BENEFIT PLANS

12 Months Ended

Dec. 31, 2020

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

BENEFIT PLANS

Pension and Other Postretirement Plans

The Company has funded defined benefit plans in Japan and the U.S., however the U.S. plan was frozen to new participants effective October 1, 2013. The Company also maintains non-qualified, unfunded supplemental retirement plans that provide defined pension benefits in excess of limits imposed by federal tax law for certain Japanese, U.S. and former employees, however the U.S. plan was frozen to new participants effective January 1, 2015. U.S. employees who are not participants in the defined benefit plan receive a nonelective 401(k) employer contribution.

The Company provides certain health care benefits for eligible U.S. retired employees, their beneficiaries and covered dependents (other postretirement benefits). The health care plan is contributory and unfunded. Effective January 1, 2014, employees eligible for benefits included the following: (1) active employees whose age plus service, in years, equaled or exceeded 80 (rule of 80); (2) active employees who were age 55 or older and have met the 15 years of service requirement; (3) active employees who would meet the rule of 80 in the next five years; (4) active employees who were age 55 or older and who would meet the 15 years of service requirement within the next five years; and (5) current retirees. For certain employees and former employees, additional coverage is provided for all medical expenses for life.

Information with respect to the Company's benefit plans' assets and obligations as of December 31 was as follows:

	Pension Benefits												Other
	Japan						U.S.						Postretirement Benefits
(In millions)	2020			2019			2020			2019			2020				2019
Projected benefit obligation:
Benefit obligation, beginning of year		$	436		$	396		$	1,058		$	875		$	39			$	37
Service cost		24			22			29			23			0				0
Interest cost		5			7			34			20			1				1
Actuarial (gain) loss		(6)			17			106			163			6				4
Benefits and expenses paid		(12)			(11)			(23)			(23)			(4)				(3)
Effect of foreign exchange rate changes		26			5			0			0			0				0
Benefit obligation, end of year		473			436			1,204			1,058			42				39
Plan assets:
Fair value of plan assets, beginning of year		344			289			644			465			0				0
Actual return on plan assets		21			24			96			98			0				0
Employer contributions		41			38			107			104			4				3
Benefits and expenses paid		(12)			(11)			(23)			(23)			(4)				(3)
Effect of foreign exchange rate changes		22			4			0			0			0				0
Fair value of plan assets, end of year		416			344			824			644			0				0
Funded status of the plans(1)		$	(57)		$	(92)		$	(380)		$	(414)		$	(42)			$	(39)
Amounts recognized in accumulated other comprehensive income:
Net actuarial (gain) loss		$	74		$	92		$	278		$	259		$	15			$	12
Prior service (credit) cost		(1)			(2)			(2)			(4)			0				0
Total included in accumulated other comprehensive income		$	73		$	90		$	276		$	255		$	15			$	12
Accumulated benefit obligation		$	425		$	390		$	1,017		$	886		N/A		(2)		N/A		(2)

(1) Recognized in other liabilities in the consolidated balance sheets

(2) Not applicable

Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets

	Pension Benefits
	Japan						U.S.
(In millions)	2020			2019			2020			2019
Accumulated benefit obligation		$	425		$	390		$	1,017		$	886
Fair value of plan assets		416			344			824			644

Information for Pension Plans with a Projected Benefit Obligation in Excess of Plan Assets

	Pension Benefits
	Japan (1)						U.S.(2)
(In millions)	2020			2019			2020			2019
Projected benefit obligation		$	473		$	436		$	1,204		$	1,058
Fair value of plan assets		416			344			824			644

(1) The net amount of projected benefit obligation and plan assets for the underfunded (including unfunded) Japan pension plan was $57 and $92 at December 31, 2020 and 2019, respectively, and was classified as liabilities on the statement of financial position.

(2) The net amount of projected benefit obligation and plan assets for the underfunded (including unfunded) U.S. pension plan was $380 and $414 at December 31, 2020 and 2019, respectively, and was classified as liabilities on the statement of financial position.

Information for other postretirement benefit plans with an accumulated postretirement benefit obligation in excess of plan assets has been disclosed in the note on “Obligations and Funded Status” because all the other postretirement benefit plans are unfunded or underfunded.

	Pension Benefits												Other
	Japan						U.S.						Postretirement Benefits
	2020		2019		2018		2020		2019		2018		2020		2019		2018
Weighted-average actuarial assumptions:
Discount rate - net periodic benefit cost	.75%		1.25%		1.25%		3.25%		4.25%		3.75%		3.25%		4.25%		3.75%
Discount rate - benefit obligations	.75		.75		1.25		2.68		3.25		4.25		2.68		3.25		4.25
Expected long-term return on plan assets	2.00		2.00		2.00		6.00		6.25		6.50		N/A	(1)	N/A	(1)	N/A	(1)
Rate of compensation increase	N/A	(1)	N/A	(1)	N/A	(1)	4.00		4.00		4.00		N/A	(1)	N/A	(1)	N/A	(1)
Health care cost trend rates	N/A	(1)	N/A	(1)	N/A	(1)	N/A	(1)	N/A	(1)	N/A	(1)	6.30	(2)	7.50	(2)	7.40	(2)

(1) Not applicable

(2)For the years 2020, 2019 and 2018, the health care cost trend rates are expected to trend down to 3.7% in 53 years, 3.8% in 54 years, and 4.1% in 61 years, respectively.

The Company determines its discount rate assumption for its pension retirement obligations based on indices for AA corporate bonds with an average duration of approximately 20 years for the Japan pension plans and 17 years for the U.S. pension plans, and determination of the U.S. pension plans discount rate utilizes the 85-year extrapolated yield curve. In Japan, participant salary and future salary increases are not factors in determining pension benefit cost or the related pension benefit obligation.

The Company bases its assumption for the long-term rate of return on assets on historical trends (10-year or longer historical rates of return for the Japanese plan assets and 15-year historical rates of return for the U.S. plan assets), expected future market movement, as well as the portfolio mix of securities in the asset portfolio including, but not limited to, style, class and equity and fixed income allocations. In addition, the Company's consulting actuaries evaluate its assumptions for long-term rates of return under Actuarial Standards of Practice (ASOP). Under the ASOP, the actual portfolio type, mix and class is modeled to determine a best estimate of the long-term rate of return. The Company in turn use those results to further validate its own assumptions.

Components of Net Periodic Benefit Cost

Pension and other postretirement benefit expenses are included in acquisition and operating expenses in the consolidated statements of earnings, which includes $30 million, $8 million and $25 million of other components of net periodic pension cost and postretirement costs (other than services costs) for the years ended December 31, 2020, 2019 and 2018, respectively. Total net periodic benefit cost includes the following components:

	Pension Benefits																		Other
		Japan								U.S.									Postretirement Benefits
(In millions)	2020			2019			2018			2020			2019			2018			2020			2019			2018
Service cost		$	24		$	22		$	19		$	29		$	23		$	27		$	0		$	0		$	0
Interest cost		5			7			7			34			20			31			1			1			1
Expected return on plan assets		(7)			(6)			(6)			(35)			(29)			(26)			0			0			0
Amortization of net actuarial loss		4			4			1			26			10			16			2			1			1
Amortization of prior service cost		(1)			0			0			(2)			0			0			0			0			0
Net periodic (benefit) cost		$	25		$	27		$	21		$	52		$	24		$	48		$	3		$	2		$	2

Changes in Accumulated Other Comprehensive Income

The following table summarizes the amounts recognized in other comprehensive loss (income) for the years ended December 31:

	Pension Benefits																		Other
	Japan									U.S.									Postretirement Benefits
(In millions)	2020			2019			2018			2020			2019			2018			2020			2019			2018
Net actuarial loss (gain)		$	(14)		$	1		$	52		$	45		$	95		$	(13)		$	5		$	4		$	4
Amortization of net actuarial loss		(4)			(4)			(1)			(26)			(10)			(16)			(2)			(1)			(1)
Amortization of prior service cost		1			0			0			2			0			0			0			0			0
Total		$	(17)		$	(3)		$	51		$	21		$	85		$	(29)		$	3		$	3		$	3

No transition obligations arose during 2020.

Benefit Payments

The following table provides expected benefit payments, which reflect expected future service, as appropriate.

	Pension Benefits						Other
(In millions)	Japan			U.S.			Postretirement Benefits
2021		$	13		$	30		$	6
2022		17			31			5
2023		15			32			5
2024		16			34			5
2025		18			35			4
2026-2030		87			223			13

Funding

The Company plans to make contributions of $37 million to the Japanese funded defined benefit plan in 2021. The Company does not plan to make any contributions to the U.S. funded defined benefit plan in 2021. The Company funded contributions of $100 million to the U.S. funded defined benefit plan in 2020. The funding policy for the Company's non-qualified supplemental defined benefit pension plans and other postretirement benefits plan is to contribute the amount of the benefit payments made during the year.

Plan Assets

The investment objective of the Company's Japanese and U.S. funded defined benefit plans is to preserve the purchasing power of the plan's assets and earn a reasonable inflation-adjusted rate of return over the long term. Furthermore, the Company seeks to accomplish these objectives in a manner that allows for the adequate funding of plan benefits and expenses. In order to achieve these objectives, the Company's goal is to maintain a conservative, well-diversified and balanced portfolio of high-quality equity, fixed-income and money market securities. As a part of its strategy, the Company has established strict policies covering quality, type and concentration of investment securities. For the Company's Japanese plan, these policies include limitations on investments in derivatives including futures, options and swaps, and low-liquidity investments such as real estate, venture capital investments, and privately issued securities. For the Company's U.S. plan, these policies prohibit investments in precious metals, limited partnerships, venture capital, and direct investments in real estate. The Company is also prohibited from trading on margin.

The plan fiduciaries for the Company's funded defined benefit plans have developed guidelines for asset allocations reflecting a percentage of total assets by asset class, which are reviewed on an annual basis. Asset allocation targets as of December 31, 2020 were as follows:

	Japan Pension			U.S. Pension
Domestic equities		5	%		40	%
International equities		21			20
Fixed income securities		65			40
Other		9			0
Total		100	%		100	%

The U.S. Pension Plan had $169 million in cash at December 31, 2020. The plan fiduciaries authorized investing contributions made to the Plan in 2019 and 2020 on a graduated basis over a period of time.

The following table presents the fair value of Aflac Japan's pension plan assets that are measured at fair value on a recurring basis as of December 31. All of these assets are classified as Level 2 in the fair value hierarchy.

(In millions)	2020			2019
Japan pension plan assets:
Equities:
Japanese equity securities		$	20		$	17
International equity securities		88			67
Fixed income securities:
Japanese bonds		23			20
International bonds		249			207
Insurance contracts		36			33
Total		$	416		$	344

The following table presents the fair value of Aflac U.S.'s pension plan assets that are measured at fair value on a recurring basis as of December 31. All of these assets are classified as Level 1 in the fair value hierarchy.

(In millions)	2020			2019
U.S. pension plan assets:
Mutual funds:
Large cap equity funds		$	234		$	179
Mid cap equity funds		24			22
Real estate equity funds		19			16
International equity funds		136			112
Fixed income bond funds		237			209
Aflac Incorporated common stock		5			6
Cash and cash equivalents		169			100
Total		$	824		$	644

The fair values of the Company's pension plan investments categorized as Level 1, consisting of mutual funds and common stock, are based on quoted market prices for identical securities traded in active markets that are readily and regularly available to the Company. The fair values of the Company's pension plan investments classified as Level 2 are based on quoted prices for similar assets in markets that are not active, other inputs that are observable, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates, or other market-corroborated inputs.

401(k) Plan

The Company sponsors a 401(k) plan in which it matches a portion of U.S. employees' contributions. The plan provides for salary reduction contributions by employees and provides for matching contributions which, starting January 1, 2018, the Company increased to 100% of each employee's contributions which were not in excess of 4% of the employee's annual cash compensation as a result of tax reform. The Company also provides a nonelective contribution to the 401(k) plan of 2% of annual cash compensation for employees who opted out of the future benefits of the U.S. defined benefit plan and for new U.S. employees. Effective January 1, 2021, the Company increased this nonelective contribution to 4% of annual compensation.

The 401(k) contributions by the Company, included in acquisition and operating expenses in the consolidated statements of earnings, were $20 million in 2020 and $18 million in both 2019 and 2018. The plan trustee held approximately 2.5 million shares of the Company's common stock for plan participants at December 31, 2020.

Stock Bonus Plan

Aflac U.S. maintains a stock bonus plan for eligible U.S. sales associates. Plan participants receive shares of Aflac Incorporated common stock based on their new annualized premium sales and their first-year persistency of substantially all new insurance policies. The cost of this plan, which was capitalized as deferred policy acquisition costs, amounted to $24 million in 2020 and $31 million in both 2019 and 2018.

Voluntary Separation Program

In September 2020, the Company announced a voluntary separation program for certain U.S. employees. The program provides eligible employees with a severance package, including twelve months of salary, the employee's targeted bonus payout for 2020 and one year of Consolidated Omnibus Budget Reconciliation Act (COBRA) or retiree medical, if eligible. Employees accepted into this program were notified in October 2020 and most transitions were completed by December 31, 2020, with a small number continuing into the first quarter of 2021. The Company recorded a one-time severance charge of $43 million in the fourth quarter of 2020 related to the program.