EMPLOYEE BENEFIT PLANS

We sponsor defined benefit and defined contribution pension plans, healthcare plans and disability and survivorship plans for eligible employees and retirees and their eligible family members.

Defined Benefit Pension Plans. We sponsor defined benefit pension plans for eligible employees and retirees. These plans are closed to new entrants and frozen for future benefit accruals. The Pension Protection Act of 2006 allows commercial airlines to elect alternative funding rules (“Alternative Funding Rules”) for defined benefit plans that are frozen. Delta elected the Alternative Funding Rules under which the unfunded liability for a frozen defined benefit plan may be amortized over a fixed 17-year period and is calculated using an 8.85% discount rate. We estimate the funding under these plans will total at least $950 million in 2015, including $340 million of contributions above the minimum funding requirements.

Defined Contribution Pension Plans. Delta sponsors several defined contribution plans. These plans generally cover different employee groups and employer contributions vary by plan. The cost associated with our defined contribution pension plans is shown in the Net Periodic Cost table below.

Postretirement Healthcare Plans. We sponsor healthcare plans that provide benefits to eligible retirees and their dependents who are under age 65. We have generally eliminated company-paid post age 65 healthcare coverage, except for (1) subsidies available to a limited group of retirees and their dependents and (2) a group of retirees who retired prior to 1987. Benefits under these plans are funded from current assets and employee contributions. During 2012, we remeasured our postretirement healthcare obligation to account for changes to retiree medical benefits resulting from the final integration of wages and benefits following our merger with Northwest Airlines and the voluntary workforce reduction programs offered to eligible employees. As a result, we recorded $116 million of special termination benefits in restructuring and other items (see Note 17).

Postemployment Plans. We provide certain other welfare benefits to eligible former or inactive employees after employment but before retirement, primarily as part of the disability and survivorship plans. Substantially all employees are eligible for benefits under these plans in the event of death and/or disability.

Benefit Obligations, Fair Value of Plan Assets and Funded Status



	Pension Benefits						Other Postretirement and Postemployment Benefits
	December 31,						December 31,
(in millions)	2014			2013			2014			2013
Benefit obligation at beginning of period	$	19,060		$	21,489		$	3,205		$	3,582
Service cost	—			—			52			49
Interest cost	928			861			155			143
Actuarial loss (gain)	2,923			(2,212		)	338			(301		)
Benefits paid, including lump sums and annuities	(1,055		)	(1,078		)	(307		)	(313		)
Participant contributions	—			—			44			45
Benefit obligation at end of period⁽¹⁾	$	21,856		$	19,060		$	3,487		$	3,205

Fair value of plan assets at beginning of period	$	8,937		$	8,196		$	1,043		$	1,004
Actual gain on plan assets	556			905			57			129
Employer contributions	917			914			160			191
Participant contributions	—			—			44			45
Benefits paid, including lump sums and annuities	(1,055		)	(1,078		)	(322		)	(326		)
Fair value of plan assets at end of period	$	9,355		$	8,937		$	982		$	1,043

Funded status at end of period	$	(12,501	)	$	(10,123	)	$	(2,505	)	$	(2,162	)


⁽¹⁾	At the end of each year presented, our accumulated benefit obligations for our pension plans are equal to the benefit obligations shown above.

During 2014, net actuarial losses increased our benefit obligation by $3.3 billion. This increase is primarily due to the decrease in discount rates from 2013 to 2014 and changes in life expectancy assumptions. These losses are recorded in AOCI and reflected in the table below. For additional information about life expectancy assumptions, see “Life Expectancy” below.

Estimated amounts that will be amortized from AOCI into net periodic benefit cost in 2015 are a net actuarial loss of $230 million. Amounts are generally amortized from AOCI over the expected future lifetime of plan participants.

Balance Sheet Position



	Pension Benefits						Other Postretirement and Postemployment Benefits
	December 31,						December 31,
(in millions)	2014			2013			2014			2013
Current liabilities	$	(28	)	$	(22	)	$	(139	)	$	(139	)
Noncurrent liabilities	(12,473		)	(10,101		)	(2,366		)	(2,023		)
Total liabilities	$	(12,501	)	$	(10,123	)	$	(2,505	)	$	(2,162	)

Net actuarial loss	$	(8,409	)	$	(5,349	)	$	(465	)	$	(103	)
Prior service credit	—			—			135			161
Total accumulated other comprehensive income (loss), pre-tax	$	(8,409	)	$	(5,349	)	$	(330	)	$	58

Net Periodic Cost



	Pension Benefits									Other Postretirement and Postemployment Benefits
	Year Ended December 31,									Year Ended December 31,
(in millions)	2014			2013			2012			2014			2013			2012
Service cost	$	—		$	—		$	—		$	52		$	49		$	56
Interest cost	928			861			930			155			143			164
Expected return on plan assets	(829		)	(734		)	(705		)	(84		)	(84		)	(77		)
Amortization of prior service credit	—			—			—			(26		)	(26		)	(21		)
Recognized net actuarial loss	134			221			143			4			25			23
Settlements	—			6			—			—			—			—
Special termination benefits	—			—			—			—			—			116
Net periodic cost	$	233		$	354		$	368		$	101		$	107		$	261
Defined contribution plan costs	551			490			426			—			—			—
Total cost	$	784		$	844		$	794		$	101		$	107		$	261

Assumptions

We used the following actuarial assumptions to determine our benefit obligations and our net periodic cost for the periods presented:



	December 31,
Benefit Obligations⁽¹⁾⁽²⁾	2014		2013
Weighted average discount rate	4.14	%	5.01	%



	Year Ended December 31,
Net Periodic Cost⁽²⁾	2014		2013		2012
Weighted average discount rate - pension benefit	4.99	%	4.10	%	4.95	%
Weighted average discount rate - other postretirement benefit⁽³⁾	4.88	%	4.00	%	4.63	%
Weighted average discount rate - other postemployment benefit	5.00	%	4.13	%	4.88	%
Weighted average expected long-term rate of return on plan assets	8.94	%	8.94	%	8.94	%
Assumed healthcare cost trend rate⁽⁴⁾	7.00	%	7.00	%	7.00	%


⁽¹⁾	Our 2014 and 2013 benefit obligations are measured using a mortality table projected to 2022 and 2017, respectively.


⁽²⁾	Future compensation levels do not impact our frozen defined benefit pension plans or other postretirement plans and impact only a small portion of our other postemployment liability.


⁽³⁾	Our assumptions reflect various remeasurements of certain portions of our obligations and represent the weighted average of the assumptions used for each measurement date.


⁽⁴⁾	Assumed healthcare cost trend rate at December 31, 2014 is assumed to decline gradually to 5.00% by 2024 and remain level thereafter.

Healthcare Cost Trend Rate. Assumed healthcare cost trend rates have an effect on the amounts reported for the other postretirement benefit plans. A 1% change in the healthcare cost trend rate used in measuring the accumulated plan benefit obligation for these plans, which provide benefits to eligible retirees and their dependents who are under age 65, at December 31, 2014, would have the following effects:



(in millions)	1% Increase		1% Decrease
Increase (decrease) in total service and interest cost	$	1	$	(2	)
Increase (decrease) in the accumulated plan benefit obligation	14		(28		)

Expected Long-Term Rate of Return. Our expected long-term rate of return on plan assets is based primarily on plan-specific investment studies using historical market return and volatility data. Modest excess return expectations versus some public market indices are incorporated into the return projections based on the actively managed structure of the investment programs and their records of achieving such returns historically. We also expect to receive a premium for investing in less liquid private markets. We review our rate of return on plan asset assumptions annually. Our annual investment performance for one particular year does not, by itself, significantly influence our evaluation. Our actual historical annualized three and five year rate of return on plan assets for our defined benefit pension plans was approximately 11% and 9%, respectively, as of December 31, 2014. The investment strategy for our defined benefit pension plan assets is to earn a long-term return that meets or exceeds our annualized return target while taking an acceptable level of risk and maintaining sufficient liquidity to pay current benefits and other cash obligations of the plan. This is achieved by investing in a globally diversified mix of public and private equity, fixed income, real assets, hedge funds, and other assets and instruments. Our expected long-term rate of return on assets for net periodic pension benefit cost for the year ended December 31, 2014 was 9%.

Life Expectancy. We have historically utilized the Society of Actuaries' ("SOA") published mortality data in developing a best estimate of life expectancy. On October 27, 2014, the SOA published updated mortality tables for U.S. plans and an updated improvement scale, which both reflect improved longevity. Based on an evaluation of these new tables and our perspective of future longevity, we updated the mortality assumptions for purposes of measuring pension and other postretirement and postemployment benefit obligations at December 31, 2014. The improvement in life expectancy increases our benefit obligations and future expense as benefit payments are paid over an extended period of time.

Benefit Payments

Benefit payments in the table below are based on the same assumptions used to measure the related benefit obligations. Actual benefit payments may vary significantly from these estimates. Benefits earned under our pension plans and certain postemployment benefit plans are expected to be paid from funded benefit plan trusts, while our other postretirement benefits are funded from current assets.

The following table summarizes, the benefit payments that are scheduled to be paid in the years ending December 31:



(in millions)	Pension Benefits		Other Postretirement and Postemployment Benefits
2015	$	1,124	$	278
2016	1,133		272
2017	1,153		265
2018	1,173		256
2019	1,191		257
2020-2024	6,229		1,305

Plan Assets

We have adopted and implemented investment policies for our defined benefit pension plans that incorporate strategic asset allocation mixes intended to best meet the plans’ long-term obligations, while maintaining an appropriate level of risk and liquidity. These asset portfolios employ a diversified mix of investments, which are reviewed periodically. Active management strategies are utilized where feasible in an effort to realize investment returns in excess of market indices. Derivatives in the plans are primarily used to manage risk and gain asset class exposure while still maintaining liquidity. As part of these strategies, the plans are required to hold cash collateral associated with certain derivative investments, thus increasing the value of cash equivalents held at December 31, 2014 when compared to December 31, 2013. Investment strategies target a mix of 40-50% growth-seeking assets, 20-30% income-generating assets and 25-30% risk-diversifying assets. Risk diversifying assets include hedged mandates implementing long-short, market neutral and relative value strategies that invest primarily in publicly-traded equity, fixed income, foreign currency and commodity securities and derivatives. Delta has increased the allocation to risk-diversifying strategies to improve the impact of active management on the plans.

Benefit Plan Assets Measured at Fair Value on a Recurring Basis

Benefit Plan Assets. Benefit plan assets relate to our defined benefit pension plans and certain of our postemployment benefit plans that are funded through trusts. The following table shows our benefit plan assets by asset class. These investments are presented net of the related benefit obligation in pension, postretirement and related benefits on the Consolidated Balance Sheets. See Note 3 for a description of the levels within the fair value hierarchy and associated valuation techniques used to measure fair value.



	December 31, 2014								December 31, 2013
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Valuation Technique
Equities and equity-related instruments	$	699	$	1,486	$	—	$	2,185	$	1,774	$	2,391	$	—	$	4,165	(a)
Fixed income and fixed income-related instruments
Sovereign fixed income	—		—		—		—		—		45		—		45		(a)(b)
Credit-related fixed income	—		470		124		594		—		525		59		584		(a)(b)
Other fixed income	18		617		—		635		—		870		—		870		(a)(b)
Private equity	—		—		1,213		1,213		—		—		1,366		1,366		(a)(b)
Real assets	—		—		663		663		—		—		688		688		(a)(b)
Hedge funds	31		—		2,214		2,245		—		—		552		552		(a)(b)
Cash equivalents	4		2,428		—		2,432		28		1,582		—		1,610		(a)
Other	—		—		384		384		—		—		—		—		(a)(b)
Total benefit plan assets	$	752	$	5,001	$	4,598	$	10,351	$	1,802	$	5,413	$	2,665	$	9,880

Equities and Equity-Related Instruments. Investments include common stock, commingled funds invested in common stock and equity-related instruments. Common stock is valued at the closing price reported on the active market on which the individual securities are traded. Commingled funds are valued using the net asset value divided by the number of shares outstanding, which is based on quoted market prices of the underlying assets owned by the fund. Equity-related instruments include investments in securities traded on exchanges, including listed futures and options, which are valued at the last reported sale prices on the last business day of the year or, if not available, the last reported bid prices. Over-the-counter securities are valued at the bid prices or the average of the bid and ask prices on the last business day of the year from published sources or, if not available, from other sources considered reliable, generally broker quotes.

Fixed Income and Fixed Income-Related Instruments. Investments include corporate bonds, government bonds, collateralized mortgage obligations and other asset-backed securities. These investments are generally valued at the bid price or the average of the bid and ask price. Prices are based on pricing models, quoted prices of securities with similar characteristics or broker quotes. Fixed income-related instruments include investments in securities traded on exchanges, including listed futures and options, which are valued at the last reported sale prices on the last business day of the year or, if not available, the last reported bid prices. Over-the-counter securities are valued at the bid prices or the average of the bid and ask prices on the last business day of the year from published sources or, if not available, from other sources considered reliable, generally broker quotes.

Private Equity and Real Assets. Real assets include real estate, energy, timberland and agriculture. The valuation of private equity requires significant judgment due to the absence of quoted market prices as well as the inherent lack of liquidity and the long-term nature of these assets. Investments are valued based on valuation models where one or more of the significant inputs into the model cannot be observed and which require the development of assumptions. We also assess the potential for adjustment to the fair value of these investments due to the lag in the availability of data. In these cases, we solicit preliminary valuation updates from the investment managers and use that information and corroborating data from public markets to determine any needed adjustments to estimate fair value.

Hedge Funds. Our hedge fund investments are primarily made through shares of limited partnerships or similar structures for which a liquid secondary market does not exist. Hedge funds are considered Level 3 assets. Hedge funds are valued monthly by a third-party administrator that has been appointed by the fund's general partner.

Cash Equivalents. These investments primarily consist of high-quality, short-term obligations that are a part of an institutional money market mutual fund. The fund’s market-based net asset value per share is calculated using current market quotations or an appropriate substitute that reflects current market conditions.

Other. Primarily globally-diversified, risk-managed commingled funds consisting mainly of equity, fixed income, and commodity exposures.

Changes in Level 3. The following table shows the changes in our benefit plan assets classified in Level 3:



(in millions)	Private Equity			Real Estate			Hedge Funds		Fixed Income			Other			Total
Balance at January 1, 2013	$	1,466		$	613		$	484	$	13		$	—		$	2,576
Actual return on plan assets:
Related to assets still held at the reporting date	98			61			49		2			—			210
Related to assets sold during the period	64			19			—		—			—			83
Purchases, sales and settlements, net	(262		)	(5		)	19		44			—			(204		)
Balance at December 31, 2013	1,366			688			552		59			—			2,665
Actual return on plan assets:
Related to assets still held at the reporting date	(116		)	(39		)	167		(17		)	(9		)	(14		)
Related to assets sold during the period	107			37			38		1			—			183
Purchases, sales and settlements, net	(144		)	(23		)	1,457		81			393			1,764
Balance at December 31, 2014	$	1,213		$	663		$	2,214	$	124		$	384		$	4,598

Other

We also sponsor defined benefit pension plans for eligible employees in certain foreign countries. These plans did not have a material impact on our Consolidated Financial Statements in any period presented.

Profit Sharing Program

Our broad-based employee profit sharing program provides that, for each year in which we have an annual pre-tax profit, as defined by the terms of the program, we will pay a specified portion of that profit to employees. In determining the amount of profit sharing, the program defines profit as pre-tax profit excluding profit sharing and special items, such as MTM adjustments and restructuring and other items. Our profit sharing program pays 10% to employees for the first $2.5 billion of annual profit and 20% of annual profit above $2.5 billion. For the years ended December 31, 2014, 2013 and 2012, we recorded expenses of $1.1 billion, $506 million and $372 million under the profit sharing program, respectively.