Substantially all U.S. employees are covered by a noncontributory defined benefit plan, the Kodak Retirement Income Plan (“KRIP”), which is funded by Company contributions to an irrevocable trust fund. The funding policy for KRIP is to contribute amounts sufficient to meet minimum funding requirements as determined by employee benefit and tax laws plus any additional amounts the Company determines to be appropriate. Assets in the trust fund are held for the sole benefit of participating employees and retirees. They are composed of corporate equity and debt securities, U.S. government securities, partnership investments, interests in pooled funds, commodities, real estate, and various types of interest rate, foreign currency, debt, and equity market financial instruments.

For U.S. employees hired prior to March 1999, KRIP’s benefits were generally based on a formula recognizing length of service and final average earnings. KRIP included a separate cash balance formula for all U.S. employees hired after February 1999, as well as employees hired prior to that date who opted into the cash balance formula during a special election period. Effective January 1, 2015 the KRIP was amended to provide that all participants accrue benefits under a single, revised cash balance formula (the “Cash Balance Plan”). The Cash Balance Plan credits employees' hypothetical accounts with an amount equal to a specified percentage of their pay, plus interest based on the 30-year Treasury bond rate. Effective January 1, 2020, the credits increased from 7% or 8% of pay to either 9% or 10% of pay.

Many subsidiaries and branches operating outside the U.S. have defined benefit retirement plans covering substantially all employees. Contributions by Kodak for these plans are typically deposited under government or other fiduciary-type arrangements. Retirement benefits are generally based on contractual agreements that provide for benefit formulas using years of service and/or compensation prior to retirement. The actuarial assumptions used for these plans reflect the diverse economic environments within the various countries in which Kodak operates.

Information on the major funded and unfunded U.S. and Non-U.S. defined benefit pension plans is presented below. The composition of the major plans may vary from year to year. If the major plan composition changes, prior year data is conformed to ensure comparability.

The measurement date used to determine the pension obligation for all funded and unfunded U.S. and Non-U.S. defined benefit plans is December 31.

	Year Ended December 31, 2020						Year Ended December 31, 2019
(in millions)	U.S.			Non-U.S.			U.S.			Non-U.S.
Change in Benefit Obligation
Projected benefit obligation at beginning of period	$	3,475		$	834		$	3,405		$	834
Service cost		11			3			10			3
Interest cost		86			9			122			13
Benefit payments		(277	)		(47	)		(349	)		(48	)
Actuarial loss		299			39			284			36
Settlements		(121	)		—			—			—
Special termination benefits		3			—			3			—
Currency adjustments		—			74			—			(4	)
Projected benefit obligation at end of period	$	3,476		$	912		$	3,475		$	834

Change in Plan Assets
Fair value of plan assets at beginning of period	$	3,610		$	661		$	3,445		$	671
Gain on plan assets		495			20			514			28
Employer contributions		—			7			—			10
Benefit payments		(277	)		(47	)		(349	)		(48	)
Settlements		(121	)		—			—			—
Currency adjustments		—			55			—			—
Fair value of plan assets at end of period	$	3,707		$	696		$	3,610		$	661

Over (under) funded status at end of period	$	231		$	(216	)	$	135		$	(173	)

Accumulated benefit obligation at end of period	$	3,473		$	903		$	3,474		$	825

The settlement amount of $121 million for the U.S. for the year ended December 31,2020 represents lump sum payments from KRIP.

Amounts recognized in the Consolidated Statement of Financial Position for all major funded and unfunded U.S. and Non-U.S. defined benefit plans are as follows (in millions):

Information with respect to the major funded and unfunded U.S. and Non-U.S. defined benefit plans with a projected benefit obligation in excess of plan assets is as follows (in millions):

Information with respect to the major funded and unfunded U.S. and Non-U.S. defined benefit plans with an accumulated benefit obligation in excess of plan assets is as follows (in millions):

Amounts recognized in accumulated other comprehensive (loss) income for all major funded and unfunded U.S. and Non-U.S. defined benefit plans consist of (in millions):

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

	Year Ended December 31,
	2020						2019
	U.S.			Non-U.S.			U.S.			Non-U.S.
Newly established gain (loss)	$	—		$	(38	)	$	16		$	(30	)
Amortization of:
Prior service credit		(7	)		—			(7	)		—
Net actuarial loss		15			7			—			5
Curtailment gain recognized in expense		—			—			(2	)		—
Net loss recognized in expense due to settlement		9			—			—			—
Total income (loss) recognized in Other comprehensive income	$	17		$	(31	)	$	7		$	(25	)

The Non-U.S. losses were driven primarily by discount rate changes. In the U.S., losses due to discount rate changes were offset by asset gains.

	Year Ended December 31,
	2020						2019
	U.S.			Non-U.S.			U.S.			Non-U.S.
Major defined benefit plans:
Service cost	$	11		$	3		$	10		$	3
Interest cost		86			9			122			13
Expected return on plan assets		(196	)		(19	)		(214	)		(22	)
Amortization of:
Prior service credit		(7	)		—			(7	)		—
Actuarial loss		15			7			—			5
Pension income before special termination benefits		(91	)		—			(89	)		(1	)
Special termination benefits		3			—			3			—
Curtailment gains		—			—			(2	)		—
Settlement losses		9			—			—			—
Net pension income for major defined benefit plans		(79	)		—			(88	)		(1	)
Other plans including unfunded plans		—			1			—			(3	)
Net pension (income), expense	$	(79	)	$	1		$	(88	)	$	(4	)

The $2 million curtailment gain for the year ended December 31, 2019 was incurred as a result of the sale of FPD. In addition, the amounts shown in Other Plans for the year ended December 31, 2019 include $5 million of settlement gains due to the transfer of non-major, non-U.S. pension liabilities as a result of the sale of FPD. These amounts are included in Earnings from discontinued operations in the Consolidated Statement of Operations.

The $9 million settlement loss for the year ended December 31, 2020 was incurred as a result of lump sum payments from KRIP.

The special termination benefits of $3 million for each of the years ended December 31, 2020 and 2019 were incurred as a result of Kodak's restructuring actions and, therefore, have been included in Restructuring costs and other in the Consolidated Statement of Operations for those periods.

The weighted-average assumptions used to determine the benefit obligation amounts for all major funded and unfunded U.S. and Non-U.S. defined benefit plans were as follows:

The weighted-average assumptions used to determine net pension (income) expense for all the major funded and unfunded U.S. and Non-U.S. defined benefit plans were as follows:

	Year Ended December 31,
	2020						2019
	U.S.			Non-U.S.			U.S.			Non-U.S.
Effective rate for service cost		2.97	%		1.48	%		4.03	%		2.47	%
Effective rate for interest cost		2.58	%		1.19	%		3.75	%		1.89	%
Salary increase rate		3.50	%		1.72	%		3.50	%		2.06	%
Expected long-term rate of return on plan assets		6.00	%		3.27	%		6.50	%		3.46	%
Interest crediting rate for cash balance plan		2.50	%	NA				2.50	%	NA

The investment strategy underlying the asset allocation for the pension assets is to achieve an optimal return on assets with an acceptable level of risk while providing for the long-term liabilities and maintaining sufficient liquidity to pay current benefits and other cash obligations of the plans. This is primarily achieved by investing in a broad portfolio constructed of various asset classes including equity and equity-like investments, debt and debt-like investments, real estate, private equity and other assets and instruments. Long duration bonds and Treasury bond futures are used to partially match the long-term nature of plan liabilities. Other investment objectives include maintaining broad diversification between and within asset classes and fund managers and managing asset volatility relative to plan liabilities.

Every three years, or when market conditions have changed materially, each of Kodak’s major pension plans will undertake an asset allocation or asset and liability modeling study. The asset allocation and expected return on the plans’ assets are individually set to provide for benefits and other cash obligations within each country’s legal investment constraints.

Actual allocations may vary from the target asset allocations due to market value fluctuations, the length of time it takes to implement changes in strategy, and the timing of cash contributions and cash requirements of the plans. The asset allocations are monitored and are rebalanced in accordance with the policy set forth for each plan.

The total plan assets attributable to the major U.S. defined benefit plans as of December 31, 2020 relates to KRIP. The expected long-term rate of return on plan assets assumption (“EROA”) is based on a combination of formal asset and liability studies that include forward-looking return expectations given the current asset allocation. A review of the EROA as of December 31, 2020, based upon the current asset allocation and forward-looking expected returns for the various asset classes in which KRIP invests, resulted in an EROA of 5.2%.

Kodak evaluates its defined benefit plans’ asset portfolios for the existence of significant concentrations of risk. Types of concentrations that are evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country, and individual fund. Foreign currency contracts and swaps are used to partially hedge foreign currency risk. Additionally, Kodak’s major defined benefit pension plans invest in government bond futures and long duration investment grade bonds to partially hedge the liability risk of the plans. As of December 31, 2020 and 2019, there were no significant concentrations (defined as greater than 10% of plan assets) of risk in Kodak’s defined benefit plan assets.

The Company’s weighted-average asset allocations for its major U.S. defined benefit pension plan by asset category, are as follows:

	As of December 31,
	2020			2019			2020 Target
Asset Category
Equity securities		10	%		10	%	5-15%
Debt securities		42	%		44	%	35-45%
Real estate		1	%		1	%	0-10%
Cash and cash equivalents		2	%		1	%	0-10%
Global balanced asset allocation funds		14	%		15	%	10-20%
Other		31	%		29	%	25-35%
Total		100	%		100	%

Kodak’s weighted-average asset allocations for its major Non-U.S. defined benefit pension plans by asset category, are as follows:

	As of December 31,
	2020			2019			2020 Target
Asset Category
Equity securities		5	%		5	%	0-10%
Debt securities		33	%		31	%	25-35%
Real estate		2	%		2	%	0-10%
Cash and cash equivalents		2	%		2	%	0-10%
Global balanced asset allocation funds		5	%		5	%	0-10%
Other		53	%		55	%	50-60%
Total		100	%		100	%

Kodak’s asset allocations by level within the fair value hierarchy at December 31, 2020 and 2019 are presented in the tables below for Kodak’s major defined benefit plans. Kodak’s plan assets are accounted for at fair value and are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement, with the exception of investments for which fair value is measured using the net asset value per share expedient. Kodak’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value of assets and their placement within the fair value hierarchy levels.

Assets not utilizing the net asset value per share expedient are valued as follows: Equity and debt securities traded on an active market are valued using a market approach based on the closing price on the last business day of the year. Real estate investments are valued primarily based on independent appraisals and discounted cash flow models, taking into consideration discount rates and local market conditions. Cash and cash equivalents are valued utilizing cost approach valuation techniques. Other investments are valued using a combination of market, income, and cost approaches, based on the nature of the investment. Private equity investments are valued primarily based on independent appraisals, discounted cash flow models, cost, and comparable market transactions, which include inputs such as discount rates and pricing data from the most recent equity financing. Insurance contracts are primarily valued based on contract values, which approximate fair value. For investments with lagged pricing, Kodak uses the available net asset values, and also considers expected return, subsequent cash flows and relevant material events.

	U.S.
(in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at NAV		Total
Cash and cash equivalents	$	—		$	—	$	—	$	66	$	66

Equity Securities		—			—		—		383		383

Debt Securities:
Government Bonds		1			—		—		1,101		1,102
Investment Grade Bonds		—			446		—				446

Real Estate		—			—		—		37		37

Global Balanced Asset Allocation Funds		—			—		—		514		514

Other:
Absolute Return		—			5		—		442		447
Private Equity		—			—		5		711		716
Derivatives with unrealized gains		3			—		—		—		3
Derivatives with unrealized losses		(7	)		—		—		—		(7	)
	$	(3	)	$	451	$	5	$	3,254	$	3,707

	U.S.
(in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at NAV		Total
Cash and cash equivalents	$	—		$	—	$	—	$	38	$	38

Equity Securities		4			—		—		374		378

Debt Securities:
Government Bonds		—			—		—		1,110		1,110
Investment Grade Bonds		—			457		—		—		457

Real Estate		—			—		—		42		42

Global Balanced Asset Allocation Funds		—			—		—		544		544

Other:
Absolute Return		—			—		—		370		370
Private Equity		—			—		7		680		687
Derivatives with unrealized gains		2			—		—		—		2
Derivatives with unrealized losses		(18	)		—		—		—		(18	)
	$	(12	)	$	457	$	7	$	3,158	$	3,610

For Kodak’s major U.S. defined benefit pension plans, equity investments are invested broadly in U.S. equity, developed international equity, and emerging markets. Fixed income investments are comprised primarily of long duration U.S. Treasuries and investment-grade corporate bonds. Real estate investments primarily include investments in limited partnerships that invest in office, industrial, retail and apartment properties. Global Balanced Asset Allocation investments are commingled funds that hold a diversified portfolio of passive market exposures, including equities, debt, currencies and commodities. Absolute return investments are comprised of a diversified portfolio of hedge funds using equity, debt, commodity and currency strategies held separate from the derivative-linked hedge funds described later in this footnote. Private equity investments are primarily comprised of limited partnerships and fund-of-fund investments that invest in distressed investments, venture capital, leveraged buyouts and special situations. Natural resource investments in oil and gas partnerships and timber funds are also included in this category.

	Non - U.S.
(in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at NAV		Total
Cash and cash equivalents	$	10	$	—	$	—	$	7	$	17

Equity Securities		36		—		—		—		36

Debt Securities:
Government Bonds		—		—		—		48		48
Investment Grade Bonds		87		90		—		—		177
Global High Yield & Emerging Market Debt		2		—		—		—		2

Real Estate		—		—		—		12		12

Global Balanced Asset Allocation Funds		—		—		—		38		38

Other:
Private Equity		—		—		—		30		30
Insurance Contracts		—		45		291		—		336
	$	135	$	135	$	291	$	135	$	696

	Non - U.S.
(in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measured at NAV		Total
Cash and cash equivalents	$	5	$	—	$	—	$	8	$	13

Equity Securities		—		—		—		33		33

Debt Securities:
Government Bonds		—		—		—		51		51
Inflation-Linked Bonds		—		—		—		4		4
Investment Grade Bonds		—		61		—		65		126
Global High Yield & Emerging Market Debt		—		—		—		26		26

Real Estate		—		—		—		11		11

Global Balanced Asset Allocation Funds		—		—		—		34		34

Other:
Absolute Return		—		—		—		7		7
Private Equity		—		—		—		38		38
Insurance Contracts		—		317		—		—		317
Derivatives with unrealized gains		1		—		—		—		1
	$	6	$	378	$	—	$	277	$	661

For Kodak’s major non-U.S. defined benefit pension plans, equity investments are invested broadly in local equity, developed international and emerging markets. Fixed income investments are comprised primarily of government and investment grade corporate bonds. Real estate investments primarily include investments in limited partnerships that invest in office, industrial, and retail properties. Global Balanced Asset Allocation investments are commingled funds that hold a diversified portfolio of passive market exposures, including equities, debt, currencies and commodities. Absolute return investments are comprised of a diversified portfolio of hedge funds using equity, debt, commodity, and currency strategies held separate from the derivative-linked hedge funds described later in this footnote. Private equity investments are comprised of limited partnerships and fund-of-fund investments that invest in distressed investments, venture capital and leveraged buyouts. Insurance contracts are typically annuities from life insurance companies covering specific pension obligations.

For Kodak’s major defined benefit pension plans, certain investment managers are authorized to invest in derivatives such as futures, swaps, and currency forward contracts. Investments in derivatives are used to obtain desired exposure to a particular asset, index or bond duration and require only a portion of the total exposure to be invested as cash collateral. In instances where exposures are obtained via derivatives, the majority of the exposure value is available to be invested, and is typically invested, in a diversified portfolio of hedge fund strategies that generate returns in addition to the return generated by the derivatives. Of the December 31, 2020 investments shown in the major U.S. plans table above, 4% of the total pension assets represented equity securities exposure obtained via derivatives and are reported in equity securities, and 29% of the total pension assets represented U.S. government bond exposure with 11 years duration, obtained via derivatives and are reported in government bonds. Of the December 31, 2019 investments shown in the major U.S. plans table above, 4% of the total pension assets represented equity securities exposure obtained via derivatives and are reported in equity securities, and 30% of the total pension assets represented U.S. government bond exposure with 12 years duration, obtained via derivatives and are reported in government bonds.

Of the December 31, 2020 investments shown in the major Non-U.S. plans table above, there are no derivative exposures. Of the December 31, 2019 investments shown in the major Non-U.S. plans table above, 7% of the total pension assets represented derivative exposures to government bonds with 2 years duration and are reported in that class.

The following is a reconciliation of the beginning and ending balances of level 3 assets of Kodak’s major U.S. and non-U.S. defined benefit pension plans:

	U.S.
			Net Realized and Unrealized Gains
(in millions)	Balance at January 1, 2020		Relating to Assets Still Held			Relating to Assets Sold During the Period		Net Purchases, Sales and Settlements		Balance at December 31, 2020
Private Equity		7		(2	)		—		—		5
Total	$	7	$	(2	)	$	—	$	—	$	5

	U.S.
			Net Realized and Unrealized Gains
(in millions)	Balance at January 1, 2019		Relating to Assets Still Held		Relating to Assets Sold During the Period		Net Purchases, Sales and Settlements			Balance at December 31, 2019
Private Equity		6		2		—		(1	)		7
Total	$	6	$	2	$	—	$	(1	)	$	7

	Non - U.S.
			Net Realized and Unrealized Gains
(in millions)	Balance at January 1, 2020 ⁽¹⁾		Relating to Assets Still Held		Relating to Assets Sold During the Period		Net Purchases, Sales and Settlements		Balance at December 31, 2020
Insurance Contracts		273		18		—		—		291
Total	$	273	$	18	$	—	$	—	$	291

⁽¹⁾

During 2020 the Company reclassified certain investments from Level 2 to Level 3.

The following pension benefit payments, which reflect expected future service, are expected to be paid (in millions):