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RETIREMENT AND DEFERRED COMPENSATION PLANS
 12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
RETIREMENT AND DEFERRED COMPENSATION PLANS RETIREMENT AND DEFERRED COMPENSATION PLANS
Apache Corporation provides retirement benefits to its U.S. employees through the use of multiple plans: a 401(k) savings plan, a money purchase retirement plan, a non-qualified retirement/savings plan, and a non-qualified restorative retirement savings plan. The 401(k) savings plan provides participating employees the ability to elect to contribute up to 50 percent of eligible compensation, as defined, to the plan with the Company making matching contributions up to a maximum of 8 percent of each employee’s annual eligible compensation. In addition, the Company annually contributes 6 percent of each participating employee’s annual eligible compensation to a money purchase retirement plan. The 401(k) savings plan and the money purchase retirement plan are subject to certain annually-adjusted, government-mandated restrictions that limit the amount of employee and Company contributions. For certain eligible employees, the Company also provides a non-qualified retirement/savings plan or a non-qualified restorative retirement savings plan. These plans allow the deferral of up to 50 percent of each employee’s base salary, up to 75 percent of each employee’s annual bonus (that accepts employee contributions) and the Company’s matching contributions in excess of the government mandated limitations imposed in the 401(k) savings plan and money purchase retirement plan.
Vesting in the Company’s contributions in the 401(k) savings plan, the money purchase retirement plan, the non-qualified retirement savings plan and the non-qualified restorative retirement savings plan occurs at the rate of 20 percent for every completed year of employment. Upon a change in control of ownership of Apache Corporation, immediate and full vesting occurs.
Additionally, Apache North Sea Limited maintains a separate retirement plan, as required under the laws of the U.K.
The aggregate annual cost to Apache of all U.S. and international savings plans, the money purchase retirement plan, non-qualified retirement/savings plan, and non-qualified restorative retirement savings plan was $52 million, $52 million, and $55 million for 2019, 2018, and 2017, respectively.
Apache also provides a funded noncontributory defined benefit pension plan (U.K. Pension Plan) covering certain employees of the Company’s North Sea operations in the U.K. The plan provides defined pension benefits based on years of service and final salary. The plan applies only to employees who were part of BP North Sea’s pension plan as of April 2, 2003, prior to the acquisition of BP North Sea by the Company effective July 1, 2003.
Additionally, the Company offers postretirement medical benefits to U.S. employees who meet certain eligibility requirements. Eligible participants receive medical benefits up until the age of 65 or at the date they become eligible for Medicare, provided the participant remits the required portion of the cost of coverage. The plan is contributory with participants’ contributions
adjusted annually. The postretirement benefit plan does not cover benefit expenses once a covered participant becomes eligible for Medicare.
 
The following tables set forth the benefit obligation, fair value of plan assets and funded status as of December 31, 2019, 2018, and 2017, and the underlying weighted average actuarial assumptions used for the U.K. Pension Plan and U.S. postretirement benefit plan. Apache uses a measurement date of December 31 for its pension and postretirement benefit plans.
 
 
2019
 
2018
 
2017
 
 
Pension
Benefits
 
Postretirement
Benefits
 
Pension
Benefits
 
Postretirement
Benefits
 
Pension
Benefits
 
Postretirement
Benefits
 
 
(In millions)
Change in Projected Benefit Obligation
 
 
 
 
 
 
 
 
 
 
 
 
Projected benefit obligation at beginning of year
 
$
187

 
$
27

 
$
216

 
$
27

 
$
202

 
$
26

Service cost
 
3

 
2

 
4

 
2

 
4

 
2

Interest cost
 
5

 
1

 
5

 
1

 
6

 
1

Foreign currency exchange rates
 
7

 
—

 
(11
)
 
—

 
20

 
—

Actuarial losses (gains)
 
15

 
(9
)
 
(11
)
 
(2
)
 
(4
)
 
1

Plan settlements
 
(14
)
 
—

 
(11
)
 
—

 
—

 
—

Benefits paid
 
(4
)
 
(2
)
 
(5
)
 
(3
)
 
(12
)
 
(4
)
Retiree contributions
 
—

 
1

 
—

 
2

 
—

 
1

Projected benefit obligation at end of year
 
199

 
20

 
187

 
27

 
216

 
27

Change in Plan Assets
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
 
208

 
—

 
238

 
—

 
206

 
—

Actual return on plan assets
 
25

 
—

 
(6
)
 
—

 
17

 
—

Foreign currency exchange rates
 
8

 
—

 
(13
)
 
—

 
22

 
—

Employer contributions
 
5

 
1

 
5

 
2

 
5

 
3

Plan settlements
 
(14
)
 
—

 
(11
)
 
—

 
—

 
—

Benefits paid
 
(4
)
 
(2
)
 
(5
)
 
(4
)
 
(12
)
 
(4
)
Retiree contributions
 
—

 
1

 
—

 
2

 
—

 
1

Fair value of plan assets at end of year
 
228

 
—

 
208

 
—

 
238

 
—

Funded status at end of year
 
$
29

 
$
(20
)
 
$
21

 
$
(27
)
 
$
22

 
$
(27
)
Amounts recognized in Consolidated Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
Current liability
 
$
—

 
$
(2
)
 
$
—

 
$
(2
)
 
$
—

 
$
(2
)
Non-current asset (liability)
 
29

 
(18
)
 
21

 
(25
)
 
22

 
(25
)
 
 
$
29

 
$
(20
)
 
$
21

 
$
(27
)
 
$
22

 
$
(27
)
Pre-tax Amounts Recognized in Accumulated Other Comprehensive Income (Loss)
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated gain (loss)
 
$
(7
)
 
$
19

 
$
(13
)
 
$
10

 
$
(11
)
 
$
8

 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Assumptions used as of December 31
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
 
2.10
%
 
3.00
%
 
2.90
%
 
4.13
%
 
2.60
%
 
3.44
%
Salary increases
 
4.30
%
 
N/A

 
4.70
%
 
N/A

 
4.70
%
 
N/A

Expected return on assets
 
2.80
%
 
N/A

 
2.80
%
 
N/A

 
2.90
%
 
N/A

Healthcare cost trend
 
 
 
 
 
 
 
 
 
 
 
 
Initial
 
N/A

 
6.25
%
 
N/A

 
6.50
%
 
N/A

 
6.75
%
Ultimate in 2025
 
N/A

 
5.00
%
 
N/A

 
5.00
%
 
N/A

 
5.00
%


As of December 31, 2019, 2018, and 2017, the accumulated benefit obligation for the U.K. Pension Plan was $181 million, $167 million, and $193 million, respectively.
Apache’s defined benefit pension plan assets are held by a non-related trustee who has been instructed to invest the assets in a blend of equity securities and low-risk debt securities. The Company intends that this blend of investments will provide a reasonable rate of return such that the benefits promised to members are provided. The U.K. Pension Plan policy is to target an ongoing funding level of 100 percent through prudent investments and includes policies and strategies such as investment goals, risk management practices, and permitted and prohibited investments. A breakout of previous allocations for plan asset holdings and the target allocation for the Company’s plan assets are summarized below:
 
 
 
Target
Allocation
 
Percentage of
Plan Assets at
Year-End
 
 
2019
 
2019
 
2018
Asset Category
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
Overseas quoted equities
 
22
%
 
23
%
 
22
%
Total equity securities
 
22
%
 
23
%
 
22
%
Debt securities:
 
 
 
 
 
 
U.K. Government bonds
 
62
%
 
62
%
 
62
%
U.K. corporate bonds
 
16
%
 
15
%
 
15
%
Total debt securities
 
78
%
 
77
%
 
77
%
Cash
 
—

 
—

 
1
%
Total
 
100
%
 
100
%
 
100
%

 
The plan’s assets do not include any direct ownership of equity or debt securities of Apache. The fair value of plan assets at December 31, 2019 and 2018 are based upon unadjusted quoted prices for identical instruments in active markets, which is a Level 1 fair value measurement. The following tables present the fair values of plan assets for each major asset category based on the nature and significant concentration of risks in plan assets at December 31, 2019 and December 31, 2018:

 
 
December 31, 2019
 
December 31, 2018
 
 
(In millions)
Equity securities:
 
 
 
 
Overseas quoted equities(1)
 
$
52

 
$
46

Total equity securities
 
52

 
46

Debt securities:
 
 
 
 
U.K. Government bonds(2)
 
140

 
129

U.K. corporate bonds(3)
 
35

 
32

Total debt securities
 
175

 
161

Cash
 
1

 
1

Fair value of plan assets
 
$
228

 
$
208

(1)
This category includes overseas equities, which comprises 20 percent passive global equities benchmarked against the MSCI World (NDR) Index, 25 percent passive global equities (hedged) benchmarked against the MSCI World (NDR) Hedged Index, 20 percent fundamental indexation global equities benchmarked against the FTSE RAFI Developed 1000 index, 25 percent fundamental indexation global equities (hedged) benchmarked against the FTSE RAFI Developed 1000 Hedge Index, and 10 percent emerging markets benchmarked against the MSCI Emerging Markets (NDR) Index, which has a performance target of 2 percent per annum over the benchmark over a rolling three-year period.
(2)
This category includes U.K. Government bonds, which comprises 61 percent index-linked gilts benchmarked against the FTSE Actuaries Government Securities Index-Linked Over 5 Years Index, 8 percent sterling nominal LDI bonds, and 31 percent sterling inflation linked LDI bonds, both benchmarked against ILIM Custom Benchmark index.
(3)
This category comprises U.K. corporate bonds benchmarked against the BofAML Sterling Corporate & Collaterlised (excluding Subordinated) Index.

The expected long-term rate of return on assets assumptions are derived relative to the yield on long-dated fixed-interest bonds issued by the U.K. government (gilts). For equities, outperformance relative to gilts is assumed to be 3.5 percent per year.
The following tables set forth the components of the net periodic cost and the underlying weighted average actuarial assumptions used for the pension and postretirement benefit plans as of December 31, 2019, 2018, and 2017: 
 
 
2019
 
2018
 
2017
 
 
Pension
Benefits
 
Postretirement
Benefits
 
Pension
Benefits
 
Postretirement
Benefits
 
Pension
Benefits
 
Postretirement
Benefits
 
 
(In millions)
Components of Net Periodic Benefit Cost
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
 
$
3

 
$
2

 
$
4

 
$
2

 
$
4

 
$
2

Interest cost
 
5

 
1

 
5

 
1

 
6

 
1

Expected return on assets
 
(5
)
 
—

 
(7
)
 
—

 
(8
)
 
—

Amortization of actuarial (gain) loss
 
—

 
(1
)
 
—

 
—

 
—

 
(1
)
Settlement loss
 
—

 
—

 
1

 
—

 
—

 
—

Net periodic benefit cost
 
$
3

 
$
2

 
$
3

 
$
3

 
$
2

 
$
2

Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for the Years Ended December 31
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
 
2.90
%
 
4.13
%
 
2.60
%
 
3.44
%
 
2.70
%
 
3.76
%
Salary increases
 
4.70
%
 
N/A

 
4.70
%
 
N/A

 
4.80
%
 
N/A

Expected return on assets
 
2.80
%
 
N/A

 
2.90
%
 
N/A

 
3.40
%
 
N/A

Healthcare cost trend
 
 
 
 
 
 
 
 
 
 
 
 
Initial
 
N/A

 
6.50
%
 
N/A

 
6.75
%
 
N/A

 
7.00
%
Ultimate in 2025
 
N/A

 
5.00
%
 
N/A

 
5.00
%
 
N/A

 
5.00
%

Assumed health care cost trend rates affect amounts reported for postretirement benefits. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
 
 
 
Postretirement Benefits
 
 
1% Increase
 
1% Decrease
 
 
(In millions)
Effect on service and interest cost components
 
$
1

 
$
(1
)
Effect on postretirement benefit obligation
 
2

 
(1
)

Apache expects to contribute approximately $6 million to its pension plan and $2 million to its postretirement benefit plan in 2020. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
 
 
 
Pension
Benefits
 
Postretirement
Benefits
 
 
(In millions)
2020
 
$
5

 
$
2

2021
 
4

 
2

2022
 
5

 
2

2023
 
6

 
2

2024
 
6

 
2

Years 2025-2029
 
32

 
8