PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

12 Months Ended

Dec. 31, 2016

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

We sponsor several retirement programs for our employees.

This note provides details about:

• defined benefit plans we sponsor, including:

◦ overview of plans,

◦ funded status of plans,

◦ pension assets,

◦ actuarial assumptions and

◦ activity of plans;

• union-administered multiemployer plans; and

• defined contribution plans.

DEFINED BENEFIT PLANS WE SPONSOR

OVERVIEW OF PLANS

The defined benefit plans we sponsor in the U.S. and Canada differ according to each country’s requirements.

In the U.S., our pension plans are:

• qualified — plans that qualify under the Internal Revenue Code; and

• nonqualified — plans for select employees that provide additional benefits not qualified under the Internal Revenue Code.

In Canada, our pension plans are:

• registered — plans that are registered under the Income Tax Act and applicable provincial pension acts; and

• nonregistered — plans for select employees that provide additional benefits that may not be registered under the Income Tax Act or provincial pension acts.

Upon our merger with Plum Creek, we assumed one qualified pension plan and two nonqualified pension plans. Refer to "Assumed Plans from Merger with Plum Creek," below, for further information.

We also offer retiree medical and life insurance plans in the U.S. and Canada. These plans are referred to as other postretirement benefit plans in the following disclosures.

Employee Eligibility and Accounting

The Pension and Other Postretirement Benefit Plans section of Note 1: Summary of Significant Accounting Policies provides information about employee eligibility for pension plans and postretirement health care and life insurance benefits, as well as how we account for the plans and benefits. See "Effects of Significant Transactions and Events," below, for changes to eligibility in the pension and other postretirement benefit plans.

Measurement Date

We measure the fair value of pension plan assets and pension and other postretirement benefit obligations as of the end of our fiscal year. The fair value of pension plan assets are estimated at the end of the year and are revised in the first half of the following year when the information needed to finalize fair values is received. Additionally, we receive updated census data that is used to refine our estimated benefit obligation.

Assumed Plans from Merger with Plum Creek

Upon our merger with Plum Creek, we assumed one qualified pension plan and two nonqualified pension plans. All active participants in these plans became fully vested and the plans were frozen as of February 19, 2016.

The fair value of these items as of February 19, 2016, were as follows:

• $137 million qualified pension plan assets,

• $149 million qualified pension plan projected benefit obligation and

• $50 million nonqualified pension plan projected benefit obligation.

We also assumed assets of $47 million related to the nonqualified plans held in a grantor trust. These assets are subject to the claims of creditors in the event of bankruptcy. As a result, these are not considered plan assets and have not been netted against the nonqualified pension liability. These assets are included in "Other assets" in our Consolidated Balance Sheet. Subsequent to the merger date, we redeemed and paid $38 million of nonqualified pension benefits payments, which included $4 million of the enhanced benefits triggered by change in control provisions. An additional $4 million of grantor trust assets were sold during fourth quarter 2016 in anticipation of benefit payments in early 2017. The balance of assets held in the grantor trust was $5 million as of December 31, 2016.

During first quarter 2016, we recognized $5 million of pension benefit costs from change in control provisions for certain Plum Creek executives. These enhanced pension benefits were triggered by changes in control and retention decisions made after the completion of the merger (see Note 17: Charges for Integration and Restructuring, Closures and Asset Impairments).     

Effective December 31, 2016, the Plum Creek Pension Plan was merged into the Weyerhaeuser Pension Plan. Similarly, the Plum Creek Supplemental Pension Plan and the Plum Creek Supplemental Benefits Plan were both merged into the Weyerhaeuser Supplemental Retirement Plan.

Amendments of Pension and Other Postretirement Benefit Plans for Salaried Employees

Pension Benefit Plan Amendments

Aside from the December 31, 2016, amendments to merge the Plum Creek plans into the Weyerhaeuser plans as described above, there were no material plan amendments in 2016. There were also no material pension benefit plan amendments in 2015 or 2014.

Postretirement Medical and Life Insurance Benefit Plan Amendments

There were no material postretirement medical or life insurance benefit plan amendments in 2016, 2015 and 2014.

During fourth quarter 2013, the decision was ratified to eliminate company funding of the Post-Medicare Health Reimbursement Account (HRA) for certain salaried retirees after 2014. This change was communicated to affected retirees during January 2014. As a result, we recognized a pretax gain of $151 million in 2014 from this plan amendment.

Midyear Remeasurement of Assets and Liabilities

Our pension plans are typically remeasured as of fiscal year-end unless a significant event occurs that requires remeasurement. There were no midyear remeasurements during 2016 or 2015. In 2014 we recorded a midyear remeasurement to capture the impacts of the WRECO Divestiture and our SG&A reduction initiatives. See the "Activity of Plans" section below for additional details about the impact of the 2014 midyear remeasurement.

FUNDED STATUS OF PLANS

The funded status of the plans we sponsor is determined by comparing the projected benefit obligation with the fair value of plan assets at the end of the year. The following table demonstrates how our plans' funded status is reflected on the Consolidated Balance Sheet.

DOLLAR AMOUNTS IN MILLIONS
	PENSION						OTHER POSTRETIREMENT BENEFITS
	2016			2015			2016			2015
Funded status:
Fair value of plan assets	$	5,351		$	5,491		$	—		$	—
Projected benefit obligations	(6,469		)	(6,211		)	(225		)	(240		)
Funded status	$	(1,118	)	$	(720	)	$	(225	)	$	(240	)
Presentation on our Consolidated Balance Sheet:
Noncurrent assets	$	27		$	70		$	—		$	—
Current liabilities	(28		)	(21		)	(21		)	(22		)
Noncurrent liabilities	(1,117		)	(769		)	(204		)	(218		)
Funded status	$	(1,118	)	$	(720	)	$	(225	)	$	(240	)

Our qualified and registered pension plans and a portion of our nonregistered pension plans are funded. We contribute to these plans according to established funding standards. The nonqualified pension plan, a portion of the nonregistered pension plans, and the other postretirement benefit plans are unfunded. For the unfunded plans, we pay benefits to retirees from our general assets as they come due.

The asset or liability on our Consolidated Balance Sheet representing the funded status of the plans is different from the cumulative income or expense that we have recorded related to these plans. These differences are actuarial gains and losses and prior service costs and credits that are deferred and will be amortized into our periodic benefit costs in future periods. These unamortized amounts are recorded in "Cumulative Other Comprehensive Loss", which is a component of total equity on our Consolidated Balance Sheet. The Cumulative Other Comprehensive Income (Loss) section of Note 15: Shareholder's Interest details changes in the amounts included in cumulative other comprehensive income (loss) by component.

Changes in Fair Value of Plan Assets

DOLLAR AMOUNTS IN MILLIONS
	PENSION						OTHER POSTRETIREMENT BENEFITS
	2016			2015			2016			2015
Fair value of plan assets at beginning of year (estimated)	$	5,491		$	5,643		$	—		$	—
Adjustment for final fair value of plan assets	7			57			—			—
Actual return on plan assets	27			226			—			—
Foreign currency translation	29			(155		)	—			—
Employer contributions and benefit payments	78			60			21			23
Plan participants’ contributions	—			—			7			9
Plan transfers	1			2			—			—
Plan acquisitions	137			—			—			—
Benefits paid (includes lump sum settlements)	(419		)	(342		)	(28		)	(32		)
Fair value of plan assets at end of year (estimated)	$	5,351		$	5,491		$	—		$	—

The values reported for our pension plan assets at year end are estimated using information available at the time. Additional information regarding the year-end values generally becomes available to us during the first half of the following year. To reflect additional information that became available in the first half of 2016, the fair value of plan assets as of December 31, 2015 was increased by $7 million.

See additional details about the changes in the fair value of plan assets in the "Pension Assets" section below.

Changes in Projected Benefit Obligations of Our Pension and Other Postretirement Benefit Plans

DOLLAR AMOUNTS IN MILLIONS
	PENSION						OTHER POSTRETIREMENT BENEFITS
	2016			2015			2016			2015
Reconciliation of projected benefit obligation:
Projected benefit obligation beginning of year	$	6,211		$	6,698		$	240		$	303
Service cost	48			57			—			—
Interest cost	277			265			8			9
Plan participants’ contributions	—			—			7			9
Actuarial (gains) losses	120			(309		)	(5		)	(34		)
Foreign currency translation	27			(159		)	3			(15		)
Benefits paid (includes lump sum settlements)	(419		)	(342		)	(28		)	(32		)
Plan amendments and other	—			(1		)	—			—
Special/contractual termination benefits	—			—			—			—
Plan transfers	1			2			—			—
Plan acquisitions	199			—			—			—
Change in control enhanced benefits	5			$	—		$	—		$	—
Projected benefit obligation at end of year	$	6,469		$	6,211		$	225		$	240

Changes in actuarial assumptions increased liabilities by $115 million as of the end of 2016. The increase was primarily attributable to decreases in discount rates applied. Discount rates decreased from 4.50 percent at the end of 2015 to 4.30 percent at the end of 2016 for the U.S. pension plans, and decreased from 4.00 percent at the end of 2015 to 3.70 percent at the end of 2016 for U.S. postretirement. The discount rates decreased from 4.00 percent at the end of 2015 to 3.70 percent at the end of 2016 for the Canadian pension plans, and decreased from 3.90 percent at the end 2015 to 3.60 percent at the end of 2016 for Canadian postretirement.

During 2016, we contributed $16 million for our Canadian registered plans, we made contributions and benefit payments of $2 million for our Canadian nonregistered pension plans and made benefit payments of $60 million for our nonqualified pension plans, including $4 million of enhanced pension benefit payments from change in control provisions. There was no minimum required contribution for our U.S. qualified plan for 2016, nor were any contributions made to this plan in 2016.

See additional details about the actuarial assumptions and changes in the projected benefit obligation in the "Actuarial Assumptions" section below.

Accumulated Benefit Obligations Greater Than Plan Assets

As of December 31, 2016, pension plans with accumulated benefit obligations greater than plan assets had:

• $5.7 billion in projected benefit obligations,

• $5.6 billion in accumulated benefit obligations and

• assets with a fair value of $4.5 billion.

As of December 31, 2015, pension plans with accumulated benefit obligations greater than plan assets had:

• $5.5 billion in projected benefit obligations,

• $5.4 billion in accumulated benefit obligations and

• assets with a fair value of $4.7 billion.

The accumulated benefit obligation for all of our defined benefit pension plans was:

• $6.4 billion at December 31, 2016; and

• $6.1 billion at December 31, 2015.

PENSION ASSETS

Our Investment Policies and Strategies

Our investment policies and strategies guide and direct how we manage funds for the benefit plans we sponsor. These funds include our:

• U.S. Pension Trust — funds our U.S. qualified pension plans;

• Canadian Pension Trust — funds our Canadian registered pension plans; and

• Retirement Compensation Arrangements — fund a portion of our Canadian nonregistered pension plans.

U.S. and Canadian Pension Trusts

Our U.S. pension trust holds the funds for our U.S. qualified pension plans, while our Canadian pension trust holds the funds for our Canadian registered pension plans.

Our strategy within the trusts is to invest:

• directly in a diversified mix of nontraditional investments; and

• indirectly through derivatives to promote effective use of capital, increase returns and manage associated risk.

Consistent with past practice and in accordance with investment guidelines established by the company’s investment committee, the investment managers of the company’s pension plan asset portfolios utilize a diversified set of investment strategies.

Our direct investments include:

• cash and short-term investments,

• common and preferred stocks,

• hedge funds and related investments and

• private equity and related investments.

Our indirect investments include:

• equity and fixed income index derivatives,

• foreign currency derivatives and

• total return swaps.

The overall return for our pension trusts includes:

• returns earned on our direct investments and

• returns earned on the derivatives we use.

Cash and short-term investments generally consist of highly liquid money market and government securities and are primarily held to fund benefit payments, capital calls, margin requirements or to meet regulatory requirements.

Common and preferred stocks are equity instruments that have been purchased directly or resulted from transactions related to private equity investment holdings.

Hedge fund investments generally consist of privately-offered managed pools primarily structured as limited liability entities, with the general members or partners of such limited liability entities serving as portfolio manager and thus being responsible for the fund’s underlying investment decisions. Generally, these funds have varying degrees of liquidity and redemption provisions. Underlying investments within these funds may include long and short public and private equities, corporate, mortgage and sovereign debt, options, swaps, forwards and other derivative positions. These funds may also use varying degrees of leverage.

Private equity investments consist of investments in private equity, mezzanine, distressed, co-investments and other structures. Private equity funds generally participate in buyouts and venture capital of limited liability entitiesthrough unlisted equity and debt instruments. These funds may also employ borrowing at the underlying entity level. Mezzanine and distressed funds generally follow strategies of investing in the debt of public or private companies with additional participation through warrants or other equity type options. Exposure to real property may be initiated through private transactions between principals or public market vehicles such as real estate investment trusts and are generally held in limited liability entities.

Derivative instruments generally are comprised of swaps, futures, forwards or options. Equity and fixed income index derivatives are utilized to achieve target equity and bond asset exposure or to reduce exposure to certain market risks. Foreign currency derivatives are utilized to reduce exposure to certain currency risks. Total return swaps are designed to gain exposure to the return characteristics of specific financial strategies with limited exchange of principal. All derivative instruments are executed in a diversified manner through a number of financial institutions and in accordance with our investment guidelines.

Retirement Compensation Arrangements

Retirement Compensation Arrangements fund a portion of our Canadian nonregistered pension plans.

Under Retirement Compensation Arrangements, our contributions are split:

• 50 percent to our investments in a portfolio of equities; and

• 50 percent to a noninterest-bearing refundable tax account held by the Canada Revenue Agency — as required by Canadian tax rules.

The Canadian tax rules requirement means that — on average, over time — approximately 50 percent of our Canadian nonregistered pension plans’ assets do not earn returns.

Managing Risk

Investments and contracts, in general, are subject to risk, including market price, liquidity, currency, interest rate and credit risks. We have established governance practices to manage certain risks. The following provides an overview of these risks and describes actions we take to mitigate the potential adverse effects of these risks on the performance of our pension plan assets. Generally, we manage these risks through:

• selection and diversification of managers and strategies,

• use of limited-liability vehicles and

• limiting the percentage of pension trust assets that can be invested in certain categories.

Market price risk is the risk that the future value of a financial instrument will fluctuate as a result of changes in its market price, whether caused by factors specific to the individual investment, its issuer, or any other market factor that may affect its price. We attempt to mitigate market price risk on the company’s pension plan asset portfolios by investing in a diversified set of assets whose returns exhibit low correlation to those of traditional asset classes and each other. In addition, we and our investment advisers monitor the investments on a regular basis to ensure the decision to invest in particular assets continues to be suitable, including performing ongoing qualitative and quantitative assessments and comprehensive investment and operational due diligence. Special attention is paid to organizational changes made by the underlying fund managers and to changes in policy relative to their investment objectives, valuation, hedging strategy, degree of diversification, leverage, alignment of fund principles and investors, risk governance and costs.

Liquidity risk is the risk that the pension trusts will encounter difficulty in meeting obligations associated with their financial liabilities. Our financial obligations as they relate to the pension plans generally consist of distributions and redemptions payable to pension plan participants, payments to counterparties and fees to service providers. As established, pension plan assets primarily consist of investments in limited liability pools for which there is no active secondary market. As a result, the investments may be illiquid. Further, hedge funds are subject to potential restrictions that may affect the timing of the realization of pending redemptions. Private equity funds, including those private equity funds that invest in real estate assets, are subject to distribution and funding schedules that are set by the private equity funds’ respective managers and market activity, and the period over which the funds are expected to liquidate is uncertain and dependent upon realization of the respective funds' underlying investments which will vary over time. To mitigate liquidity risk on the company’s pension plan asset portfolios, private equity portfolios have been diversified across different vintage years and strategies and hedge fund portfolios have been diversified across investment fund managers, strategies and funds that possess varying liquidity provisions. By doing so, the company seeks to maintain a liquidity profile wherein the potential liquidity offered by the pension plan assets is diversified over time. For instance, under normal operating conditions, the frequency by which investments in hedge funds may be redeemed ranges from daily to every three years with notice periods as few as five days to as much as a year. This liquidity profile, however, can be affected by existing terms that permit redemption restrictions and decisions by underlying fund managers to create illiquid side pockets, adopt a fund liquidation strategy or suspend redemptions altogether. In addition, the investment committee regularly reviews cash flows of the pension trusts and sets appropriate guidelines to address liquidity needs.

Currency risk arises from holding pension plan assets denominated in a currency other than the currency in which its liabilities are settled. Such risk is managed generally through notional contracts designed to hedge the net exposure to non-functional currencies.

Interest rate risk is the risk that a change in interest rates will adversely affect the fair value of fixed income securities. The pension trust’s primary exposure to interest rate risk is indirect and through their investments in limited liability pools. Such indirect exposure is managed by the respective fund managers in conjunction with their investment level decisions and predefined investment mandates.

Credit risk relates to the extent to which failures by counterparties to discharge their obligations could reduce the amount of future cash flows on hand at the balance sheet date. The pension trusts’ exposure to counterparty credit risk is reflected in settlement receivables from derivative contracts within the pension plan assets. In evaluating credit risk, we will often be dependent upon information provided by the counterparty or a rating agency, which may be inaccurate. We decrease exposure to credit risk by only dealing with highly-rated financial counterparties, and as of year-end, our counterparties each had a credit rating of at least A from S&P.

We further manage this risk through:

• diversification of counterparties,

• predefined settlement and margining provisions and

• documented agreements.

We expect that none of our counterparties will fail to meet their obligations. Also, no principal is at risk as a result of these types of investments. Only the amount of unsettled net receivables is at risk.

We are also exposed to credit risk indirectly through counterparty relationships entered into by the underlying managers of investments in limited liability pools. This indirect exposure is mitigated through a due diligence process, which focuses on monitoring each investment fund to ensure the decision to invest in or maintain exposure to a fund continues to be suitable for the pension plans’ asset portfolios.

While we do not target specific direct investment or derivative allocations, we have established guidelines on the percentage of pension trust assets that can be invested in certain categories to provide diversification by investment type fund and investment managers, as well as to manage overall liquidity.

Assets within our qualified and registered pension plans in our U.S. and Canadian pension trusts were invested as follows:

	DECEMBER 31, 2016		DECEMBER 31, 2015
Cash and short-term investments	13.7	%	13.2	%
Common and preferred stock	0.1		—
Hedge funds and related investments	56.6		54.4
Private equity and related investments	22.7		24.2
Derivative instruments, net	7.1		8.3
Accrued liabilities	(0.2	)	(0.1	)
Total	100.0	%	100.0	%

Assets within our Canadian nonregistered plans were invested as follows:

	DECEMBER 31, 2016		DECEMBER 31, 2015
Cash and short-term investments	53.4	%	55.9	%
Common and preferred stock	46.6		44.1
Total	100.0	%	100.0	%

Valuation of Our Plan Assets

The pension assets are stated at fair value based upon the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. We do not value pension investments based upon a forced or distressed sale scenario. Instead, we consider both observable and unobservable inputs that reflect assumptions applied by market participants when setting the exit price of an assetor liability in an orderly transaction within the principal market of that asset or liability.

We value the pension plan assets based upon the observability of exit pricing inputs and classify pension plan assets based upon the lowest level input that is significant to the fair value measurement of the pension plan assets in their entirety. The fair value hierarchy we follow is outlined below;

Level 1: Inputs are unadjusted quoted prices for identical assets and liabilities traded in an active market.

Level 2: Inputs are quoted prices in non-active markets for which pricing inputs are observable either directly or indirectly at the reporting date.

Level 3: Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The pension assets are comprised of cash and short-term investments, derivative investments, common and preferred stock and fund units. The fund units are typically limited liability interests in hedge funds, private equity and related investments. Each of these assets participates in its own unique principal market.

Cash and short-term investments when held directly are valued at cost, which approximates market.

Common and preferred stocks are valued at exit prices quoted in the public markets.

Fund units are valued based upon the net asset values of the funds which we believe represent the per-unit prices at which new investors are permitted to invest and the prices at which existing investors are permitted to exit. To the degree net asset values as of the end of the year have not been received, we use the most recently reported net asset values and adjust for market events and cash flows that have occurred between the interim date and the end of the year to estimate the fair values as of the end of the year.

Derivative instruments held by our pension trusts are not publicly traded and each derivative contract is specifically negotiated with a unique financial counterparty and references either illiquid fund units or a unique number of synthetic units of a publicly reported market index. The derivative contracts are valued based upon valuation statements received from the financial counterparties.

Assets that do not have readily available quoted prices in an active market require a higher degree of judgment to value and have a higher degree of risk that the value that could have been realized upon sale as of the valuation date could be different from the reported value than assets with observable pricing inputs. It is possible that the full extent of market price, liquidity, currency, interest rate, or credit risks may not be fully factored into the fair values of our pension plan assets that use significant unobservable inputs. Approximately $455 million, or 8.5 percent, of our pension plan assets were classified as Level 3 assets as of December 31, 2016.

We estimate the fair value of pension plan assets based upon the information available during the year-end reporting process. In some cases, primarily private equity funds, the information available consists of net asset values as of an interim date, cash flows between the interim date and the end of the year, and market events. When the difference is significant, we revise the year-end estimated fair value of pension plan assets to incorporate year-end net asset values received after we have filed our annual report on Form 10-K. We increased the fair value of pension assets in second quarter 2016 by $7 million, or less than 1.0 percent.

The net pension plan assets, when categorized in accordance with this fair value hierarchy, are as follows:

DOLLAR AMOUNTS IN MILLIONS
2016	LEVEL 1		LEVEL 2			LEVEL 3		TOTAL
Pension trust investments:
Cash and short-term investments	$	715	$	16		$	—	$	731
Common and preferred stock	7		—			—		7
Hedge fund and related investments:
Measured within the fair value hierarchy	62		—			4		66
Measured at net asset value(1)								2,957
Private equity and related investments:
Measured within the fair value hierarchy	—		—			75		75
Measured at net asset value(1)								1,138
Derivative instruments:
Assets	—		10			376		386
Liabilities	—		(8		)	—		(8		)
Total pension trust investments	784		18			455		5,352
Accrued liabilities, net								(11		)
Pension trust net assets								5,341
Canadian nonregistered plan assets:
Cash and short-term investments	5		—			—		5
Common and preferred stock	5		—			—		5
Total Canadian nonregistered plan assets	10		—			—		10
Total plan assets								$	5,351
(1) As a result of adopting ASU 2015-07, investments for which fair value is measured using the net asset value per share as a practical expedient are not categorized within the fair value hierarchy. See Note 1: Summary of Significant Accounting Polices for additional information.

DOLLAR AMOUNTS IN MILLIONS
2015	LEVEL 1		LEVEL 2			LEVEL 3		TOTAL
Pension trust investments:
Cash and short-term investments	$	676	$	46		$	—	$	722
Common and preferred stock	—		—			—		—
Hedge fund and related investments:
Measured within the fair value hierarchy	87		—			3		90
Measured at net asset value(1)								2,893
Private equity and related investments:
Measured within the fair value hierarchy	—		—			52		52
Measured at net asset value(1)								1,275
Derivative instruments:
Assets	—		4			491		495
Liabilities	—		(41		)	—		(41		)
Total pension trust investments	763		9			546		5,486
Accrued liabilities, net								(5		)
Pension trust net investments								5,481
Canadian nonregistered plan assets:
Cash and short-term investments	6		—			—		6
Common and preferred stock	4		—			—		4
Total Canadian nonregistered plan assets	10		—			—		10
Total plan assets								$	5,491
(1) As a result of adopting ASU 2015-07, investments for which fair value is measured using the net asset value per share as a practical expedient are not categorized within the fair value hierarchy. See Note 1: Summary of Significant Accounting Polices for additional information.

This table shows the fair value of the derivative instruments held by our pension trusts at the end of the last two years.

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016			DECEMBER 31, 2015
Equity and fixed income index derivatives, net	$	10		$	3
Foreign currency derivatives, net	(5		)	(37		)
Total return swaps, net	373			488
Total	$	378		$	454

This table shows the aggregate notional amount of the derivative instruments held by our pension trusts at the end of the last two years.

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016		DECEMBER 31, 2015
Equity and fixed income index derivatives	$	405	$	449
Foreign currency derivatives	2,811		1,023
Total return swaps	1,515		1,609
Total	$	4,731	$	3,081

A reconciliation of the beginning and ending balances of the pension plan assets measured at fair value using significant unobservable inputs (Level 3) is presented below:

DOLLAR AMOUNTS IN MILLIONS
	INVESTMENTS
	Hedge funds and related investments			Private equity  and related investments			Derivative instruments, net			Total
Balance as of December 31, 2014	$	5		$	65		$	425		$	495
Net realized gains (losses)	—			1			35			36
Net change in unrealized gains (losses)	(2		)	(15		)	67			50
Purchases	—			4			—			4
Sales	—			(3		)	—			(3		)
Issuances	—			—			48			48
Settlements	—			—			(84		)	(84		)
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Balance as of December 31, 2015	3			52			491			546
Net realized gains (losses)	(1		)	(2		)	134			131
Net change in unrealized gains (losses)	2			(3		)	(121		)	(122		)
Purchases	—			21			—			21
Sales	—			(18		)	—			(18		)
Issuances	—			—			39			39
Settlements	—			—			(167		)	(167		)
Transfers into Level 3	—			25			—			25
Transfers out of Level 3	—			—			—			—
Balance as of December 31, 2016	$	4		$	75		$	376		$	455

Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers into Level 3 in the hedge fund and private equity classifications relate to investments for which net asset value was used to measure fair value at the end of the prior period, but not at the end of the current period. Transfers out of Level 3 in the hedge fund and private equity classifications were investments for which net asset value was used to measure fair value at the end of the current period, but not at the end of the prior period.

ACTUARIAL ASSUMPTIONS

We use actuarial assumptions to estimate our benefit obligations and our net periodic benefit costs.

Rates We Use in Estimating Our Benefit Obligations

We use assumptions to estimate our benefit obligations that include:

• discount rates in the U.S. and Canada, including discount rates used to value lump sum distributions;

• rates of compensation increases for our salaried and hourly employees in the U.S. and Canada; and

• estimated percentages of eligible retirees who will elect lump sum payments of benefits.

Discount Rates and Rates of Compensation Increase Used in Estimating Our Pension and Other Postretirement Benefit Obligation

	PENSION		OTHER POSTRETIREMENT BENEFITS
	DECEMBER 31, 2016	DECEMBER 31, 2015	DECEMBER 31, 2016	DECEMBER 31, 2015
Discount rates:
United States	4.30%	4.50%	3.70%	4.00%
Canada	3.70%	4.00%	3.60%	3.90%
Lump sum distributions (US salaried and nonqualified plans only)(1)	PPA Table	PPA Table	N/A	N/A
Rate of compensation increase:
Salaried:
United States	13.00% to 2.00% decreasing with participant's age	13.00% to 2.00% decreasing with participant's age	N/A	N/A
Canada	—	2.50% for 2015 and 3.50% thereafter	N/A	N/A
Hourly:
United States	13.00% to 2.30% decreasing with participant's age	13.00% to 2.30% decreasing with participant's age	N/A	N/A
Canada	3.25%	3.25%	N/A	N/A
Election of lump sum or installment distributions (US salaried and nonqualified plans only)	60.00%	60.00%	N/A	N/A
(1) The PPA Phased Table: Interest and mortality assumptions as mandated by Pension Protection Act of 2006 including the phase out of the prior interest rate basis in 2013.

Estimating Our Net Periodic Benefit Costs

The assumptions we use to estimate our net periodic benefit costs include:

• discount rates in the U.S. and Canada, including discount rates used to value lump sum distributions;

• expected returns on our plan assets;

• rates of compensation increases for our salaried and hourly employees in the U.S. and Canada; and

• estimated percentages of eligible retirees who will elect lump sum payments of benefits.

This table shows the discount rates, expected returns on our plan assets and rates of compensation increases we used the last three years to estimate our net periodic benefit costs.

Rates Used to Estimate Our Net Periodic Benefit Costs

	PENSION			OTHER POSTRETIREMENT BENEFITS
	2016	2015	2014	2016	2015	2014
Discount rates:
United States	4.50%	4.10%	4.90% for the first half of 2014 and 4.40% for the second half of 2014	4.00%	3.60%	4.00%
Salaried – lump sum distributions (U.S. salaried and nonqualified plan only)(1)	PPA Table	PPA Table	PPA Table	N/A	N/A	N/A
Canada	4.00%	3.90%	4.70%	3.90%	3.80%	4.60%
Expected return on plan assets:
Qualified/registered plans	9.00% for all plans except 7.00% for plans assumed from Plum Creek(2)	9.00%	9.00%	N/A	N/A	N/A
Nonregistered plans (Canada only)	3.50%	3.50%	3.50%	N/A	N/A	N/A
Rate of compensation increase:
Salaried:
United States	13.00% to 2.00% decreasing with participant's age	2.50% for 2015 and 3.50% thereafter	2.50% for 2014 and 3.50% thereafter	N/A	N/A	N/A
Canada	3.50%	2.50% for 2015 and 3.50%  thereafter	2.50% for 2014 and 3.50%  thereafter	N/A	N/A	N/A
Hourly:
United States	13.00% to 2.30% decreasing with participant age	3.00%	3.00%	N/A	N/A	N/A
Canada	3.25%	3.25%	3.25%	N/A	N/A	N/A
Election of lump sum distributions (U.S. salaried and nonqualified plans only)	60.00%	60.00%	60.00%	N/A	N/A	N/A
(1) PPA Phased Table: Interest and mortality assumptions as mandated by Pension Protection Act of 2006 including the phase out of the prior interest rate basis in 2013. (2) Beginning in 2017 we will use an assumed expected return on plan assets of 8.00% for qualified and registered pension plans.

Expected Return on Plan Assets

We estimate the expected long-term return on assets for our:

• qualified and registered pension plans and

• nonregistered plans.

Qualified and Registered Pension Plans. We have assumed a long-term rate of return on plan assets of 9 percent for the year ended December 31, 2016. As part of our annual evaluation of key assumptions which includes consideration of actual pension fund performance over multiple years and current and expected valuation levels in the global equity and credit markets, we have determined that we will reduce our assumption of long-term rate of return on plan assets to 8 percent for estimated 2017 net periodic benefit cost.

Determining our expected return:

• requires a high degree of judgment,

• uses our historical fund returns as a base and

• places added weight on more recent pension plan asset performance.

Over the 32 years it has been in place, our U.S. pension trust investment strategy has achieved a 13.8 percent net compound annual return rate. The past 5 years, our net compounded annual return was 8.1 percent.

Nonregistered plans. Canadian tax rules require that 50 percent of the assets for nonregistered plans go to a noninterest-bearing refundable tax account. As a result, the return we earn investing the other 50 percent is spread over 100 percent of the assets.

Our expected long-term annual rate of return on the equity portion of this portfolio — the portion we are allowed to invest and manage — is 7 percent. We base that expected rate of return on:

• historical experience and

• future return expectations.

Our expected overall annual return on assets that fund our nonregistered plans is 3.5 percent.

Actual Returns on Assets Held by Our Pension Trusts

Based on valuations received as of year-end, our total actual return on assets held by our pension trusts was a gain of approximately $27 million in 2016. These trusts fund our qualified, registered and a portion of our nonregistered pension plans.

DOLLAR AMOUNTS IN MILLIONS
	2016		2015		2014
Direct investments	$	12	$	175	$	258
Derivative instruments	15		51		110
Total	$	27	$	226	$	368

Health Care Costs

Rising costs of health care affect the costs of our other postretirement plans.

Health Care Cost Trend Rates

We use assumptions about health care cost trend rates to estimate the cost of benefits we provide. In 2016, the assumed weighted health care cost trend rate was:

• 7.2 percent for U.S. Pre-Medicare

• 4.5 percent for U.S. HRA

• 5.0 percent for Canada

This table shows the assumptions we use in estimating the annual cost increase for health care benefits we provide.

Assumptions We Use in Estimating Health Care Benefit Costs

	2016		2015
	U.S.	CANADA	U.S.	CANADA
Weighted health care cost trend rate assumed for next year	8.90% for Pre-Medicare and 4.50% for HRA	4.90%	7.20% for Pre-Medicare and 4.50% for HRA	5.00%
Rate to which cost trend rate is assumed to decline (ultimate trend rate)	4.50%	4.30%	4.50%	4.30%
Year that the rate reaches the ultimate trend rate	2037	2028	2036	2028

The assumed health care cost trend rate can significantly influence projected postretirement benefit plan payments. Some of the benefits are defined dollar amounts and are unaffected by changes in health care costs. To determine the health care cost trend rate, we look at historical market experience, current environment and future expectations. The following table demonstrates the effect a one percent change in assumed health care cost trend rates would have with all other assumptions remaining constant.

Effect of a One Percent Change in Health Care Costs

AS OF DECEMBER 31, 2016 (DOLLAR AMOUNTS IN MILLIONS)
	1% INCREASE		1% DECREASE
Effect on total service and interest cost components	less than $1		less than $(1)
Effect on accumulated postretirement benefit obligation	$	8	$	(7	)

ACTIVITY OF PLANS

Net Periodic Benefit Cost (Credit)

DOLLAR AMOUNTS IN MILLIONS
	PENSION									OTHER POSTRETIREMENT BENEFITS
	2016			2015			2014			2016			2015			2014
Net periodic benefit cost (credit):
Service cost(1)	$	48		$	57		$	53		$	—		$	—		$	1
Interest cost	277			265			271			8			9			10
Expected return on plan assets	(495		)	(476		)	(467		)	—			—			—
Amortization of actuarial loss	156			182			125			9			10			12
Amortization of prior service cost (credit)(2)	4			4			5			(7		)	(9		)	(161		)
Recognition of curtailments, settlements and special termination benefits due to closures, restructuring or divestitures(3)	—			—			9			—			—			—
Accelerated pension costs for Plum Creek merger-related change-in-control provisions	5			—			—			—			—			—
Other	—			—			—			—			—			(4		)
Net periodic benefit cost (credit)	$	(5	)	$	32		$	(4	)	$	10		$	10		$	(142	)
(1) Service cost includes $13 million in 2016, $17 million in 2015, and $11 million in 2014 for employees that were part of our Cellulose Fibers divestitures. Service cost includes $2 million in 2014 for employees that were part of the WRECO Divestiture. These charges are included in our results of discontinued operations. Curtailment and special termination benefits are related to involuntary terminations, due to restructuring activities, as well as the WRECO Divestiture. (2) During fourth quarter 2013, the decision was ratified to eliminate company funding of the Post-Medicare Health Reimbursement Account (HRA) for certain salaried retirees after 2014. This change was communicated to affected retirees during January 2014. As a result, we recognized a pretax gain of $151 million in 2014 from this plan amendment. (3) As a result of the WRECO Divestiture as well as our selling, general and administrative cost reduction initiative, we remeasured our U.S. qualified pension plan during third quarter 2014. We recognized a $9 million charge in third quarter 2014 for curtailments and special termination benefits. Of this amount, $6 million is included in the net gain on the WRECO Divestiture and is presented in "Earnings from discontinued operations, net of income taxes" in our Consolidated Statement of Operations. The remaining $3 million is included in "Charges for restructuring, closures and impairments" in our Consolidated Statement of Operations.

Estimated Amortization from Cumulative Other Comprehensive Loss in 2017

Amortization of the net actuarial loss and prior service cost (credit) of our pension and postretirement benefit plans will affect our other comprehensive income in 2017. The net effect of the estimated amortization will be anincrease in net periodic benefit costs or a decrease in net periodic benefit credits in 2017.

DOLLAR AMOUNTS IN MILLIONS
	PENSION		OTHER POSTRETIREMENT BENEFITS			TOTAL
Net actuarial loss	$	219	$	8		$	227
Prior service cost (credit)	4		(8		)	(4		)
Net effect cost	$	223	$	—		$	223

Expected Pension Funding

Established funding standards govern the funding requirements for our qualified and registered pension plans. We fund the benefit payments of our nonqualified and nonregistered plans as benefit payments come due.

During 2017, based on estimated year-end asset values and projections of plan liabilities, we expect to:

• be required to contribute approximately $19 million for our Canadian registered plan;

• be required to contribute or make benefit payments for our Canadian nonregistered plans of $3 million; and

• make benefit payments of approximately $26 million for our U.S. nonqualified pension plans.

We do not anticipate a contribution being required for our U.S. qualified pension plan for 2017.

Expected Postretirement Benefit Funding

Our retiree medical and life insurance plans are unfunded. Benefits for these plans are paid from our general assets as they come due. We expect to make benefit payments of $21 million for our U.S. and Canadian other postretirement benefit plans in 2017, including $7 million expected to be required to cover benefit payments under collectively bargained contractual obligations.

Estimated Projected Benefit Payments for the Next 10 Years

DOLLAR AMOUNTS IN MILLIONS
	PENSION		OTHER POSTRETIREMENT BENEFITS
2017(1)	$	478	$	21
2018	362		20
2019	366		19
2020	370		18
2021	371		17
2022-2026	1,873		75
(1) The estimate of projected benefit payments in 2017 assumes that former employees of our divested Cellulose Fibers businesses that participate in sponsored pension plans and are eligible to take a lump sum payment will do so during 2017, using our current assumption.

UNION-ADMINISTERED MULTIEMPLOYER BENEFIT PLANS

We contribute to multiemployer defined benefit plans under the terms of collective-bargaining agreements that cover some of our union-represented employees.

The U.S. plans are established to provide retirement income for eligible employees who meet certain age and service requirements at retirement. The benefits are generally based on:

• a percentage of the employer contributions paid into the plan on the eligible employee's behalf or

• a formula considering an eligible employee's service, the total contributions paid on their behalf plus a benefit based on the value of an eligible employee's account.

The Canadian plan is a negotiated cost defined benefit plan. The plan is established to provide retirement income for members based on their number of years of service in the industry, and the benefit rate that applied to that service. 

The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

• 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 plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

• If we choose to stop participating in some of the multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

As of December 31, 2016, these plans covered approximately 1,200 of our employees.

Our contributions were:

• $4 million in 2016,

• $4 million in 2015 and

• $4 million in 2014.

There have been no significant changes that affect the comparability of the 2016, 2015 and 2014 contributions. None of our contributions exceeded more than 5 percent of any plan's total contributions during 2016, 2015 or 2014.

DEFINED CONTRIBUTION PLANS

We sponsor various defined contribution plans for our U.S. and Canadian salaried and hourly employees. Our contributions to these plans were:

• $27 million in 2016,

• $21 million in 2015 and

• $20 million in 2014.

Upon our merger with Plum Creek, we assumed one defined contribution plan, the Plum Creek Thrift and Profit Sharing Plan. Effective July 15, 2016, the assets and liabilities of this plan were merged into the Weyerhaeuser 401(k) Plan.