NONPENSION POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

Postretirement

The Company sponsors a number of plans to provide health care and other welfare benefits to retired employees in the United States and Canada, who have met certain age and service requirements. The majority of these plans are funded or unfunded defined benefit plans, although the Company does participate in a limited number of multiemployer or other defined contribution plans for certain employee groups. The Company contributes to voluntary employee benefit association (VEBA) trusts to fund certain U.S. retiree health and welfare benefit obligations. Beginning in 2015, the Company used a December 31 measurement date for these plans and, when necessary, adjusts for plan contributions and significant events between December 31 and its fiscal year-end.

Obligations and funded status

The aggregate change in accumulated postretirement benefit obligation, plan assets, and funded status is presented in the following tables.



(millions)	2015			2014
Change in accumulated benefit obligation
Beginning of year	$	1,288		$	1,202
Service cost	29			28
Interest cost	48			55
Actuarial (gain) loss	(53		)	116
Benefits paid	(57		)	(62		)
Curtailments	—			(28		)
Amendments	(84		)	(18		)
Foreign currency adjustments	(8		)	(5		)
End of year	$	1,163		$	1,288
Change in plan assets
Fair value beginning of year	$	1,204		$	1,178
Actual return on plan assets	(65		)	81
Employer contributions	14			16
Benefits paid	(69		)	(71		)
Fair value end of year	$	1,084		$	1,204
Funded status	$	(79	)	$	(84	)
Amounts recognized in the Consolidated Balance Sheet consist of
Other non-current assets	$	—		$	—
Other current liabilities	(2		)	(2		)
Other liabilities	(77		)	(82		)
Net amount recognized	$	(79	)	$	(84	)
Amounts recognized in accumulated other comprehensive income consist of
Prior service credit	(95		)	(16		)
Net amount recognized	$	(95	)	$	(16	)

Expense

Components of postretirement benefit expense (income) were:



(millions)	2015			2014			2013
Service cost	$	29		$	28		$	34
Interest cost	48			55			50
Expected return on plan assets	(100		)	(98		)	(86		)
Amortization of unrecognized prior service credit	(5		)	(3		)	(3		)
Recognized net (gain) loss	112			133			(247		)
Curtailment	—			(28		)	1
Postretirement benefit expense:
Defined benefit plans	84			87			(251		)
Defined contribution plans	14			14			13
Total	$	98		$	101		$	(238	)

The estimated prior service credit that will be amortized from accumulated other comprehensive income into nonpension postretirement benefit expense over the next fiscal year is expected to be approximately $9 million.

Assumptions

The weighted-average actuarial assumptions used to determine benefit obligations were:



	2015		2014		2013
Discount rate	4.2	%	4.0	%	4.8	%

The weighted-average actuarial assumptions used to determine annual net periodic benefit cost were:



	2015		2014		2013
Discount rate	4.0	%	4.8	%	3.9	%
Long-term rate of return on plan assets	8.5	%	8.5	%	8.5	%

The Company determines the overall discount rate and expected long-term rate of return on VEBA trust obligations and assets in the same manner as that described for pension trusts in Note 9.

The assumed health care cost trend rate is 5.0% for 2016, decreasing gradually to 4.5% by the year 2018 and remaining at that level thereafter. These trend rates reflect the Company’s historical experience and management’s expectations regarding future trends. A one percentage point change in assumed health care cost trend rates would have the following effects:



(millions)	One percentage point increase		One percentage point decrease
Effect on total of service and interest cost components	$	4	$	(3	)
Effect on postretirement benefit obligation	89		(72		)

Plan assets

The fair value of Plan assets as of January 2, 2016 summarized by level within fair value hierarchy described in Note 9, are as follows:



(millions)	Total Level 1		Total Level 2		Total Level 3		Total
Cash and cash equivalents	$	9	$	13	$	—	$	22
Corporate stock, common:
Domestic	195		—		—		195
International	5		—		—		5
Mutual funds:
Domestic equity	—		52		—		52
International equity	—		111		—		111
Domestic debt	—		54		—		54
Collective trusts:
Domestic equity	—		150		—		150
International equity	—		148		—		148
Limited partnerships	—		166		—		166
Bonds, corporate	—		120		—		120
Bonds, government	—		48		—		48
Bonds, other	—		12		—		12
Other	—		1		—		1
Total	$	209	$	875	$	—	$	1,084

The fair value of Plan assets at January 3, 2015 are summarized as follows:



(millions)	Total Level 1		Total Level 2		Total Level 3		Total
Cash and cash equivalents	$	6	$	27	$	—	$	33
Corporate stock, common:
Domestic	214		—		—		214
International	17		—		—		17
Mutual funds:
Domestic equity	—		153		—		153
International equity	—		120		—		120
Domestic debt	—		63		—		63
Collective trusts:
Domestic equity	—		53		—		53
International equity	—		164		—		164
Limited partnerships	—		174		—		174
Bonds, corporate	—		141		—		141
Bonds, government	—		54		—		54
Bonds, other	—		17		—		17
Other	—		1		—		1
Total	$	237	$	967	$	—	$	1,204

The Company’s asset investment strategy for its VEBA trusts is consistent with that described for its pension trusts in Note 9. The current target asset allocation is 75% equity securities and 25% debt securities. The Company currently expects to contribute approximately $15 million to its VEBA trusts during 2016.

There were no Level 3 assets during 2015 and 2014.

Postemployment

Under certain conditions, the Company provides benefits to former or inactive employees, including salary continuance, severance, and long-term disability, in the United States and several foreign locations. The Company’s postemployment benefit plans are unfunded. Actuarial assumptions used are generally consistent with those presented for pension benefits in Note 9. The aggregate change in accumulated postemployment benefit obligation and the net amount recognized were:



(millions)	2015			2014
Change in accumulated benefit obligation
Beginning of year	$	104		$	87
Service cost	7			7
Interest cost	4			4
Actuarial (gain)loss	—			8
Benefits paid	(6		)	(9		)
Amendments	—			8
Foreign currency adjustments	(1		)	(1		)
End of year	$	108		$	104
Funded status	$	(108	)	$	(104	)
Amounts recognized in the Consolidated Balance Sheet consist of
Other current liabilities	$	(8	)	$	(8	)
Other liabilities	(100		)	(96		)
Net amount recognized	$	(108	)	$	(104	)
Amounts recognized in accumulated other comprehensive income consist of
Net prior service cost	$	6		$	7
Net experience loss	27			30
Net amount recognized	$	33		$	37

Components of postemployment benefit expense were:



(millions)	2015		2014		2013
Service cost	$	7	$	7	$	7
Interest cost	4		4		3
Amortization of unrecognized prior service cost	1		—		—
Recognized net loss	3		3		5
Postemployment benefit expense	$	15	$	14	$	15

The estimated net experience loss and net prior service cost that will be amortized from accumulated other comprehensive income into postemployment benefit expense over the next fiscal year is $3 million and $1 million, respectively.

Benefit payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:



(millions)	Postretirement		Postemployment
2016	$	71	$	9
2017	72		8
2018	73		8
2019	73		8
2020	74		8
2021-2025	390		42