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EMPLOYEE RETIREMENT PLANS
 12 Months Ended
Dec. 31, 2020
Retirement Benefits [Abstract]  
EMPLOYEE RETIREMENT PLANS EMPLOYEE RETIREMENT PLANS
Defined Contribution Plans

Southwest has defined contribution plans covering substantially all of its Employees. Contributions under all defined contribution plans are primarily based on Employee compensation and performance of the Company. The Company sponsors Employee savings plans under section 401(k) of the Internal Revenue Code of 1986, as amended. The Southwest Airlines Co. 401(k) Plan includes Company matching contributions and the Southwest Airlines Pilots Retirement Saving Plan has non-elective Company contributions. In addition, the Southwest Airlines Co. ProfitSharing Plan (ProfitSharing Plan) is a defined contribution plan to which the Company may contribute a percentage of its eligible pre-tax profits, as defined, on an annual basis. No Employee contributions to the ProfitSharing Plan are allowed.

Amounts associated with the Company's defined contribution plans expensed in 2020, 2019, and 2018, reflected as a component of Salaries, wages, and benefits, were $561 million, $1.2 billion, and $1.0 billion, respectively.
Postretirement Benefit Plans

The Company provides postretirement benefits to qualified retirees in the form of medical and dental coverage. Employees must meet minimum levels of service and age requirements as set forth by the Company, or as specified in collective-bargaining agreements with specific workgroups. Employees meeting these requirements, as defined, may use accrued unused sick time to pay for medical and dental premiums from the age of retirement until age 65.

The following table shows the change in the accumulated postretirement benefit obligation ("APBO") for the years ended December 31, 2020 and 2019:
 
(in millions)20202019
APBO at beginning of period$288 $232 
Service cost22 17 
Interest cost10 10 
Benefits paid(10)(9)
Actuarial loss63 38 
Curtailment53 — 
Special termination benefits2 — 
APBO at end of period$428 $288 

During 2020, the Company recorded a $63 million actuarial loss as an increase to the APBO with an offset to AOCI. This actuarial loss is reflected above and resulted from changes in certain key assumptions used to determine the Company’s year-end obligation. The assumption change that resulted in the largest portion of the actuarial loss was a reduction in the discount rate used, which caused the funded position to deteriorate. During 2020, the Company also recognized a Curtailment charge and Special termination benefit charge as a result of elections to participate in the plan by eligible Employees upon separating from the Company via Voluntary Separation Plan 2020. See Note 2 for further information.

All plans are unfunded, and benefits are paid as they become due. Estimated future benefit payments expected to be paid are $24 million in 2021, $25 million in 2022, $24 million in 2023, $24 million in 2024, $26 million in 2025, and $146 million for the next five years thereafter.

The following table reconciles the funded status of the plans to the accrued postretirement benefit cost recognized in Other non-current liabilities on the Company’s Consolidated Balance Sheet at December 31, 2020 and 2019.
 
(in millions)20202019
Funded status$(428)$(288)
Unrecognized net actuarial (gain) loss40 (24)
Unrecognized prior service cost3 4 
Accumulated other comprehensive income (loss)(43)20 
Consolidated Balance Sheet liability$(428)$(288)
The consolidated periodic postretirement benefit cost for the years ended December 31, 2020, 2019, and 2018, included the following:
 
(in millions)202020192018
Service cost$22 $17 $18 
Interest cost10 10 9 
Amortization of prior service cost1 1 3 
Amortization of net gain— (2)— 
Curtailment53 — — 
Special termination benefits2 — — 
Net periodic postretirement benefit cost$88 $26 $30 

Service cost and Special termination benefits are recognized within Salaries, wages, and benefits expense, and all other costs are recognized in Other (gains) losses, net in the Consolidated Statement of Income (Loss). Unrecognized prior service cost is expensed using a straight-line amortization of the cost over the average future service of Employees expected to receive benefits under the plans. Actuarial gains are amortized utilizing the minimum amortization method. The following actuarial assumptions were used to account for the Company’s postretirement benefit plans at December 31, 2020, 2019, and 2018:
 
202020192018
Weighted-average discount rate2.45 %3.30 %4.35 %
Assumed healthcare cost trend rate (a)6.75 %7.13 %7.13 %
 
(a)The assumed healthcare cost trend rate is expected to be 6.50% for 2021, then decline gradually to 4.75% by 2028 and remain level thereafter.
The selection of a discount rate is made annually and is selected by the Company based upon comparison of the expected future cash flows associated with the Company’s future payments under its consolidated postretirement obligations to a yield curve created using high quality bonds that closely match those expected future cash flows. This rate decreased during 2020 due to market conditions. The assumed healthcare trend rate is also reviewed at least annually and is determined based upon both historical experience with the Company’s healthcare benefits paid and expectations of how those trends may or may not change in future years.