PENSION AND OTHER POSTRETIREMENT BENEFITS

9 Months Ended

Jul. 31, 2016

PENSION AND OTHER POSTRETIREMENT BENEFITS

PENSION AND OTHER POSTRETIREMENT BENEFITS

(7)  The Company has several defined benefit pension plans and defined postretirement health care and life insurance plans covering its U.S. employees and employees in certain foreign countries.

The worldwide components of net periodic pension cost consisted of the following in millions of dollars:

	Three Months Ended				Nine Months Ended
	July 31				July 31
	2016		2015		2016		2015
Service cost	$	64	$	70	$	190	$	212
Interest cost		98		118		293		356
Expected return on plan assets		(194)		(192)		(581)		(577)
Amortization of actuarial loss		51		55		155		165
Amortization of prior service cost		4		7		12		19
Settlements/curtailments		1		4		10		5
Net cost	$	24	$	62	$	79	$	180

The worldwide components of net periodic postretirement benefits cost (health care and life insurance) consisted of the following in millions of dollars:

	Three Months Ended				Nine Months Ended
	July 31				July 31
	2016		2015		2016		2015
Service cost	$	9	$	12	$	28	$	35
Interest cost		51		65		153		194
Expected return on plan assets		(8)		(14)		(26)		(42)
Amortization of actuarial loss		18		22		55		68
Amortization of prior service credit		(19)		(19)		(58)		(57)
Net cost	$	51	$	66	$	152	$	198

During the first nine months of 2016, the Company contributed approximately $64 million to its pension plans and $24 million to its other postretirement benefit plans. The Company presently anticipates contributing an additional $16 million to its pension plans and $2 million to its other postretirement benefit plans during the remainder of fiscal year 2016. These contributions include payments from Company funds to either increase plan assets or make direct payments to plan participants.

Beginning in 2016, the Company changed the method used to estimate the service and interest cost components of the net periodic pension and other postretirement benefit costs. The new method uses the spot yield curve approach to estimate the service and interest costs by applying the specific spot rates along the yield curve used to determine the benefit obligations to relevant projected cash outflows. Previously, those costs were determined using a single weighted-average discount rate. The change does not affect the measurement of the total benefit obligations as the change in service and interest costs offsets in the actuarial gains and losses recorded in other comprehensive income. The new method provides a more precise measure of interest and service costs by improving the correlation between the projected benefit cash flows and the discrete spot yield curve rates. The Company accounted for this change as a change in estimate prospectively beginning in the first quarter of 2016. The discount rates used to measure the 2016 service costs are 4.3 percent and 5.0 percent for pension and other postretirement employee benefit obligations (OPEB), respectively. The discount rates used to measure the 2016 interest costs are 3.4 percent and 3.5 percent for pension and OPEB, respectively. The previous method would have used a discount rate for both service and interest costs of 4.1 percent for pension and 4.3 percent for OPEB. The decrease in the fiscal year 2016 service and interest costs is approximately $175 million compared to the previous method.