The Company has retirement obligations under OfficeMax’s U.S. pension plans. The Company sponsors these defined benefit pension plans covering certain terminated employees, vested employees, retirees and some active employees. In 2004 or earlier, OfficeMax’s pension plans were closed to new entrants and the benefits of eligible participants were frozen. Under the terms of these plans, the pension benefit for employees was based primarily on the employees’ years of service and benefit plan formulas that varied by plan. The Company’s general funding policy is to make contributions to the plans in amounts that are within the limits of deductibility under current tax regulations, and not less than the minimum contribution required by law.

Additionally, under previous OfficeMax arrangements, the Company has responsibility for sponsoring retiree medical benefit and life insurance plans including plans related to operations in the U.S. and Canada (referred to as “Other Benefits” in the tables below). The type of retiree benefits and the extent of coverage vary based on employee classification, date of retirement, location, and other factors. All of these postretirement medical plans are unfunded. The Company explicitly reserves the right to amend or terminate its retiree medical and life insurance plans at any time, subject only to constraints, if any, imposed by the terms of collective bargaining agreements. Amendment or termination may significantly affect the amount of expense incurred.

The following table provides a reconciliation of changes in the projected benefit obligation and the fair value of plan assets, as well as the funded status of the plans to amounts recognized on the Company’s Consolidated Balance Sheets. Accumulated benefit obligations exceed plan assets in all individual plans.

	Pension Benefits						Other Benefits
(In millions)	2018			2017			2018			2017
Changes in projected benefit obligation:
Obligation at beginning of period	$	979		$	1,000		$	14		$	13
Service cost		4			6			—			—
Interest cost		35			39			1			1
Assumption changes		—			—			(1	)		—
Actuarial (gain) loss		(51	)		25			—			—
Currency exchange rate change		—			—			(1	)		1
Benefits paid		(87	)		(91	)		(1	)		(1	)
Obligation at end of period	$	880		$	979		$	12		$	14
Change in plan assets:
Fair value of plan assets at beginning of period	$	908		$	870		$	—		$	—
Actual return (loss) on plan assets		(46	)		114			—			—
Employer contribution		5			15			1			1
Benefits paid		(87	)		(91	)		(1	)		(1	)
Fair value of plan assets at end of period		780			908			—			—
Net liability recognized at end of period	$	(100	)	$	(71	)	$	(12	)	$	(14	)

The following table shows the amounts recognized in the Consolidated Balance Sheets related to the Company’s North America defined benefit pension and other postretirement benefit plans as of year-ends:

Other changes in plan assets and benefit obligations recognized in other comprehensive loss (income) are as follows:

Less than $1 million of the accumulated other comprehensive loss is expected to be recognized as components of net periodic cost during 2019.

Accumulated other comprehensive loss (income) as of year-ends 2018 and 2017 consist of net losses (gains).

The assumptions used in accounting for the Company’s plans are estimates of factors including, among other things, the amount and timing of future benefit payments. The following table presents the key weighted average assumptions used in the measurement of the Company’s benefit obligations as of year-ends:

The following table presents the weighted average assumptions used in the measurement of net periodic benefit:

For pension benefits, the selected discount rates (which is required to be the rates at which the projected benefit obligations could be effectively settled as of the measurement date) are based on the rates of return for a theoretical portfolio of high-grade corporate bonds (rated AA- or better) with cash flows that generally match expected benefit payments in future years. In selecting bonds for this theoretical portfolio, the Company focuses on bonds that match cash flows to benefit payments and limit the concentration of bonds by issuer. To the extent scheduled bond proceeds exceed the estimated benefit payments in a given period, the yield calculation assumes those excess proceeds are reinvested at an assumed forward rate. The implied forward rate used in the bond model is based on the Citigroup Pension Discount Curve as of the last day of the year. The selected discount rate for other benefits is from a discount rate curve matched to the assumed payout of related obligations.

The expected long-term rates of return on plan assets assumptions are based on the weighted average of expected returns for the major asset classes in which the plans’ assets are held. Asset-class expected returns are based on long-term historical returns, inflation expectations, forecasted gross domestic product and earnings growth, as well as other economic factors. The weights assigned to each asset class are based on the Company’s investment strategy. The weighted average expected return on plan assets used in the calculation of net periodic pension cost for 2019 is 5.44%.

Obligation and costs related to the Canadian retiree health plan are impacted by changes in trend rates.

The following table presents the assumed healthcare cost trend rates used in measuring the Company’s postretirement benefit obligations at year-ends:

A 1% change in the assumed healthcare cost trend rates would impact operating income by less than $1 million.

The Company reassessed the mortality assumptions to measure the North American pension and other postretirement benefit plan obligations at year end 2018, adopting the most applicable mortality tables and improvement factors released in 2018 by The Society of Actuaries’ Retirement Plan Experience Committee. As a result of this assumption change, pension and other postretirement benefit plan obligations decreased by $3 million and less than $1 million, respectively. As a result of the mortality assumption change in 2017, pension and other postretirement benefit plan obligations decreased by $10 million and less than $1 million, respectively.

The Employee Benefit Committee is responsible for establishing and overseeing the implementation of the investment policy for the Company’s pension plans. The investment policy is structured to optimize growth of the pension plan trust assets, while minimizing the risk of significant losses, in order to enable the plans to satisfy their benefit payment obligations over time. The Company uses a glide path investment strategy and Company contributions as its primary rebalancing mechanisms to maintain the asset class exposures within the guideline ranges established under the investment policy.

In the second quarter of 2017, the Company reinvested substantially all of the assets attributable to the U.S. pension plans in common collective trust funds. The common collective trust funds are comprised of a diversified portfolio of investments across various asset classes, including U.S. and international equities and fixed-income securities. The common collective trust funds are valued at the net asset value (“NAV”) provided by the administrator of the fund. The net asset value is based on the value of the underlying assets owned by the fund, minus its liabilities, divided by the number of units outstanding.

The investment policy for the pension plan assets allows for a broad range of asset allocations that permit the plans to de-risk in response to changes in funded position and market risks. The investment policy includes a general target asset allocation range of 27% to 37% equity securities and 63% to 73% fixed income securities. The allocation range varies to be more weighted to fixed income securities as funded status increases. Occasionally, the Company may utilize futures or other financial instruments to alter the pension trust’s exposure to various asset classes in a lower-cost manner than trading securities in the underlying portfolios.

The following table presents the pension plan assets by level within the fair value hierarchy at year-ends.

(In millions)					Fair Value Measurements 2018
Asset Category	Total		Assets Measured at NAV ^(a)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Plan assets measured at net asset value: ^(a)
Common collective trust funds:
U.S. small and mid-cap equity securities	$	14	$	14	$	—	$	—	$	—
U.S. large cap equity securities		70		70		—		—		—
International equity securities		135		135		—		—		—
Corporate bonds		375		375		—		—		—
Government securities		161		161		—		—		—
Other fixed-income		7		7		—		—		—
Cash		11		11		—		—		—
Total common collective trust funds		773		773		—		—		—
Total plan assets measured at net asset value		773		773		—		—		—
Plan assets measured in the fair value hierarchy:
Cash		7		—		7		—		—
Total plan assets measured in the fair value hierarchy		7		—		7		—		—
Total plan assets	$	780	$	773	$	7	$	—	$	—

^(a)

Fair values of Common collective trust funds are estimated using net asset value per unit as a practical expedient which are excluded from the disclosure requirement to classify amounts in the fair value hierarchy in connection with the adoption of Accounting Standards Update (ASU) 2015 -07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).

(In millions)					Fair Value Measurements 2017
Asset Category	Total		Assets Measured at NAV ^(a)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Plan assets measured at net asset value: ^(a)
Common collective trust funds:
U.S. small and mid-cap equity securities	$	23	$	23	$	—	$	—	$	—
U.S. large cap equity securities		108		108		—		—		—
International equity securities		202		202		—		—		—
Corporate bonds		356		356		—		—		—
Government securities		144		144		—		—		—
Other fixed-income		6		6		—		—		—
Cash		62		62		—		—		—
Total common collective trust funds		901		901		—		—		—
Total plan assets measured at net asset value		901		901		—		—		—
Plan assets measured in the fair value hierarchy:
Cash		7		—		7		—		—
Total plan assets measured in the fair value hierarchy		7		—		7		—		—
Total plan assets	$	908	$	901	$	7	$	—	$	—

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Pension plan contributions include required statutory minimum amounts and, in some years, additional discretionary amounts. In 2018, the Company contributed $6 million to these pension plans. Pension contributions for the full year of 2019 are estimated to be $3 million. The Company may elect at any time to make additional voluntary contributions.

Qualified pension benefit payments are paid from the assets held in the plan trust, while nonqualified pension and other benefit payments are paid by the Company. Anticipated benefit payments by year are as follows:

The following table provides a reconciliation of changes in the projected benefit obligation, the fair value of plan assets and the funded status of the plan to amounts recognized on the Company’s Consolidated Balance Sheets.

(In millions)	2018			2017
Changes in projected benefit obligation:
Obligation at beginning of period	$	249		$	230
Service cost		—			—
Interest cost		6			6
Plan amendments		2			—
Plan settlements		(7	)		—
Benefits paid		(5	)		(10	)
Actuarial (gain) loss		(29	)		1
Currency translation		(13	)		22
Obligation at end of period		203			249
Changes in plan assets:
Fair value of plan assets at beginning of period		313			278
Actual return on plan assets		(3	)		16
Company contributions		2			2
Plan settlements		(7	)		—
Benefits paid		(5	)		(10	)
Currency translation		(18	)		27
Fair value of plan assets at end of period		282			313
Net asset recognized at end of period	$	79		$	64

In the Consolidated Balance Sheets, the net funded amounts are classified as a non-current asset in the caption Other assets.

Included in Accumulated other comprehensive income was deferred income of $16 million and $3 million in 2018 and 2017, respectively.

Assumptions used in calculating the funded status and net periodic benefit included:

The long-term rate of return on assets assumption has been derived based on long-term UK government fixed income yields, having regard to the proportion of assets in each asset class. The funds invested in equities have been assumed to return 4.5% above the return on UK government securities of appropriate duration. A return equal to a 15 year AA bond index is assumed for funds invested in corporate bonds. Allowance is made for expenses of 0.18% of assets.

A committee, comprised of representatives of the Company and of this plan, is responsible for establishing and overseeing the implementation of the investment policy for this plan. The plan’s investment policy and strategy are to ensure assets are available to meet the obligations to the beneficiaries and to adjust plan contributions accordingly. The plan trustees are also committed to reducing the level of risk in the plan over the long term, while retaining a return above that of the growth of liabilities. Matching investments are intended to provide a return similar to the increase in the plan liabilities. Growth investments are assets intended to provide a return in excess of the increase in liabilities. At December 29, 2018, the asset target allocation was in accordance with the investment strategy. Asset-class allocations within the ranges are continually evaluated based on expectations for future returns, the funded position of the plan and market risks.

The following table presents the pension plan assets by level within the fair value hierarchy.

(In millions)			Fair Value Measurements 2018
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	1	$	1	$	—	$	—
Equity securities
Developed market equity funds		8		8		—		—
Emerging market equity funds		4		4		—		—
Mutual funds real estate		19		—		—		19
Mutual funds		23		—		23		—
Total equity securities		54		12		23		19
Fixed-income securities
UK debt funds		91		—		91		—
Liability term matching debt funds		115		—		115		—
Emerging market debt fund		3		—		3		—
High yield debt		18		—		18		—
Total fixed-income securities		227		—		227		—
Total	$	282	$	13	$	250	$	19

(In millions)			Fair Value Measurements 2017
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	1	$	1	$	—	$	—
Equity securities
Developed market equity funds		11		11		—		—
Emerging market equity funds		4		4		—		—
Mutual funds real estate		20		—		—		20
Mutual funds		25		—		25		—
Total equity securities		60		15		25		20
Fixed-income securities
UK debt funds		100		—		100		—
Liability term matching debt funds		132		—		132		—
Emerging market debt fund		1		—		1		—
High yield debt		19		—		19		—
Total fixed-income securities		252		—		252		—
Total	$	313	$	16	$	277	$	20

The following is a reconciliation of the change in fair value of the pension plan assets calculated based on Level 3 inputs:

Anticipated benefit payments for the European pension plan, at 2018 year-end exchange rates, are as follows:

The Company also sponsors defined contribution plans for most of its employees. Eligible Company employees may participate in the Office Depot, Inc. Retirement Savings Plans (a plan for U.S. employees and a plan for Puerto Rico employees). All of the Company’s defined contribution plans (the “401(k) Plans”) allow eligible employees to contribute a percentage of their salary, commissions and bonuses in accordance with plan limitations and provisions of Section 401(k) of the Internal Revenue Code and the Company makes partial matching contributions to each plan subject to the limits of the respective 401(k) Plans. Matching contributions are invested in the same manner as the participants’ pre-tax contributions. The 401(k) Plans also allow for a discretionary matching contribution in addition to the normal match contributions if approved by the Board of Directors.

Office Depot and OfficeMax previously sponsored non-qualified deferred compensation plans that allowed certain employees, who were limited in the amount they could contribute to their respective 401(k) plans, to defer a portion of their earnings and receive a Company matching amount. Both plans are closed to new contributions.

In connection with the acquisition of CompuCom, the Company assumed responsibility for sponsoring CompuCom’s defined contribution 401(k) matched savings plan (covering substantially all of the United States associates) and the defined contribution registered pension plan (covering substantially all of the Canadian associates).

Compensation expense for the Company’s contributions to these retirement savings plans was $26 million in 2018, $21 million in 2017 and $20 million in 2016.