Note 12—Postemployment Benefit Plans

Defined benefit pension plans and other postretirement employee benefit plans

Overview—Benefits under all of our U.S. defined benefit pension plans have ceased accruing. We maintain the respective pension obligations under such plans until they have been fully satisfied. As of December 31, 2016, we maintained three funded and three unfunded defined benefit plans in the U.S. (the “U.S. Plans”). During the year ended December 31, 2016, we permitted certain participants of one of our funded U.S. Plans to make a one‑time election to receive a payment of retirement benefits in the form of either (a) a lump sum distribution or (b) an annuity starting October 1, 2016.

As of December 31, 2016, we maintained one defined benefit plan in the U.K. (the “U.K. Plan”), under which we and the plan trustees mutually agreed to cease accruing benefits, effective March 31, 2016. As of December 31, 2016, we also maintained two funded and two unfunded defined benefit plans, primarily group pension schemes with life insurance companies, which cover certain eligible Norway employees and former employees (the “Norway Plans”). During the year ended December 31, 2016, we satisfied our obligations under four funded defined benefit plans in Norway and the unfunded defined benefit plans in Nigeria. During the year ended December 31, 2015, we satisfied our obligations under the unfunded defined benefit plans in Egypt and Indonesia. We refer to the U.K. Plan, the Norway Plans and the plans in Nigeria, Egypt and Indonesia, collectively, as the “Non‑U.S. Plans.”

We refer to the U.S. Plans and the Non‑U.S. Plans, collectively, as the “Transocean Plans”. Additionally, we maintain certain unfunded other postretirement employee benefit plans (collectively, the “OPEB Plans”), under which benefits to eligible participants diminish during a phase‑out period ending December 31, 2025.

Assumptions—We estimated our benefit obligations using the following weighted‑average assumptions:


	December 31, 2016						December 31, 2015
	U.S.		Non-U.S.		OPEB		U.S.		Non-U.S.		OPEB
	Plans		Plans		Plans		Plans		Plans		Plans
Discount rate	4.26	%	2.69	%	3.08	%	4.55	%	3.59	%	3.13	%
Compensation trend rate	na		2.25	%	na		3.82	%	3.77	%	na

We estimated our net periodic benefit costs using the following weighted‑average assumptions:


	Year ended December 31, 2016						Year ended December 31, 2015						Year ended December 31, 2014
	U.S.		Non-U.S.		OPEB		U.S.		Non-U.S.		OPEB		U.S.		Non-U.S.
	Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans		OPEB Plans
Discount rate	4.56	%	3.69	%	3.13	%	4.16	%	3.26	%	3.86	%	5.04	%	4.41	%	4.54	%
Expected rate of return	6.82	%	5.85	%	na		7.79	%	5.93	%	na		7.18	%	6.07	%	na
Compensation trend rate	0.22	%	4.01	%	na		0.21	%	3.83	%	na		4.13	%	4.25	%	na
Health care cost trend rate
-initial	na		na		na		na		na		7.81	%	na		na		7.81	%
-ultimate	na		na		na		na		na		5.00	%	na		na		5.00	%
-ultimate year	na		na		na		na		na		2023		na		na		2020

“na” means not applicable.

Net periodic benefit costs—Net periodic benefit costs, before tax, included the following components (in millions):


	Year ended December 31, 2016						Year ended December 31, 2015						Year ended December 31, 2014
	U.S.		Non-U.S.		Transocean		U.S.		Non-U.S.		Transocean		U.S.		Non-U.S.		Transocean
	Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans
Net periodic benefit costs
Service cost	$	3	$	10	$	13	$	5	$	26	$	31	$	39	$	29	$	68
Interest cost		69		17		86		65		19		84		64		27		91
Expected return on plan assets		(80)		(25)		(105)		(87)		(28)		(115)		(75)		(28)		(103)
Settlements and curtailments		—		(5)		(5)		3		2		5		(7)		3		(4)
Actuarial (gain) loss, net		5		(1)		4		11		11		22		17		5		22
Prior service cost, net		—		—		—		—		—		—		(1)		—		(1)
Net periodic benefit costs	$	(3)	$	(4)	$	(7)	$	(3)	$	30	$	27	$	37	$	36	$	73

In September and December 2014, we recognized settlement and curtailment charges for two of our unfunded Non‑U.S. Plans in Nigeria and Egypt associated with certain employee terminations.

In the years ended December 31, 2016, 2015 and 2014, for the OPEB Plans, the combined components of net periodic benefit costs, including service cost, interest cost, recognized net actuarial losses, prior service cost amortization, curtailments and special termination benefits, were income of $4 million, income of $1 million and costs of $2 million, respectively.

The following table presents the amounts in accumulated other comprehensive income (loss), before tax, that have not been recognized as components of net periodic benefit costs (in millions):


	December 31, 2016								December 31, 2015
	U.S.		Non-U.S.		OPEB				U.S.		Non-U.S.		OPEB
	Plans		Plans		Plans		Total		Plans		Plans		Plans		Total
Actuarial gain (loss), net	$	(316)	$	(94)	$	(3)	$	(413)	$	(281)	$	(119)	$	(6)	$	(406)
Prior service cost, net		—		—		26		26		—		—		31		31
Total	$	(316)	$	(94)	$	23	$	(387)	$	(281)	$	(119)	$	25	$	(375)

The following table presents the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit costs during the year ending December 31, 2017 (in millions):


	Year ending December 31, 2017
	U.S.		Non-U.S.		OPEB
	Plans		Plans		Plans		Total
Actuarial loss, net	$	5	$	1	$	—	$	6
Prior service cost, net		—		—		(3)		(3)
Total amount expected to be recognized	$	5	$	1	$	(3)	$	3

Funded status—The changes in projected benefit obligation, plan assets and funded status and the amounts recognized on our consolidated balance sheets were as follows (in millions):


	Year ended December 31, 2016								Year ended December 31, 2015
	U.S.		Non-U.S.		OPEB				U.S.		Non-U.S.		OPEB
	Plans		Plans		Plans		Total		Plans		Plans		Plans		Total
Change in projected benefit obligation
Projected benefit obligation, beginning of period	$	1,523	$	502	$	24	$	2,049	$	1,592	$	629	$	59	$	2,280
Actuarial (gains) losses, net		52		36		(3)		85		(71)		(83)		—		(154)
Service cost		3		10		—		13		5		26		1		32
Interest cost		69		17		1		87		65		19		2		86
Plan amendments		—		—		—		—		—		—		(33)		(33)
Currency exchange rate changes		—		(77)		—		(77)		—		(48)		—		(48)
Participant contributions		—		—		1		1		—		1		3		4
Benefits paid		(90)		(46)		(4)		(140)		(65)		(44)		(8)		(117)
Settlements and curtailments		—		(44)		—		(44)		(3)		2		—		(1)
Projected benefit obligation, end of period		1,557		398		19		1,974		1,523		502		24		2,049

Change in plan assets
Fair value of plan assets, beginning of period		1,198		439		—		1,637		1,271		488		—		1,759
Actual return on plan assets		93		84		—		177		(21)		12		—		(9)
Currency exchange rate changes		—		(80)		—		(80)		—		(39)		—		(39)
Employer contributions		3		43		3		49		13		21		5		39
Participant contributions		—		—		1		1		—		1		3		4
Benefits paid		(90)		(46)		(4)		(140)		(65)		(44)		(8)		(117)
Settlements		—		(40)		—		(40)		—		—		—		—
Fair value of plan assets, end of period		1,204		400		—		1,604		1,198		439		—		1,637

Funded status, end of period	$	(353)	$	2	$	(19)	$	(370)	$	(325)	$	(63)	$	(24)	$	(412)

Balance sheet classification, end of period:
Pension asset, non-current	$	—	$	5	$	—	$	5	$	—	$	2	$	—	$	2
Pension liability, current		(2)		—		(3)		(5)		(3)		(3)		(3)		(9)
Pension liability, non-current		(351)		(3)		(16)		(370)		(322)		(62)		(21)		(405)
Accumulated other comprehensive income (loss) (a)		(316)		(94)		23		(387)		(281)		(119)		25		(375)

(a)

Amounts are before income tax effect.

The aggregate projected benefit obligation and fair value of plan assets for plans with a projected benefit obligation in excess of plan assets were as follows (in millions):


	December 31, 2016								December 31, 2015
	U.S.		Non-U.S.		OPEB				U.S.		Non-U.S.		OPEB
	Plans		Plans		Plans		Total		Plans		Plans		Plans		Total
Projected benefit obligation	$	1,557	$	5	$	19	$	1,581	$	1,523	$	502	$	24	$	2,049
Fair value of plan assets		1,204		2		—		1,206		1,198		439		—		1,637

At December 31, 2016 and 2015, the accumulated benefit obligation for all defined benefit pension plans was $2.0 billion. The aggregate accumulated benefit obligation and fair value of plan assets for plans with an accumulated benefit obligation in excess of plan assets were as follows (in millions):


	December 31, 2016								December 31, 2015
	U.S.		Non-U.S.		OPEB				U.S.		Non-U.S.		OPEB
	Plans		Plans		Plans		Total		Plans		Plans		Plans		Total
Accumulated benefit obligation	$	1,557	$	4	$	19	$	1,580	$	1,523	$	374	$	24	$	1,921
Fair value of plan assets		1,204		—		—		1,204		1,198		352		—		1,550

Plan assets—We periodically review our investment policies, plan assets and asset allocation strategies to evaluate performance relative to specified objectives. In determining our asset allocation strategies for the U.S. Plans, we review the results of regression models to assess the most appropriate target allocation for each plan, given the plan’s status, demographics and duration. For the U.K. Plan, the plan trustees establish the asset allocation strategies consistent with the regulations of the U.K. pension regulators and in consultation with financial advisors and company representatives. Investment managers for the U.S. Plans and the U.K. Plan are given established ranges within which the investments may deviate from the target allocations. For the Norway Plans, we establish minimum rates of return under the terms of investment contracts with insurance companies.

As of December 31, 2016 and 2015, the weighted‑average target and actual allocations of the investments for our funded Transocean Plans were as follows:


	December 31, 2016									December 31, 2015
		Target allocation				Actual allocation				Target allocation				Actual allocation
		U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
		Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans
Equity securities		50	%	45	%	53	%	45	%	50	%	56	%	47	%	49	%
Fixed income securities		50	%	45	%	47	%	44	%	50	%	16	%	52	%	26	%
Other investments		—		10	%	—		11	%	—		28	%	1	%	25	%
Total		100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

As of December 31, 2016, the investments for our funded Transocean Plans were categorized as follows (in millions):


	December 31, 2016
	Significant observable inputs						Significant other observable inputs						Total
	U.S.		Non-U.S.		Transocean		U.S.		Non-U.S.		Transocean		U.S.		Non-U.S.		Transocean
	Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans
Mutual funds
U.S. equity funds	$	516	$	—	$	516	$	2	$	—	$	2	$	518	$	—	$	518
Non-U.S. equity funds		113		—		113		4		181		185		117		181		298
Bond funds		567		—		567		—		178		178		567		178		745
Total mutual funds		1,196		—		1,196		6		359		365		1,202		359		1,561

Other investments
Cash and money market funds		2		2		4		—		—		—		2		2		4
Property collective trusts		—		—		—		—		17		17		—		17		17
Investment contracts		—		—		—		—		22		22		—		22		22
Total other investments		2		2		4		—		39		39		2		41		43

Total investments	$	1,198	$	2	$	1,200	$	6	$	398	$	404	$	1,204	$	400	$	1,604

As of December 31, 2015, the investments for our funded Transocean Plans were categorized as follows (in millions):


	December 31, 2015
	Significant observable inputs						Significant other observable inputs						Total
	U.S.		Non-U.S.		Transocean		U.S.		Non-U.S.		Transocean		U.S.		Non-U.S.		Transocean
	Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans
Mutual funds
U.S. equity funds	$	459	$	—	$	459	$	—	$	36	$	36	$	459	$	36	$	495
Non-U.S. equity funds		104		2		106		3		179		182		107		181		288
Bond funds		626		—		626		—		115		115		626		115		741
Total mutual funds		1,189		2		1,191		3		330		333		1,192		332		1,524

Other investments
Cash and money market funds		6		—		6		—		—		—		6		—		6
Property collective trusts		—		—		—		—		20		20		—		20		20
Investment contracts		—		—		—		—		87		87		—		87		87
Total other investments		6		—		6		—		107		107		6		107		113

Total investments	$	1,195	$	2	$	1,197	$	3	$	437	$	440	$	1,198	$	439	$	1,637

The U.S. Plans and the U.K. Plan invest primarily in passively managed funds that reference market indices. The funded Norway Plans are subject to contractual terms under selected insurance programs. Each plan’s investment managers have discretion to select the securities held within each asset category. Given this discretion, the managers may occasionally invest in our debt or equity securities, and may hold either long or short positions in such securities. As the plan investment managers are required to maintain well diversified portfolios, the actual investment in our securities would be immaterial relative to asset categories and the overall plan assets.

Funding contributions—In the years ended December 31, 2016, 2015 and 2014, we made an aggregate contribution of $49 million, $39 million and $101 million, respectively, to the Transocean Plans and the OPEB Plans using our cash flows from operations. In the year ending December 31, 2017, we expect to contribute $11 million to the Transocean Plans, and we expect to fund benefit payments of approximately $3 million for the OPEB Plans as costs are incurred.

Benefit payments—The following were the projected benefits payments (in millions):


	U.S.		Non-U.S.		OPEB
	Plans		Plans		Plans		Total
Years ending December 31,
2017	$	64	$	7	$	3	$	74
2018		68		6		3		77
2019		71		8		3		82
2020		74		8		2		84
2021		78		9		2		89
2022 - 2026		417		59		7		483

Defined contribution plans

At December 31, 2016, we sponsored four defined contribution plans, including (1) a qualified savings plan covering certain employees working in the U.S. (the “U.S. Savings Plan”), (2) a non‑qualified supplemental plan covering certain eligible employees working in the U.S. (the “U.S. Savings Restoration Plan”), (3) a qualified savings plan covering certain eligible U.K. employees (the “U.K. Savings Plan”) and (4) a non‑qualified savings plan covering certain employees working outside the U.S. and U.K. (the “Non‑U.S. Savings Plan”). In the years ended December 31, 2016, 2015 and 2014, we recognized expense of $51 million, $89 million and $84 million, respectively, related to our defined contribution plans.

The U.S. Savings Plan, effective January 1, 2015, provides eligible employees with matching contributions up to 10.0 percent of each participant’s base salary and annual bonus based on the participant’s contribution to the plan. In the year ended December 31, 2014, the U.S. Savings Plan provided eligible employees with matching contributions up to 6.0 percent of each participant’s base salary based on the participant’s contribution to the plan. The U.S. Savings Restoration Plan, effective January 1, 2015, provides eligible employees with benefits in excess of those allowed under the U.S. Savings Plan.

The U.K. Savings Plan provides eligible employees with matching contributions between 4.5 percent and 9.5 percent based on the participant’s contribution to the plan. The Non‑U.S. Savings Plan, provides eligible employees with (a) matching contributions up to 6.0 percent of each participant’s base salary based on the participant’s contribution to the plan and (b) contributions between 4.5 percent and 6.5 percent of each participant’s base salary and annual bonus based on the participant’s years of eligible service. In the year ended December 31, 2016, we amended the Non‑U.S. Savings Plan, effective January 1, 2017, to provide eligible employees with matching contributions up to 12 percent of each participant’s base salary and annual bonus based on the participant’s contribution and eliminate the portion of the contribution that was based on years of service.