XML 92 R26.htm IDEA: XBRL DOCUMENT v3.22.0.1
Employee Benefit Plans
 12 Months Ended
Dec. 31, 2021
Defined Benefit Plan Disclosure [Line Items]  
Employee Benefit Plans Employee Benefit Plans
We sponsor defined benefit and defined contribution pension plans for eligible employees. The defined benefit pension plans provide benefits for participating employees based on years of service and average compensation for a specified period of time before retirement. Effective November 1, 2012, substantially all of our defined benefit pension plans were frozen and we began providing enhanced benefits under our defined contribution pension plans for certain employee groups. We use a December 31 measurement date for all of our defined benefit pension plans. We also provide certain retiree medical and other postretirement benefits, including health care and life insurance benefits, to retired employees. Effective November 1, 2012, we modified our retiree medical and other postretirement benefits plans to eliminate the company subsidy for employees who retire on or after November 1, 2012. As a result of modifications to our retiree medical and other postretirement benefits plans in 2012, we recognized a negative plan amendment of $1.9 billion, which was included as a component of prior service benefit in accumulated other comprehensive income (loss) (AOCI) and was amortized over the future service life of the active plan participants for whom the benefit was eliminated. This prior service benefit was fully amortized as of December 31, 2020.
Effective January 1, 2021, health coverage under our retiree medical benefit program that is currently provided to certain retirees age 65 and over who retired prior to November 1, 2012, transitioned from a self-insured plan to a fully-insured Medicare Advantage plan. Benefits coverage has not been reduced and cost shared has not changed as a result of this transition. Due to this transition, as of December 31, 2020, we recognized a negative plan amendment of $313 million to reduce our benefit obligation, which was included as a component of prior service cost in AOCI and will be amortized over the average remaining life expectancy of all retirees, or approximately 13 years. As of December 31, 2021, $195 million of prior service cost remains to be amortized.
Benefit Obligations, Fair Value of Plan Assets and Funded Status
The following tables provide a reconciliation of the changes in the pension and retiree medical and other postretirement benefits obligations, fair value of plan assets and a statement of funded status as of December 31, 2021 and 2020:
 Pension BenefitsRetiree Medical and 
Other Postretirement Benefits
 2021202020212020
 (In millions)
Benefit obligation at beginning of period$19,812 $18,358 $1,046 $824 
Service cost4 2 12 8 
Interest cost526 615 30 30 
Actuarial (gain) loss (1), (2)
(609)1,613 (57)46 
Special termination benefits (3)
— — 139 410 
Plan amendments (4)
— — — (195)
Settlements(1)(36)— — 
Benefit payments(822)(740)(72)(77)
Benefit obligation at end of period$18,910 $19,812 $1,098 $1,046 
Fair value of plan assets at beginning of period$13,557 $12,897 $170 $204 
Actual return on plan assets1,710 1,427 21 13 
Employer contributions (5)
247 9 48 30 
Settlements(1)(36)— — 
Benefit payments(822)(740)(72)(77)
Fair value of plan assets at end of period$14,691 $13,557 $167 $170 
Funded status at end of period$(4,219)$(6,255)$(931)$(876)
(1)The 2021 and 2020 pension actuarial (gain) loss primarily relates to the change in our weighted average discount rate assumption.
(2)The 2021 and 2020 retiree medical and other postretirement benefits actuarial (gain) loss primarily relates to the change in our weighted average discount rate assumption and, in 2021, plan experience adjustments.
(3)During the first quarter of 2021 and the third quarter of 2020, we remeasured our retiree medical and other postretirement benefits to account for enhanced healthcare benefits provided to eligible team members who opted into voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic. As a result, during 2021, we recognized a $139 million special charge for these enhanced healthcare benefits and increased our postretirement benefits obligation by $139 million, and during 2020, we recognized a $410 million special charge for these enhanced healthcare benefits and increased our postretirement benefits obligation by $410 million.
(4)Principally relates to the transition of our retiree medical benefit program from a self-insured plan to a fully-insured Medicare Advantage plan as discussed above.
(5)In January 2021, we made $241 million in contributions to our pension plans, including a contribution of $130 million for the 2020 calendar year that was permitted to be deferred to January 4, 2021 as provided under the CARES Act.
Balance Sheet Position
 Pension BenefitsRetiree Medical and 
Other Postretirement Benefits
 2021202020212020
 (In millions)
As of December 31,
Current liability$7 $7 $90 $55 
Noncurrent liability4,212 6,248 841 821 
Total liabilities$4,219 $6,255 $931 $876 
Net actuarial loss (gain)$5,252 $6,700 $(396)$(358)
Prior service cost (benefit)47 75 (167)(181)
Total accumulated other comprehensive loss (income), pre-tax
$5,299 $6,775 $(563)$(539)
Plans with Projected Benefit Obligations Exceeding Fair Value of Plan Assets
 Pension Benefits
 20212020
 (In millions)
Projected benefit obligation$18,910 $19,812 
Fair value of plan assets14,691 13,557 
Plans with Accumulated Benefit Obligations Exceeding Fair Value of Plan Assets
 Pension BenefitsRetiree Medical and 
Other Postretirement Benefits
 2021202020212020
 (In millions)
Accumulated benefit obligation$18,899 $19,799 $— $— 
Accumulated postretirement benefit obligation
— — 1,098 1,046 
Fair value of plan assets14,691 13,557 167 170 
Net Periodic Benefit Cost (Income)
 Pension BenefitsRetiree Medical and
Other Postretirement Benefits
 202120202019202120202019
 (In millions)
Defined benefit plans:
Service cost$4 $2 $2 $12 $8 $3 
Interest cost526 615 703 30 30 33 
Expected return on assets(1,084)(1,010)(815)(12)(11)(15)
Special termination benefits— — — 139 410 — 
Settlements— 12 — — — — 
Amortization of:
Prior service cost (benefit)28 30 28 (13)(135)(236)
Unrecognized net loss (gain)212 164 150 (24)(24)(31)
Net periodic benefit cost (income)$(314)$(187)$68 $132 $278 $(246)
The service cost component of net periodic benefit cost (income) is included in operating expenses, the cost for the special termination benefits is included in special items, net and the other components of net periodic benefit cost (income) are included in nonoperating other income, net on our consolidated statements of operations.
Assumptions
The following actuarial assumptions were used to determine our benefit obligations and net periodic benefit cost (income) for the periods presented:
 Pension BenefitsRetiree Medical and
Other Postretirement Benefits
 2021202020212020
Benefit obligations:
Weighted average discount rate3.0%2.7%2.8%2.4%
 Pension BenefitsRetiree Medical and
Other Postretirement Benefits
 202120202019202120202019
Net periodic benefit cost (income):
Weighted average discount rate2.7%3.4%4.4%2.4%3.2%4.3%
Weighted average expected rate of return on plan assets
8.0%8.0%8.0%8.0%8.0%8.0%
Weighted average health care cost trend rate assumed for next year (1)
N/AN/AN/A4.8%4.0%3.7%
(1)The weighted average health care cost trend rate at December 31, 2021 is assumed to decline gradually to 3.9% by 2028 and remain level thereafter.
As of December 31, 2021, our estimate of the long-term rate of return on plan assets was 8.0% based on the target asset allocation. Expected returns on long duration bonds are based on yields to maturity of the bonds held at year-end. Expected returns on other assets are based on a combination of long-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management and securities lending programs.
Minimum Contributions
We are required to make minimum contributions to our defined benefit pension plans under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and various other laws for U.S. based plans as well as underfunding rules specific to countries where we maintain defined benefit plans. On March 11, 2021, the ARP was enacted, which included funding relief provisions benefiting single employer qualified retirement benefit pension plans such as those sponsored by us. Based on the ARP provisions applicable to our pension plans, we will have no additional funding requirements until 2023. Our funding obligations will depend on the performance of our investments held in trust by the pension plans, interest rates for determining liabilities, the amount of and timing of any supplemental contributions and our actuarial experience.
Benefit Payments
The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (approximately, in millions):
202220232024202520262027-2031
Pension benefits$864 $898 $933 $966 $994 $5,225 
Retiree medical and other postretirement benefits114 109 103 99 95 390 
Plan Assets
The objectives of our investment policies are to: maintain sufficient income and liquidity to pay retirement benefits; produce a long-term rate of return that meets or exceeds the assumed rate of return for plan assets; limit the volatility of asset performance and funded status; and diversify assets among asset classes and investment managers.
Based on these investment objectives, a long-term strategic asset allocation has been established. This strategic allocation seeks to balance the potential benefit of improving the funded position with the potential risk that the funded position would decline. The current strategic target asset allocation is as follows:
Asset Class/Sub-ClassAllowed Range
Equity
45% - 80%
Public:
U.S. Large
10% - 40%
U.S. Small/Mid
2% - 10%
International
10% - 25%
International Small/Mid
0% - 10%
Emerging Markets
2% - 15%
Alternative Investments
5% - 30%
Fixed Income
20% - 55%
Public:
U.S. Long Duration
15% - 45%
High Yield and Emerging Markets
0% - 10%
Private Income
0% - 15%
Other
0% - 5%
Cash Equivalents
0% - 20%
U.S. long duration bonds are used to partially hedge the assets from declines in interest rates. Public equity as well as high yield fixed income securities are used to provide diversification and are expected to generate higher returns over the long-term than U.S. long duration bonds. Alternative (private) investments are used to provide expected returns in excess of the public markets over the long-term. The pension plan’s master trust also participates in securities lending programs to generate additional income by loaning plan assets to borrowers on a fully collateralized basis. These programs are subject to market risk.
Investments in securities traded on recognized securities exchanges are valued at the last reported sales price on the last business day of the year. Securities traded in the over-the-counter market are valued at the last bid price. Investments in limited partnerships are carried at estimated net asset value as determined by and reported by the general partners of the partnerships and represent the proportionate share of the estimated fair value of the underlying assets of the limited partnerships. Common/collective trusts are valued at net asset value based on the fair values of the underlying investments of the trusts as determined by the sponsor of the trusts. No changes in valuation techniques or inputs occurred during the year.
Benefit Plan Assets Measured at Fair Value on a Recurring Basis
The fair value of our pension plan assets at December 31, 2021 and 2020, by asset category, were as follows (in millions):
 Fair Value Measurements as of December 31, 2021
Asset CategoryQuoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Cash and cash equivalents$76 $— $— $76 
Equity securities:
International markets (a), (b)
2,166 — 4 2,170 
Large-cap companies (b)
1,860 — — 1,860 
Mid-cap companies (b)
449 — — 449 
Small-cap companies (b)
84 2 — 86 
Mutual funds/exchange traded funds (c)
263 — — 263 
Fixed income:
Corporate debt (d)
— 2,847 — 2,847 
Government securities (e)
— 1,128 — 1,128 
U.S. municipal securities— 19 — 19 
Alternative instruments:
Private market partnerships (f)
— — 52 52 
Private market partnerships measured at net asset value (f), (g)
— — — 2,827 
Common/collective trusts (h)
— 337 — 337 
Common/collective trusts measured at net asset value (g), (h)
— — — 2,514 
Insurance group annuity contracts— — 2 2 
Other investments— 3 — 3 
Dividend and interest receivable45 — — 45 
Due from brokers for sale of securities – net10 — — 10 
Other receivables – net3 — — 3 
Total$4,956 $4,336 $58 $14,691 
(a)Holdings are diversified as follows: 14% United Kingdom, 10% Ireland, 10% Japan, 9% Switzerland, 7% France, 6% Germany, 12% emerging markets and the remaining 32% with no concentration greater than 5% in any one country.
(b)There are no significant concentrations of holdings by company or industry.
(c)Investment includes holdings invested 70% in U.S. treasuries and corporate bonds, 17% in equity securities of international companies and 13% in equity securities of large-cap, mid-cap and small-cap U.S. companies.
(d)Includes approximately 81% investments in corporate debt with a S&P rating lower than A and 19% investments in corporate debt with a S&P rating A or higher. Holdings include 86% U.S. companies, 12% international companies and 2% emerging market companies.
(e)Includes approximately 94% investments in U.S. domestic government securities and 6% in emerging market government securities. There are no significant foreign currency risks within this classification.
(f)Includes limited partnerships that invest primarily in domestic private equity and private income opportunities. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the pension plan’s master trust has future funding commitments of approximately $1.6 billion over the next ten years.
(g)Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.
(h)Investment includes 31% in a common/collective trust investing in large market capitalization equity securities within the U.S., 29% in three common/collective trusts investing in emerging country equity securities, 22% in a common/collective trust investing in equity securities of companies located outside the U.S., 11% in a collective interest trust investing primarily in short-term securities, 6% in a common/collective trust investing in smaller market capitalization equity securities within the U.S. and 1% in Canadian segregated balanced value, income growth and diversified pooled funds. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred.
 Fair Value Measurements as of December 31, 2020
Asset CategoryQuoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Cash and cash equivalents$40 $— $— $40 
Equity securities:
International markets (a), (b)
2,282 — — 2,282 
Large-cap companies (b)
2,085 — — 2,085 
Mid-cap companies (b)
428 — — 428 
Small-cap companies (b)
73 1 — 74 
Mutual funds (c)
80 — — 80 
Fixed income:
Corporate debt (d)
— 3,026 — 3,026 
Government securities (e)
— 1,010 — 1,010 
U.S. municipal securities— 30 — 30 
Alternative instruments:
Private market partnerships (f)
— — 15 15 
Private market partnerships measured at net asset value (f), (g)
— — — 1,791 
Common/collective trusts (h)
— 259 — 259 
Common/collective trusts measured at net asset value (g), (h)
— — — 2,384 
Insurance group annuity contracts— — 2 2 
Dividend and interest receivable49 — — 49 
Due from brokers for sale of securities – net1 — — 1 
Other receivables – net1 — — 1 
Total$5,039 $4,326 $17 $13,557 
(a)Holdings are diversified as follows: 11% Switzerland, 11% Ireland, 10% United Kingdom, 9% France, 8% Japan, 7% Germany, 6% Netherlands, 13% emerging markets and the remaining 25% with no concentration greater than 5% in any one country.
(b)There are no significant concentrations of holdings by company or industry.
(c)Investment includes mutual funds invested 39% in equity securities of large-cap, mid-cap and small-cap U.S. companies, 35% in U.S. treasuries and corporate bonds and 26% in equity securities of international companies.
(d)Includes approximately 77% investments in corporate debt with a S&P rating lower than A and 23% investments in corporate debt with a S&P rating A or higher. Holdings include 89% U.S. companies, 9% international companies and 2% emerging market companies.
(e)Includes approximately 89% investments in U.S. domestic government securities, 9% in emerging market government securities and 2% in international government securities. There are no significant foreign currency risks within this classification.
(f)Includes limited partnerships that invest primarily in domestic private equity and private income opportunities. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the pension plan’s master trust has future funding commitments of approximately $1.6 billion over the next ten years.
(g)Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.
(h)Investment includes 34% in a common/collective trust investing in large market capitalization equity securities within the U.S., 30% in three common/collective trusts investing in emerging country equity securities, 21% in a common/collective trust investing in equity securities of companies located outside the U.S., 9% in a collective interest trust investing primarily in short-term securities, 5% in a common/collective trust investing in smaller market capitalization equity securities within the U.S. and 1% in Canadian segregated balanced value, income growth and diversified pooled funds. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred.
Changes in fair value measurements of Level 3 investments during the years ended December 31, 2021 and 2020, were as follows (in millions):
20212020
Balance at beginning of year$17 $12 
Actual gain on plan assets:
Relating to assets still held at the reporting date10 1 
Purchases32 4 
Sales(1)— 
Balance at end of year$58 $17 
The fair value of our retiree medical and other postretirement benefits plans’ assets by asset category, were as follows (in millions):
 Fair Value Measurements as of December 31, 2021
Asset CategoryQuoted Prices in
Active Markets for Identical Assets
(Level 1)		Significant
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Money market fund$4 $— $— $4 
Mutual funds – AAL Class— 163 — 163 
Total$4 $163 $— $167 
 Fair Value Measurements as of December 31, 2020
Asset CategoryQuoted Prices in
Active Markets for Identical Assets
(Level 1)		Significant
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Money market fund$4 $— $— $4 
Mutual funds – AAL Class— 166 — 166 
Total$4 $166 $— $170 
Investments in the retiree medical and other postretirement benefits plans’ mutual funds are valued by quoted prices on the active market, which is fair value, and represents the net asset value of the shares of such funds as of the close of business at the end of the period. Net asset value is based on the fair market value of the funds’ underlying assets and liabilities at the date of determination. The AAL Class mutual funds are offered only to benefit plans of American, therefore, trading is restricted only to American, resulting in a fair value classification of Level 2. Investments included approximately 24% and 25% of investments in non-U.S. common stocks in 2021 and 2020, respectively.
Defined Contribution and Multiemployer Plans
The costs associated with our defined contribution plans were $920 million for the year ended December 31, 2021 and $860 million for each of the years ended December 31, 2020 and 2019.
We participate in the International Association of Machinists & Aerospace Workers (IAM) National Pension Fund, Employer Identification No. 51-6031295 and Plan No. 002 (the IAM Pension Fund). Our contributions to the IAM Pension Fund were $43 million, $40 million and $32 million for the years ended December 31, 2021, 2020 and 2019, respectively. The IAM Pension Fund reported $494 million in employers’ contributions for the year ended December 31, 2020, which is the most recent year for which such information is available. For 2020, our contributions represented more than 5% of total contributions to the IAM Pension Fund.
On March 29, 2019, the actuary for the IAM Pension Fund certified that the fund was in “endangered” status despite reporting a funded status of over 80%. Additionally, the IAM Pension Fund’s Board voluntarily elected to enter into “critical” status on April 17, 2019. Upon entry into critical status, the IAM Pension Fund was required by law to adopt a rehabilitation plan aimed at restoring the financial health of the pension plan and did so on April 17, 2019 (the Rehabilitation Plan). Under the Rehabilitation Plan, we were subject to an immaterial contribution surcharge, which ceased to apply June 14, 2019 upon our mandatory adoption of a contribution schedule under the Rehabilitation Plan. The contribution schedule requires 2.5% annual increases to our contribution rate. This contribution schedule will remain in effect through the earlier of December 31, 2031 or the date the IAM Pension Fund emerges from critical status.
Profit Sharing Program
We accrue 5% of our pre-tax income excluding net special items for our profit sharing program. As a result of our pre-tax loss excluding net special items, there will not be a payout for 2021 under our profit sharing program.
American Airlines, Inc.  
Defined Benefit Plan Disclosure [Line Items]  
Employee Benefit Plans Employee Benefit Plans
American sponsors defined benefit and defined contribution pension plans for eligible employees. The defined benefit pension plans provide benefits for participating employees based on years of service and average compensation for a specified period of time before retirement. Effective November 1, 2012, substantially all of American’s defined benefit pension plans were frozen and American began providing enhanced benefits under its defined contribution pension plans for certain employee groups. American uses a December 31 measurement date for all of its defined benefit pension plans. American also provides certain retiree medical and other postretirement benefits, including health care and life insurance benefits, to retired employees. Effective November 1, 2012, American modified its retiree medical and other postretirement benefits plans to eliminate the company subsidy for employees who retire on or after November 1, 2012. As a result of modifications to its retiree medical and other postretirement benefits plans in 2012, American recognized a negative plan amendment of $1.9 billion, which was included as a component of prior service benefit in accumulated other comprehensive income (loss) (AOCI) and was amortized over the future service life of the active plan participants for whom the benefit was eliminated. This prior service benefit was fully amortized as of December 31, 2020.
Effective January 1, 2021, health coverage under American’s retiree medical benefit program that is currently provided to certain retirees age 65 and over who retired prior to November 1, 2012, transitioned from a self-insured plan to a fully-insured Medicare Advantage plan. Benefits coverage has not been reduced and cost shared has not changed as a result of this transition. Due to this transition, as of December 31, 2020, American recognized a negative plan amendment of $313 million to reduce its benefit obligation, which was included as a component of prior service cost in AOCI and will be amortized over the average remaining life expectancy of all retirees, or approximately 13 years. As of December 31, 2021, $195 million of prior service cost remains to be amortized.
Benefit Obligations, Fair Value of Plan Assets and Funded Status
The following tables provide a reconciliation of the changes in the pension and retiree medical and other postretirement benefits obligations, fair value of plan assets and a statement of funded status as of December 31, 2021 and 2020:
 Pension BenefitsRetiree Medical and
Other Postretirement Benefits
 2021202020212020
 (In millions)
Benefit obligation at beginning of period$19,690 $18,246 $1,046 $824 
Service cost3 2 12 8 
Interest cost523 611 30 30 
Actuarial (gain) loss (1), (2)
(606)1,603 (57)46 
Special termination benefits (3)
— — 139 410 
Plan amendments (4)
— — — (195)
Settlements(1)(36)— — 
Benefit payments(818)(736)(72)(77)
Benefit obligation at end of period$18,791 $19,690 $1,098 $1,046 
Fair value of plan assets at beginning of period$13,477 $12,829 $170 $204 
Actual return on plan assets1,700 1,414 21 13 
Employer contributions (5)
247 6 48 30 
Settlements(1)(36)— — 
Benefit payments(818)(736)(72)(77)
Fair value of plan assets at end of period$14,605 $13,477 $167 $170 
Funded status at end of period$(4,186)$(6,213)$(931)$(876)
(1)The 2021 and 2020 pension actuarial (gain) loss primarily relates to the change in American’s weighted average discount rate assumption.
(2)The 2021 and 2020 retiree medical and other postretirement benefits actuarial (gain) loss primarily relates to the change in American’s weighted average discount rate assumption and, in 2021, plan experience adjustments.
(3)During the first quarter of 2021 and the third quarter of 2020, American remeasured its retiree medical and other postretirement benefits to account for enhanced healthcare benefits provided to eligible team members who opted into voluntary early retirement programs offered as a result of reductions to its operation due to the COVID-19 pandemic. As a result, during 2021, American recognized a $139 million special charge for these enhanced healthcare benefits and increased its postretirement benefits obligation by $139 million and during 2020 American recognized a $410 million special charge for these enhanced healthcare benefits and increased its postretirement benefits obligation by $410 million.
(4)Principally relates to the transition of American’s retiree medical benefit program from a self-insured plan to a fully-insured Medicare Advantage plan as discussed above.
(5)In January 2021, American made $241 million in contributions to its pension plans, including a contribution of $130 million for the 2020 calendar year that was permitted to be deferred to January 4, 2021 as provided under the CARES Act.
Balance Sheet Position
 Pension BenefitsRetiree Medical and
Other Postretirement Benefits
 2021202020212020
 (In millions)
As of December 31,
Current liability$7 $7 $90 $55 
Noncurrent liability4,179 6,206 841 821 
Total liabilities$4,186 $6,213 $931 $876 
Net actuarial loss (gain)$5,241 $6,679 $(396)$(358)
Prior service cost (benefit)46 75 (167)(181)
Total accumulated other comprehensive loss (income), pre-tax
$5,287 $6,754 $(563)$(539)
Plans with Projected Benefit Obligations Exceeding Fair Value of Plan Assets
 Pension Benefits
 20212020
 (In millions)
Projected benefit obligation$18,791 $19,690 
Fair value of plan assets14,605 13,477 
Plans with Accumulated Benefit Obligations Exceeding Fair Value of Plan Assets
 Pension BenefitsRetiree Medical and
Other Postretirement Benefits
 2021202020212020
 (In millions)
Accumulated benefit obligation$18,782 $19,678 $— $— 
Accumulated postretirement benefit obligation
— — 1,098 1,046 
Fair value of plan assets14,605 13,477 167 170 
Net Periodic Benefit Cost (Income)
 Pension BenefitsRetiree Medical and
  Other Postretirement Benefits  
 202120202019202120202019
 (In millions)
Defined benefit plans:
Service cost$3 $2 $2 $12 $8 $3 
Interest cost523 611 699 30 30 33 
Expected return on assets(1,078)(1,005)(811)(12)(11)(15)
Special termination benefits— — — 139 410 — 
Settlements— 12 — — — — 
Amortization of:
Prior service cost (benefit)28 29 28 (13)(135)(236)
Unrecognized net loss (gain)211 164 150 (24)(24)(31)
Net periodic benefit cost (income)$(313)$(187)$68 $132 $278 $(246)
The service cost component of net periodic benefit cost (income) is included in operating expenses, the cost for the special termination benefits is included in special items, net and the other components of net periodic benefit cost (income) are included in nonoperating other income, net on American’s consolidated statements of operations.
Assumptions
The following actuarial assumptions were used to determine American’s benefit obligations and net periodic benefit cost (income) for the periods presented:
 Pension BenefitsRetiree Medical and
Other Postretirement Benefits
 2021202020212020
Benefit obligations:
Weighted average discount rate3.0%2.7%2.8%2.4%
 Pension BenefitsRetiree Medical and
Other Postretirement Benefits
 202120202019202120202019
Net periodic benefit cost (income):
Weighted average discount rate2.7%3.4%4.4%2.4%3.2%4.3%
Weighted average expected rate of return on plan assets
8.0%8.0%8.0%8.0%8.0%8.0%
Weighted average health care cost trend rate assumed for next year (1)
N/AN/AN/A4.8%4.0%3.7%
(1)The weighted average health care cost trend rate at December 31, 2021 is assumed to decline gradually to 3.9% by 2028 and remain level thereafter.
As of December 31, 2021, American’s estimate of the long-term rate of return on plan assets was 8.0% based on the target asset allocation. Expected returns on long duration bonds are based on yields to maturity of the bonds held at year-end. Expected returns on other assets are based on a combination of long-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management and securities lending programs.
Minimum Contributions
American is required to make minimum contributions to its defined benefit pension plans under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and various other laws for U.S. based plans as well as underfunding rules specific to countries where American maintains defined benefit plans. On March 11, 2021, the ARP was enacted, which included funding relief provisions benefiting single employer qualified retirement benefit pension plans such as those sponsored by American. Based on the ARP provisions applicable to its pension plans, American will have no additional funding requirements until 2023. American’s funding obligations will depend on the performance of American’s investments held in trust by the pension plans, interest rates for determining liabilities, the amount of and timing of any supplemental contributions and American’s actuarial experience.
Benefit Payments
The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (approximately, in millions):
202220232024202520262027-2031
Pension benefits$860 $893 $928 $961 $989 $5,194 
Retiree medical and other postretirement benefits114 109 103 99 95 390 
Plan Assets
The objectives of American’s investment policies are to: maintain sufficient income and liquidity to pay retirement benefits; produce a long-term rate of return that meets or exceeds the assumed rate of return for plan assets; limit the volatility of asset performance and funded status; and diversify assets among asset classes and investment managers.
Based on these investment objectives, a long-term strategic asset allocation has been established. This strategic allocation seeks to balance the potential benefit of improving the funded position with the potential risk that the funded position would decline. The current strategic target asset allocation is as follows:
Asset Class/Sub-ClassAllowed Range
Equity
45% - 80%
Public:
U.S. Large
10% - 40%
U.S. Small/Mid
2% - 10%
International
10% - 25%
International Small/Mid
0% - 10%
Emerging Markets
2% - 15%
Alternative Investments
5% - 30%
Fixed Income
20% - 55%
Public:
U.S. Long Duration
15% - 45%
High Yield and Emerging Markets
0% - 10%
Private Income
0% - 15%
Other
0% - 5%
Cash Equivalents
0% - 20%
U.S. long duration bonds are used to partially hedge the assets from declines in interest rates. Public equity as well as high yield fixed income securities are used to provide diversification and are expected to generate higher returns over the long-term than U.S. long duration bonds. Alternative (private) investments are used to provide expected returns in excess of the public markets over the long-term. The pension plan’s master trust also participates in securities lending programs to generate additional income by loaning plan assets to borrowers on a fully collateralized basis. These programs are subject to market risk.
Investments in securities traded on recognized securities exchanges are valued at the last reported sales price on the last business day of the year. Securities traded in the over-the-counter market are valued at the last bid price. Investments in limited partnerships are carried at estimated net asset value as determined by and reported by the general partners of the partnerships and represent the proportionate share of the estimated fair value of the underlying assets of the limited partnerships. Common/collective trusts are valued at net asset value based on the fair values of the underlying investments of the trusts as determined by the sponsor of the trusts. No changes in valuation techniques or inputs occurred during the year.
Benefit Plan Assets Measured at Fair Value on a Recurring Basis
The fair value of American’s pension plan assets at December 31, 2021 and 2020, by asset category, were as follows (in millions):
 Fair Value Measurements as of December 31, 2021
Asset CategoryQuoted Prices in
Active Markets 
for Identical Assets
(Level 1)		Significant
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Cash and cash equivalents$76 $— $— $76 
Equity securities:
International markets (a), (b)
2,166 — 4 2,170 
Large-cap companies (b)
1,860 — — 1,860 
Mid-cap companies (b)
449 — — 449 
Small-cap companies (b)
84 2 — 86 
Mutual funds/exchange traded funds (c)
177 — — 177 
Fixed income:
Corporate debt (d)
— 2,847 — 2,847 
Government securities (e)
— 1,128 — 1,128 
U.S. municipal securities— 19 — 19 
Alternative instruments:
Private market partnerships (f)
— — 52 52 
Private market partnerships measured at net asset value (f), (g)
— — — 2,827 
Common/collective trusts (h)
— 337 — 337 
Common/collective trusts measured at net asset value (g), (h)
— — — 2,514 
Insurance group annuity contracts— — 2 2 
Other investments— 3 — 3 
Dividend and interest receivable45 — — 45 
Due from brokers for sale of securities – net10 — — 10 
Other receivables – net3 — — 3 
Total$4,870 $4,336 $58 $14,605 
(a)Holdings are diversified as follows: 14% United Kingdom, 10% Ireland, 10% Japan, 9% Switzerland, 7% France, 6% Germany, 12% emerging markets and the remaining 32% with no concentration greater than 5% in any one country.
(b)There are no significant concentrations of holdings by company or industry.
(c)Investment includes holdings invested 86% in U.S. treasuries and corporate bonds and 14% in equity securities of international companies.
(d)Includes approximately 81% investments in corporate debt with a S&P rating lower than A and 19% investments in corporate debt with a S&P rating A or higher. Holdings include 86% U.S. companies, 12% international companies and 2% emerging market companies.
(e)Includes approximately 94% investments in U.S. domestic government securities and 6% in emerging market government securities. There are no significant foreign currency risks within this classification.
(f)Includes limited partnerships that invest primarily in domestic private equity and private income opportunities. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the pension plan’s master trust has future funding commitments of approximately $1.6 billion over the next ten years.
(g)Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.
(h)Investment includes 31% in a common/collective trust investing in large market capitalization equity securities within the U.S., 29% in three common/collective trusts investing in emerging country equity securities, 22% in a common/collective trust investing in equity securities of companies located outside the U.S., 11% in a collective interest trust investing primarily in short-term securities, 6% in a common/collective trust investing in smaller market capitalization equity securities within the U.S. and 1% in Canadian segregated balanced value, income growth and diversified pooled funds. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred.
 Fair Value Measurements as of December 31, 2020
Asset CategoryQuoted Prices in
Active Markets 
for Identical Assets
(Level 1)		Significant
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Cash and cash equivalents$40 $— $— $40 
Equity securities:
International markets (a), (b)
2,282 — — 2,282 
Large-cap companies (b)
2,085 — — 2,085 
Mid-cap companies (b)
428 — — 428 
Small-cap companies (b)
73 1 — 74 
Fixed income:
Corporate debt (c)
— 3,026 — 3,026 
Government securities (d)
— 1,010 — 1,010 
U.S. municipal securities— 30 — 30 
Alternative instruments:
Private market partnerships (e)
— — 15 15 
Private market partnerships measured at net asset value (e), (f)
— — — 1,791 
Common/collective trusts (g)
— 259 — 259 
Common/collective trusts measured at net asset value (f), (g)
— — — 2,384 
Insurance group annuity contracts— — 2 2 
Dividend and interest receivable49 — — 49 
Due from brokers for sale of securities – net1 — — 1 
Other receivables – net1 — — 1 
Total$4,959 $4,326 $17 $13,477 
(a)Holdings are diversified as follows: 11% Switzerland, 11% Ireland, 10% United Kingdom, 9% France, 8% Japan, 7% Germany, 6% Netherlands, 13% emerging markets and the remaining 25% with no concentration greater than 5% in any one country.
(b)There are no significant concentrations of holdings by company or industry.
(c)Includes approximately 77% investments in corporate debt with a S&P rating lower than A and 23% investments in corporate debt with a S&P rating A or higher. Holdings include 89% U.S. companies, 9% international companies and 2% emerging market companies.
(d)Includes approximately 89% investments in U.S. domestic government securities, 9% in emerging market government securities and 2% in international government securities. There are no significant foreign currency risks within this classification.
(e)Includes limited partnerships that invest primarily in domestic private equity and private income opportunities. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the pension plan’s master trust has future funding commitments of approximately $1.6 billion over the next ten years.
(f)Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.
(g)Investment includes 34% in a common/collective trust investing in large market capitalization equity securities within the U.S., 30% in three common/collective trusts investing in emerging country equity securities, 21% in a common/collective trust investing in equity securities of companies located outside the U.S., 9% in a collective interest trust investing primarily in short-term securities, 5% in a common/collective trust investing in smaller market capitalization equity securities within the U.S. and 1% in Canadian segregated balanced value, income growth and diversified pooled funds. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred.
Changes in fair value measurements of Level 3 investments during the years ended December 31, 2021 and 2020, were as follows (in millions):
20212020
Balance at beginning of year$17 $12 
Actual gain on plan assets:
Relating to assets still held at the reporting date10 1 
Purchases32 4 
Sales(1)— 
Balance at end of year$58 $17 
The fair value of American’s retiree medical and other postretirement benefits plans’ assets by asset category, were as follows (in millions):
 Fair Value Measurements as of December 31, 2021
Asset CategoryQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Money market fund$4 $— $— $4 
Mutual funds – AAL Class— 163 — 163 
Total$4 $163 $— $167 

 Fair Value Measurements as of December 31, 2020
Asset CategoryQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Money market fund$4 $— $— $4 
Mutual funds – AAL Class— 166 — 166 
Total$4 $166 $— $170 
Investments in the retiree medical and other postretirement benefits plans’ mutual funds are valued by quoted prices on the active market, which is fair value, and represents the net asset value of the shares of such funds as of the close of business at the end of the period. Net asset value is based on the fair market value of the funds’ underlying assets and liabilities at the date of determination. The AAL Class mutual funds are offered only to benefit plans of American, therefore, trading is restricted only to American, resulting in a fair value classification of Level 2. Investments included approximately 24% and 25% of investments in non-U.S. common stocks in 2021 and 2020, respectively.
Defined Contribution and Multiemployer Plans
The costs associated with American’s defined contribution plans were $893 million, $835 million and $836 million for the years ended December 31, 2021, 2020 and 2019, respectively.
American participates in the International Association of Machinists & Aerospace Workers (IAM) National Pension Fund, Employer Identification No. 51-6031295 and Plan No. 002 (the IAM Pension Fund). American’s contributions to the IAM Pension Fund were $43 million, $40 million and $32 million for the years ended December 31, 2021, 2020 and 2019, respectively. The IAM Pension Fund reported $494 million in employers’ contributions for the year ended December 31, 2020, which is the most recent year for which such information is available. For 2020, American’s contributions represented more than 5% of total contributions to the IAM Pension Fund.
On March 29, 2019, the actuary for the IAM Pension Fund certified that the fund was in “endangered” status despite reporting a funded status of over 80%. Additionally, the IAM Pension Fund’s Board voluntarily elected to enter into “critical” status on April 17, 2019. Upon entry into critical status, the IAM Pension Fund was required by law to adopt a rehabilitation plan aimed at restoring the financial health of the pension plan and did so on April 17, 2019 (the Rehabilitation Plan). Under the Rehabilitation Plan, American was subject to an immaterial contribution surcharge, which ceased to apply June 14, 2019 upon American’s mandatory adoption of a contribution schedule under the Rehabilitation Plan. The contribution schedule requires 2.5% annual increases to its contribution rate. This contribution schedule will remain in effect through the earlier of December 31, 2031 or the date the IAM Pension Fund emerges from critical status.
Profit Sharing Program
American accrues 5% of its pre-tax income excluding net special items for its profit sharing program. As a result of American’s pre-tax loss excluding net special items, there will not be a payout for 2021 under its profit sharing program.