PENSION AND POSTRETIREMENT PLANS

In the first quarter of 2018, the Company adopted new guidance which requires the presentation of service cost in the same line item as other compensation costs arising from services by employees during the period, while the other components of the net periodic benefit are recognized in non-operating pension and postretirement benefit income in the Company’s Condensed Consolidated Statement of Operations.

On March 22, 2018, the Company eliminated the accrual of pension benefits for certain Kaplan University employees related to their future service. As a result, the Company remeasured the accumulated and projected benefit obligation of the pension plan as of March 22, 2018, and the Company recorded a curtailment gain in the first quarter of 2018. The new measurement basis was used for the recognition of the Company’s pension benefit following the remeasurement. The curtailment gain on the Kaplan University transaction is included in the gain on the Kaplan University transaction and reported in Other income, net on the Condensed Consolidated Statement of Operations.

Defined Benefit Plans. The total benefit arising from the Company’s defined benefit pension plans consists of the following components:



	Three Months Ended June 30						Six Months Ended June 30
(in thousands)	2018			2017			2018			2017
Service cost	$	4,317		$	4,591		$	9,257		$	9,505
Interest cost	11,844			11,979			23,099			23,965
Expected return on assets	(32,796		)	(30,403		)	(65,282		)	(60,740		)
Amortization of prior service cost	36			43			78			86
Recognized actuarial gain	(2,974		)	(1,039		)	(4,020		)	(2,333		)
Net Periodic Benefit	(19,573		)	(14,829		)	(36,868		)	(29,517		)
Curtailment gain	—			—			(806		)	—
Total Benefit	$	(19,573	)	$	(14,829	)	$	(37,674	)	$	(29,517	)

The total cost arising from the Company’s Supplemental Executive Retirement Plan (SERP) consists of the following components:



	Three Months Ended June 30				Six Months Ended June 30
(in thousands)	2018		2017		2018		2017
Service cost	$	204	$	215	$	409	$	429
Interest cost	966		1,058		1,932		2,116
Amortization of prior service cost	78		114		156		228
Recognized actuarial loss	601		443		1,202		887
Net Periodic Cost	$	1,849	$	1,830	$	3,699	$	3,660

Defined Benefit Plan Assets. The Company’s defined benefit pension obligations are funded by a portfolio made up of a U.S. stock index fund, a relatively small number of stocks and high-quality fixed-income securities that are held by a third-party trustee. The assets of the Company’s pension plan were allocated as follows:



	As of
	June 30, 2018		December 31, 2017
	June 30, 2018		December 31, 2017
U.S. equities	49	%	53	%
U.S. stock index fund	31	%	30	%
U.S. fixed income	11	%	11	%
International equities	9	%	6	%
	100	%	100	%

The Company manages approximately 44% of the pension assets internally, of which the majority is invested in a U.S. stock index fund with the remaining investments in Berkshire Hathaway stock and short-term fixed income securities. The remaining 56% of plan assets are managed by two investment companies. The goal for the investments is to produce moderate long-term growth in the value of these assets, while protecting them against large decreases in value. Both investment managers may invest in a combination of equity and fixed-income securities and cash. The managers are not permitted to invest in securities of the Company or in alternative investments. The investment managers cannot invest more than 20% of the assets at the time of purchase in the stock of Berkshire Hathaway or more than 10% of the assets in the securities of any other single issuer, except for obligations of the U.S. Government, without receiving prior approval from the Plan administrator. As of June 30, 2018, the investment managers can invest no more than 23% of the assets they manage in specified international exchanges, at the time the investment is made, and no less than 10% of the assets could be invested in fixed-income securities.

In determining the expected rate of return on plan assets, the Company considers the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. In addition, the Company may consult with and consider the input of financial and other professionals in developing appropriate return benchmarks.

The Company evaluated its defined benefit pension plan asset portfolio for the existence of significant concentrations (defined as greater than 10% of plan assets) of credit risk as of June 30, 2018. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country and individual fund. At June 30, 2018 and December 31, 2017, the pension plan held investments in one common stock and one U.S. stock index fund that exceeded 10% of total plan assets. These investments were valued at $1,053.4 million and $1,079.3 million at June 30, 2018 and December 31, 2017, respectively, or approximately 45% and 46%, respectively, of total plan assets.

Other Postretirement Plans. The total cost arising from the Company’s other postretirement plans consists of the following components:



	Three Months Ended June 30						Six Months Ended June 30
(in thousands)	2018			2017			2018			2017
Service cost	$	268		$	257		$	536		$	514
Interest cost	169			194			339			389
Amortization of prior service credit	(44		)	(37		)	(88		)	(74		)
Recognized actuarial gain	(921		)	(972		)	(1,843		)	(1,945		)
Net Periodic Benefit	$	(528	)	$	(558	)	$	(1,056	)	$	(1,116	)