                 
Projected benefit obligation
 
$
3,607
 
   $
3,341
  
Fair value of plan assets
 
$
2,787
 
   $
2,635
  
 
In
2016,
the fair value of plan assets exceeded the projected benefit obligation for the United Kingdom and
one
of the South Korea pension plans.
 
The following information is presented for pension plans where the accumulated benefit obligation as of
December
31,
2016
and
2015
exceeded the fair value of plan assets (in millions):
   
December 31,
  
 
 
2016
 
  
2015
  
                 
Accumulated benefit obligation
 
$
3,285
 
   $
3,159
  
Fair value of plan assets
 
$
2,786
 
   $
2,634
  
 
In
2016,
the fair value of plan assets exceeded the accumulated benefit obligation for the United Kingdom and the South Korea pension plans.
 
The components of net periodic benefit expense for our employee retirement plans follow (in millions):
   
Total pension benefits
    
Domestic pension benefits
    
International pension benefits
  
December 31,
 
2016
 
  
2015
    
2014
  
 
2016
 
  
2015
    
2014
  
 
2016
 
  
2015
    
2014
  
                                                                         
Service cost
 
$
85
 
   $
90
     $
82
  
 
$
61
 
   $
64
     $
55
  
 
$
24
 
   $
26
     $
27
  
Interest cost
 
 
124
 
    
144
      
160
  
 
 
111
 
    
126
      
137
  
 
 
13
 
    
18
      
23
  
Expected return on plan assets
 
 
(165
)
    
(178
 )    
(174
 )
 
 
(153
)
    
(166
 )    
(159
 )
 
 
(12
)
    
(12
 )    
(15
 )
Amortization of prior service cost (credit)
 
 
6
 
    
6
      
6
  
 
 
6
 
    
7
      
7
      
 
      
(1
 )    
(1
 )
Recognition of actuarial loss
 
 
67
 
    
165
      
29
  
 
 
55
 
    
162
      
4
  
 
 
12
 
    
3
      
25
  
Total net periodic benefit expense
 
$
117
 
   $
227
     $
103
  
 
$
80
 
   $
193
     $
44
  
 
$
37
 
   $
34
     $
59
  
Settlement charge
 
 
1
 
 
 
 
 
 
 
 
 
 
 
1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total expense
 
$
118
 
 
 $
 
227
 
 
 $
103
 
 
$
81
 
 
 $
 
193
 
 
 $
 
44
 
 
$
 37
 
 
 $
 
34
 
 
 $
59
 
                                                                         
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Curtailment effects
    
 
      
 
     $
(3
 )    
 
      
 
      
 
      
 
      
 
     $
(3
 )
Settlements
 
$
(2
)
   $
(1
 )    
(2
 )
 
$
(2
)
    
 
      
 
      
 
     $
(1
 )    
(2
 )
Current year actuarial loss
 
 
84
 
    
191
      
212
  
 
 
63
 
   $
189
     $
198
  
 
$
21
 
    
2
      
14
  
Recognition of actuarial (loss)
 
 
(64
)
    
(165
 )    
(29
 )
 
 
(55
)
    
(162
 )    
(4
 )
 
 
(9
)
    
(3
 )    
(25
 )
Current year prior service cost
    
 
      
 
      
25
      
 
      
 
      
25
      
 
      
 
      
 
  
Amortization of prior service (cost) credit
 
 
(6
)
    
(6
 )    
(6
 )
 
 
(6
)
    
(7
 )    
(7
 )    
 
      
1
      
1
  
Total recognized in other comprehensive (income) loss
 
$
12
 
   $
19
     $
197
  
 
$
0
 
   $
20
     $
212
  
 
$
12
 
   $
(1
 )   $
(15
 )
                                                                         
Total recognized in net periodic benefit cost and other comprehensive (income) loss
 
$
130
 
   $
246
     $
300
  
 
$
81
 
   $
213
     $
256
  
 
$
49
 
   $
33
     $
44
  
 
   
Postretirement benefits
  
 
 
2016
 
  
2015
    
2014
  
                         
Service cost
 
$
9
 
   $
13
     $
11
  
Interest cost
 
 
26
 
    
33
      
38
  
Amortization of net gain (loss)
 
 
(1
)
    
3
      
 
  
Amortization of prior service credit
 
 
(4
)
    
(7
 )    
(6
 )
Total net periodic benefit expense
 
$
30
 
   $
42
     $
43
  
                         
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
Current year actuarial loss (gain)
 
$
15
 
   $
(96
 )   $
49
  
Amortization of actuarial gain (loss)
 
 
1
 
    
(3
 )    
 
  
Current year prior service credit
    
 
      
 
      
(5
 )
Amortization of prior service credit
 
 
5
 
    
7
      
6
  
Total recognized in other comprehensive loss (income)
 
$
21
 
   $
(92
 )   $
50
  
                         
Total recognized in net periodic benefit cost and other comprehensive loss (income)
 
$
51
 
   $
(50
 )   $
93
  
 
 
The Company expects to recognize
$6
million of net prior service cost as a component of net periodic pension cost in
2017
for its defined benefit pension plans. The Company expects to recognize
$1
million of net actuarial gain and
$3
million of net prior service credit as components of net periodic postretirement benefit cost in
2017.
 
Corning uses a hypothetical yield curve and associated spot rate curve to discount the plan’s projected benefit payments. Once the present value of projected benefit payments is calculated, the suggested discount rate is equal to the level rate that results in the same present value. The yield curve is based on actual high-quality corporate bonds across the full maturity spectrum, which also includes private placements as well as Eurobonds that are denominated in U.S. currency. The curve is developed from yields on approximately
350
-
375
bonds from
four
grading sources, Moody’s, S&P, Fitch and the Dominion Bond Rating Service. A bond will be included if at least half of the grades from these sources are Aa, non-callable bonds. The very highest
10%
yields and the lowest
40%
yields are excluded from the curve to eliminate outliers in the bond population.
 
Mortality is
one
of the key assumptions used in valuing liabilities of retirement plans. It is used to assign a probability of payment for future plan benefits that are contingent upon participants’ survival. To make this assumption, benefit plan sponsors typically use a base mortality table and an improvement scale that adjusts the rates of mortality for future anticipated changes to historical death rates. For the
seven
years prior to the year ended
December
31,
2014,
Corning utilized the RP
2000
mortality table with improvement Scale AA in performing valuations of its U.S. pension and OPEB liabilities. On
October
27,
2014,
the Society of Actuaries (“SOA”) published new mortality tables for benefit plan sponsors to consider when measuring their benefit plan costs and obligations. These tables reflect the fact that life expectancies have improved since the last comprehensive study of mortality data was released in
2000.
Therefore, in the
fourth
quarter of
2014,
Corning undertook a review of its mortality assumption for its U.S. benefit plans to determine if an update to our current mortality table was appropriate. Based on the findings of this analysis, Corning believes that the RP-
2014
table adjusted for Corning’s experience with future improvements projected using scale BB-
2D
represents the best estimate of future mortality improvement for Corning’s U.S. benefit plans.
 
Prior to the
December
31,
2015
valuation of its defined benefit pension and OPEB plans, Corning used the traditional, single weighted-average discount rate approach to develop the obligation, interest cost and service cost components of net periodic benefit cost for its defined benefit pension and OPEB plans. The individual spot rates from the yield curve are used in measuring the pension plan projected benefit obligation (PBO) or OPEB plan accumulated postretirement benefit obligation (APBO) at the measurement date. The benefit obligation is effectively calculated as the aggregate present value at the measurement date of each future benefit payment related to past service, with each payment discounted using a spot rate from a high-quality corporate bond yield curve that matches the duration of the benefit payment. Under Corning’s traditional, single weighted-average discount rate approach, a single weighted-average rate is developed from the approach described above and rounded to the nearest
25
basis points. Traditionally, the weighted-average discount rate is determined at the plan measurement date, based on the same projected future benefit payments used in developing the benefit obligation. The traditional single weighted-average discount rate represents the constant annual rate that would be required to discount all future benefit payments related to past service from the date of expected future payment to the measurement date such that the aggregate present value equals the benefit obligation.
 
Beginning with the
December
31,
2015
valuation of its defined benefit pension and OPEB plans, Corning changed its methodology of determining the service and interest cost components of net periodic pension and other postretirement benefit costs to a more granular approach. Under the new approach the cash flows from each applicable pension and OPEB plan will be used to directly calculate the benefit obligation, service cost and interest cost using the spot rates from the applicable yield curve.
 
Moving to a more granular approach has a limited impact on the determination of the respective benefit obligations. The only impacts will be as a result of the elimination of the rounding of the discount rate that occurred in the traditional approach and the use of specific cash flows for Corning’s non-qualified pension plans, while separately applying the yield curve to each separate OPEB plan instead of aggregating the OPEB plan cash flows. This change will result in a decrease in the interest cost and service cost components of net periodic pension and OPEB costs. For the year ended
December
31,
2017,
net periodic pension and OPEB costs will be lower by approximately
$23
million and
$5
million, respectively, due to this change. For Corning’s pension plans, this change will increase the immediate recognition of actuarial losses (or decrease the immediate recognition of actuarial gains), due to Corning’s previous election to immediately recognize actuarial gains and losses outside of the corridor. For Corning’s OPEB plans, this change will increase the accumulated other comprehensive income (AOCI) account balance due to the accumulation of lower actuarial gains or higher actuarial losses. Over time, the amortization of the actuarial losses from AOCI will begin to reduce the savings from the lower interest cost and service cost.
 
This change is a change in accounting estimate and therefore applied prospectively (beginning with the next measurement date of
December
31,
2015).
No restatement of prior periods is required.
 
Measurement of postretirement benefit expense is based on assumptions used to value the postretirement benefit obligation at the beginning of the year.
 
The weighted-average assumptions used to determine benefit obligations at
December
31
follow:
 
 
Pension benefits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
International
 
 
Postretirement benefits
 
 
 
2016
 
  
2015
    
2014
  
 
2016
 
  
2015
    
2014
  
 
2016
 
  
2015
    
2014
  
Discount rate
 
 
4.01
%
    
4.24
 %    
4.00
 %
 
 
2.29
%
    
3.23
 %    
3.21
 %
 
 
4.07
%
    
4.31
 %    
4.00
 %
Rate of compensation increase
 
 
3.50
%
    
3.50
 %    
3.50
 %
 
 
3.97
%
    
3.92
 %    
3.88
 %    
 
      
 
      
 
  
 
The weighted-average assumptions used to determine net periodic benefit cost for years ended
December
31
follow:
 
 
Pension benefits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
International
 
 
Postretirement benefits
 
 
 
2016
 
  
2015
    
2014
  
 
2016
 
  
2015
    
2014
  
 
2016
 
  
2015
    
2014
  
Discount rate
 
 
4.24
%
    
4.00
 %    
4.75
 %
 
 
3.23
%
    
3.21
 %    
4.08
 %
 
 
4.31
%
 
 
4.00
 %    
4.75
 %
Expected return on plan assets
 
 
6.00
%
    
6.00
 %    
6.25
 %
 
 
2.89
%
    
2.97
 %    
4.12
 %    
 
      
 
      
 
  
Rate of compensation increase
 
 
3.50
%
    
3.50
 %    
4.00
 %
 
 
3.92
%
    
3.88
 %    
3.85
 %    
 
      
 
      
 
  
 
The assumed rate of return was determined based on the current interest rate environment and historical market premiums relative to fixed income rates of equities and other asset classes. Reasonableness of the results is tested using models provided by the plan actuaries.
 
Assumed health care trend rates at December 31
 
2016
 
  
2015
  
Health care cost trend rate assumed for next year
 
 
6.75
%
    
7
 %
Rate that the cost trend rate gradually declines to
 
 
5
%
    
5
 %
Year that the rate reaches the ultimate trend rate
 
2024
 
  
2024
  
 
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A
one
-percentage-point change in assumed health care cost trend rates would have the following effects (in millions):
   
One-percentage-point
increase
    
One-percentage-point
decrease
  
Effect on annual total of service and interest cost (credit)
   $
3
     $
(3
 )
Effect on postretirement benefit obligation
   $
55
     $
(45
 )
 
Plan Assets
Corning’s expected long-term rates of return on plan assets reflect the average rates of earnings expected on the funds invested to provide for the benefits included in our domestic and international projected benefit obligations. We based these rates on asset/liability forecast modeling, which is based on our current asset allocation, the return and standard deviation for each asset class, current market conditions and transitions from current conditions to long-term returns.
 
The Company’s overall investment strategy is to obtain sufficient return to offset or exceed inflation and provide adequate liquidity to meet the benefit obligations of the pension plan. Investments are made in public securities to ensure adequate liquidity to support benefit payments. Domestic and international stocks and bonds provide diversification to the portfolio. The target allocation range for global equity investment is
20%
-
25%
which includes large, mid and small cap companies and investments in both developed and emerging markets. The target allocation for bond investments is
60%,
which predominately includes corporate bonds. Long duration fixed income assets are utilized to mitigate the sensitivity of funding ratios to changes in interest rates. The target allocation range for non-public investments in private equity and real estate is
5%
-
15%,
and is used to enhance returns and offer additional asset diversification. The target allocation range for commodities is
0%
-
5%,
which provides some inflation protection to the portfolio.
 
The following tables provide fair value measurement information for the Company’s major categories; Level
1
(quoted market prices in active markets for identical assets), Level
2
(significant other observable inputs) and Level
3
(significant unobservable inputs) of our domestic defined benefit plan assets:
 
 
 
December 31, 2016
 
  
December 31, 2015
  
(in millions)
 
Total
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
  
Total
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Equity securities:
                                                                
U.S. companies
 
$
318
 
 
$
47
 
 
$
271
 
    
 
     $
336
     $
51
     $
285
      
 
  
International companies
 
 
340
 
 
 
90
 
 
 
250
 
    
 
      
322
      
79
      
243
      
 
  
                                                                 
Fixed income:
                                                                
U.S. corporate bonds
 
 
1,608
 
 
 
175
 
 
 
1,433
 
    
 
      
1,566
      
158
      
1,408
      
 
  
                                                                 
Private equity
(1)
 
 
137
 
 
 
 
 
 
 
 
 
 
$
137
 
    
163
      
 
      
 
     $
163
  
Real estate
(2)
 
 
150
 
 
 
 
 
 
 
 
 
 
 
150
 
    
61
      
 
      
 
      
61
  
Cash equivalents
 
 
100
 
 
 
100
 
    
 
      
 
      
71
      
71
      
 
      
 
  
Commodities
(3)
 
 
112
 
 
 
 
 
 
 
112
 
    
 
      
97
      
 
      
97
      
 
  
Total
 
$
2,765
 
 
$
412
 
 
$
2,066
 
 
$
287
 
   $
2,616
     $
359
     $
2,033
     $
224
  
 
(1)
This category includes venture capital, leverage buyouts and distressed debt limited partnerships invested primarily in U.S. companies. The inputs are valued by discounted cash flow analysis and comparable sale analysis.
(2)
This category includes industrial, office, apartments, hotels, infrastructure and retail investments which are limited partnerships predominately in the U.S. The inputs are valued by discounted cash flow analysis; comparable sale analysis and periodic external appraisals.
(3)
This category includes investments in energy, industrial metals, precious metals, agricultural and livestock primarily through futures, options, swaps and exchange traded funds.
 
The following tables provide fair value measurement information for the Company’s major categories; Level
1
(quoted market prices in active markets for identical assets), Level
2
(significant other observable inputs) and Level
3
(significant unobservable inputs) of our international defined benefit plan assets:
 
 
 
December 31, 2016
 
  
December 31, 2015
  
(in millions)
 
Total
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
  
Total
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Equity securities:
                                                                
U.S. companies
 
$
7
 
 
 
 
 
 
$
7
 
    
 
     $
7
      
 
     $
7
      
 
  
International companies
 
 
26
 
 
 
 
 
 
 
26
 
    
 
      
23
      
 
      
23
      
 
  
                                                                 
Fixed income:
                                                                
International fixed income
 
 
385
 
 
$
321
 
 
 
64
 
    
 
      
347
     $
286
      
61
      
 
  
                                                                 
Insurance contracts
 
 
2
 
 
 
 
 
 
 
 
 
 
$
2
 
    
3
      
 
      
 
     $
3
  
Mortgages
    
 
      
 
      
 
      
 
      
2
      
 
      
 
      
2
  
Cash equivalents
 
 
40
 
 
 
40
 
    
 
      
 
      
60
      
60
      
 
      
 
  
Total
 
$
460
 
 
$
361
 
 
$
97
 
 
$
2
 
   $
442
     $
346
     $
91
     $
5
  
 
The tables below set forth a summary of changes in the fair value of the defined benefit plans Level
3
assets for the years ended
December
31,
2016
and
2015:
   
Level 3 assets – Domestic
   
Level 3 assets – International
  
   
Year ended December 2016
    
Year ended December 2016
  
(in millions)
  
Private
equity
    
Real
estate
    
Mortgages
    
Insurance
contracts
  
                                 
Beginning balance at December 31, 2015
   $
163
     $
61
     $
2
     $
3
  
                                 
Actual return on plan assets relating to assets still held at the reporting date
    
14
      
(7
 )    
 
      
 
  
Transfers in and/or out of level 3
    
(40
 )    
96
      
(2
 )    
(1
 )
Ending balance at December 31, 2016
  
$
137
 
 
$
150
    
$
0
 
 
$
2
  
 
   
Level 3 assets – Domestic
   
Level 3 assets – International
  
   
Year ended December 2015
    
Year ended December 2015
  
(in millions)
  
Private
equity
    
Real
estate
    
Mortgages
    
Insurance
contracts
  
                                 
Beginning balance at December 31, 2014
   $
192
     $
84
     $
7
     $
5
  
                                 
Actual return on plan assets relating to assets still held at the reporting date
    
16
      
12
      
 
      
 
  
Transfers in and/or out of level 3
    
(45
 )    
(35
 )    
(5
 )    
(2
 )
Ending balance at December 31, 2015
   $
163
     $
61
     $
2
     $
3
  
 
Credit Risk
58%
of domestic plan assets are invested in long duration bonds. The average rating for these bonds is A. These bonds are subject to credit risk, such that a decline in credit ratings for the underlying companies, countries or assets (for asset-backed securities) would result in a decline in the value of the bonds. These bonds are also subject to default risk.
 
Currency Risk
12%
of domestic assets are valued in non-U.S. dollar denominated investments that are subject to currency fluctuations. The value of these securities will decline if the U.S. dollar increases in value relative to the value of the currencies in which these investments are denominated.
 
Liquidity Risk
10%
of the domestic securities are invested in Level
3
securities. These are long-term investments in private equity and private real estate investments that
may
not mature or be sellable in the near-term without significant loss.
 
At
December
31,
2016
and
2015,
the amount of Corning common stock included in equity securities was not significant.
 
Cash Flow Data
In
2017,
we do not anticipate making voluntary cash contributions to our domestic defined benefit plan and expect to make voluntary contributions of approximately
$23
million to our international defined benefit plans.
 
The following reflects the gross benefit payments that are expected to be paid for our domestic and international defined benefit pension plans, the postretirement medical and life plans and the gross amount of annual Medicare Part D federal subsidy expected to be received (in millions):
     
Expected benefit payments
          
     
Domestic
pension
benefits
    
International
pension
benefits
    
Postretirement
benefits
    
Expected federal subsidy payments
postretirement benefits
  
2017
     $
182
     $
19
     $
43
     $
3
  
2018
     $
189
     $
24
     $
42
     $
3
  
2019
     $
196
     $
24
     $
42
     $
3
  
2020
     $
201
     $
27
     $
42
     $
3
  
2021
     $
206
     $
27
     $
43
     $
3
  
2022-2026     $
1,118
     $
172
     $
215
     $
17
  
 
Other Benefit Plans
 
We offer defined contribution plans covering employees meeting certain eligibility requirements. Total consolidated defined contribution plan expense was
$56
million,
$53
million and
$62
million for the years ended
December
31,
2016,
2015
and
2014,
respectively.