As of December 31, 2018, the Verso Paper Corp. Pension Plan for Hourly Employees (Androscoggin) and the NewPage Cash Balance Plan for Non-Bargained Employees were merged into the NewPage Retirement Plan for Bargained Hourly Employees to form a combined plan which was renamed the Verso Corporation Employee Pension Plan. As of December 31, 2019, this plan covers approximately 64% of Verso’s employees. The pension plan provides defined benefits based on years of service multiplied by a flat monetary benefit or based on a percentage of compensation as defined by the respective plan document. As of December 31, 2015, all of the defined benefit pension plans were frozen to new entrants. Some of the pension plan participants previously in the NewPage Retirement Plan for Bargained Hourly Employees continue to earn service accruals toward their pension benefits but no longer receive multiplier increases. Verso employees previously in the NewPage Cash Balance Plan for Non-Bargained Employees continue to earn annual interest credits, but no longer earn cash balance benefit credits. Benefit accruals are frozen for employees previously in the Verso Paper Corp. Pension Plan for Hourly Employees (Androscoggin).

During the fourth quarter 2019, Verso offered a voluntary lump-sum option, on a temporary basis, to certain terminated vested and retired participants in the Verso Corporation Employee Pension Plan. The election period to participate began October 24, 2019 and ended November 22, 2019. Lump-sum payments were distributed in November and December 2019, to those participants who were eligible and elected this form of payment. This action resulted in a settlement gain of $13 million, included in Other (income) expense on the Consolidated Statement of Operations for the year ended December 31, 2019.



	Year Ended December 31,
(Dollars in millions)	2017			2018			2019
Components of net periodic pension cost (income):
Service cost	$	16		$	6		$	4
Interest cost	65			60			65
Expected return on plan assets	(75		)	(73		)	(70		)
Settlement	—			—			(13		)
Net periodic pension cost (income)	$	6		$	(7	)	$	(14	)

Verso makes contributions that are sufficient to fund actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act. Contributions to the pension plans were $32 million in 2017, $43 million in 2018 and $42 million in 2019. In 2020, Verso expects to make cash contributions to the pension plan of $54 million. Verso expects no plan assets to be returned to the Company in 2020.



	Year Ended December 31,
(Dollars in millions)	2018			2019
Change in Projected Benefit Obligation:
Benefit obligation at beginning of period	$	1,753		$	1,590
Settlement	—			(55		)
Service cost	6			4
Interest cost	60			65
Actuarial (gain) loss	(136		)	170
Benefits paid	(93		)	(85		)
Settlement payments	—			(147		)
Benefit obligation at end of period	$	1,590		$	1,542
Change in Plan Assets:
Plan assets at fair value at beginning of period	$	1,296		$	1,162
Settlement payments	—			(147		)
Actual net return on plan assets	(84		)	201
Employer contributions	43			42
Benefits paid	(93		)	(85		)
Plan assets at fair value at end of period	$	1,162		$	1,173
Funded (underfunded) status at end of period	$	(428	)	$	(369	)

In connection with the Pixelle Sale on February 10, 2020, Pixelle assumed approximately $35 million of Verso’s unfunded pension liabilities (see Note 19). The above table does not reflect changes the Pixelle Sale will have on future pension benefit payments from the plan.

Verso evaluates the actuarial assumptions annually as of December 31 (the measurement date) and considers changes in these long-term factors based upon market conditions and the requirements of ASC Topic 715, Compensation—Retirement Benefits. These assumptions are used to calculate benefit obligations as of December 31 of the current year and pension expense to be recorded for the following year. The discount rate assumption reflects the yield on a portfolio of high quality fixed-income instruments that have a similar duration to the plan’s liabilities. The expected long-term rate of return assumption reflects the average return expected on the assets invested to provide for the plan’s liabilities.



	Year Ended December 31,
	2017		2018		2019
Weighted average assumptions used to determine benefit obligations as of end of period:
Discount rate	3.51	%	4.17	%	3.11	%
Rate of compensation increase	N/A		N/A		N/A
Weighted average assumptions used to determine net periodic pension cost for the period:
Discount rate	3.98	%	3.51	%	4.17	%
Rate of compensation increase	N/A		N/A		N/A
Expected long-term return on plan assets	6.50	%	6.50	%	7.00	%

The primary investment objective is to ensure, over the long-term life of the pension plan, an adequate pool of sufficiently liquid assets to support the benefit obligations. In meeting this objective, the pension plan seeks to achieve a high level of investment return through long-term stock and bond investment strategies, consistent with a prudent level of portfolio risk. The expected long-term rate of return on plan assets reflects the weighted-average expected long-term rates of return for the broad categories of investments currently held in the plan (adjusted for expected changes), based on historical rates of return for each broad category, as well as factors that may constrain or enhance returns in the broad categories in the future. The expected long-term rate of return on plan assets is adjusted when there are fundamental changes in expected returns in one or more broad asset categories and when the weighted-average mix of assets in the plan changes significantly.



	Allocation of Plan Assets
	2018	Allocation on		2019	Allocation on
	Targeted	December 31,		Targeted	December 31,
	Allocation	2018		Allocation	2019
Fixed income:	25-55%			25-55%
Cash and cash equivalent		1	%		3	%
Fixed income funds		34	%		31	%
Equity securities:	35-65%			35-65%
Domestic equity funds - large cap		29	%		34	%
Domestic equity funds - small cap		6	%		5	%
International equity funds		20	%		17	%
Other:	4-15%			4-15%
Hedge funds, private equity, real estate, commodities		10	%		10	%

ASC Topic 820, Fair Value Measurements and Disclosures, provides a common definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions used to value the assets or liabilities (see Note 1).

In accordance with accounting guidance ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), certain investments have been valued using the NAV per share (or its equivalent) practical expedient and are therefore not classified in the fair value hierarchy. The fair value amounts presented in these tables for investments are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the reconciliation of changes in the plan's benefit obligations and fair value of plan assets above.



(Dollars in millions)	Total		Level 1		Level 2		Level 3		Assets Valued at NAV Practical Expedient
December 31, 2019
Cash and cash equivalent	$	38	$	—	$	38	$	—	$	—
Fixed income	360		—		347		13		—
Domestic equity - large cap	394		—		1		—		393
International equity	202		78		—		1		123
Domestic equity - small cap	60		1		—		—		59
Other (hedge funds, private equity, real estate, commodities)	119		14		—		—		105
Total assets at fair value	$	1,173	$	93	$	386	$	14	$	680
December 31, 2018
Cash and cash equivalent	$	12	$	12	$	—	$	—	$	—
Fixed income	397		—		393		4		—
Domestic equity - large cap	339		20		1		—		318
International equity	229		46		—		—		183
Domestic equity - mid cap	1		—		1		—		—
Domestic equity - small cap	64		11		—		—		53
Other (hedge funds, private equity, real estate, commodities)	120		—		—		—		120
Total assets at fair value	$	1,162	$	89	$	395	$	4	$	674



(Dollars in millions)	Fair Value
Balance, January 1, 2018	$	—
Purchase of securities	4
Change in the fair value	—
Balance, December 31, 2018	$	4
Purchase of securities	16
Sale of securities	(3		)
Change in the fair value of current securities	(2		)
Transfers into Level 3	—
Transfers out of Level 3	(1		)
Balance, December 31, 2019	$	14

There were no transfers of investments between the levels of the fair value hierarchy during the years ended December 31, 2018. For the year ended December 31, 2019, $1 million of investments transferred from Level 3 to Level 2 due to changes in the observability of significant inputs.

The majority of investments are comprised of investments in publicly traded mutual funds and common/collective trusts. Publicly traded mutual funds are valued based on their publicly traded exchange value and common/collective trusts are valued using a NAV provided by the manager of each fund. The NAV is based on the underlying net assets owned by the fund, divided by the number of shares or units outstanding. The fair value of the underlying securities within the fund, which are generally traded on an active market, are valued at the closing price reported on the active market on which those individual securities are traded.

The table below sets forth the fair values of investments, whose fair values are estimated at December 31, 2019, using the NAV per share derived by the fund managers as a practical expedient that have unfunded commitments and/or redemption restrictions. To derive the estimated NAV per share, the fund managers apply various methodologies, including, but not limited to, use of proprietary estimation models, quoted market prices or third-party valuations for underlying securities within the investments, evaluating contributions, distributions, interest, dividends and management fees, as well as evaluating the general market conditions and their correlation and impact on the investments.



	December 31, 2019
(Dollars in millions)	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Multi-strategy hedge fund ⁽¹⁾	$	—	$	—	Annually	45 days
Debt securities hedge fund ⁽²⁾	72		—		Semi-Annually	90 days
Private equity ⁽³⁾	11		2		N/A	N/A
Domestic equity funds - large cap ⁽⁴⁾	69		—		Monthly	Various ⁽⁵⁾
	$	152	$	2

(1) The fund invests in equities, equity-related instruments, fixed income and other debt-related instruments, real estate and other tangible assets, cash and cash equivalents, options, futures, swaps and other derivatives. The fund utilizes leverage in its investment program and includes both long and short positions. The fund’s investment objective is to generate consistent, absolute returns with low volatility.

(2) The fund’s objective is to achieve superior risk-adjusted total returns by investing primarily in public and private non-investment grade and nonrated debt securities. Securities and other instruments acquired by the fund may include all types of debt obligations consisting primarily of public and private non-investment grade and nonrated debt, convertible bonds, preferred stock, bank debt, middle market loans and notes, trade claims, liquidating trusts, assignments, options swaps and any other securities with fixed-income characteristics, including, without limitation, debentures, notes deferred interest, pay-in-kind or zero coupon bonds, mortgages and mortgage-backed securities, collateralized mortgage obligations and other real estate-related instruments. The fund may also acquire common or preferred stock, warrants to purchase common or preferred stock and any other equity interests.

(3) This category consists of several private equity funds some of which invest in limited partnerships which make equity-oriented investments in young, growing or emerging companies or entities. Additionally, the funds can invest in limited partnerships or other pooled investment vehicles which, in turn, make investments in management buy-in, management buy-out, leveraged buy-out, mezzanine, special situation and recapitalization transactions or other partnerships either directly or purchased in the secondary market, as well as investments in mezzanine, distressed and venture debt. These funds invest in a wide range of industries primarily in the United States. These investments cannot be redeemed. Instead, distributions are received when the underlying assets of the funds are liquidated.

(4) This fund may invest and trade, on margin or otherwise, in common and preferred stock, futures, convertible securities, rights, warrants, bonds, corporate notes, debentures, U.S. and non U.S. government securities, U.S. government obligations, certificates of deposit, money market funds, cash instruments, U.S. equity index futures, volatility futures, exchange traded funds, exchange traded notes, swaps (including variance swaps), money market instruments and in rights and options, including “put” and “call” options or any combination thereof written by the fund or by others, on securities, commodity, volatility, or other indices, index futures, exchange traded funds, or exchange traded notes.

(5) Withdrawals are permitted as of (i) the last business day of each calendar month if written notification is received by the managing member or International Fund Services (N.A.) L.L.C., a subsidiary of the administrator (the “Transfer Agent”) prior to the close of business on the fifth business day of the month, (ii) the last business day of the month following the month that written notification is received by the managing member or Transfer Agent if written notification is received by the Transfer Agent or the managing member after the fifth business day of the month, or (iii) at such times (with less or no prior written notice) as determined by the managing member in its sole discretion.

Verso also sponsors defined contribution plans for certain employees. Employees may elect to contribute a percentage of their salary on a pre-tax and/or after-tax basis, subject to regulatory limitations, into an account with an independent trustee which can then be invested in a variety of investment options at the employee’s discretion. Verso may also contribute to the employee’s account depending upon the requirements of the plan. For certain employees, these employer contributions may be in the form of a specified percentage of each employee’s total compensation or in the form of discretionary profit-sharing that may vary depending on the achievement of certain company objectives. Certain defined contribution benefits are provided in accordance with collective bargaining agreements. Expenses under these plans are presented below.