As of December 31, 2019, the Company sponsors several active 401(k) savings plans that cover all employees who meet plan eligibility requirements. The Company makes matching contributions consistent with the provisions of the respective plans.

At the participant’s option, account balances, including the Company’s matching contribution, can be invested among various investment options under each plan. Two of the defined contribution plans offer the Company’s common stock fund as an investment option. The Company also maintains nonqualified, unfunded deferred compensation plans for certain key employees. The plans provide participants the opportunity to defer portions of their eligible compensation and for certain nonqualified plans, participants receive matching contributions equivalent to what they could have received under the CVS Health Future Fund 401(k) Plan or Aetna 401(k) Plan absent certain restrictions and limitations under the Internal Revenue Code. The Company’s contributions under the above defined contribution plans were $550 million, $334 million and $314 million in 2019, 2018 and 2017, respectively. The Company’s contributions for the years ended December 31, 2019 and 2018 include contributions to the Aetna Inc. 401(k) plan subsequent to the Aetna Acquisition Date.

On November 28, 2018, the Company completed the Aetna Acquisition. Aetna sponsors a tax-qualified defined benefit pension plan that was frozen in 2010. Aetna also sponsors a nonqualified supplemental pension plan that was frozen in 2007. Aetna’s pension plan benefit obligations and the fair value of plan assets were remeasured as of the Aetna Acquisition Date.

Prior to the Aetna Acquisition, during the year ended December 31, 2017, the Company settled the pension obligations of its two existing tax-qualified defined benefit pension plans by irrevocably transferring pension liabilities to an insurance company through the purchase of group annuity contracts and through lump sum distributions. These purchases, funded with pension plan assets, resulted in pre-tax settlement losses of $187 million in the year ended December 31, 2017, related to the recognition of accumulated deferred actuarial losses. The settlement losses were recorded in other expense in the consolidated statement of operations. The Company also sponsors several other defined benefit pension plans that are unfunded nonqualified supplemental retirement plans.



In millions	2019			2018
Change in benefit obligation:
Benefit obligation, beginning of year	$	5,841		$	131
Acquired benefit obligations	—			5,685
Interest cost	225			25
Actuarial loss	530			41
Benefit payments	(357		)	(41		)
Benefit obligation, end of year	6,239			5,841

Change in plan assets:
Fair value of plan assets, beginning of year	5,663			—
Fair value of plan assets acquired	—			5,709
Actual return on plan assets	1,064			(17		)
Employer contributions	25			12
Benefit payments	(357		)	(41		)
Fair value of plan assets, end of year	6,395			5,663

Funded status	$	156		$	(178	)



In millions	2019			2018
Non-current assets reflected in other assets	$	494		$	147
Current liabilities reflected in accrued expenses	(25		)	(25		)
Non-current liabilities reflected in other long-term liabilities	(313		)	(300		)
Net assets (liabilities)	$	156		$	(178	)



In millions	2019			2018			2017
Components of net periodic benefit cost (income):
Interest cost	$	225		$	25		$	20
Expected return on plan assets	(357		)	(33		)	(20		)
Amortization of net actuarial loss	1			2			21
Settlement losses	—			—			187
Net periodic benefit cost (income)	$	(131	)	$	(6	)	$	208

The Company uses a series of actuarial assumptions to determine its benefit obligation and net periodic benefit cost (income), including discount rates and expected return on plan assets assumptions, as further detailed below.

Discount Rates - The discount rate is determined using a yield curve as of the annual measurement date. The yield curve consists of a series of individual discount rates, with each discount rate corresponding to a single point in time, based on high-quality bonds. Projected benefit payments are discounted to the measurement date using the corresponding rate from the yield curve that is consistent with the maturity profile of the expected liability cash flows.

Expected Return on Plan Assets - The expected long-term rate of return on plan assets is determined by using the plan’s target allocation and return expectations based on many factors including forecasted long-term capital market real returns and the inflationary outlook on a plan by plan basis. See “Pension Plan Assets” below for additional details regarding the pension plan assets as of December 31, 2019 and 2018.

As of December 31, 2017, the assets in the Company’s tax-qualified defined benefit pension plans had been fully liquidated to settle all plan obligations through the purchase of group annuity contracts and through lump sum distributions. Subsequent to the Aetna Acquisition Date, the Company’s pension plan assets primarily include debt and equity securities held in separate accounts, common/collective trusts and real estate investments. The valuation methodologies used to value these debt and equity securities and common/collective trusts are similar to the methodologies described in Note 4 “Fair Value.” Pension plan assets also include investments in other assets that are carried at fair value. The following is a description of the valuation methodologies used to value real estate investments and these additional investments, including the general classification pursuant to the fair value hierarchy.

Real Estate - Real estate investments are valued by independent third party appraisers. The appraisals comply with the Uniform Standards of Professional Appraisal Practice, which include, among other things, the income, cost, and sales comparison approaches to estimating property value. Therefore, these investments are classified in Level 3.

Private equity and hedge fund limited partnerships - Private equity and hedge fund limited partnerships are carried at fair value which is estimated using the NAV per unit as reported by the administrator of the underlying investment fund as a practical expedient to fair value. Therefore, these investments have been excluded from the fair value table below.



In millions	Level 1		Level 2			Level 3		Total
Cash and cash equivalents	$	92	$	65		$	—	$	157
Debt securities:
U.S. government securities	592		31			—		623
States, municipalities and political subdivisions	—		157			—		157
U.S. corporate securities	—		1,849			1		1,850
Foreign securities	—		178			—		178
Residential mortgage-backed securities	—		385			—		385
Commercial mortgage-backed securities	—		89			—		89
Other asset-backed securities	—		150			—		150
Redeemable preferred securities	—		5			—		5
Total debt securities	592		2,844			1		3,437
Equity securities:
U.S. domestic	931		1			—		932
International	481		—			—		481
Domestic real estate	25		—			—		25
Total equity securities	1,437		1			—		1,438
Other investments:
Real estate	—		—			353		353
Common/collective trusts ⁽¹⁾	—		288			—		288
Derivatives	—		(2		)	—		(2		)
Total other investments	—		286			353		639
Total pension investments ⁽²⁾	$	2,121	$	3,196		$	354	$	5,671



In millions	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	68	$	30	$	—	$	98
Debt securities:
U.S. government securities	511		38		—		549
States, municipalities and political subdivisions	—		147		—		147
U.S. corporate securities	—		1,671		5		1,676
Foreign securities	—		177		—		177
Residential mortgage-backed securities	—		339		—		339
Commercial mortgage-backed securities	—		70		—		70
Other asset-backed securities	—		162		—		162
Redeemable preferred securities	—		6		—		6
Total debt securities	511		2,610		5		3,126
Equity securities:
U.S. domestic	744		—		—		744
International	356		—		—		356
Domestic real estate	30		—		—		30
Total equity securities	1,130		—		—		1,130
Other investments:
Real estate	—		—		425		425
Common/collective trusts ⁽¹⁾	—		253		—		253
Derivatives	—		2		—		2
Total other investments	—		255		425		680
Total pension investments ⁽²⁾	$	1,709	$	2,895	$	430	$	5,034



	2019
In millions	Real estate			U.S. corporate securities			Total
Beginning balance	$	425		$	5		$	430
Actual return on plan assets	5			—			5
Purchases, sales and settlements	(77		)	(5		)	(82		)
Transfers into (out of) Level 3	—			1			1
Ending balance	$	353		$	1		$	354

The increase in the balance of Level 3 pension plan assets during 2018 relates to investments acquired in the Aetna Acquisition. There was an immaterial amount of transfers into or out of Level 3 from the Aetna Acquisition Date to December 31, 2018.

The Company’s pension plan invests in a diversified mix of assets intended to maximize long-term returns while recognizing the need for adequate liquidity to meet ongoing benefit and administrative obligations. The risk of unexpected investment and actuarial outcomes is regularly evaluated. This evaluation is performed through forecasting and assessing ranges of investment outcomes over short- and long-term horizons and by assessing the pension plan’s liability characteristics. Complementary investment styles and strategies are utilized by multiple investment management firms to further improve portfolio and operational risk characteristics. Public and private equity investments are used primarily to increase overall plan returns. Real estate investments are viewed favorably for their diversification benefits and above-average dividend generation. Fixed income

At December 31, 2019, target investment allocations for the Company’s pension plan were: 33% in equity securities, 54% in debt securities, 6% in real estate, 4% in private equity limited partnerships and 3% in hedge funds. Actual asset allocations may differ from target allocations due to tactical decisions to overweight or underweight certain assets or as a result of normal fluctuations in asset values. Asset allocations are consistent with stated investment policies and, as a general rule, periodically rebalanced back to target asset allocations. Asset allocations and investment performance are formally reviewed periodically throughout the year by the pension plan’s Benefit Finance Committee. Forecasting of asset and liability growth is performed at least annually.

The Company generally contributes to its tax-qualified pension plan based on minimum funding requirements determined under applicable federal laws and regulations. Employer contributions related to the nonqualified supplemental pension plans generally represent payments to retirees for current benefits. The Company contributed $25 million, $12 million and $46 million to its pension plans during 2019, 2018 and 2017, respectively. No contributions are required for the tax-qualified pension plan in 2020. The Company expects to make an immaterial amount of contributions for all other pension plans in 2020. The Company estimates the following future benefit payments, which are calculated using the same actuarial assumptions used to measure the pension benefit obligation as of December 31, 2019:

The Company also contributes to a number of multiemployer pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer pension plans in the following respects: (i) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers, (ii) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, and (iii) if the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the applicable plan, which is referred to as a withdrawal liability.

None of the multiemployer pension plans in which the Company participates are individually significant to the Company. The Company’s contributions to multiemployer pension plans were $18 million, $18 million and $17 million in 2019, 2018 and 2017, respectively.

The Company provides postretirement health care and life insurance benefits to certain retirees who meet eligibility requirements. During 2018, the Company acquired additional OPEB plans in connection with the Aetna Acquisition. The Company’s funding policy is generally to pay covered expenses as they are incurred. For retiree medical plan accounting, the Company reviews external data and its own historical trends for health care costs to determine the health care cost trend rates. As of December 31, 2019 and 2018, the Company’s other postretirement benefits had an accumulated postretirement benefit obligation of $246 million and $228 million, respectively. Net periodic benefit costs related to these other postretirement benefits were $7 million, $2 million and $1 million in 2019, 2018 and 2017, respectively.

The Company estimates the following future benefit payments, which are calculated using the same actuarial assumptions used to measure the accumulated other postretirement benefit obligation as of December 31, 2019: