8. Retirement-Related Benefits: The company offers defined benefit pension plans, defined contribution pension plans, as well as nonpension postretirement plans primarily consisting of retiree medical benefits. The following tables provide the pre-tax cost for all retirement-related plans.

					Yr. to Yr.
(Dollars in millions)					Percent
For the three months ended June 30:	2016		2015		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	455	$	493	(7.7	)%
Nonpension postretirement plans — cost	61		67		(9.8	)

Total	$	516	$	560	(7.9	)%

					Yr. to Yr.
(Dollars in millions)					Percent
For the six months ended June 30:	2016		2015		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	894	$	1,242	(28.0	)%
Nonpension postretirement plans — cost	121		139		(13.0	)

Total	$	1,014	$	1,380	(26.5	)%

The following tables provide the components of the cost/(income) for the company’s pension plans.

Cost/(Income) of Pension Plans

(Dollars in millions)	U.S. Plans						Non-U.S. Plans
For the three months ended June 30:	2016			2015			2016			2015
Service cost	$	—		$	—		$	106		$	116
Interest cost	511			507			267			270
Expected return on plan assets	(922		)	(988		)	(481		)	(482		)
Amortization of prior service costs/(credits)	3			2			(27		)	(24		)
Recognized actuarial losses	324			412			359			393
Curtailments and settlements	—			—			10			3
Multi-employer plans/other costs	—			—			37			8

Total net periodic pension (income)/cost of defined benefit plans	(85		)	(67		)	271			283
Cost of defined contribution plans	161			166			108			111

Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	76		$	99		$	379		$	394

(Dollars in millions)	U.S. Plans						Non-U.S. Plans
For the six months ended June 30:	2016			2015			2016			2015
Service cost	$	—		$	—		$	210		$	224
Interest cost	1,024			1,014			529			541
Expected return on plan assets	(1,845		)	(1,977		)	(951		)	(965		)
Amortization of prior service costs/(credits)	5			5			(52		)	(49		)
Recognized actuarial losses	657			827			706			794
Curtailments and settlements	—			—			14			7
Multi-employer plan/other costs	—			—			55			256

Total net periodic pension (income)/cost of defined benefit plans	(158		)	(131		)	512			808
Cost of defined contribution plans	326			339			215			226

Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	167		$	208		$	727		$	1,034

On March 24, 2014, the Supreme Court of Spain issued a ruling against IBM Spain in litigation involving its defined benefit and defined contribution plans. As a result of the ruling, the company recorded pre-tax retirement-related obligations of $233 million in 2015 ($230 million in the first quarter of 2015) in selling, general and administrative expense in the Consolidated Statement of Earnings. These obligations are reflected in “Non-U.S. Plans - Multi-employer plans/other costs” in the table above.

In March 2016, the company initiated a change to the investment strategy of its U.S. defined benefit plan. The 2016 target asset allocation was modified by reducing equity securities from 34 percent to 21 percent, other investments from 10 percent to 9 percent and increasing debt securities from 56 percent to 70 percent of total plan assets. This change is designed to reduce the risk associated with the potential negative impact that equity markets might have on the funded status of the U.S. defined benefit plan. The change is expected to reduce the 2017 expected long-term rate of return on assets from 7.00 percent to approximately 6.25 percent. See note S, “Retirement-Related Benefits,” on page 118 in the company’s recast 2015 Annual Report on Form 8-K dated June 13, 2016 for additional information regarding the company’s investment strategy.

In 2016, the company expects to contribute approximately $500 million to its non-U.S. defined benefit and multi-employer plans, the largest of which will be contributed to the defined benefit pension plans in the UK and Japan. This amount generally represents the legally mandated minimum contribution. Total net contributions to the non-U.S. plans in the first six months of 2016 were $217 million, of which $83 million was in cash and $134 million in U.S. Treasury securities. Total net contributions to the non-U.S. plans in the first six months of 2015 were $186 million in cash. The contribution of U.S. Treasury securities is considered a non-cash transaction in the Consolidated Statement of Cash Flows.

The following tables provide the components of the cost/(income) for the company’s nonpension postretirement plans.

Cost of Nonpension Postretirement Plans

(Dollars in millions)	U.S. Plan						Non-U.S. Plans
For the three months ended June 30:	2016			2015			2016			2015
Service cost	$	4		$	6		$	1		$	2
Interest cost	41			40			11			13
Expected return on plan assets	—			0			(2		)	(2		)
Amortization of prior service costs/(credits)	(2		)	(2		)	(1		)	(1		)
Recognized actuarial losses	5			9			2			2
Curtailments and settlements	—			0			—			0

Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings	$	49		$	53		$	12		$	14

(Dollars in millions)	U.S. Plan						Non-U.S. Plans
For the six months ended June 30:	2016			2015			2016			2015
Service cost	$	9		$	12		$	3		$	4
Interest cost	82			82			22			27
Expected return on plan assets	—			0			(3		)	(4		)
Amortization of prior service costs/(credits)	(4		)	(4		)	(2		)	(3		)
Recognized actuarial losses	10			20			4			5
Curtailments and settlements	—			0			0			0

Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings	$	97		$	109		$	23		$	29

The company contributed $200 million in U.S. Treasury securities and $227 million in cash to the U.S. nonpension postretirement benefit plan during the six months ended June 30, 2016 and 2015, respectively. The contribution of U.S. Treasury securities is considered a non-cash transaction in the Consolidated Statement of Cash Flows.