Employee Benefit Plans

9 Months Ended

Sep. 30, 2020

Defined Benefit Pension and Other Postretirement Benefit Plans. The Company's net periodic benefit cost includes the following components for the three months ended September 30 (in millions):


	Pension Benefits						Other Postretirement Benefits			Affected Line Item in the Statements of Consolidated Operations
	2020		2019		2020		2019
Service cost	$	58	$	46	$	3	$	2	Salaries and related costs
Interest cost	52		56		7		10		Miscellaneous, net
Expected return on plan assets	(77)		(73)		—		—		Miscellaneous, net
Amortization of unrecognized (gain) loss	48		29		(9)		(12)		Miscellaneous, net
Amortization of prior service credit	—		—		(31)		(23)		Miscellaneous, net
Settlement loss	5		2		—		—		Miscellaneous, net
Settlement loss - VSPs (defined below)	319		—		—		—		Miscellaneous, net
Special termination benefit - VSPs	19		—		76		—		Miscellaneous, net
Curtailment	1		—		—		—		Miscellaneous, net
Total	$	425	$	60	$	46	$	(23)

The Company's net periodic benefit cost includes the following components for the nine months ended September 30 (in millions):


	Pension Benefits						Other Postretirement Benefits			Affected Line Item in the Statements of Consolidated Operations
	2020		2019		2020		2019
Service cost	$	165	$	138	$	8	$	7	Salaries and related costs
Interest cost	164		170		21		39		Miscellaneous, net
Expected return on plan assets	(259)		(218)		(1)		(1)		Miscellaneous, net
Amortization of unrecognized (gain) loss	120		87		(31)		(42)		Miscellaneous, net
Amortization of prior service credit	—		—		(93)		(42)		Miscellaneous, net
Settlement loss	19		5		—		—		Miscellaneous, net
Settlement loss - VSPs (defined below)	390		—		—		—		Miscellaneous, net
Special termination benefit - VSPs	54		—		201		—		Miscellaneous, net
Curtailment	1		—		—		—		Miscellaneous, net
Total	$	654	$	182	$	105	$	(39)

Given the impacts of the COVID-19 pandemic, the Company does not plan to make any contributions in 2020 to its two primary defined benefit pension plans, one covering certain pilot employees and another covering certain U.S. non-pilot employees. The Company does not have any minimum required contributions for 2020.

During the second and third quarters of 2020, the Company offered voluntary separation programs ("VSPs") to its U.S. based front line employees and management and administrative employees. The Company offered certain of its eligible front-line employees, based on employee group, age and completed years of service, special termination benefits in the form of additional years of pension service and additional subsidies for retiree medical costs. As a result, the Company recorded, in the three and

nine months ended September 30, 2020, $19 million and $54 million, respectively, for those additional pension benefits. In the three and nine months ended September 30, 2020, the Company recorded $76 million and $201 million, respectively, for those additional retiree medical benefits. Also, the Company recognized, in the three and nine months ended September 30, 2020, $319 million and $390 million, respectively, in settlement losses related to the defined benefit pension plan covering certain U.S. non-pilot employees. As a result of the VSPs and other furlough programs, the Company remeasured both its defined pension plan and its retiree medical benefit program liabilities using discount rates of 3.01% and 2.61%, respectively. During the nine months ended September 30, 2020, as a result of the remeasurements, settlements, curtailments and special termination benefits, the projected benefit obligation of the defined benefit pension plan decreased by $380 million and accumulated other comprehensive losses increased by approximately $286 million. Also, during the nine months ended September 30, 2020, the retiree medical benefit program projected benefit obligation increased by $270 million and accumulated other comprehensive gains decreased by $69 million.

Share-Based Compensation. In the nine months ended September 30, 2020, UAL granted share-based compensation awards pursuant to the United Continental Holdings, Inc. 2017 Incentive Compensation Plan. These share-based compensation awards included 2.4 million restricted stock units ("RSUs"), consisting of 2.1 million time-vested RSUs and 0.3 million performance-based RSUs. The time-vested RSUs vest pro-rata, typically on February 28th of each year, over a three-year period from the date of grant. The amount of performance-based RSUs vest upon the achievement of established goals based on the Company's absolute pre-tax margin performance as well as a customer metric based on the Company's relative quarterly average of net promoter scores as compared to a group of industry peers, both of which are measured for the three-year performance period ending December 31, 2022. RSUs are generally equity awards settled in stock for domestic employees and liability awards settled in cash for international employees. The cash payments are based on the 20-day average closing price of UAL common stock immediately prior to the vesting date.

The table below presents information related to share-based compensation (in millions):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020		2019
Share-based compensation expense	$	41	$	33	$	83	$	70

	September 30, 2020		December 31, 2019
Unrecognized share-based compensation	$	120	$	77