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
	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Projected benefit obligations
Beginning obligations	$	(14,480	)	$	(12,379	)	$	(1,759	)	$	(1,590	)
Service cost	(368		)	(318		)	(11		)	(11		)
Interest cost	(447		)	(458		)	(56		)	(61		)
Actuarial gain / (loss)	343			(1,769		)	42			(142		)
Plan amendments and other	(22		)	8			(9		)	(9		)
Benefits paid	442			436			47			54
Ending obligations	$	(14,532	)	$	(14,480	)	$	(1,746	)	$	(1,759	)
Fair value of plans’ assets
Beginning fair value	$	10,401		$	9,415		$	614		$	568
Actual return on plan assets	1,056			624			61			34
Contributions	1,348			839			61			61
Benefits paid	(442		)	(436		)	(47		)	(54		)
Expenses and other	(38		)	(41		)	7			5
Ending fair value	$	12,325		$	10,401		$	696		$	614

Underfunded status of the plans	$	(2,207	)	$	(4,079	)	$	(1,050	)	$	(1,145	)
Amounts recognized in the balance sheet
Non-current assets	$	70		$	—		$	—		$	—
Current liabilities	(46		)	(40		)	—			—
Non-current liabilities	(2,231		)	(4,039		)	(1,050		)	(1,145		)
	$	(2,207	)	$	(4,079	)	$	(1,050	)	$	(1,145	)

The components of net periodic benefit cost are as follows:



	Pension Plans									Postretirement Medical Plans
	2017			2016			2015			2017			2016			2015
Service cost	$	368		$	318		$	332		$	11		$	11		$	14
Interest cost	447			458			521			56			61			68
Expected return on plan assets	(874		)	(747		)	(711		)	(49		)	(45		)	(39		)
Amortization of prior year service costs	12			14			16			—			(1		)	(1		)
Recognized net actuarial loss	405			242			247			17			8			10
Net periodic benefit cost	$	358		$	285		$	405		$	35		$	34		$	52

In fiscal 2018, we expect pension and postretirement medical costs to decrease by $63 million to $330 million driven by higher expected returns on plan assets as a result of higher asset values at the end of fiscal 2017.



Key assumptions are as follows:
	Pension Plans						Postretirement Medical Plans
	2017		2016		2015		2017		2016		2015
Discount rate used to determine the fiscal year end benefit obligation	3.88	%	3.73	%	4.47	%	3.88	%	3.73	%	4.47	%
Discount rate used to determine the interest cost component of net periodic benefit cost	3.18	%	3.81	%	4.40	%	3.18	%	3.81	%	4.40	%
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		2031		2030		2029

Assumed mortality is also a key assumption in determining benefit obligations.

AOCI, before tax, as of September 30, 2017 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	$	(65	)	$	—		$	(65	)
Net actuarial loss	(4,578		)	(194		)	(4,772		)
Total amounts included in AOCI	(4,643		)	(194		)	(4,837		)
Prepaid / (accrued) pension cost	2,436			(856		)	1,580
Net balance sheet liability	$	(2,207	)	$	(1,050	)	$	(3,257	)

Amounts included in AOCI, before tax, as of September 30, 2017 that are expected to be recognized as components of net periodic benefit cost during fiscal 2018 are:



	Pension Plans			Postretirement Medical Plans			Total
Prior service cost	$	(13	)	$	—		$	(13	)
Net actuarial loss	(347		)	(14		)	(361		)
Total	$	(360	)	$	(14	)	$	(374	)

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 $8.5 billion, $7.7 billion and $6.4 billion, respectively, as of September 30, 2017 and $13.4 billion, $12.4 billion and $9.5 billion, respectively, as of October 1, 2016.

For pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and aggregate fair value of plan assets were $12.8 billion and $10.5 billion, respectively, as of September 30, 2017 and $14.5 billion and $10.4 billion respectively, as of October 1, 2016.

The Company’s total accumulated pension benefit obligations at September 30, 2017 and October 1, 2016 were $13.4 billion and $13.3 billion. Approximately 99% was vested as of both dates.

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 $1.7 billion and $0.7 billion, respectively, at September 30, 2017 and $1.8 billion and $0.6 billion, respectively, at October 1, 2016.

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. Investments are monitored to assess whether 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 pursuant to investment management agreements 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 generally classified in one of the following categories of the fair value hierarchy:

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

During fiscal 2017, the Company adopted new accounting guidance that allows for investments that are measured at net asset value (NAV) (or its equivalent) as a practical expedient to be excluded from the fair value hierarchy disclosure. Prior year disclosures have been restated to conform to the current year presentation.

The following is a description of the valuation methodologies used for assets reported at fair value. The methodologies used at September 30, 2017 and October 1, 2016 are the same.

Level 1 investments are valued based on reported market prices on the last trading day of the fiscal year. Investments in common and preferred stocks are valued based on an 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, corporate bonds and mortgage-backed securities (MBS) and asset-backed securities 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.

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



	As of September 30, 2017
Description	Level 1		Level 2		Total		Plan Asset Mix

Cash	$	88	$	—	$	88	1	%
Common and preferred stocks⁽¹⁾	2,974		—		2,974		23	%
Mutual funds	771		—		771		6	%
Government and federal agency bonds, notes and MBS	1,870		548		2,418		19	%
Corporate bonds	—		579		579		4	%
Mortgage- and asset-backed securities	—		99		99		1	%
Derivatives and other, net	—		14		14		—	%
Total investments in the fair value hierarchy	$	5,703	$	1,240	$	6,943

Assets valued at NAV as a practical expedient:
Common collective funds					2,727		21	%
Alternative investments					2,201		17	%
Money market funds and other					1,150		9	%
Total investments at fair value					$	13,021	100	%



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

Cash	$	115	$	—		$	115		1	%
Common and preferred stocks⁽¹⁾	2,238		—			2,238			20	%
Mutual funds	720		—			720			7	%
Government and federal agency bonds, notes and MBS	2,116		420			2,536			23	%
Corporate bonds	—		469			469			4	%
Mortgage- and asset-backed securities	—		86			86			1	%
Derivatives and other, net	1		(7		)	(6		)	—	%
Total investments in the fair value hierarchy	$	5,190	$	968		$	6,158

Assets valued at NAV as a practical expedient:
Common collective funds						1,861			17	%
Alternative investments						2,072			19	%
Money market funds and other						924			8	%
Total investments at fair value						$	11,015		100	%


⁽¹⁾	Includes 2.9 million shares of Company common stock valued at $282 million (2% of total plan assets) and 2.8 million shares valued at $264 million (2% of total plan assets) at September 30, 2017 and October 1, 2016, respectively.

Uncalled Capital Commitments

Alternative investments held by the master trust include interests in funds 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 September 30, 2017, the total committed capital still uncalled and unpaid was $788 million.

Plan Contributions

During fiscal 2017, the Company made contributions to its pension and postretirement medical plans totaling $1.4 billion. The Company currently does not expect to make material contributions in fiscal 2018. However, final minimum funding requirements for fiscal 2018 will be determined based on the January 1, 2018 funding actuarial valuation, which is expected to be received during the fourth quarter of fiscal 2018.

Estimated Future Benefit Payments

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



	Pension Plans		Postretirement Medical Plans⁽¹⁾
2018	$	503	$	49
2019	504		53
2020	536		58
2021	569		63
2022	607		67
2023 – 2027	3,569		405


⁽¹⁾	Estimated future benefit payments are net of expected Medicare subsidy receipts of $79 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. The Company measures service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows.

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	7	%	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. The 2017 actuarial valuation 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 September 30, 2017 and on cost for fiscal 2018:



	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	$	263		$	2,778		$	127		$	(29	)	$	(239	)
1 ppt increase	(242		)	(2,349		)	(127		)	44			316

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 2017, 2016 and 2015, respectively:



	2017		2016		2015
Pension plans	$	127	$	126	$	128
Health & welfare plans	160		167		173
Total contributions	$	287	$	293	$	301

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 2017, 2016 and 2015, the costs of these defined contribution plans were $143 million, $131 million and $110 million, respectively. The Company also has defined contribution retirement plans for employees in our international operations. The costs of these defined contribution plans were $20 million, $19 million and $19 million in 2017, 2016 and 2015, respectively.