Note 18: Retirement Benefit Plans

DEFINED CONTRIBUTION PLANS

We provide tax-qualified defined contribution plans for the benefit of eligible employees, former employees, and retirees in the U.S. and certain other countries. The plans are designed to provide employees with an accumulation of funds for retirement on a tax-deferred basis. For the benefit of eligible U.S. employees, we also provide an unfunded non-tax-qualified supplemental deferred compensation plan for certain highly compensated employees.

We expensed $346 million for discretionary contributions to the U.S. qualified defined contribution and non-qualified deferred compensation plans in 2017 ($326 million in 2016 and $337 million in 2015).

U.S. POSTRETIREMENT MEDICAL BENEFITS PLAN

Upon retirement, we provide benefits to eligible U.S. employees who were hired prior to 2014 under the U.S. Postretirement Medical Benefits Plan. The benefits can be used to pay all or a portion of the cost to purchase eligible coverage in a medical plan.

As of December 30, 2017 and December 31, 2016, the projected benefit obligation was $567 million and $588 million, respectively, which used the discount rate of 3.8% and 4.2%, respectively. The December 30, 2017 and December 31, 2016 corresponding fair value of plan assets was $563 million and $409 million, respectively.

The investment strategy for U.S. Postretirement Medical Benefits Plan assets is to invest primarily in liquid assets, due to the level of expected future benefit payments. The assets are invested solely in a tax-aware global equity portfolio, which is actively managed by an external investment manager. The tax-aware global equity portfolio is composed of a diversified mix of equities in developed countries. For 2018, the expected long-term rate of return for the U.S. Postretirement Medical Benefits Plan assets is 5.9%. As of December 30, 2017, substantially all of the U.S. Postretirement Medical Benefits Plan assets were invested in exchange-traded equity securities and were measured at fair value using Level 1 inputs.

The estimated benefit payments for this plan over the next 10 fiscal years are as follows:



(In Millions)	2018		2019		2020		2021		2022		2023-2027
Postretirement Medical Benefits	$	28	$	29	$	30	$	31	$	32	$	179

PENSION BENEFIT PLANS

We provide defined-benefit pension plans in certain countries, most significantly the U.S., Ireland, Germany, and Israel. The majority of the plans' benefits have been frozen.

BENEFIT OBLIGATION AND PLAN ASSETS FOR PENSION BENEFITS PLANS

The vested benefit obligation for a defined-benefit pension plan is the actuarial present value of the vested benefits to which the employee is currently entitled based on the employee's expected date of separation or retirement.



(In Millions)	Dec 30, 2017			Dec 31, 2016
Changes in projected benefit obligation:
Beginning projected benefit obligation	$	3,640		$	3,130
Service cost	84			130
Interest cost	117			106
Actuarial (gain) loss	24			575
Currency exchange rate changes	281			(80		)
Plan curtailments	(162		)	17
Plan settlements	(101		)	(202		)
Other	(41		)	(36		)
Ending projected benefit obligation¹	3,842			3,640

Changes in fair value of plan assets:
Beginning fair value of plan assets	1,696			1,638
Actual return on plan assets	136			81
Employer contributions	471			416
Currency exchange rate changes	124			(26		)
Plan settlements	(101		)	(202		)
Benefits paid to plan participants	(42		)	(84		)
Other	3			(127		)
Ending fair value of plan assets²	2,287			1,696

Amounts recognized in the consolidated balance sheet³	$	1,555		$	1,944

Accumulated other comprehensive loss (income), before tax⁴	$	1,257		$	1,603

Accumulated benefit obligation⁵	$	3,423		$	2,976


¹	The split between U.S. and non-U.S. in the projected benefit obligation was 38% and 62%, respectively, as of December 30, 2017 and December 31, 2016.


²	The split between the U.S. and non-U.S. in the fair value of plan assets was 49% and 51%, respectively, as of December 30, 2017 and 46% and 54%, respectively, as of December 31, 2016.


³	Substantially all amounts recognized in the consolidated balance sheet are recorded in other long-term liabilities for all periods presented.


⁴	The split between U.S. and non-U.S. in the accumulated other comprehensive loss (income), before tax, was 38% and 62%, respectively, as of December 30, 2017 and 34% and 66%, respectively, as of December 31, 2016. Substantially all amounts recognized in accumulated other comprehensive loss (income) are attributable to net actuarial gain or loss.


⁵	All plans had accumulated benefit obligations and projected benefit obligations in excess of plan assets for all periods presented.

We use the corridor approach to amortize actuarial gains and losses. Under this approach, net actuarial gains or losses in excess of 10% of the larger of the projected benefit obligation or the fair value of plan assets are amortized on a straight-line basis.

ASSUMPTIONS FOR PENSION BENEFIT PLANS



	Dec 30, 2017		Dec 31, 2016
Weighted average actuarial assumptions used to determine benefit obligations
Discount rate	3.0	%	3.2	%
Rate of compensation increase	3.3	%	3.6	%



	2017		2016		2015
Weighted average actuarial assumptions used to determine costs
Discount rate	3.2	%	3.3	%	3.1	%
Expected long-term rate of return on plan assets	4.6	%	5.5	%	5.9	%
Rate of compensation increase	3.6	%	3.8	%	3.9	%

We establish the discount rate for each pension plan by analyzing current market long-term bond rates and matching the bond maturity with the average duration of the pension liabilities.

We establish the long-term expected rate of return by developing a forward-looking, long-term return assumption for each pension fund asset class, taking into account factors such as the expected real return for the specific asset class and inflation. A single, long-term rate of return is then calculated as the weighted average of the target asset allocation percentages and the long-term return assumption for each asset class.

FUNDING

Policy. Our practice is to fund the various pension plans in amounts sufficient to meet the minimum requirements of applicable local laws and regulations. Additional funding may be provided as deemed appropriate. Funding for the U.S. Postretirement Medical Benefits Plan is discretionary under applicable laws and regulations; additional funding may be provided as deemed appropriate.

Funding Status. On a worldwide basis, our pension and postretirement benefit plans were 65% funded as of December 30, 2017. The U.S. Intel Minimum Pension Plan, which accounts for 33% of the worldwide pension and postretirement benefit obligations, was 77% funded. Funded status is not indicative of our ability to pay ongoing pension benefits or of our obligation to fund retirement trusts. Required pension funding for U.S. retirement plans is determined in accordance with the Employee Retirement Income Security Act (ERISA), which sets required minimum contributions. Cumulative company funding to the U.S. Intel Minimum Pension Plan currently exceeds the minimum ERISA funding requirements.

NET PERIODIC BENEFIT COST

The net periodic benefit cost for pension benefits and U.S. postretirement medical benefits was $243 million in 2017, ($415 million in 2016 and $250 million in 2015). The service cost component of the corresponding net periodic benefit cost was $104 million in 2017 ($156 million in 2016 and $176 million in 2015).

The increase in the net periodic pension benefit cost in 2016 compared to 2015 was primarily attributed to plan settlements and remeasurement in conjunction with our 2016 Restructuring Program. For more information on the 2016 Restructuring Program, see "Note 7: Restructuring and Other Charges."

PENSION PLAN ASSETS



	December 30, 2017								Dec 31, 2016
	Fair Value Measured at Reporting Date Using
(In Millions)	Level 1		Level 2		Level 3		Total		Total
Equity securities	$	451	$	—	$	22	$	473	$	328
Fixed income	45		326		94		465		304
Other investments	19		—		—		19		—
Assets measured by fair value hierarchy	$	515	$	326	$	116	$	957	$	632
Assets measured at net asset value							1,208		1,044
Cash and cash equivalents							122		20
Total pension plan assets at fair value							$	2,287	$	1,696

U.S. Plan Assets

The investment strategy for U.S. Intel Minimum Pension Plan assets is to maximize risk-adjusted returns, taking into consideration the investment horizon and expected volatility to help ensure that sufficient assets are available to pay pension benefits as they come due. The allocation to each asset class will fluctuate with market conditions, such as volatility and liquidity concerns, and will typically be rebalanced when outside the target ranges, which were 45% fixed income, 30% hedge funds, and 25% equity investments in 2017. For 2018, the expected long-term rate of return for the U.S. Intel Minimum Pension Plan assets is 5.1%.

Substantially all of the fixed-income investments in the U.S. plan assets are asset-backed securities, corporate debt, and government debt. Government debt includes instruments such as non-U.S. government securities, U.S. agency securities, and U.S. treasury securities.

The assets measured at net asset value are invested in common collective trust funds, limited partnerships, and limited liability companies.

Non-U.S. Plan Assets

The investments of the non-U.S. plans are managed by insurance companies, pension funds, or third-party trustees, consistent with regulations or market practice of the country where the assets are invested. The investment manager makes investment decisions within the guidelines set by Intel or local regulations. Investments managed by qualified insurance companies or pension funds under standard contracts follow local regulations, and we are not actively involved in their investment strategies. For the assets that we have discretion to set investment guidelines, the assets are invested in developed country equity investments and fixed-income investments, either through index funds or direct investment. In general, the investment strategy is designed to accumulate a diversified portfolio among markets, asset classes, or individual securities to reduce market risk and to help ensure that the pension assets are available to pay benefits as they come due. The target allocation of the non-U.S. plan assets that we have control over is approximately 45% equity, 35% fixed-income, and 20% hedge fund investments. For 2018, the average expected long-term rate of return for the non-U.S. plan assets is 4.2%.

Most of the equity investments in the non-U.S. plan assets are invested in a diversified mix of equities of developed countries, including the U.S., and emerging markets throughout the world.

We have control over the investment strategy related to the majority of the assets measured at net asset value, which are invested in hedge funds, bond index, and equity index funds.

ESTIMATED FUTURE BENEFIT PAYMENTS FOR PENSION BENEFIT PLANS

Estimated benefit payments over the next 10 fiscal years are as follows:



(In Millions)	2018		2019		2020		2021		2022		2023-2027
Pension benefits	$	125	$	117	$	115	$	121	$	124	$	673