Pension and Other Benefit Programs

The Company maintains pension and postretirement medical benefit plans covering certain of its employees not covered by union or industry-wide plans. The Company’s defined benefit pension plans cover employees hired prior to January 1, 2012. For employees hired after this date, the Company has a defined contribution plan. Benefits under these pension plans are generally based on years of service and/or compensation and generally require 3 years of vesting service. Employees generally hired after January 1, 1987 for certain of our media businesses and other employees generally hired after January 1, 1994 are not eligible for postretirement medical benefits.

Defined Benefit Plans

The Company measures the actuarial value of its benefit obligations and plan assets for its defined benefit pension and postretirement medical benefit plans at September 30 and adjusts for any plan contributions or significant events between September 30 and our fiscal year end.

The following chart summarizes the benefit obligations, assets, funded status and balance sheet impacts associated with the defined benefit pension and postretirement medical benefit plans:



	Pension Plans						Postretirement Medical Plans
	October 1, 2016			October 3, 2015			October 1, 2016			October 3, 2015
Projected benefit obligations
Beginning obligations	$	(12,379	)	$	(12,190	)	$	(1,590	)	$	(1,567	)
Service cost	(318		)	(332		)	(11		)	(14		)
Interest cost	(458		)	(521		)	(61		)	(68		)
Actuarial gain / (loss)	(1,769		)	(176		)	(142		)	33
Plan amendments and other	8			28			(9		)	(9		)
Benefits paid⁽¹⁾	436			812			54			35
Ending obligations	$	(14,480	)	$	(12,379	)	$	(1,759	)	$	(1,590	)
Fair value of plans’ assets
Beginning fair value	$	9,415		$	9,765		$	568		$	538
Actual return on plan assets	624			163			34			9
Contributions	839			337			61			48
Benefits paid⁽¹⁾	(436		)	(812		)	(54		)	(35		)
Expenses and other	(41		)	(38		)	5			8
Ending fair value	$	10,401		$	9,415		$	614		$	568

Underfunded status of the plans	$	(4,079	)	$	(2,964	)	$	(1,145	)	$	(1,022	)
Amounts recognized in the balance sheet
Non-current assets	$	—		$	3		$	—		$	—
Current liabilities	(40		)	(36		)	—			(13		)
Non-current liabilities	(4,039		)	(2,931		)	(1,145		)	(1,009		)
	$	(4,079	)	$	(2,964	)	$	(1,145	)	$	(1,022	)


⁽¹⁾	Fiscal 2015 pension plans include $340 million of payments under a plan offered for a limited time to certain former employees who had vested benefits in our qualified defined benefit pension plans. These employees elected to receive an immediate lump-sum distribution in lieu of benefits they would have received following their retirement.

The components of net periodic benefit cost are as follows:



	Pension Plans									Postretirement Medical Plans
	2016			2015			2014			2016			2015			2014
Service cost	$	318		$	332		$	277		$	11		$	14		$	10
Interest cost	458			521			488			61			68			65
Expected return on plan assets	(747		)	(711		)	(645		)	(45		)	(39		)	(36		)
Amortization of prior year service costs	14			16			14			(1		)	(1		)	(2		)
Recognized net actuarial loss / (gain)	242			247			145			8			10			(7		)
Net periodic benefit cost	$	285		$	405		$	279		$	34		$	52		$	30



Key assumptions are as follows:
	Pension Plans						Postretirement Medical Plans
	2016		2015		2014		2016		2015		2014
Discount rate used to determine the benefit obligation	3.73	%	4.47	%	4.40	%	3.73	%	4.47	%	4.40	%
Discount rate used to determine the net periodic benefit cost	3.81	%	4.40	%	5.00	%	3.81	%	4.40	%	5.00	%
Rate of return on plan assets	7.50	%	7.50	%	7.50	%	7.50	%	7.50	%	7.50	%
Rate of salary increase	4.00	%	4.00	%	4.00	%	n/a		n/a		n/a
Year 1 increase in cost of benefits	n/a		n/a		n/a		7.00	%	7.00	%	7.00	%
Rate of increase to which the cost of benefits is assumed to decline (the ultimate trend rate)	n/a		n/a		n/a		4.25	%	4.25	%	4.25	%
Year that the rate reaches the ultimate trend rate	n/a		n/a		n/a		2030		2029		2028

In addition to the assumptions in the above table, assumed mortality is also a key assumption in determining benefit obligations. Net periodic benefit cost is based on assumptions determined at the prior-year end measurement date.

AOCI, before tax, as of October 1, 2016 consists of the following amounts that have not yet been recognized in net periodic benefit cost:



	Pension Plans			Postretirement Medical Plans			Total
Prior service cost	$	(56	)	$	—		$	(56	)
Net actuarial loss	(5,470		)	(263		)	(5,733		)
Total amounts included in AOCI	(5,526		)	(263		)	(5,789		)
Prepaid / (accrued) pension cost	1,447			(882		)	565
Net balance sheet liability	$	(4,079	)	$	(1,145	)	$	(5,224	)

Amounts included in AOCI, before tax, as of October 1, 2016 that are expected to be recognized as components of net periodic benefit cost during fiscal 2017 are:



	Pension Plans			Postretirement Medical Plans			Total
Prior service cost	$	(11	)	$	—		$	(11	)
Net actuarial loss	(403		)	(16		)	(419		)
Total	$	(414	)	$	(16	)	$	(430	)

Plan Funded Status

The projected benefit obligation, accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $13.4 billion, $12.4 billion and $9.5 billion, respectively, as of October 1, 2016 and $11.5 billion, $10.6 billion and $8.5 billion as of October 3, 2015, respectively.

For pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and aggregate fair value of plan assets were $14.5 billion and $10.4 billion, respectively, as of October 1, 2016 and $12.4 billion and $9.4 billion as of October 3, 2015, respectively.

The Company’s total accumulated pension benefit obligations at October 1, 2016 and October 3, 2015 were $13.3 billion and $11.4 billion, respectively, of which 99% and 98%, respectively, was vested.

The accumulated postretirement medical benefit obligations and fair value of plan assets for postretirement medical plans with accumulated postretirement medical benefit obligations in excess of plan assets were $1.8 billion and $0.6 billion, respectively, at October 1, 2016 and $1.6 billion and $0.6 billion, respectively, at October 3, 2015.

Plan Assets

A significant portion of the assets of the Company’s defined benefit plans are managed in a third-party master trust. The investment policy and allocation of the assets in the master trust were approved by the Company’s Investment and Administrative Committee, which has oversight responsibility for the Company’s retirement plans. The investment policy ranges for the major asset classes are as follows:



Asset Class	Minimum		Maximum

Equity investments	30	%	60	%
Fixed income investments	20	%	40	%
Alternative investments	10	%	30	%
Cash & money market funds	0	%	10	%

The primary investment objective for the assets within the master trust is the prudent and cost effective management of assets to satisfy benefit obligations to plan participants. Financial risks are managed through diversification of plan assets, selection of investment managers and through the investment guidelines incorporated in investment management agreements. Assets are monitored to ensure that investment returns are commensurate with risks taken.

The long-term asset allocation policy for the master trust was established taking into consideration a variety of factors that include, but are not limited to, the average age of participants, the number of retirees, the duration of liabilities and the expected payout ratio. Liquidity needs of the master trust are generally managed using cash generated by investments or by liquidating securities.

Assets are generally managed by external investment managers, and we have investment management agreements with respect to securities in the master trust. These agreements include account guidelines that establish permitted securities and risk controls commensurate with the account’s investment strategy. Some agreements permit the use of derivative securities (futures, options, interest rate swaps, credit default swaps) that enable investment managers to enhance returns and manage exposures within their accounts.

Fair Value Measurements of Plan Assets

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and is classified in one of the following three categories:

Level 1 – Quoted prices for identical instruments in active markets

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

The following is a description of the valuation methodologies used for assets reported at fair value. There have been no changes in the methodologies used at October 1, 2016 and October 3, 2015.

Level 1 investments are valued based on reported market prices on the last trading day of the year. Investments in common and preferred stocks are valued based on the securities exchange-listed price or a broker’s quote in an active market. Investments in U.S. Treasury securities are valued based on a broker’s quote in an active market.

Level 2 investments in government and federal agency bonds, mortgage-backed securities (MBS), asset-backed securities and corporate bonds are valued using a broker’s quote in a non-active market or an evaluated price based on a compilation of reported market information, such as benchmark yield curves, credit spreads and estimated default rates. Derivative financial instruments are valued based on models that incorporate observable inputs for the underlying securities, such as interest rates or foreign currency exchange rates. Shares in money market and mutual funds and certain alternative investments are valued at the net asset value of the shares held by the Plan at year-end based on the fair value of the underlying investments.

Level 3 investments primarily consist of investments in limited partnerships, which are valued based on the master trust’s pro-rata share of the partnerships’ underlying net investment holdings as reported in the partnerships’ financial statements. The investments held by the partnerships are recorded at fair value, and the partnerships’ financial statements are generally audited annually. The fair values of the underlying investments are estimated using significant unobservable inputs (e.g., discounted cash flow models or relative valuation methods that incorporate comparable market information such as earnings and cash flow multiples from similar publicly traded companies or real estate properties).

The Company’s defined benefit plan assets are summarized by level in the following tables:



	As of October 1, 2016
Description	Level 1			Level 2		Level 3		Total		Plan Asset Mix

Cash & money market funds	$	116		$	916	$	—	$	1,032	9	%
Common and preferred stocks⁽¹⁾	2,238			945		—		3,183		29	%
Mutual funds	636			232		—		868		8	%
Common collective funds	13			558		—		571		5	%
Government and federal agency bonds, notes and MBS	2,114			458		—		2,572		24	%
Corporate bonds	—			577		—		577		5	%
Mortgage- and asset-backed securities	—			86		—		86		1	%
Alternative investments	84			975		1,067		2,126		19	%
Derivatives and other, net	(1		)	1		—		—		—	%
Total	$	5,200		$	4,748	$	1,067	$	11,015	100	%



	As of October 3, 2015
Description	Level 1		Level 2		Level 3		Total		Plan Asset Mix

Cash & money market funds	$	56	$	1,036	$	—	$	1,092	11	%
Common and preferred stocks⁽¹⁾	2,000		883		—		2,883		29	%
Mutual funds	476		215		—		691		7	%
Common collective funds	13		476		—		489		5	%
Government and federal agency bonds, notes and MBS	1,090		483		—		1,573		16	%
Corporate bonds	—		671		—		671		7	%
Mortgage- and asset-backed securities	—		137		—		137		1	%
Alternative investments	80		952		1,200		2,232		22	%
Derivatives and other, net	212		3		—		215		2	%
Total	$	3,927	$	4,856	$	1,200	$	9,983	100	%


⁽¹⁾	Includes 2.8 million shares of Company common stock valued at $264 million (2% of total plan assets) and 2.8 million shares valued at $290 million (3% of total plan assets) at October 1, 2016 and October 3, 2015, respectively.

Changes in Level 3 assets are as follows:



	Year Ended
	October 1, 2016			October 3, 2015
Balance, beginning of year	$	1,200		$	1,266
Additions	174			168
Distributions	(300		)	(332		)
Gain / (Loss)	(7		)	98
Balance, end of year	$	1,067		$	1,200

Uncalled Capital Commitments

Alternative investments held by the master trust include interests in investments that have rights to make capital calls to the investors. In such cases, the master trust would be contractually obligated to make a cash contribution at the time of the capital call. At October 1, 2016, the total committed capital still uncalled and unpaid was $623 million.

Plan Contributions

During fiscal 2016, the Company made contributions to its pension and postretirement medical plans totaling $900 million. In the first quarter of 2017, we contributed $1.3 billion and do not expect to make any additional material contributions for the remainder of fiscal 2017. However, final minimum funding requirements for fiscal 2017 will be determined based on our January 1, 2017 funding actuarial valuation, which we expect to receive during the fourth quarter of fiscal 2017.

Estimated Future Benefit Payments

The following table presents estimated future benefit payments for the next ten fiscal years:



	Pension Plans		Postretirement Medical Plans⁽¹⁾
2017	$	470	$	45
2018	469		49
2019	502		53
2020	535		57
2021	567		62
2022 – 2026	3,374		378


⁽¹⁾	Estimated future benefit payments are net of expected Medicare subsidy receipts of $72 million.

Assumptions

Assumptions, such as discount rates, long-term rate of return on plan assets and the healthcare cost trend rate, have a significant effect on the amounts reported for net periodic benefit cost as well as the related benefit obligations.

Discount Rate — The assumed discount rate for pension and postretirement medical plans reflects the market rates for high-quality corporate bonds currently available. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves.

At the end of fiscal 2015, the Company changed the approach used to measure service and interest costs for pension and other postretirement benefits. For fiscal 2015, the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For fiscal 2016, we elected to measure service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. The Company believes the new approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of our plan obligations but generally results in lower pension expense in periods when the yield curve is upward sloping, which was the case in fiscal 2016. The Company has accounted for this change as a change in accounting estimate and, accordingly, has accounted for it on a prospective basis starting in fiscal 2016.

Long-term rate of return on plan assets — The long-term rate of return on plan assets represents an estimate of long-term returns on an investment portfolio consisting of a mixture of equities, fixed income and alternative investments. When determining the long-term rate of return on plan assets, the Company considers long-term rates of return on the asset classes (both historical and forecasted) in which the Company expects the pension funds to be invested. The following long-term rates of return by asset class were considered in setting the long-term rate of return on plan assets assumption:



Equity Securities	7	%	to	11	%
Debt Securities	3	%	to	5	%
Alternative Investments	8	%	to	12	%

Healthcare cost trend rate — The Company reviews external data and its own historical trends for healthcare costs to determine the healthcare cost trend rates for the postretirement medical benefit plans. For the 2016 actuarial valuation, we assumed a 7.00% annual rate of increase in the per capita cost of covered healthcare claims with the rate decreasing in even increments over fourteen years until reaching 4.25%.

Sensitivity — A one percentage point (ppt) change in the key assumptions would have the following effects on the projected benefit obligations for pension and postretirement medical plans as of October 1, 2016 and on cost for fiscal 2017:



	Discount Rate						Expected Long-Term Rate of Return On Assets			Assumed Healthcare Cost Trend Rate
Increase/(decrease)	Benefit Expense			Projected Benefit Obligations			Benefit Expense			Net Periodic Postretirement Medical Cost			Projected Benefit Obligations
1 ppt decrease	$	271		$	2,853		$	123		$	(25	)	$	(233	)
1 ppt increase	(235		)	(2,401		)	(123		)	41			287

Multiemployer Benefit Plans

The Company participates in a number of multiemployer pension plans under union and industry-wide collective bargaining agreements that cover our union-represented employees and expenses its contributions to these plans as incurred. These plans generally provide for retirement, death and/or termination benefits for eligible employees within the applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods and benefit formulas. The risks of participating in these multiemployer plans are different from single-employer plans. For example:


•	Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.


•	If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the plan may become the obligation of the remaining participating employers.


•	If the Company chooses to stop participating in these multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan.

The Company also participates in several multiemployer health and welfare plans that cover both active and retired employees. Health care benefits are provided to participants who meet certain eligibility requirements under the applicable collective bargaining unit.

The following table sets forth our contributions to multiemployer pension and health and welfare benefit plans that were expensed during the fiscal years 2016, 2015 and 2014, respectively:



	2016		2015		2014
Pension plans	$	126	$	128	$	115
Health & welfare plans	167		173		158
Total contributions	$	293	$	301	$	273

Defined Contribution Plans

The Company has defined contribution retirement plans for domestic employees who began service after December 31, 2011 and are not eligible to participate in the defined benefit pension plans. In general, the Company contributes from 3% to 9% of an employee’s compensation depending on the employee’s age and years of service with the Company up to plan limits. The Company has savings and investment plans that allow eligible employees to contribute up to 50% of their salary through payroll deductions depending on the plan in which the employee participates. The Company matches 50% of the employee’s contribution up to plan limits. In fiscal years 2016, 2015 and 2014, the costs of these defined contribution plans were $131 million, $110 million and $87 million, respectively. The Company also has defined contribution retirement plans for employees in our international operations. In each of fiscal years 2016, 2015 and 2014, the costs of these defined contribution plans were $19 million.