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PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Tables)

12 Months Ended

Dec. 31, 2016

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	)

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		$	—		$	—

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

Schedules of Allocation of Our Plans' Assets

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.

Reconciliation of Pension Plan Assets Measured at Level 3 Fair Value

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

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.

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.

Actual Returns on Assets Held by Our Pension Trusts



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

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

Effect of a One Percent Change in Health Care Costs

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



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

Estimated Projected Benefit Payments for the Next 10 Years

ligations.

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.

Qualified and Registered Pension Plans

Schedules of Allocation of Our Plans' Assets

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	%

Non Registered Canadian Pension Plans

Schedules of Allocation of Our Plans' Assets

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	%

Derivative instruments | Qualified and Registered Pension Plans

Schedules of Allocation of Our Plans' Assets

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

Derivative financial instruments, assets | Qualified and Registered Pension Plans

Schedules of Allocation of Our Plans' Assets

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

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