Pension and Other Employee Benefits

12 Months Ended

Dec. 31, 2019

Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]

Pension and Other Employee Benefits

Pension and Other Employee Benefits

We have pension plans covering the majority of our employees hired prior to January 1, 2007, including certain employees in foreign countries (Pension Benefits). Our primary pension obligations relate to our domestic Internal Revenue Service (IRS) qualified pension plans. In addition, we provide certain health care and life insurance benefits to retired employees and to eligible employees upon retirement through other postretirement benefit (PRB) plans.

The fair value of plan assets for our domestic and foreign Pension Benefits plans was as follows:

(In millions)	2019		2018
Domestic Pension Benefits plan	$	20,366	$	18,488
Foreign Pension Benefits plan	951		833

We maintain a defined contribution plan that includes a 401(k) plan. Covered employees hired or rehired on or after January 1, 2007 are eligible for a Company contribution based on age and service, instead of participating in our pension plans. These and other covered employees are eligible to contribute up to a specific percentage of their pay to the 401(k) plan, subject to IRS compensation and contribution limits. We match the employee contributions. The match is generally 3% or 4% of the employee’s pay and is invested in the same way as the employee contributions. Total expense for our contributions was $357 million, $326 million and $303 million in 2019, 2018 and 2017, respectively.

At December 31, 2019 and December 31, 2018, there was $20.6 billion and $17.0 billion invested in our defined contribution plan, respectively. At December 31, 2019 and December 31, 2018, $2.1 billion and $1.6 billion of these amounts were invested in our stock fund, respectively.

We also sponsor nonqualified defined benefit and defined contribution plans to provide benefits in excess of qualified plan limits. We have set aside certain assets in separate trusts, which we expect to be used to pay for trust obligations. The fair value of marketable securities held in trusts, which are considered Level 1 assets under the fair value hierarchy, consisted of the following at December 31:

(In millions)	2019		2018
Marketable securities held in trusts	$	753	$	642

Included in marketable securities held in trusts in the table above was $476 million and $420 million at December 31, 2019 and December 31, 2018, respectively, related to the nonqualified defined contribution plans. The liabilities related to the nonqualified defined contribution plans were $489 million and $431 million at December 31, 2019 and December 31, 2018, respectively.

We also maintain additional contractual pension benefits agreements for certain executive officers. The liability associated with such agreements was $39 million and $36 million at December 31, 2019 and December 31, 2018, respectively.

Contributions and Benefit Payments

We may make both required and discretionary contributions to our pension plans. Required contributions are primarily determined in accordance with the Pension Protection Act of 2006 (PPA), which amended the Employee Retirement Income Security Act of 1974 (ERISA) rules, and are affected by the actual return on plan assets (ROA) and plan funded status. The funding requirements under the PPA require us to fully fund our pension plans over a rolling seven-year period as determined annually based upon the funded status at the beginning of the year.

Due to the low interest rate environment, Congress provided for temporary pension funding relief through a provision in the Surface Transportation Extension Act of 2012 (STE Act). The provision was extended through 2020 by the Highway and Transportation Funding Act of 2014 (HATFA) and the Bipartisan Budget Act (BBA) of 2015. The provision adjusts the 24-month average high quality corporate bond rates used to determine the PPA funded status so that they are within a floor and cap, or “corridor,” based on the 25-year average of corporate bond rates. Beginning after 2020, the provision will be gradually phased out.

We made the following contributions to our pension and PRB plans during the years ended December 31:  

(In millions)	2019		2018		2017
Required pension contributions	$	343	$	889	$	615
Discretionary pension contributions	—		1,250		1,000
PRB contributions	37		22		27
Total	$	380	$	2,161	$	1,642

We periodically evaluate whether to make additional discretionary contributions. We did not make any discretionary pension contributions in 2019. We made a $1.25 billion discretionary pension contribution in third quarter 2018 and elected to apply approximately $1 billion to partially offset required contributions in 2019 and 2020, roughly split evenly between the two years. We expect to make required contributions of approximately $319 million and $50 million to our pension and PRB plans, respectively, in 2020.

The table below reflects the total Pension Benefits expected to be paid from the plans or from our assets, including both our share of the benefit cost and the participants’ share of the cost, which is funded by participant contributions. PRB benefits expected to be paid reflect our portion only.

(In millions)	Pension Benefits		PRB
2020	$	1,984	$	61
2021	1,874		58
2022	1,806		55
2023	1,646		53
2024	1,583		50
Thereafter (next 5 years)	7,641		218

Defined Benefit Retirement Plan Summary Financial Information

The tables below outline the components of net periodic benefit expense (income) of our domestic and foreign Pension Benefits and PRB plans. 

	Pension Benefits
Components of Net Periodic Pension Expense (Income) (in millions)	2019			2018			2017
Operating expense
Service cost	$	420		$	504		$	473
Non-operating expense
Interest cost	1,046			1,004			1,088
Expected return on plan assets	(1,436		)	(1,435		)	(1,377		)
Amortization of prior service cost	5			6			5
Amortization of net actuarial loss	1,050			1,351			1,177
Loss recognized due to settlements	1			286			1
Total pension non-service expense	666			1,212			894
Net periodic pension expense (income)	$	1,086		$	1,716		$	1,367

Net periodic pension expense (income) includes income from foreign Pension Benefits plans of $3 million in 2019, income of $8 million in 2018 and expense of $2 million in 2017. 

In July 2018, certain Raytheon-sponsored pension plans purchased a group annuity contract from an insurance company to transfer $923 million of our outstanding pension benefit obligations related to certain U.S. retirees and beneficiaries of our previously discontinued operations. As a result of the transaction, the insurance company is now required to pay and administer the retirement benefits owed to the approximately 13,000 U.S. retirees and beneficiaries, with no change to their monthly retirement benefit payment amounts. In connection with this transaction, in the third quarter of 2018 we recognized a non-cash pension settlement charge of $288 million before tax, $228 million net of tax, in non-operating (income) expense, net, primarily related to the accelerated recognition of actuarial losses included in AOCL for those plans.

	PRB
Components of Net Periodic PRB Expense (Income) (in millions)	2019			2018			2017
Operating expense
Service cost	$	3		$	5		$	6
Non-operating expense
Interest cost	28			27			30
Expected return on plan assets	(18		)	(21		)	(21		)
Amortization of prior service cost	—			—			(1		)
Amortization of net actuarial loss	10			11			10
Loss recognized due to settlements	2			1			1
Total PRB non-service expense	22			18			19
Net periodic PRB expense (income)	$	25		$	23		$	25

	Pension Benefits						PRB
Funded Status – Amounts Recognized on our Balance Sheets (in millions) December 31:	2019			2018			2019			2018
Noncurrent assets	$	174		$	126		$	—		$	—
Current liabilities	(160		)	(150		)	(18		)	(18		)
Noncurrent liabilities	(7,687		)	(6,111		)	(369		)	(354		)
Net amount recognized on our balance sheets	$	(7,673	)	$	(6,135	)	$	(387	)	$	(372	)

	Pension Benefits						PRB
Reconciliation of Amounts Recognized on our Balance Sheets (in millions) December 31:	2019			2018			2019			2018
Accumulated other comprehensive loss:
Prior service (cost) credit	$	(23	)	$	(27	)	$	—		$	—
Net actuarial loss	(11,389		)	(10,590		)	(148		)	(121		)
Accumulated other comprehensive loss	(11,412		)	(10,617		)	(148		)	(121		)
Accumulated contributions in excess of (below) net periodic expense	3,739			4,482			(239		)	(251		)
Net amount recognized on our balance sheets	$	(7,673	)	$	(6,135	)	$	(387	)	$	(372	)

	Pension Benefits						PRB
Sources of Change in Accumulated Other Comprehensive Loss (in millions)	2019			2018			2019			2018
Prior service (cost) credit arising during period	$	(1	)	$	(10	)	$	—		$	—
Amortization of prior service cost (credit) included in net income	5			6			—			—
Net change in prior service (cost) credit not recognized in net income during the period	4			(4		)	—			—
Actuarial gain (loss) arising during period	(1,847		)	(630		)	(39		)	4
Amortization of net actuarial (gain) loss	1,050			1,351			10			11
Loss recognized due to settlements	1			286			2			1
Net change in actuarial gain (loss) not included in net income during the period	(796		)	1,007			(27		)	16
Effect of exchange rates	(3		)	9			—			—
Total change in accumulated other comprehensive loss during period	$	(795	)	$	1,012		$	(27	)	$	16

The amounts in AOCL at December 31, 2019 expected to be recognized as components of net periodic pension or PRB expense in 2020 are as follows: 

(In millions)	Pension Benefits			PRB
Amortization of net actuarial gain (loss)	$	(1,197	)	$	(13	)
Amortization of prior service (cost) credit	(4		)	—
Total	$	(1,201	)	$	(13	)

The projected benefit obligation (PBO) represents the present value of Pension Benefits earned through the end of the year, with an allowance for future salary increases. The accumulated benefit obligation (ABO) is similar to the PBO, but does not provide for future salary increases. The PBO, ABO and asset values for our domestic qualified pension plans were as follows:

(In millions)	2019		2018
PBO for domestic qualified pension plans	$	26,597	$	23,359
ABO for domestic qualified pension plans	24,213		21,595
Asset values for domestic qualified pension plans	20,366		18,488

The PBO and fair value of plan assets for Pension Benefits plans with PBOs in excess of plan assets were $27,994 million and $20,146 million, respectively, at December 31, 2019 and $24,561 million and $18,300 million, respectively, at December 31, 2018.

The ABO and fair value of plan assets for Pension Benefits plans with ABOs in excess of plan assets were $25,313 million and $20,146 million, respectively, at December 31, 2019 and $22,554 million and $18,300 million, respectively, at December 31, 2018. The ABO for all Pension Benefits plans was $26,307 million and $23,447 million at December 31, 2019 and December 31, 2018, respectively.

The tables below provide a reconciliation of benefit obligations, plan assets and related actuarial assumptions of our domestic and foreign Pension Benefits and PRB plans.

	Pension Benefits						PRB
Change in Projected Benefit Obligation (in millions)	2019			2018			2019			2018
PBO at beginning of year	$	25,456		$	28,569		$	672		$	745
Service cost	420			504			3			5
Interest cost	1,046			1,004			28			27
Plan participants’ contributions	4			6			58			49
Amendments	1			10			—			—
Plan settlements	(7		)	(474		)	(9		)	(10		)
Actuarial loss (gain)	3,926			(1,580		)	71			(39		)
Foreign exchange loss (gain)	24			(56		)	—			—
Benefits paid	(1,880		)	(2,527		)	(112		)	(105		)
PBO at end of year	$	28,990		$	25,456		$	711		$	672

The PBO for our domestic and foreign Pension Benefits plans was $28,108 million and $882 million, respectively, at December 31, 2019 and $24,656 million and $800 million, respectively, at December 31, 2018.

	Pension Benefits						PRB
Change in Plan Assets (in millions)	2019			2018			2019			2018
Fair value of plan assets at beginning of year	$	19,321		$	21,002		$	300		$	358
Actual return (loss) on plan assets	3,516			(775		)	50			(14		)
Company contributions	343			2,139			37			22
Plan participants’ contributions	4			6			58			49
Plan settlements	(7		)	(474		)	(9		)	(10		)
Foreign exchange gain (loss)	20			(50		)	—			—
Benefits paid	(1,880		)	(2,527		)	(112		)	(105		)
Fair value of plan assets at end of year	$	21,317		$	19,321		$	324		$	300

Retirement Plan Assumptions 

The tables below outline the actuarial assumptions of our domestic and foreign Pension Benefits and PRB plans.

	Pension Benefits
Weighted-Average Net Periodic Benefit Cost Assumptions	2019		2018		2017
Discount rate	4.28	%	3.68	%	4.31	%
Expected long-term rate of return on plan assets	7.38	%	7.38	%	7.39	%
Rate of compensation increase
Range	2%–7%		2%–7%		2%–7%
Average	4.43	%	4.43	%	4.43	%

	PRB
Weighted-Average Net Periodic Benefit Cost Assumptions	2019		2018		2017
Discount rate	4.31	%	3.72	%	4.28	%
Expected long-term rate of return on plan assets	6.25	%	6.25	%	6.25	%
Rate of compensation increase
Range	2%–7%		2%–7%		2%–7%
Average	4.50	%	4.50	%	4.50	%
Health care trend rate*	4.00	%	4.00	%	4.00	%

 * Currently at the ultimate trend rate.

	Pension Benefits				PRB
Weighted-Average Year-End Benefit Obligation Assumptions	2019		2018		2019		2018
Discount rate	3.25	%	4.28	%	3.29	%	4.31	%
Rate of compensation increase
Range	3%–8%		2%–7%		3%–8%		2%–7%
Average	4.40	%	4.40	%	4.50	%	4.50	%
Health care trend rate*					3.50	%	4.00	%

 * Currently at the ultimate trend rate.

Our long-term return on plan assets (ROA) and discount rate assumptions are the key variables in determining the net periodic benefit cost and the pension benefit obligation of our pension plans under U.S. GAAP. Our long-term ROA assumption only impacts the retirement benefits non-service expense. The discount rate assumption impacts the service cost component of FAS expense and retirement benefits non-service expense, while also impacting the pension benefit obligation.

The discount rate represents the interest rate that should be used to determine the present value of future cash flows currently expected to be required to settle our pension and PRB obligations. The discount rate assumption is determined by using a theoretical bond portfolio model consisting of bonds rated AA or better by Moody’s Investors Service for which the timing and amount of cash flows approximate the estimated benefit payments for each of our pension plans. The weighted-average year-end benefit obligation discount rate for our domestic Pension Benefits plans was 3.29% and 4.33% at December 31, 2019 and December 31, 2018, respectively. Our foreign Pension Benefits plan assumptions have been included in the Pension Benefits assumptions in the table above.

The long-term ROA represents the average rate of earnings expected over the long term on the assets invested to provide for anticipated future benefit payment obligations. The long-term ROA used to calculate net periodic pension cost is set annually at the beginning of each year. Given the long-term nature of the ROA assumption, which we believe should not be solely reactive to short-term market conditions that may not persist, we expect the long-term ROA to remain unchanged unless there are significant changes in our investment strategy, the underlying economic assumptions or other major factors.

To establish our long-term ROA assumption we employ a “building block” approach. Under this building block method, the overall expected investment return equals the weighted-average of the individual expected return for each asset class based on the target asset allocation and the long-term capital market assumptions. The expected return for each asset class is composed of inflation plus a risk-free rate of return, plus an expected risk premium for that asset class. The resulting return is then adjusted for administrative, investment management and trading expenses as well as recognition of excess returns, also known as alpha, for active management. We then annually consider whether it is appropriate to change our long-term ROA assumption by reviewing the existing assumption against a statistically determined reasonable range of outcomes. The building block approach and the reasonable range of outcomes are based upon our asset allocation assumptions and long-term capital market assumptions. Such assumptions incorporate the economic outlook for various asset classes over short- and long-term periods and also take into consideration other factors, including historical market performance, inflation and interest rates.

Actuarial Standard of Practice No. 27, Selection of Economic Assumptions for Measuring Pension Obligations (ASOP 27) requires the selection of a reasonable long-term ROA assumption that considers multiple criteria including the purposes of measurement, the actuary’s professional judgment, historical and current economic data and estimates of future experience and has no significant bias. We evaluate our long-term ROA assumption against a reasonable range of possible outcomes which we define as between the 35th to 65th percentile likelihood of achieving a long-term return over future years. We believe that validating our ROA assumption within this reasonable range ensures an unbiased result while also ensuring that the ROA assumption is not solely reactive to short-term market conditions that may not persist, and is consistent with external actuarial practices.

The reasonable range of long-term returns that was used to validate the long-term ROA assumption for the calculation of the net periodic benefit cost for 2019, 2018 and 2017 is shown below.

Percentile	2019		2018		2017
35th	5.49	%	5.67	%	5.82	%
65th	7.57	%	7.81	%	7.96	%

2017 ROA Assumption—At year end 2016, we determined that the 8.0% long-term ROA assumption no longer fell within the range of reasonable outcomes, driven primarily by the current outlook on economic assumptions used to develop the reasonable range. As a result, we employed the building block approach described above to develop our 2017 long-term ROA assumption. The building block approach resulted in a long-term ROA assumption of 7.5% for 2017. To validate this assumption, we compared the result against the reasonable range of outcomes and confirmed that the 7.5% fell between the 55th and 60th percentile of the reasonable range for 2017 with the 50th percentile at 6.89%.

Based upon our application of the building block approach and our review of the resulting assumption against the 35th to 65th percentile reasonable range and an analysis of our historical results, we established a 2017 long-term ROA domestic assumption of 7.5% for purposes of determining the net periodic benefit cost for 2017 and determined that the assumption is reasonable and consistent with the provisions of ASOP 27.

2018 ROA Assumption—The long-term domestic ROA of 7.5% fell between the 60th and 65th percentiles of the applicable reasonable range for 2018. The 50th percentile of this reasonable range was 6.74%.

2019 ROA Assumption—The long-term domestic ROA of 7.5% fell between the 60th and 65th percentiles of the applicable reasonable range for 2019. The 50th percentile of this reasonable range was 6.53%.

Our domestic pension plans’ actual rates of return were approximately 19%, (4)% and 15% for 2019, 2018 and 2017, respectively. The difference between the actual rate of return and our long-term ROA assumption is included in deferred gains and losses.

The long-term ROA assumptions for our foreign Pension Benefits plans are based on the asset allocations and the economic environment prevailing in the locations where the Pension Benefits plans reside. Foreign pension assets do not make up a significant portion of the total assets for all of our Pension Benefits plans.

For purposes of determining pension expense under U.S. GAAP, a “corridor” approach may be elected and applied in the recognition of asset and liability gains or losses which limits expense recognition to the net outstanding gains and losses in excess of the greater of 10% of the projected benefit obligation (PBO) or the calculated “market-related value” of assets. We do not use a “corridor” approach in the calculation of FAS pension expense.

The effect of a 1% increase or decrease in the assumed health care trend rate for each future year on total service cost and interest cost is less than a $1 million increase or decrease and on the accumulated postretirement benefit obligation is a $4 million increase or decrease.

Plan Assets

Substantially all our domestic Pension Benefits Plan (Plan) assets, which consist of investments in cash and cash equivalents, U.S. and international equities, real assets, private equity funds, private real estate funds, fixed income and other investments such as absolute return funds, insurance contracts and derivatives, are held in a master trust, which was established for the investment of assets of our Company-sponsored retirement plans. The assets of the master trust are overseen by our Investment Committee comprised of members of senior management drawn from appropriate diversified levels of the executive management team.

The Investment Committee is responsible for setting the policy that provides the framework for management of the Plan assets. In accordance with its responsibilities and charter, the Investment Committee meets on a regular basis to review the performance of the Plan assets and compliance with the investment policy. The policy sets forth an investment structure for managing Plan assets, including setting the asset allocation ranges, which are expected to provide an appropriate level of overall diversification and total investment return over the long term while maintaining sufficient liquidity to pay the benefits of the Plan. In developing the asset allocation ranges, third-party asset allocation and liability studies are periodically performed that consider the current and expected positions of the Plan assets and funded status. Based on these studies and other appropriate information, the Investment Committee establishes asset allocation ranges taking into account acceptable risk targets and associated returns.

The investment policy asset allocation ranges for the Plan, as set by the Investment Committee, for the year ended December 31, 2019 were as follows:

Asset Category
Global equity (combined U.S. and international equity)	30%-60%
U.S. equities	20%-35%
International equities	10%-25%
Fixed income	20%-45%
Cash and cash equivalents	0%-10%
Private equity and private real estate funds	10%-20%
Real assets	0%-4%
Other (including absolute return funds)	5%-15%

The Investment Committee appoints the investment fiduciary, who is responsible for making investment decisions within the framework of the Investment Policy, for setting the long-term target allocation within the investment policy asset allocation ranges and for supervising the internal pension investment team. The pension investment team is comprised of experienced investment professionals, who are all employees of the Company. The investment fiduciary reports back to the Investment Committee. The investment fiduciary may seek authorization from the Investment Committee to change the asset allocation ranges with a focus on managing the Plan in a prudent manner.

Taking into account the asset allocation ranges, the investment fiduciary determines the specific allocation of the Plan’s investments within various asset classes. The Plan utilizes select investment strategies which are executed through separate account or fund structures with external investment managers who demonstrate experience and expertise in the appropriate asset classes and styles. The selection of investment managers is done with careful evaluation of all aspects of performance and risk, due diligence of internal operations and controls, reputation, systems evaluation, fees and a review of investment

managers’ policies and processes. Investment performance is monitored frequently against appropriate benchmarks and within a compliance framework with the assistance of third-party performance measurement and evaluation tools, analytics and metrics.

Consistent with managing the Plan in a prudent manner, multiple investment strategies are employed to diversify risk such that no single investment or manager holding represents a significant exposure to the total investment portfolio. Plan assets are invested in numerous strategies with the intent to build a diversified portfolio. Plan assets can be invested in funds that track an index and are designed to achieve broad market diversification. The Plan had $4.6 billion invested in such funds across seven indices as of December 31, 2019. Excluding funds that track an index, no individual investment strategy represented more than 5% of the Plan as of December 31, 2019. Further, within each separate account strategy, guidelines are established which set forth the list of authorized investments, the typical portfolio characteristics and diversification required by limiting the amount that can be invested by sector, country and issuer.

The Plan’s investments are stated at fair value. Investments in equity securities are valued at the last reported sales price when an active market exists. Investments in fixed income securities are generally valued using methods based upon market transactions for comparable securities and various relationships between securities which are generally recognized by institutional market participants. Investments in funds are estimated at fair market value, which primarily utilizes net asset values reported by the investment manager or fund administrator. We review additional valuation and pricing information from fund managers, including audited financial statements, to evaluate the net asset values.

The fair value of our Plan assets by asset category and by level (as described in “Note 1: Summary of Significant Accounting Policies”) at December 31, 2019 and December 31, 2018 were as follows: 

December 31, 2019 (in millions)	Total		Level 1		Level 2		Level 3		Not subject to leveling(7)
U.S. equities(1)	$	5,563	$	715	$	—	$	—	$	4,848
International equities(1)	3,403		2,838		13		—		552
Real assets(2)	157		—		—		—		157
Fixed income
U.S. government and agency securities	2,026		1,836		190		—		—
Corporate debt securities/instruments(3)	3,039		378		2,308		—		353
Global multi-sector fixed income(4)	303		303		—		—		—
Securitized and structured credit(5)	573		—		—		—		573
Cash and cash equivalents(6)	603		43		—		—		560
Absolute return funds	1,564		—		—		—		1,564
Private equity funds	1,579		—		—		—		1,579
Private real estate funds	1,403		—		—		—		1,403
Insurance contracts	32		—		—		32		—
Total investments	20,245		6,113		2,511		32		11,589
Net receivables and payables	121		—		—		—		121
Total assets	$	20,366	$	6,113	$	2,511	$	32	$	11,710

(1) U.S. and International equities primarily include investments across the spectrum of large, medium and small market capitalization stocks.

(2) Real assets primarily include investments in physical and permanent assets, including infrastructure.

(3) Corporate debt securities/instruments primarily include investments in investment grade and non-investment grade fixed income securities.

(4) Global multi-sector fixed income primarily includes investments that invest globally among several sectors including governments, investment grade corporate bonds, high yield corporate bonds and emerging market securities.

(5) Securitized and structured credit primarily includes investments that pool together various cash flow producing financial assets that are structured in a way that can achieve desired targeted credit, maturity or other characteristics and are typically collateralized by residential mortgages, commercial mortgages and other assets, and other fixed income related securities.

(6) Cash and cash equivalents are primarily investments in highly liquid money market funds and bank sponsored collective funds. Included in cash and cash equivalents is excess cash in investment manager accounts which is available for immediate use and is used to fund daily operations and execute the investment policy. Excess cash in investment manager accounts is not considered to be part of the cash target allocation set forth in the investment policy.

(7) Receivables, payables and certain investments that are valued using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amount presented for the total domestic pension benefits plan assets.

December 31, 2018 (in millions)	Total		Level 1		Level 2		Level 3		Not subject to leveling(7)
U.S. equities(1)	$	4,701	$	2,189	$	—	$	—	$	2,512
International equities(1)	3,141		2,522		4		—		615
Real assets(2)	53		—		—		—		53
Fixed income
U.S. government and agency securities	1,923		1,727		196		—		—
Corporate debt securities/instruments(3)	2,907		329		2,088		—		490
Global multi-sector fixed income(4)	400		400		—		—		—
Securitized and structured credit(5)	534		—		—		—		534
Cash and cash equivalents(6)	486		39		—		—		447
Absolute return funds	1,432		—		—		—		1,432
Private equity funds	1,419		—		—		—		1,419
Private real estate funds	1,264		—		—		—		1,264
Insurance contracts	31		—		—		31		—
Total investments	18,291		7,206		2,288		31		8,766
Net receivables and payables	197		—		—		—		197
Total assets	$	18,488	$	7,206	$	2,288	$	31	$	8,963

(1) U.S. and International equities primarily include investments across the spectrum of large, medium and small market capitalization stocks.

(2) Real assets primarily include investments in physical and permanent assets, including infrastructure.

(3) Corporate debt securities/instruments primarily include investments in investment grade and non-investment grade fixed income securities.

(4) Global multi-sector fixed income primarily includes investments that invest globally among several sectors including governments, investment grade corporate bonds, high yield corporate bonds and emerging market securities.

(5) Securitized and structured credit primarily includes investments that pool together various cash flow producing financial assets that are structured in a way that can achieve desired targeted credit, maturity or other characteristics and are typically collateralized by residential mortgages, commercial mortgages and other assets, and other fixed income related securities.

(6) Cash and cash equivalents are primarily investments in highly liquid money market funds and bank sponsored collective funds. Included in cash and cash equivalents is excess cash in investment manager accounts which is available for immediate use and is used to fund daily operations and execute the investment policy. Excess cash in investment manager accounts is not considered to be part of the cash target allocation set forth in the investment policy.

(7) Receivables, payables and certain investments that are valued using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amount presented for the total domestic pension benefits plan assets.

The Plan limits the use of derivatives through direct or separate account investments such that the derivatives used are liquid and able to be readily valued in the market. Derivative usage in separate account structures is limited to hedging or adjusting market exposure in a non-speculative manner. The fair market value of the Plan’s derivatives through direct or separate account investments was approximately $(8) million and $6 million as of December 31, 2019 and December 31, 2018, respectively.

In addition, assets are held in trust for non-U.S. Pension Benefits plans, primarily in the U.K. and Canada, which are governed in accordance with specific jurisdictional requirements. Investments in the non-U.S. Pension Benefits plans consist primarily of fixed income and equities and had a fair market value of $951 million and $833 million at December 31, 2019 and December 31, 2018, respectively. Investments with significant unobservable inputs (Level 3) are immaterial in the non-U.S. Pension Benefits plans.

The fair market value of assets related to our PRB Benefits was $324 million and $300 million as of December 31, 2019 and December 31, 2018, respectively. These assets included $144 million and $141 million at December 31, 2019 and December 31, 2018, respectively, which were invested in the master trust described above and are therefore invested in the same assets described above. The remaining investments are held within Voluntary Employees’ Beneficiary Association (VEBA) trusts. The assets of the VEBA trusts are also overseen by the Investment Committee and managed by the same investment fiduciary that manages the master trust’s investments. These assets are generally invested in mutual funds and are valued primarily using quoted prices in active markets (Level 1). There were no Level 3 investments in the VEBA trusts at December 31, 2019 or December 31, 2018.

The table below details assets by category for our VEBA trusts. These assets consisted primarily of publicly-traded equity securities and publicly-traded fixed income securities.

	% of Plan Assets at Dec 31:
Asset category	2019		2018
Fixed income securities	43	%	42	%
U.S. equities	38	%	36	%
International equities	10	%	10	%
Cash and cash equivalents	9	%	12	%
Total	100	%	100	%