Pension and Other Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefit Plans

Note 16. Pension and Other Postretirement Benefit Plans

We have a number of defined contribution plans covering a portion of our U.S. and Canadian employees. Under the U.S. qualified defined contribution plan, employees are allowed to make contributions that we match, and most employees also receive an automatic company contribution, regardless of the employee’s contribution. The amount of the automatic company contribution, in most instances, is a percentage of the employee’s pay, determined based on age and years of service. The Canadian registered defined contribution plans provide for mandatory contributions by employees and by us, as well as opportunities for employees to make additional optional contributions and receive, in most cases, matching contributions on those optional amounts. Our expense for the defined contribution plans totaled $18 million in 2021, $17 million in 2020 and $18 million in 2019.

We also have multiple contributory and non-contributory defined benefit pension plans covering a portion of our U.S. and Canadian employees. Benefits are based on years of service and, depending on the plan, average compensation earned by employees either during their last years of employment or over their careers. Our plan assets and cash contributions to the plans have been sufficient to provide pension benefits to participants and meet the funding requirements of the Employee Retirement Income Security Act of 1974 in the U.S. as well as applicable legislation in Canada. We also sponsor a number of OPEB plans (e.g., health care and life insurance plans) for retirees at certain locations.

Certain of the above plans are covered under collective bargaining agreements.

In December 2020, the pension plan of the Thorold paper mill, which was indefinitely idled in 2017 and sold in 2020, was wound-up following the approval of the pension benefits distribution and assets liquidation. This resulted in the conversion of the buy-in annuity contract to a buy-out contract, and the recognition of a settlement loss of $28 million in “Non-operating pension and other postretirement benefit credits” in our Consolidated Statements of Operations for the year ended

December 31, 2020, and the reduction of both pension plan assets and pension benefit obligations by $98 million as of December 31, 2020.

The following tables include both our foreign (Canada) and domestic plans. The assumptions used to measure the obligations of each of our foreign and domestic plans are not significantly different from each other, with the exception of the health care trend rates, which are presented below.

The changes in our pension and OPEB benefit obligations and plan assets for the years ended December 31, 2021 and 2020, and the funded status and reconciliation of amounts recognized in our Consolidated Balance Sheets as of December 31, 2021 and 2020, were as follows:

	Pension Plans				OPEB Plans
(In millions)	2021		2020		2021		2020
Change in benefit obligations:
Benefit obligations as of beginning of year	$	5,246	$	5,188	$	136	$	147
Service cost		16		14		1		1
Interest cost		133		151		3		4
Actuarial (gain) loss		(168)		265		(7)		(6)
Participant contributions		6		7		2		2
Special termination benefits		—		3		—		—
Curtailments		(7)		(2)		(1)		(1)
Settlements		(15)		(118)		—		—
Benefits paid		(345)		(341)		(13)		(13)
Effect of foreign currency exchange rate changes		31		79		1		2
Benefit obligations as of end of year		4,897		5,246		122		136
Change in plan assets:
Fair value of plan assets as of beginning of year		3,806		3,862		—		—
Actual return on plan assets		296		241		—		—
Employer contributions		86		91		11		11
Participant contributions		6		7		2		2
Settlements		(15)		(118)		—		—
Benefits paid		(345)		(341)		(13)		(13)
Effect of foreign currency exchange rate changes		22		64		—		—
Fair value of plan assets as of end of year		3,856		3,806		—		—
Funded status as of end of year	$	(1,041)	$	(1,440)	$	(122)	$	(136)
Amounts recognized in our Consolidated Balance Sheets consisted of:
Other assets	$	2	$	—	$	—	$	—
Accounts payable and other		(3)		(3)		(11)		(11)
Pension and OPEB obligations		(1,040)		(1,437)		(111)		(125)
Net obligations recognized	$	(1,041)	$	(1,440)	$	(122)	$	(136)

The total benefit obligations and the total fair value of plan assets for pension plans with benefit obligations in excess of plan assets were $4,612 million and $3,570 million, respectively, as of December 31, 2021, and were $5,067 million and $3,627 million, respectively, as of December 31, 2020. The total accumulated benefit obligations and the total fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $4,588 million and $3,570 million, respectively, as of December 31, 2021, and were $5,034 million and $3,627 million, respectively, as of December 31, 2020. The total accumulated benefit obligations for all pension plans were $4,873 million and $5,212 million as of December 31, 2021 and 2020, respectively.

The actuarial gains and losses impacting the benefit obligations for our pension and OPEB plans in 2021 are primarily due to changes in the economic environment, which resulted in an increase to the discount rates selected for the plans as of December 31, 2021, compared to December 31, 2020. The actuarial gains and losses impacting the benefit obligations for our pension and OPEB plans in 2020 were primarily due to changes in the economic environment, which resulted in a decrease to the discount rates selected for the plans as of December 31, 2020, compared to December 31, 2019.

Components of net periodic benefit cost (credit)

The components of net periodic benefit cost (credit) relating to our pension and OPEB plans for the years ended December 31, 2021, 2020 and 2019, were as follows:

	Pension Plans						OPEB Plans
(In millions)	2021		2020		2019		2021		2020		2019
Interest cost	$	133	$	151	$	181	$	3	$	4	$	6
Expected return on plan assets		(215)		(226)		(251)		—		—		—
Amortization of prior service costs (credits)		1		—		—		(4)		(4)		(11)
Amortization of actuarial losses (gains)		78		63		34		(6)		(6)		(6)
Non-operating credits		(3)		(12)		(36)		(7)		(6)		(11)
Service cost		16		14		15		1		1		—
Net periodic benefit costs (credits) before special events		13		2		(21)		(6)		(5)		(11)
Curtailments, settlements and other (gains) losses (1)		(1)		32		—		—		(14)		—
	$	12	$	34	$	(21)	$	(6)	$	(19)	$	(11)

(1)Includes a settlement loss of $28 million for the year ended December 31, 2020, resulting from the wind-up of the Thorold pension plan.

The prior service costs (credits) and the actuarial gains and losses are amortized to “Non-operating pension and other postretirement benefit credits” in our Consolidated Statements of Operations, over the expected average remaining service lifetime or the average future lifetime, as applicable, of the respective plans.

Assumptions used to determine benefit obligations and net periodic benefit costs (credits)

The weighted-average assumptions used to determine the benefit obligations at the measurement dates (each December 31) and the net periodic benefit costs (credits) for the years ended December 31, 2021, 2020 and 2019, were as follows:

	Pension Plans						OPEB Plans
	2021		2020		2019		2021		2020		2019
Benefit obligations:
Discount rate	2.8	%	2.5	%	3.0	%	2.9	%	2.5	%	3.1	%
Rate of compensation increase	2.1	%	2.1	%	2.1	%
Net periodic benefit cost (credit):
Discount rate	2.5	%	3.0	%	3.8	%	2.5	%	3.1	%	3.9	%
Expected return on assets	5.7	%	6.0	%	6.5	%
Rate of compensation increase	2.1	%	2.1	%	2.1	%

The discount rate for our domestic and foreign plans was determined with a model that develops a hypothetical high-quality bond portfolio, where the bonds are theoretically purchased to settle the expected benefit payments of the plans. The discount rate reflects the single rate that produces the same discounted values as the value of the theoretical bond portfolio. In determining the expected return on assets, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. In determining the rate of compensation increase, we reviewed historical salary increases and promotions, while considering current industry conditions, the terms of collective bargaining agreements with our employees, and the outlook for our industry. In determining the life expectancy rate of our

domestic and foreign plans, we used the most recent actuarially-determined mortality tables and improvement scales. For the foreign plans, the mortality tables were adjusted with the result of our historical mortality experience study. The rates used are consistent with our future expectations of life expectancy for the employees who participate in our pension and OPEB plans.

The assumed health care cost trend rates used to determine the benefit obligations for our domestic and foreign OPEB plans as of December 31, 2021 and 2020, were as follows:

	2021				2020
	Domestic Plan		Foreign Plans		Domestic Plan		Foreign Plans
Health care cost trend rate assumed for next year	7.0	%	4.8	%	7.2	%	4.8	%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)	4.5	%	4.5	%	4.5	%	4.5	%
Year that the rate reaches the ultimate trend rate	2033		2033		2033		2033

For the health care cost trend rates, we considered historical trends for these costs, actual experience of the plans, as well as future expectations.

Fair value of plan assets

The fair value of plan assets held by our pension plans as of December 31, 2021, was as follows:

(In millions)	Total		Level 1		Level 2		Level 3
Equity securities:
U.S. companies	$	646	$	646	$	—	$	—
Non-U.S. companies		872		872		—		—
Debt securities:
Corporate and government securities		1,197		29		1,168		—
Asset-backed securities		87		—		87		—
Cash and cash equivalents		117		117		—		—
Certain insurance contracts (1)		314		—		—		314
Other plan assets, net		(4)		—		(4)		—
Total before investments measured at NAV	$	3,229	$	1,664	$	1,251	$	314
Investments measured at NAV		627
	$	3,856

(1)The Level 3 plan assets were purchased during the year ended December 31, 2021. There were no Level 3 plan asset

balances during the year ended December 31, 2020.

The fair value of plan assets held by our pension plans as of December 31, 2020, was as follows:

(In millions)	Total		Level 1		Level 2		Level 3
Equity securities:
U.S. companies	$	737	$	737	$	—	$	—
Non-U.S. companies		1,197		1,197		—		—
Debt securities:
Corporate and government securities		1,086		36		1,050		—
Asset-backed securities		148		—		148		—
Cash and cash equivalents		179		179		—		—
Other plan assets, net		9		—		9		—
Total before investments measured at NAV	$	3,356	$	2,149	$	1,207	$	—
Investments measured at NAV		450
	$	3,806

Equity securities include large-cap, mid-cap and small-cap publicly-traded companies mainly located in the U.S., Canada and other developed and emerging countries, as well as commingled equity funds invested in the same types of securities. The fair value of the equity securities is determined based on quoted market prices (Level 1).

Debt securities include corporate bonds of U.S. and Canadian companies from diversified industries, bonds and Treasuries issued by the U.S. government and the Canadian federal and provincial governments, asset-backed securities and commingled fixed income funds invested in these same types of securities. The fair value of the debt securities is determined based on quoted market prices (Level 1), and market-corroborated inputs such as matrix prices, yield curves and indices (Level 2).

Certain insurance contracts include group contracts that have been purchased to cover a portion of the plan members. The fair value of annuity buy-in contracts changes based on fluctuations in the obligation associated with the covered plan members (Level 3).

Other plan assets, net, include accrued interest and dividends, and amounts receivable or payable for unsettled security transactions. The fair value of accrued interest and dividends is determined based on market-corroborated inputs such as declared dividends and stated interest rates (Level 2). The fair value of receivables and payables for unsettled security transactions is determined based on market-corroborated inputs such as the trade date fair value of the security (Level 2).

Investments measured at NAV are excluded from the fair value hierarchy tables. These investments are commingled funds, composed of either debt securities, equity securities or real estate investments, where the corresponding NAV per share is equal to the total net assets divided by the total number of shares.

Long-term strategy and objective

Our investment strategy and objective is to maximize the long-term rate of return on our plan assets within an acceptable level of risk in order to meet our current and future obligations to pay benefits to qualifying employees and their beneficiaries while minimizing and stabilizing pension benefit costs and contributions. Diversification of assets is achieved through strategic allocations to various asset classes, and by retaining multiple, experienced third-party investment management firms with complementary investment styles and philosophies to implement these allocations. Risk is further managed by reviewing our investment policies at least annually and monitoring our fund managers at least quarterly for compliance with mandates and performance measures. A series of permitted and prohibited investments are listed in our respective investment policies, which are provided to our fund managers. The use of derivative financial instruments for speculative purposes and investments in the equity or debt securities of Resolute and its affiliates is prohibited.

We have established a target asset allocation policy and ranges for each participating defined benefit pension plan based upon analysis of risk and return tradeoffs and correlations of asset mixes given long-term historical returns, prospective capital market returns, forecasted benefit payments and the forecasted timing of those payments. The targeted asset allocation policy of the plan assets is designed to hedge the change in the pension liabilities resulting from fluctuations in the discount rate by investing in debt and other securities, while also generating excess returns required to reduce the unfunded pension deficit by investing in equity securities with higher potential returns. Real assets (infrastructure and real estate) are also used to diversify the assets and improve the risk-return profile of the plans. The targeted asset allocation policy of each participating defined

benefit pension plan is 45% equity securities, 10% real assets, and 45% debt and other fixed income securities, including up to 5% in short-term instruments required for near-term liquidity needs. Equities have an allowable range of 25% to 55%, real assets have an allowable range of 0% to 15%, while debt securities have an allowable range of 35% to 65%. Approximately 60% of the equity securities are targeted to be invested in the U.S. and Canada, with the balance in other developed and emerging countries. Substantially all of the debt securities are targeted to be invested in the U.S. and Canada. The asset allocation for each participating defined benefit pension plan is reviewed periodically and, when necessary, rebalanced to bring the asset allocation within the prescribed ranges.

Expected benefit payments and future contributions

As of December 31, 2021, benefit payments expected to be paid over the next 10 years are as follows:

(In millions)	Pension Plans (1)		OPEB Plans
2022	$	347	$	11
2023	$	330	$	10
2024	$	323	$	10
2025	$	316	$	9
2026	$	308	$	9
2027 - 2031	$	1,425	$	38

(1)Benefit payments are expected to be paid from the plans’ net assets.

We expect our 2022 pension contributions (excluding contributions to our defined contribution plans) to be approximately $77 million.

U.S. pension funding

The funding of our U.S. pension plan is governed by the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code, and is also subject to the Moving Ahead for Progress in the 21st Century Act, the American Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act of 2021. Under these regulations, the liabilities are discounted using 25-year average corporate bond rates within a specified corridor. During 2021, regulations were modified to implement a minimum 5% floor on the 25-year average corporate bond rates and to maintain the corridor at 5% through 2030 and then to gradually increase the corridor by 5% each year until it reaches 30% for 2035 and beyond. Under current regulations, funding shortfall is amortized over 15 years for purposes of determining minimum contribution requirements.

Canadian pension funding

Quebec plans

The funding of our Quebec pension plans is subject to Quebec’s Supplemental Pension Plans Act (or, the “SPPA”), which is the pension plan funding regime generally applicable to pension plans in that province. Our contributions to our Quebec plans are determined on a going concern basis under the Quebec’s SPPA.

Ontario plans

The funding of our Ontario pension plans is subject to the Ontario Pension Benefits Act (or, the “PBA”), which is the pension plan funding regime generally applicable to pension plans in that province. The PBA provides for funding pension fund deficits on a going concern basis, or on a solvency basis if the solvency funded status of a pension plan is below 85%.

Additional undertakings

Our principal Canadian subsidiaries had entered into certain undertakings with the Governments of Ontario and Quebec, which expired in 2015 and 2016, respectively. The expiration of those undertakings did not eliminate ongoing obligations we incurred under the terms of those undertakings prior to their expiration, including the undertaking requiring us to make an additional solvency deficit reduction contribution to our pension plans of C$75, payable over four years, for each metric ton of capacity reduced in Quebec or Ontario, in the event of downtime of more than six consecutive months or nine cumulative months over a

period of 18 months. Accordingly, we made additional contributions for past capacity reductions of C$4 million and C$2 million in 2019 and 2020, respectively. The 2020 contribution was the last one required to be made.