PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

12 Months Ended

Dec. 31, 2023

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

PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

NOTE 8: PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

This note provides details about defined benefit and defined contribution plans we sponsor for our employees. The "Pension and Other Post-Employment Benefit Plans" section of Note 1: Summary of Significant Accounting Policies provides information about how we account for pension and other post-employment plans and benefits.

PLANS WE SPONSOR

OVERVIEW OF PLANS

The defined benefit pension plans we sponsor in the U.S. and Canada differ according to each country’s requirements. In the U.S., we have plans that qualify under the Internal Revenue Code (qualified plans), as well as plans for select employees that provide additional benefits not qualified under the Internal Revenue Code (nonqualified plans). In Canada, we have plans that are registered under the Income Tax Act and applicable provincial pension acts (registered plans), as well as nonregistered plans for select employees that provide additional benefits that may not be registered under the Income Tax Act or provincial pension acts (nonregistered plans). We also sponsor other post-employment benefit (OPEB) plans in the U.S. and Canada, including retiree medical and life insurance plans. Our defined benefit pension plans were closed to newly hired and rehired salaried and non-union employees effective January 1, 2014, and were closed to union employees at various dates over the course of 2014 to 2019.

We sponsor various defined contribution plans for our U.S. and Canadian salaried and hourly employees. Our contributions to these plans were $35 million, $31 million and $27 million in 2023, 2022 and 2021, respectively.

Actions to Reduce Pension Plan Obligations

As part of our continued efforts to reduce pension plan obligations, we transferred approximately $420 million of Canadian registered assets and liabilities to insurance companies through the purchase of a group annuity contract in December 2022 (2022 Retiree Annuity Purchase). In connection with this transaction, we recorded a noncash pretax settlement charge of $205 million during 2022. This settlement charge accelerated the recognition of previously unrecognized losses in "Accumulated Other Comprehensive Loss," that would have been recognized in subsequent periods. Given the timing of the 2022 Retiree Annuity Purchase, the plan remeasurement triggered as a result of the transaction was conducted as part of our annual valuation process.

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 our Consolidated Balance Sheet.

DOLLAR AMOUNTS IN MILLIONS
	PENSION						OPEB
	2023			2022			2023			2022
Projected benefit obligation at beginning of year	$	2,278		$	3,708		$	95		$	131
Service cost		23			36			—			—
Interest cost		118			106			5			3
Actuarial losses (gains)(1)		63			(933	)		(2	)		(26	)
Plan participants’ contributions		—			—			2			2
Benefits paid, including lump sum and annuity transfers		(146	)		(598	)		(12	)		(13	)
Foreign currency translation and other		11			(41	)		1			(2	)
Projected benefit obligation at end of year	$	2,347		$	2,278		$	89		$	95
Fair value of plan assets at beginning of year (estimated)	$	2,053		$	3,418		$	8		$	13
Actual return on plan assets(2)		71			(740	)		—			—
Employer contributions and benefit payments		14			17			6			7
Plan participants’ contributions		—			—			2			2
Benefits paid, including lump sum and annuity transfers		(146	)		(598	)		(12	)		(13	)
Other, including foreign currency translation		8			(44	)		1			(1	)
Fair value of plan assets at end of year (estimated)	$	2,000		$	2,053		$	5		$	8
Presentation on our Consolidated Balance Sheet:(3)
Noncurrent assets	$	49		$	53		$	—		$	—
Current liabilities		(11	)		(14	)		(8	)		(7	)
Noncurrent liabilities		(385	)		(264	)		(76	)		(80	)
Funded status(4)	$	(347	)	$	(225	)	$	(84	)	$	(87	)
Accumulated benefit obligation at end of year	$	2,289		$	2,218		N/A			N/A
Actuarial Assumptions Used in Estimating Our Pension and OPEB Benefit Obligations:
Discount rate(5)	4.70 - 5.20%			5.30 - 5.40%			4.60 - 5.10%			5.30 - 5.40%
Rate of compensation increase(6)	1.00 - 13.00%			1.00 - 13.00%			N/A			N/A
Lump sum or installment distributions election(7)	70.00%			70.00%			N/A			N/A
Healthcare cost trend rate:
Assumed for next year(8)	N/A			N/A			5.13 - 7.25%			4.50 - 5.70%
Ultimate(8)	N/A			N/A			4.00 - 4.50%			4.00 - 4.50%
Year when rate will reach ultimate(8)	N/A			N/A			2035 - 2040			2037 - 2040

(1)Actuarial losses (gains) are primarily due to year-over-year changes in discount rates.

(2)Includes adjustments for final fair value of plan assets.

(3)Assets and liabilities on our Consolidated Balance Sheet are different from the cumulative income or expense that we have recorded associated with the plans. The differences are actuarial gains and losses and prior service costs and credits that are deferred and amortized into periodic benefit costs in future periods. Unamortized amounts are recorded in "Accumulated Other Comprehensive Loss", which is a component of total equity on our Consolidated Balance Sheet. The "Accumulated Other Comprehensive Loss" section of Note 14: Shareholders' Interest details changes in these amounts by component.

(4)For pension plans with a projected benefit obligation exceeding plan assets, the projected benefit obligation and fair value of plan assets were $2.1 billion and $1.7 billion at December 31, 2023, respectively, and $2.1 billion and $1.8 billion at December 31, 2022, respectively. For pension plans with an accumulated benefit obligation exceeding plan assets, the accumulated benefit obligation and fair value of plan assets were $2.1 billion and $1.7 billion at December 31, 2023, respectively, and $2.0 billion and $1.8 billion at December 31, 2022, respectively.

(5)For the U.S. defined benefit plans, the discount rate assumption was 5.2% and 5.4% for 2023 and 2022, respectively. For the Canadian defined benefit plans, the discount rate assumption was 4.7% and 5.3% for 2023 and 2022, respectively. For U.S. OPEB plans, the discount rate assumption was 5.1% and 5.4% for 2023 and 2022, respectively. For Canadian OPEB plans, the discount rate assumption was 4.6% and 5.3% for 2023 and 2022, respectively. For lump sum distributions (for U.S. qualified salaried and nonqualified plans only), the interest and mortality assumptions are the same as those mandated by the Pension Protection Act of 2006 for benefits commencing in the current year.

(6)For the U.S. defined benefit plans, the rate of compensation increase assumption for both 2023 and 2022 was between 2.00% - 13.00% for salaried participants and was decreasing with participant age. For the Canadian defined benefit plans, the rate of compensation increase assumption was 1.00% - 2.75% and 2.00% - 2.75% for salaried and hourly participants, respectively, for both 2023 and 2022.

(7)U.S. qualified salaried and nonqualified plans only.

(8)For U.S. OPEB plans, the healthcare cost trend rate assumption for the next year for Pre-Medicare was 7.25% and 5.70% for 2023 and 2022, respectively. The ultimate healthcare cost trend rate was 4.50% for both 2023 and 2022 and the assumption for the year the ultimate healthcare cost trend rate is reached was 2035 and 2037 in 2023 and 2022, respectively. For Canadian OPEB plans, the healthcare cost trend rate was 5.13% for 2023 and 5.20% for 2022. The ultimate healthcare cost trend rate was 4.00% and the assumption for the year the ultimate healthcare cost trend rate is reached was 2040 for both 2023 and 2022.

PENSION ASSETS

Our Investment Policies and Strategies

Our investment policies, strategies and advisory agreements guide and direct how the funds are managed 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

In 2018, we began to shift pension plan assets to an allocation that more closely aligns with our pension plan liability profile. Our former investment strategy included investments primarily in hedge funds and private equity funds. These asset classes are now in redemption and run-off mode. However, given the long-term nature of these investments, they will continue to comprise a portion of the plan assets for several years. We expect all investments in redemption to be redeemed at amounts materially consistent with their net asset values (NAV). As these investments are redeemed or liquidated, cash proceeds available for investment will be invested in accordance with our current investment strategy.

Our investment strategy targets a percentage allocation to growth assets and a percentage allocation to liability hedging assets based on each plan’s funded status. We expect to increase the allocation to liability hedging assets over time as the funded status of the pension plans improves. Growth assets may include investments in global equities, hedge funds (which are in redemption), private equity assets (which are in run-off mode), fixed income and real estate. Liability hedging assets may include corporate credit and government issued fixed income securities as well as treasury futures selected to align with the plan liabilities.

Assets within our U.S. and Canadian pension trusts were invested as follows:

	DECEMBER 31, 2023			DECEMBER 31, 2022
Cash and short-term investments(1)	4.1%			3.6%
Public equity investments(2)		0.9			0.9
Fixed income investments:(3)
Corporate		45.6			42.7
Government		16.9			15.5
Repurchase agreements		(1.3	)		(0.6	)
Hedge funds and related investments(4)(5)		3.4			4.2
Private equity and related investments(5)(6)		30.5			34.5
Derivative instruments, net(7)		0.1			—
Accrued liabilities		(0.2	)		(0.8	)
Total	100.0%			100.0%

(1)Cash and short-term investments are valued at cost, which approximates market.

(2)Public equity investments are valued at exit prices quoted in active markets.

(3)Fixed income investments include publicly traded corporate and government issued debt. These bonds have varying maturities, credit quality and sector exposure and are selected to align with the duration of our plan liabilities. Additionally, our fixed income portfolio includes repurchase agreements, which represent short-term borrowings to hedge against interest rate risk. We have an obligation to return the cash related to these borrowings in accordance with the agreements, which are collateralized by our government bonds. Fixed income investments are valued at exit prices quoted in active or non-active markets or based on observable inputs.

(4)Hedge funds and related investments are privately-offered managed pools primarily structured as limited liability entities. General members or partners of these limited liability entities serve as portfolio managers and are thus responsible for the fund’s underlying investment decisions. 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 have varying degrees of leverage, liquidity and redemption provisions.

(5)These investments are primarily valued based on the NAVs of the funds. These values represent the per-unit price at which new investors are permitted to invest and existing investors are permitted to exit. When NAVs as of the end of the year have not been received, we estimate fair value by adjusting the most recently reported NAVs for market events and cash flows between the interim date and the end of the year.

(6)Private equity and related investments include both investments in private equity and investments in mezzanine distressed, co-investments and other structures. Private equity funds generally participate in buyout and venture capital strategies through unlisted equity and debt instruments. These funds may also borrow at the underlying entity level. Mezzanine and distressed funds generally invest in the debt of public or private companies with additional participation through warrants or other equity options.

(7)Derivative instruments have historically been comprised of swaps, futures, forwards or options. At December 31, 2023, only a small amount of risk-mitigating futures remain in the portfolio. Derivative instruments are valued based upon valuation statements received from each derivative’s counterparty.

Retirement Compensation Arrangements

Retirement compensation arrangements fund a portion of our Canadian nonregistered pension plans. As required by Canadian tax rules, approximately 50 percent of these assets are invested into a non-interest bearing refundable tax account held by the Canada Revenue Agency. This portion of the portfolio does not earn returns. The remaining portion is invested in a portfolio of equities.

Managing Risk

Investments and contracts are subject to risks including market price, interest rate, credit, currency and liquidity risks. We mitigate these risks to our pension plan asset portfolios through advisory agreements, investment in diversified portfolios, inclusion of fixed income investments that align with plan liabilities and investment in assets designed to address both currency and liquidity considerations. In addition, we and our investment advisers perform regular monitoring with ongoing qualitative assessments, quantitative assessments and investment and operational due diligence.

Valuation of Our Plan Assets

Pension assets are stated at fair value or NAV. Fair value is based on the amount that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the reporting date. We consider both observable and unobservable inputs that reflect assumptions applied by market participants when setting the exit price of an asset or liability in an orderly transaction within the principal market for 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. Refer to Note 1: Summary of Significant Accounting Policies for details on the fair value hierarchy. The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. We evaluate the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total net assets available for benefits.

Investments for which fair value is measured using the NAV per share as a practical expedient are not categorized within the fair value hierarchy.

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

DOLLAR AMOUNTS IN MILLIONS	2023										2022
	LEVEL 1		LEVEL 2			LEVEL 3		TOTAL			LEVEL 1		LEVEL 2			LEVEL 3		TOTAL
Pension trust investments:
Cash and short-term investments	$	82	$	—		$	—	$	82		$	73	$	—		$	—	$	73
Public equity investments		17		—			—		17			18		—			—		18
Fixed income investments:
Corporate		—		907			—		907			—		874			—		874
Government		—		337			—		337			—		316			—		316
Repurchase agreements		—		(25	)		—		(25	)		—		(12	)		—		(12	)
Hedge funds and related investments(1)		—		—			21		21			—		—			16		16
Private equity and related investments(1)		—		—			26		26			—		—			34		34
Derivative instruments(2)		—		1			—		1			—		—			—		—
Total pension trust investments measured at fair value(1)	$	99	$	1,220		$	47	$	1,366		$	91	$	1,178		$	50	$	1,319
Canadian nonregistered plan assets:
Cash and short-term investments		5	—			—			5			5	—			—			5
Public equity investments		4	—			—			4			3	—			—			3
Total Canadian nonregistered plan assets measured at fair value	$	9	$	—		$	—	$	9		$	8	$	—		$	—	$	8
Total plan assets measured at fair value(1)								$	1,375									$	1,327

(1)December 31, 2023 and 2022 exclude $628 million and $740 million, respectively, of hedge fund and private equity investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient, which are not required to be classified in the fair value hierarchy. Additionally, December 31, 2023 and 2022 exclude $3 million and $14 million of accrued liabilities, respectively.

(2)Derivative instruments include futures contracts. The fair value and aggregate notional value of these contracts were $1 million and $393 million at December 31, 2023, respectively, and less than $1 million and $418 million at December 31, 2022, respectively.

ACTIVITY OF PLANS

Net Periodic Benefit Cost

Our net periodic benefit cost and the assumptions used to estimate it are shown in the following table.

DOLLAR AMOUNTS IN MILLIONS
	PENSION									OPEB
	2023			2022			2021			2023			2022			2021
Net periodic benefit cost:
Service cost	$	23		$	36		$	42		$	—		$	—		$	—
Interest cost		118			106			98			5			3			3
Expected return on plan assets		(119	)		(160	)		(204	)		—			—			—
Amortization of actuarial loss		40			93			115			1			5			5
Amortization of prior service cost (credit)		1			3			3			(1	)		(1	)		(1	)
Settlement charges		—			205			—			—			—			—
Net periodic benefit cost	$	63		$	283		$	54		$	5		$	7		$	7
Actuarial Assumptions Used in Estimating Our Pension and OPEB Net Periodic Benefit Cost:
Discount rate(1)	5.30 - 5.40%			2.90 - 3.10%			2.50%			5.30 - 5.40%			2.60 - 3.00%			2.10 - 2.40%
Expected return on assets(2)	6.50%			5.00%			6.00%			N/A			N/A			N/A
Rate of compensation increase(3)	1.00 - 13.00%			2.00 - 13.00%			2.00 - 13.00%			N/A			N/A			N/A
Lump sum or installment distributions election(4)	70.00%			60.00%			60.00%			N/A			N/A			N/A
Weighted healthcare cost trend rate(5)	N/A			N/A			N/A			4.50 - 5.70%			4.50 - 6.20%			4.50 - 6.80%

(1)For the U.S. defined benefit plans, the discount rate assumption was 5.40%, 2.90% and 2.50% for 2023, 2022 and 2021, respectively. For the Canadian defined benefit plans, the discount rate assumption was 5.30%, 3.10% and 2.50% for 2023, 2022 and 2021, respectively. For U.S. OPEB plans, the discount rate assumption was 5.40%, 2.60% and 2.10%, for 2023, 2022 and 2021, respectively. For Canadian OPEB plans, the discount rate assumption was 5.30%, 3.00% and 2.40% for 2023, 2022 and 2021, respectively. For lump sum distributions (for U.S. qualified salaried and nonqualified plans only), the interest and mortality assumptions are the same as those mandated by the Pension Protection Act of 2006 for benefits commencing in the current year.

(2)Determining our expected return requires a high degree of judgment. We consider actual pension fund asset performance over multiple years, and current and expected valuation levels in the global equity and credit markets. Historical fund returns are used as a base and we place added weight on more recent pension plan asset performance.

(3)For the U.S. defined benefit plans, the rate of compensation increase assumption for 2023, 2022 and 2021 was between 2.00% - 13.00% for salaried participants and was decreasing with participant age. For the Canadian defined benefit plans, the rate of compensation increase assumption for salaried participants was 1.00% - 2.75% for 2023 and 3.25% for 2022 and 2021. The rate of compensation increase assumption for hourly participants was 2.00% - 2.75% for 2023 and 3.00% for 2022 and 2021.

(4)U.S. qualified salaried and nonqualified plans only.

(5)For OPEB plans during 2023, the assumed weighted healthcare cost trend rate was 5.70%, 4.50% and 5.20% for U.S. Pre-Medicare participants, U.S. HRA participants and Canadian OPEB plans, respectively.

Pension Plan Contributions and Benefit Payments

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 2023, we made contributions and/or benefit payments of $12 million for our U.S. nonqualified pension plans, $1 million for our Canadian nonregistered pension plans and $1 million for our Canadian registered plans.

During 2024, based on estimated year-end asset values and projections of plan liabilities, we expect to make contributions and/or benefit payments of approximately:

	$10 million for our U.S. nonqualified pension plans,
	$2 million for the Canadian non-registered plans and
	$1 million for our Canadian registered plan (required contribution).

We do not anticipate contributions being required for our U.S. qualified pension plan for 2024.

OPEB Benefit Payments

During 2023, we contributed $5 million and $1 million to our U.S. and Canadian OPEB plans, respectively. In 2024, we expect to make contributions of $7 million in total for our U.S. and Canadian OPEB plans, including $4 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		OPEB
2024	$	149	$	11
2025	$	150	$	10
2026	$	154	$	9
2027	$	155	$	9
2028	$	157	$	8
2029-2033	$	806	$	33

UNION-ADMINISTERED MULTIEMPLOYER BENEFIT PLANS

We contribute to multiemployer defined benefit plans under the terms of collective-bargaining agreements. These plans cover a small number of our employees and on an annual basis our contributions are immaterial.

These plans have different risks than single-employer plans. Our contributions may be used to fund benefits for employees of other participating employers. If we choose to stop participating, we may be required to pay a withdrawal liability based on the underfunded status of the plan. If another participating employer stops contributing to the plan, we may become responsible for remaining plan unfunded obligations.