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RETIREMENT BENEFITS (Tables)

12 Months Ended

Dec. 31, 2019

The following tables summarize the components of net periodic pension cost (income) of Verso’s pension plans for the periods presented:



	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	)

Detail of Prior Service Cost and Net Actuarial Loss Recognized in Accumulated Other Comprehensive Income

The following table provides detail on net actuarial (gain) loss recognized in Accumulated other comprehensive (income) loss:



	December 31,
(Dollars in millions)	2018			2019
Amounts recognized in Accumulated other comprehensive (income) loss:
Net actuarial (gain) loss, net of tax	$	(120	)	$	(122	)

Reconciliation of Plans' Benefit Obligation, Plan Assets and Funded Status

The following table sets forth a reconciliation of the pension plans’ benefit obligations, plan assets and funded status for the periods presented:



	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	)

Summary of Expected Future Pension Benefit Payments

The following table summarizes expected future pension benefit payments from the plan:



(Dollars in millions)
2020	$	89
2021	91
2022	92
2023	93
2024	93
2025 - 2029	461

Actuarial Assumptions Used in Defined Benefit Pension Plans

The actuarial assumptions used in the defined benefit pension plans were as follows:



	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	%

Schedule of Pension Plan's Asset Allocation

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.

The following table provides the pension plans’ asset allocation for the periods presented:



	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	%

Schedule of Pension Plans Assets at Fair Value

The following table sets forth by level, within the fair value hierarchy, the pension plans’ assets at fair value as of the periods presented:



(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

Schedule of Changes in Fair Value of Plan Assets

The following table sets forth a summary of the changes in the fair value of the pension plan’s Level 3 assets, which are corporate debt and equity securities, for the years ended December 31, 2018 and 2019:



(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

Defined Contribution Plan Disclosures

Expenses under these plans are presented below.



	Year Ended December 31,
(Dollars in millions)	2017		2018		2019
Defined Contribution Plans
Non-elective employer contribution	$	14	$	14	$	13
Employer 401(k) matching contributions	14		14		14