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Pension and Other Postretirement Benefits

12 Months Ended

Dec. 31, 2019

Pension and Other Postretirement Benefits

15) PENSION AND OTHER POSTRETIREMENT BENEFITS

ViacomCBS and certain of its subsidiaries sponsor qualified and non-qualified defined benefit pension plans, principally non-contributory, covering eligible employees. Our pension plans consist of both funded and unfunded plans. The majority of participants in these plans are retired employees or former employees of previously divested businesses. Most of our pension plans are closed to new entrants and pension plans sponsored by Viacom prior to the Merger are frozen to future benefit accruals. The benefits for some plans are based primarily on an employee’s years of service and average pay near retirement. Benefits under other plans are based primarily on an employee’s pay for each year that the employee participated in the plan. Participating employees are vested in the plans after five years of service. We fund our pension plans in accordance with the Employee Retirement Income Security Act of 1974 (“ERISA”), the Pension Protection Act of 2006, the Internal Revenue Code of 1986 and other applicable rules and regulations. Plan assets consist principally of corporate bonds, equity securities, common collective trust funds and U.S. government securities. At December 31, 2019, ViacomCBS Common Stock represented approximately 2.1% of the fair value of plan assets. At December 31, 2018, 2.4% of the fair value of plan assets was invested in CBS Common Stock or Viacom Common Stock.

During 2017, we purchased a group annuity contract under which an insurance company permanently assumed our obligation to pay and administer pension benefits to certain pension plan participants, or their designated beneficiaries, who had been receiving pension benefits. The purchase of this group annuity contract was funded with pension plan assets. As a result, our outstanding pension benefit obligation was reduced by approximately $800 million. In connection with this transaction, we recorded a settlement charge of $352 million in 2017, reflecting the accelerated recognition of a portion of unamortized actuarial losses in the plan. Additionally, during 2017, we made discretionary contributions totaling $600 million to prefund our qualified pension plans.

In addition, ViacomCBS sponsors health and welfare plans that provide postretirement health care and life insurance benefits to eligible retired employees and their covered dependents. Eligibility is based in part on certain age and service requirements at the time of their retirement. Most of the plans are contributory and contain cost-sharing features such as deductibles and coinsurance which are adjusted annually, as well as caps on the annual dollar amount we will contribute toward the cost of coverage. Claims and premiums for which we are responsible are paid with our own funds.

The pension plan disclosures herein include information related to our domestic plans only, unless otherwise noted. At December 31, 2019 and 2018, the Consolidated Balance Sheets include a liability of $80 million and $67 million, respectively, in “Pension and postretirement benefit obligations” relating to our non-U.S. pension plans.

We use a December 31 measurement date for all pension and other postretirement benefit plans.

The following table sets forth the change in benefit obligation for our pension and postretirement benefit plans.



	Pension Benefits						Postretirement Benefits
	2019			2018			2019			2018
Change in benefit obligation:
Benefit obligation, beginning of year	$	4,511		$	4,877		$	376		$	456
Service cost	28			30			1			1
Interest cost	191			180			16			17
Actuarial loss (gain)	593			(240		)	8			(8		)
Benefits paid	(360		)	(336		)	(59		)	(106		)
Participants’ contributions	—			—			13			12
Retiree Medicare drug subsidy	—			—			5			4
Benefit obligation, end of year	$	4,963		$	4,511		$	360		$	376

The following table sets forth the change in plan assets for our pension and postretirement benefit plans.



	Pension Benefits						Postretirement Benefits
	2019			2018			2019			2018
Change in plan assets:
Fair value of plan assets, beginning of year	$	2,932		$	3,412		$	1		$	—
Actual return on plan assets	530			(205		)	(1		)	—
Employer contributions	74			61			41			91
Benefits paid	(360		)	(336		)	(59		)	(106		)
Participants’ contributions	—			—			13			12
Retiree Medicare drug subsidy	—			—			5			4
Fair value of plan assets, end of year	$	3,176		$	2,932		$	—		$	1

The funded status of pension and postretirement benefit obligations and the related amounts recognized on the Consolidated Balance Sheets were as follows:



	Pension Benefits						Postretirement Benefits
At December 31,	2019			2018			2019			2018
Funded status at end of year	$	(1,787	)	$	(1,579	)	$	(360	)	$	(375	)
Amounts recognized on the Consolidated Balance Sheets:
Other assets	$	5		$	5		$	—		$	—
Current liabilities	(69		)	(70		)	(42		)	(48		)
Noncurrent liabilities	(1,723		)	(1,514		)	(318		)	(327		)
Net amounts recognized	$	(1,787	)	$	(1,579	)	$	(360	)	$	(375	)

Our qualified pension plans were underfunded by $734 million and $623 million at December 31, 2019 and 2018, respectively.

The following amounts were recognized in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.



	Pension Benefits						Postretirement Benefits
At December 31,	2019			2018			2019			2018
Net actuarial (loss) gain	$	(2,153	)	$	(2,001	)	$	147		$	174
Net prior service cost	(3		)	(5		)	(1		)	(2		)
Share of equity investee	(2		)	(1		)	—			—
	(2,158		)	(2,007		)	146			172
Deferred income taxes ^(a)	563			756			(14		)	(19		)
Net amount recognized in accumulated other comprehensive income (loss)	$	(1,595	)	$	(1,251	)	$	132		$	153

(a) The decrease in 2019 primarily reflects the reclassification of certain income tax effects of the Tax Reform Act on items within accumulated other comprehensive loss to retained earnings upon the adoption of new FASB guidance (see Note 1).

The accumulated benefit obligation for all defined benefit pension plans was $4.87 billion and $4.43 billion at December 31, 2019 and 2018, respectively.

Information for the pension plans with an accumulated benefit obligation in excess of plan assets is set forth below.



At December 31,	2019		2018
Projected benefit obligation	$	4,962	$	4,511
Accumulated benefit obligation	$	4,873	$	4,427
Fair value of plan assets	$	3,170	$	2,926

The following tables present the components of net periodic benefit cost and amounts recognized in other comprehensive income (loss).



	Pension Benefits									Postretirement Benefits
Year Ended December 31,	2019			2018			2017			2019			2018			2017
Components of net periodic cost:
Service cost	$	28		$	30		$	28		$	1		$	1		$	1
Interest cost	191			180			219			16			17			19
Expected return on plan assets	(183		)	(214		)	(230		)	—			—			—
Amortization of actuarial losses (gains)	94			87			105			(18		)	(18		)	(22		)
Amortization of prior service cost	1			1			1			1			1			1
Settlements	—			—			352			—			—			—
Net periodic cost	$	131		$	84		$	475		$	—		$	1		$	(1	)

The service cost component of net periodic cost is presented on the Consolidated Statements of Operations within operating income. All other components of net periodic cost are presented below operating income, in “Other items, net” and “Pension settlement charge.” Included in net loss from discontinued operations was net periodic cost of $3 million in 2017.



	Pension Benefits											Postretirement Benefits
Year Ended December 31,	2019				2018			2017				2019			2018			2017
Other comprehensive income (loss):				-200							45
Actuarial (loss) gain	$	(246	)		$	(179	)	$	(269	)		$	(9	)	$	8		$	(20	)
Amortization of actuarial losses (gains) ^(a)	94				87			105				(18		)	(18		)	(22		)
Amortization of prior service cost ^(a)	1				1			1				1			1			1
Settlements ^(a)	—				—			352				—			—			—
	(151		)		(91		)	189				(26		)	(9		)	(41		)
Deferred income taxes	37				25			(94		)		5			2			13
Recognized in other comprehensive income (loss), net of tax	$	(114	)		$	(66	)	$	95			$	(21	)	$	(7	)	$	(28	)

(a) Reflects amounts reclassified from accumulated other comprehensive income (loss) to net earnings.

Estimated net actuarial losses and prior service costs related to the defined benefit pension plans of approximately $103 million and $1 million, respectively, will be amortized from accumulated other comprehensive loss into net periodic benefit costs in 2020.

Estimated net actuarial gains related to the other postretirement benefit plans of approximately $15 million will be amortized from accumulated other comprehensive loss into net periodic benefit costs in 2020.



	Pension Benefits						Postretirement Benefits
	2019		2018		2017		2019		2018		2017
Weighted average assumptions used to determine benefit obligations at December 31:
Discount rate	3.5	%	4.5	%	3.9	%	3.3	%	4.4	%	3.9	%
Rate of compensation increase	3.0	%	3.0	%	3.0	%	N/A		N/A		N/A
Weighted average assumptions used to determine net periodic costs for the year ended December 31:
Discount rate	4.5	%	3.8	%	4.2	%	4.4	%	3.9	%	4.1	%
Expected long-term return on plan assets	6.6	%	6.6	%	6.6	%	N/A		N/A		2.0	%
Rate of compensation increase	3.0	%	3.0	%	3.0	%	N/A		N/A		N/A

N/A - not applicable

The discount rates are determined primarily based on the yield of a portfolio of high quality bonds, providing cash flows necessary to meet the pension plans’ expected future benefit payments, as determined for the projected benefit obligations. The expected return on plan assets assumption is derived using the current and expected asset allocation of the pension plan assets and considering historical as well as expected returns on various classes of plan assets.

The following additional assumptions were used in accounting for postretirement benefits.



	CBS				Viacom
	2019		2018		2019		2018
Projected health care cost trend rate (pre-65)	7.0	%	6.6	%	6.3	%	6.7	%
Projected health care cost trend rate (post-65)	7.0	%	6.6	%	5.7	%	5.9	%
Ultimate trend rate	5.0	%	5.0	%	4.5	%	4.5	%
Year ultimate trend rate is achieved	2025		2023		2026		2026

A one percentage point change in assumed health care cost trend rates would have the following effects:



	One Percentage			One Percentage
	Point Increase			Point Decrease
Effect on total service and interest cost components		$	—		$	—
Effect on the accumulated postretirement benefit obligation		$	5		$	(5	)

Plan Assets

Prior to the Merger, the investments committees of Viacom and CBS determined the strategies for the investment of pension plan assets. These committees established target asset allocations for our pension plan trusts based upon an analysis of the timing and amount of projected benefit payments, projected company contributions, the expected returns and risk of the asset classes and the correlation of those returns. The target asset allocation for CBS’s domestic pension plans is to invest between 70% - 80% in long duration fixed income investments, 16% - 28% in equity securities and the remainder in cash and other investments. At December 31, 2019, this trust was invested approximately 73% in long duration fixed income securities, 24% in equity investments, and the remainder in cash, cash equivalents and other investments. Long duration fixed income investments consist of a diversified portfolio of fixed income instruments that are substantially investment grade, with a duration that approximates the duration of the liabilities covered by the trust. All equity portfolios are diversified between U.S. and non-U.S. equities and include large and small capitalization equities. The asset allocations are reviewed regularly.

The target asset allocation for Viacom’s domestic pension plans is to invest 70% - 90% in return-seeking investments, 10% - 30% in liability hedging and 0% - 10% in cash and cash equivalents. Return-seeking investments consist of diversified equity and credit funds and liability hedging investments consist of U.S. treasury rate funds. At December 31, 2019, the Viacom Pension Plan was invested 76% in return seeking, 18% in liability hedging and 6% in cash and cash equivalents.

The following tables set forth our pension plan assets measured at fair value on a recurring basis at December 31, 2019 and 2018. These assets have been categorized according to the three-level fair value hierarchy established by the FASB which prioritizes the inputs used in measuring fair value. Level 1 is based on quoted prices for the asset in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset in inactive markets or quoted prices for similar assets. Level 3 is based on unobservable inputs that market participants would use in pricing the asset.



At December 31, 2019	Level 1		Level 2		Level 3		Total
Cash and cash equivalents ^(a)	$	1	$	34	$	—	$	35
Fixed income securities:
U.S. treasury securities	83		—		—		83
Government-related securities	—		171		—		171
Corporate bonds ^(b)	—		1,562		—		1,562
Mortgage-backed and asset-backed securities	—		98		—		98
Equity securities:
U.S. large capitalization	113		—		—		113
U.S. small capitalization	40		—		—		40
Other	—		25		—		25
Total assets in fair value hierarchy	$	237	$	1,890	$	—	$	2,127
Common collective funds measured at net asset value ^{(c) (d)}							978
Limited partnerships measured at net asset value ^(c)							23
Mutual funds measured at net asset value ^(c)							48
Investments, at fair value							$	3,176



At December 31, 2018	Level 1		Level 2		Level 3		Total
Cash and cash equivalents ^(a)	$	4	$	7	$	—	$	11
Fixed income securities:
U.S. treasury securities	85		31		—		116
Government-related securities	—		169		—		169
Corporate bonds ^(b)	—		1,529		—		1,529
Mortgage-backed and asset-backed securities	—		120		—		120
Equity securities:
U.S. large capitalization	150		—		—		150
U.S. small capitalization	35		—		—		35
Other	1		18		—		19
Total assets in fair value hierarchy	$	275	$	1,874	$	—	$	2,149
Common collective funds measured at net asset value ^{(c) (d)}							688
Limited partnerships measured at net asset value ^(c)							63
Mutual funds measured at net asset value ^(c)							32
Investments, at fair value							$	2,932

(a) Assets categorized as Level 2 reflect investments in money market funds.

(b) Securities of diverse sectors and industries, substantially all investment grade.

(c) In accordance with FASB guidance investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.

(d) Underlying investments consist mainly of U.S. large capitalization and international equity securities.

Money market investments are carried at amortized cost which approximates fair value due to the short-term maturity of these investments. Investments in equity securities are reported at fair value based on quoted market prices on national security exchanges. The fair value of investments in common collective funds and mutual funds are determined using the net asset value (“NAV”) provided by the administrator of the fund as a practical expedient. The NAV is determined by each fund’s trustee based upon the fair value of the underlying assets owned by the fund, less liabilities, divided by the number of outstanding units. The fair value of U.S. treasury securities is determined based on quoted market prices in active markets. The fair value of government related securities and corporate bonds is determined based on quoted market prices on national security exchanges, when available, or using valuation models which incorporate certain other observable inputs including recent trading activity for comparable securities and broker quoted prices. The fair value of mortgage-backed and asset-backed securities is based upon valuation models which incorporate available dealer quotes, projected cash flows and market information. The fair value of limited partnerships has been estimated using the NAV of the ownership interest. The NAV is determined using quarterly financial statements issued by the partnership which determine the value based on the fair value of the underlying investments.

Future Benefit Payments

Estimated future benefit payments are as follows:



	2020		2021		2022		2023		2024		2025-2029
Pension	$	357	$	304	$	305	$	307	$	304	$	1,487
Postretirement	$	48	$	45	$	42	$	40	$	37	$	144
Retiree Medicare drug subsidy	$	5	$	5	$	5	$	5	$	4	$	20

In 2020, we expect to make contributions of approximately $70 million to our non-qualified pension plans to satisfy the benefit payments due under these plans. Also in 2020, we expect to contribute approximately $43 million to our other postretirement benefit plans to satisfy our portion of benefit payments due under these plans.

Multiemployer Pension and Postretirement Benefit Plans

We contribute to a number of multiemployer defined benefit pension plans under the terms of collective bargaining agreements that cover our union-represented employees including talent, writers, directors, producers and other employees, primarily in the entertainment industry. The other employers participating in these multiemployer plans are primarily in the entertainment and other related industries. The risks of participating in multiemployer plans are different from single-employer plans as assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers and if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. In addition, if we choose to stop participating in some of its multiemployer plans we may be required to pay those plans a withdrawal liability based on the underfunded status of the plan.

The financial health of a multiemployer plan is indicated by the zone status, as defined by the Pension Protection Act of 2006. Plans in the red zone are in critical status; those in the yellow zone are in endangered status; and those in the green zone are neither critical nor endangered.

The table below presents information concerning our participation in multiemployer defined benefit pension plans.



	Employer Identification Number/Pension Plan Number	Pension Protection Act		Company Contributions						Expiration Date of Collective Bargaining Agreement
		Zone Status ^(a)		Company Contributions
Pension Plan		2019	2018	2019		2018		2017
AFTRA Retirement Plan^(b)	13-6414972-001	Green	Green	$	12	$	11	$	12	(c)
Directors Guild of America - Producer ^(d)	95-2892780-001	Green	Green	19		15		15		6/30/2020
Producer-Writers Guild of America	95-2216351-001	Green	Green	26		25		22		5/1/2020
Screen Actors Guild - Producers	95-2110997-001	Green	Green	43		36		29		6/30/2020
Motion Picture Industry	95-1810805-001	Green	Green	43		42		40		(e)
I.A.T.S.E. Local No. 33 Pension Trust Fund ^(f)	95-6377503-001	Green	Green	5		10		9		12/31/2019
Other Plans				16		12		10
	Total contributions			$	164	$	151	$	137

(a) The Zone status for each individual plan listed was certified by each plan’s actuary as of the beginning of the plan years for 2019 and 2018. The plan year is the twelve months ending December 31 for each plan listed above except AFTRA Retirement Plan which has a plan year ending November 30.

(b) The Company was listed in AFTRA Retirement Plan’s Form 5500 as providing more than 5% of total contributions for the plan year ended November 30, 2018.

(d) The Company was listed in Directors Guild of America - Producer Pension Plan’s Form 5500 as providing more than 5% of total contributions for the plan year ended December 2018.

(e) The expiration dates range from May 15, 2021 through March 2, 2022.

(f) The Company was listed in I.A.T.S.E. Local No. 33 Pension Trust Fund’s Form 5500 as providing more than 5% of total contributions for the plan year ended December 31, 2018.

As a result of the above noted zone status there were no funding improvements or rehabilitation plans implemented, as defined by ERISA, nor any surcharges imposed for any of the individual plans listed.

We also contribute to multiemployer plans that provide postretirement healthcare and other benefits to certain employees under collective bargaining agreements. The contributions to these plans were $89 million, $74 million and $74 million for the years ended December 31, 2019, 2018 and 2017, respectively.

We recognize the net periodic cost for multiemployer pension and postretirement benefit plans based on the required contributions to the plans.

Defined Contribution Plans

We sponsor defined contribution plans for the benefit of substantially all employees meeting eligibility requirements. Employer contributions to such plans were $95 million, $87 million and $94 million for the years ended December 31, 2019, 2018 and 2017, respectively.