Employee Retirement Plans

12 Months Ended

Dec. 31, 2020

Employee Retirement Plans [Abstract]

Employee Retirement Plans

13.Employee Retirement Plans

Defined Benefit Plans

Corning has defined benefit pension plans covering certain domestic and international employees. The Company’s funding policy has been to contribute, as necessary, an amount exceeding the minimum requirements to achieve the Company’s long-term funding targets. In 2020, voluntary cash contributions were made to domestic defined benefit pension plans and international pension plans in the amount of $180 million and $41 million, respectively. In 2019, no voluntary contributions were made to domestic defined benefit pension plans. Voluntary cash contributions of $2 million were made to international pension plans. During 2021, the Company plans to make cash contributions of $31 million to international pension plans.

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. In 2020, voluntary cash contributions were made to domestic postretirement plans in the amount of $30 million. For current retirees (including surviving spouses) and active employees eligible for the salaried retiree medical program, Corning has placed a “cap” on the amount to be contributed toward retiree medical coverage in the future. The cap is equal to 120% of the 2005 contributions toward retiree medical benefits. Once 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 attained for pre-65 retirees in 2010. 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.

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Obligations and Funded Status

The change in benefit obligation and funded status of our defined benefit pension plans are as follows (in millions):

	Total ‎pension benefits				Domestic ‎pension benefits				International ‎pension benefits
December 31,	2020		2019		2020		2019		2020		2019
Change in benefit obligation
Benefit obligation at beginning of year	$	4,581	$	4,003	$	3,856	$	3,358	$	725	$	645
Service cost		118		101		92		76		26		25
Interest cost		122		148		110		133		12		15
Plan participants’ contributions		1		1		1		1
Plan amendments		1				1
Actuarial loss		358		533		329		462		29		71
Other		(29)		6		8		6		(37)
Benefits paid		(213)		(214)		(194)		(180)		(19)		(34)
Foreign currency translation		42		3						42		3
Benefit obligation at end of year	$	4,981	$	4,581	$	4,203	$	3,856	$	778	$	725
Change in plan assets
Fair value of plan assets at beginning of year	$	3,671	$	3,239	$	3,153	$	2,742	$	518	$	497
Actual gain on plan assets		469		615		420		576		49		39
Employer contributions		245		22		195		14		50		8
Plan participants’ contributions		1		1		1		1
Benefits paid		(238)		(214)		(194)		(180)		(44)		(34)
Foreign currency translation		25		8						25		8
Fair value of plan assets at end of year	$	4,173	$	3,671	$	3,575	$	3,153	$	598	$	518
Funded status at end of year
Fair value of plan assets	$	4,173	$	3,671	$	3,575	$	3,153	$	598	$	518
Benefit obligations		(4,981)		(4,581)		(4,203)		(3,856)		(778)		(725)
Funded status of plans	$	(808)	$	(910)	$	(628)	$	(703)	$	(180)	$	(207)
Amounts recognized in the consolidated ‎  balance sheets consist of:
Noncurrent asset	$	99	$	82					$	99	$	82
Current liability		(20)		(20)	$	(13)	$	(13)		(7)		(7)
Noncurrent liability		(887)		(972)		(615)		(690)		(272)		(282)
Recognized liability	$	(808)	$	(910)	$	(628)	$	(703)	$	(180)	$	(207)
Amounts recognized in accumulated other ‎  comprehensive income consist of:
Net actuarial loss	$	394	$	338	$	387	$	306	$	7	$	32
Prior service cost (credit)		27		29		26		30		1		(1)
Amount recognized at end of year	$	421	$	367	$	413	$	336	$	8	$	31

An actuarial loss of $358 million was recognized in 2020 primarily due to decreases in bond yields during the year, leading to a domestic plan weighted-average discount rate that was 78 basis points lower than the prior year. In 2019, an actuarial loss of $533 million was recognized primarily due to decreases in bond yields during the year, leading to a domestic plan weighted-average discount rate that was 100 basis points lower than the prior year. The accumulated benefit obligation for defined benefit pension plans was $4.7 billion and $4.3 billion at December 31, 2020 and 2019, respectively.

The following information is presented for pension plans where the projected benefit obligation exceeded the fair value of plan assets (in millions):

	December 31,
	2020		2019
Projected benefit obligation	$	4,665	$	4,298
Fair value of plan assets	$	3,758	$	3,305

In 2020 and 2019, the fair value of plan assets exceeded the projected benefit obligation for the United Kingdom pension plan.

The following information is presented for pension plans where the accumulated benefit obligation exceeded the fair value of plan assets (in millions):

	December 31,
	2020		2019
Accumulated benefit obligation	$	4,247	$	3,904
Fair value of plan assets	$	3,603	$	3,178

In 2020 and 2019, the fair value of plan assets exceeded the accumulated benefit obligation for the United Kingdom and South Korea pension plans.

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The change in benefit obligation and funded status of our postretirement plans are as follows (in millions):

	Postretirement benefits
December 31,	2020		2019
Change in benefit obligation
Benefit obligation at beginning of year	$	705	$	699
Service cost		9		9
Interest cost		20		27
Plan participants’ contributions		8		8
Plan amendments				5
Actuarial loss (gain)		58		6
Other		2		1
Benefits paid		(38)		(50)
Benefit obligation at end of year	$	764	$	705
Change in plan asset
Fair value of plan assets at beginning of year	$	—
Employer contributions		60
Plan participants' contributions		8
Gross benefits paid		(38)
Fair value of plan assets at end of year	$	30
Funded status at end of year
Fair value of plan assets	$	30
Benefit obligations		(764)	$	(705)
Funded status of plans	$	(734)	$	(705)
Amounts recognized in the consolidated balance sheets consist of:
Current liability	$	(7)	$	(34)
Noncurrent liability		(727)		(671)
Recognized liability	$	(734)	$	(705)
Amounts recognized in accumulated other comprehensive income consist of:
Net actuarial loss	$	86	$	28
Prior service credit		(26)		(32)
Amount recognized at end of year	$	60	$	(4)

An actuarial loss of $58 million was recognized in 2020 due to current year decreases in bond yields, leading to a weighted-average discount rate that was 72 basis points lower than the prior year. In 2019, an actuarial loss of $6 million was recognized due to decreases in bond yields during the year, leading to a weighted-average discount rate that was 92 basis points lower than the prior year.

The components of net periodic benefit cost for employee retirement plans are presented in the following tables (in millions):

	Total pension benefits						Domestic pension benefits						International pension benefits
December 31,	2020		2019		2018		2020		2019		2018		2020		2019		2018
Service cost	$	118	$	101	$	103	$	92	$	76	$	78	$	26	$	25	$	25
Interest cost		122		148		132		110		133		116		12		15		16
Expected return on plan assets		(195)		(171)		(189)		(186)		(161)		(178)		(9)		(10)		(11)
Amortization of prior service ‎  cost (credit)		5		6		6		6		7		7		(1)		(1)		(1)
Recognition of actuarial loss		22		90		145		12		66		143		10		24		2
Total net periodic benefit expense	$	72	$	174	$	197	$	34	$	121	$	166	$	38	$	53	$	31
Settlement charge						(1)												(1)
Special termination benefit charge		8		6				8		6
Total expense	$	80	$	180	$	196	$	42	$	127	$	166	$	38	$	53	$	30
Other changes in plan assets and ‎  benefit obligations recognized ‎  in other comprehensive (income) loss:
Curtailment effects	$	(4)											$	(4)
Settlements					$	1											$	1
Current year actuarial loss (gain)		83	$	88		180	$	94	$	47	$	182		(11)	$	41		(2)
Recognition of actuarial loss		(22)		(90)		(145)		(12)		(66)		(143)		(10)		(24)		(2)
Current year prior service cost		1				20		1				20
Amortization of prior service ‎  (cost) credit		(5)		(6)		(6)		(6)		(7)		(7)		1		1		1
Total recognized in other ‎  comprehensive loss (income)	$	53	$	(8)	$	50	$	77	$	(26)	$	52	$	(24)	$	18	$	(2)

	Postretirement benefits
	2020		2019		2018
Service cost	$	9	$	9	$	10
Interest cost		20		27		24
Amortization of prior service credit		(5)		(7)		(7)
Amortization of actuarial loss (gain)		1		(1)
Total net periodic benefit expense	$	25	$	28	$	27
Special termination benefit charge		1		1
Total expense	$	26	$	29	$	27
Other changes in plan assets and benefit obligations ‎  recognized in other comprehensive loss (income):
Current year actuarial loss (gain)	$	58	$	6	$	(47)
Amortization of actuarial (loss) gain		(1)		1
Current year prior service cost (credit)				5		(40)
Amortization of prior service credit		5		7		7
Total recognized in other comprehensive loss (income)	$	62	$	19	$	(80)

The components of net periodic benefit cost other than the service cost component are included in the line item other expense, net, in the consolidated statements of income.

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 and eurobonds that are denominated in U.S. currency. The curve is developed from yields on hundreds of 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 benefits that are contingent upon participants’ survival. To make this assumption, benefit plan sponsors typically use a base mortality table and an improvement scale to mortality rates for future anticipated changes to historical death rates.

As of December 31, 2020, Corning updated the adjustment factors applied to its base mortality assumption (PRI-2012 white collar table and PRI-2012 blue collar table for non-union and union participants, respectively) to value its U.S. benefit plan obligations as of December 31, 2020. In addition, Corning also updated to the MP-2020 projection scale at year-end 2020. As the Society of Actuaries publishes additional mortality improvement scales (i.e. MP-2020) and base mortality tables (i.e. PRI-2012), each year Corning considers these revised schedules in setting its mortality assumptions. Furthermore, Corning updated for the year ended 2020 the mortality assumption applied to disabled participants to be the PRI-2012 disabled mortality base table with future improvements using MP-2020.

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, 2020 were as follows:

	Pension benefits
	Domestic						International						Postretirement benefits
	2020		2019		2018		2020		2019		2018		2020		2019		2018
Discount rate	2.50	%	3.28	%	4.28	%	1.02	%	1.34	%	1.96	%	2.69	%	3.41	%	4.33	%
Rate of compensation increase	4.16	%	3.50	%	3.50	%	3.55	%	2.96	%	2.96	%
Cash balance crediting rate	3.84	%	3.94	%	3.94	%	0.94	%	0.97	%	0.97	%
Employee contributions crediting rate	0.62	%	2.03	%	3.47	%

The weighted-average assumptions used to determine net periodic benefit cost for years ended December 31 were as follows:

	Pension benefits
	Domestic						International						Postretirement benefits
	2020		2019		2018		2020		2019		2018		2020		2019		2018
Discount rate	3.28	%	4.28	%	3.58	%	1.34	%	1.96	%	1.93	%	3.41	%	4.33	%	3.63	%
Expected return on plan assets	6.00	%	6.00	%	6.00	%	1.71	%	2.01	%	2.13	%
Rate of compensation increase	3.50	%	3.50	%	3.50	%	2.96	%	2.96	%	2.81	%
Cash balance crediting rate	3.94	%	3.94	%	3.94	%	0.97	%	0.97	%	1.00	%
Employee contributions crediting rate	2.03	%	3.47	%	2.62	%

Expected long-term returns on plan assets is based on long-term expectations for future returns informed by historical data in conjunction with the investment policies further described within “Plan Assets” below. Reasonableness of the results is tested using models provided by the plan actuaries.

Assumed health care trend rates at December 31	2020	2019
Health care cost trend rate assumed for next year	6.50%	6.75%
Rate that the cost trend rate gradually declines to	5%	5%
Year that the rate reaches the ultimate trend rate	2027	2027

Plan Assets

The Company’s primary objective is to ensure the plan has sufficient return on assets to fund the plan’s current and future obligations as they become due. Investments are primarily made in public securities to ensure adequate liquidity to support benefit payments. Domestic and international stocks provide diversification to the portfolio. The target allocation range equity investment is 40% 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 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 domestic defined benefit plan assets:

	December 31, 2020								December 31, 2019
(in millions)	Total		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)
Equity securities:
U.S. companies	$	781	$	1	$	780			$	494	$	2	$	492
International companies		441				441				387				387
Fixed income:
U.S. treasury bonds		147		147
U.S. corporate bonds		1,951				1,951				2,017		226		1,791
Preferred securities		11				11
Private equity (1)		51					$	51		64					$	64
Real estate (2)		140						140		145						145
Cash equivalents		83		83						46		46
Total	$	3,605	$	231	$	3,183	$	191	$	3,153	$	274	$	2,670	$	209

(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.

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 international defined benefit plan assets:

	December 31, 2020								December 31, 2019
(in millions)	Total		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)
Fixed income:
International fixed income	$	519	$	426	$	93			$	455	$	373	$	82
Insurance contracts		3					$	3		2					$	2
Mortgages		20						20		21						21
Cash equivalents		56		56						40		40
Total	$	598	$	482	$	93	$	23	$	518	$	413	$	82	$	23

The following table sets forth a summary of changes in the fair value of the defined benefit plans Level 3 assets:

	Level 3 assets – domestic				Level 3 assets – international
(in millions)	Private ‎equity		Real ‎estate		Mortgages		Insurance ‎contracts
Balance at December 31, 2018	$	82	$	148	$	22	$	2
Actual return on plan assets relating to assets ‎  still held at the reporting date				2
Transfers in or out of level 3		(18)		(5)		(1)
Balance at December 31, 2019	$	64	$	145	$	21	$	2
Actual return on plan assets relating to assets ‎  still held at the reporting date		4
Transfers in or out of level 3		(17)		(5)		(1)		1
Balance at December 31, 2020	$	51	$	140	$	20	$	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 both credit and default risk and changes in the risk could lead to a decline in the value of these bonds. 

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

5% 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, 2020 and 2019, the amount of Corning common stock included in equity securities was not significant.

Cash Flow Data

The following reflects the gross benefit payments that are expected to be paid for domestic and international defined benefit pension plans and the postretirement medical and life plans (in millions):

	Expected benefit payments
	Domestic ‎pension ‎benefits		International ‎pension ‎benefits		Postretirement ‎benefits
2021	$	216	$	25	$	37
2022	$	221	$	31	$	37
2023	$	231	$	30	$	37
2024	$	238	$	32	$	37
2025	$	247	$	35	$	37
2026-2030	$	1,312	$	219	$	188

Other Benefit Plans

Corning offers defined contribution plans covering employees meeting certain eligibility requirements. Total consolidated defined contribution plan expense was $76 million, $108 million and $67 million for the years ended December 31, 2020, 2019 and 2018, respectively.