RETIREMENT PLANS

The Company has defined benefit and defined contribution retirement plans for its employees, and provides certain postretirement health and welfare benefits to eligible retirees and their dependents. Also, the Company contributes to various multiemployer plans under certain of its collective bargaining agreements.

Company Sponsored Defined Benefit Plans —The Company maintains a qualified retirement plan and a nonqualified retirement plan (“Retirement Plans”) that pay benefits to certain employees at retirement, using formulas based on a participant’s years of service and compensation. The Company also maintains postretirement health and welfare plans for certain employees. Amounts related to the defined benefit and other postretirement plans recognized in the Company's consolidated financial statements are determined on an actuarial basis.

The components of net periodic pension benefit (credits) costs for the last three fiscal years were as follows:



	2018			2017			2016
Components of net periodic pension (credits) benefit costs:
Service cost	$	2		$	2		$	4
Interest cost	36			40			41
Expected return on plan assets	(52		)	(48		)	(48		)
Amortization of net loss	3			4			8
Settlements	—			18			4
Net periodic pension (credits) benefit costs	$	(11	)	$	16		$	9

Other postretirement (credits) benefit costs were de minimis for fiscal years 2018, 2017 and 2016.

The service cost component of net periodic (credits) benefit costs is included in distribution, selling and administrative costs, while the other components of net periodic (credits) benefit costs are included in other income—net, respectively, in the Company's Consolidated Statements of Comprehensive Income.

The Company contributed approximately $71 million to its defined benefit and other postretirement plans during fiscal year 2018, of which $35 million represented an additional, voluntary contribution to the defined benefit plan. As a result of the incremental voluntary contribution, the Company remeasured its defined benefit pension liability as of May 31, 2018, resulting in a reduction in the benefit obligation of $33 million, with a corresponding benefit to accumulated other comprehensive loss. The remeasurement had an immaterial impact on the 2018 annual net periodic (credits) benefit costs.

The Company incurred non-cash settlement charges of $18 million and $4 million for fiscal years 2017 and 2016, respectively, resulting from lump sum benefit payments. No non-cash settlement charges were incurred in 2018. All lump sum benefit payments were paid from plan assets.

Changes in plan assets and benefit obligations recorded in accumulated other comprehensive loss for pension benefits for the last three fiscal years were as follows:



	2018		2017		2016
Changes recognized in accumulated other comprehensive loss:
Actuarial gain (loss)	$	6	$	—	$	(63	)
Prior year correction⁽¹⁾	—		—		(22		)
Amortization of net loss	3		4		8
Settlements	—		18		4
Net amount recognized	$	9	$	22	$	(73	)


(1)	In the second quarter of fiscal year 2016, the Company recorded a $22 million increase to its pension obligation, with a corresponding increase to accumulated other comprehensive loss, to correct a computational error related to a 2015 pension plan freeze. The Company determined the error did not materially impact the financial statements for any of the periods reported.

Changes in plan assets and benefit obligations recorded in accumulated other comprehensive loss for other postretirement benefits for the last three fiscal years were de minimis.

The funded status of the defined benefit plans for the last three fiscal years was as follows:



	Pension Benefits
	2018			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	976		$	966		$	863
Service cost	2			2			4
Interest cost	36			40			41
Actuarial (gain) loss	(97		)	76			73
Prior year correction	—			—			22
Settlements	—			(87		)	(16		)
Benefit disbursements	(46		)	(21		)	(21		)
Benefit obligation at end of year	871			976			966
Change in plan assets:
Fair value of plan assets at beginning of year	851			799			742
Return on plan assets	(40		)	124			58
Employer contribution	71			36			36
Settlements	—			(87		)	(16		)
Benefit disbursements	(46		)	(21		)	(21		)
Fair value of plan assets at end of year	836			851			799
Net funded status	$	(35	)	$	(125	)	$	(167	)

The fiscal year 2018 pension benefits actuarial gain of $97 million was primarily due to an increase in the discount rate. The 2017 and 2016 pension benefits actuarial losses of $76 million and $73 million, respectively, were primarily due to decreases in discount rates.



	Other Postretirement Plans
	2018			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	7		$	7		$	7
Benefit disbursements	(1		)	(1		)	(1		)
Other	—			1			1
Benefit obligation at end of year	6			7			7
Change in plan assets:
Fair value of plan assets at beginning of year	—			—			—
Employer contribution	1			1			1
Benefit disbursements	(1		)	(1		)	(1		)
Fair value of plan assets at end of year	—			—			—
Net funded status	$	(6	)	$	(7	)	$	(7	)

Service cost, interest cost and actuarial (gain) loss for other postretirement benefits were de minimis for fiscal years 2018, 2017 and 2016.



	Pension Benefits
	2018			2017			2016
Amounts recognized in the consolidated balance sheets consist of the following:
Accrued benefit obligation—current	$	—		$	(1	)	$	(1	)
Accrued benefit obligation—noncurrent	(35		)	(124		)	(166		)
Net amount recognized in the consolidated balance sheets	$	(35	)	$	(125	)	$	(167	)
Amounts recognized in accumulated other comprehensive loss consist of the following:
Net loss	$	190		$	199		$	221
Net loss recognized in accumulated other comprehensive loss	$	190		$	199		$	221
Additional information:
Accumulated benefit obligation	$	869		$	974		$	963



	Other Postretirement Plans
	2018			2017			2016
Amounts recognized in the consolidated balance sheets consist of the following:
Accrued benefit obligation—current	$	(1	)	$	(1	)	$	(1	)
Accrued benefit obligation—noncurrent	(5		)	(6		)	(6		)
Net amount recognized in the consolidated balance sheets	$	(6	)	$	(7	)	$	(7	)
Amounts recognized in accumulated other comprehensive loss consist of the following:
Gain, net of prior service cost	$	1		$	1		$	1
Net gain recognized in accumulated other comprehensive loss	$	1		$	1		$	1



	Pension Benefits
Amounts expected to be amortized from accumulated other comprehensive loss in the next fiscal year:
Net loss	$	4
Net expected to be amortized	$	4

Amounts expected to be amortized from accumulated other comprehensive loss in the next fiscal year for other postretirement benefits are expected to be de minimis.

Weighted average assumptions used to determine benefit obligations at period-end and net pension costs for the last three fiscal years were as follows:



	Pension Benefits
	2018		2017		2016
Benefit obligation:
Discount rate	4.35	%	3.70	%	4.25	%
Annual compensation increase	3.60	%	3.60	%	3.60	%
Net cost:
Discount rate	3.70	%	4.25	%	4.64	%
Expected return on plan assets	6.00	%	6.00	%	6.50	%
Annual compensation increase	3.60	%	3.60	%	3.60	%



	Other Postretirement Plans
	2018		2017		2016
Benefit obligation—discount rate	4.35	%	3.70	%	4.25	%
Net cost—discount rate	3.70	%	4.25	%	4.40	%

The measurement date for the defined benefit and other postretirement benefit plans was December 31 for 2018, 2017 and 2016. The Company applies the practical expedient under ASU No. 2015-4 to measure defined benefit retirement obligations and related plan assets as of the month-end that is closest to its fiscal year-end.

The mortality assumptions used to determine the pension benefit obligation as of December 31, 2018 are based on the RP-2014 base mortality table with the MP-2018 mortality improvement scale published by the Society of Actuaries.

A health care cost trend rate is used in the calculations of postretirement medical benefit plan obligations. The assumed healthcare trend rates for the last three fiscal years were as follows:



	2018		2017		2016
Immediate rate	6.30	%	6.70	%	7.40	%
Ultimate trend rate	4.50	%	4.50	%	4.50	%
Year the rate reaches the ultimate trend rate	2037		2037		2037

A 1% change in the rate would result in a change to the postretirement medical plan obligation of less than $1 million. Retirees covered under these plans are responsible for the cost of coverage in excess of the subsidy, including all future cost increases.

In determining the discount rate, the Company determines the implied rate of return on a hypothetical portfolio of high-quality fixed-income investments, for which the timing and amount of cash outflows approximates the estimated pension plan payouts. The discount rate assumption is reviewed annually and revised as appropriate.

The expected long-term rate of return on plan assets is derived from a mathematical asset model. This model incorporates assumptions on the various asset class returns, reflecting a combination of historical performance analysis and the forward-looking views of the financial markets regarding the yield on long-term bonds and the historical returns of the major stock markets. The rate of return assumption is reviewed annually and revised as deemed appropriate.

The investment objective for the Company sponsored plans is to provide a common investment platform. Investment managers, overseen by the US Foods, Inc. Benefits Administration Committee, are expected to adopt and maintain an asset allocation strategy for the plans’ assets designed to address the Retirement Plans’ liability structure. The Company has developed an asset allocation policy and rebalancing policy. The Benefits Administration Committee reviews the major asset classes, through consultation with its investment consultants, periodically to determine if the plan assets are performing as expected. The Company’s 2018 strategy initially targeted a mix of 50% equity securities and 50% long-term debt securities and cash equivalents. During 2018, the Company revised its target to a mix of 35% equity securities and 65% long-term debt securities and cash equivalents. The actual mix of investments at December 29, 2018 was 30% equity securities and 70% long-term debt securities and cash equivalents. The Company plans to manage the actual mix of investments to achieve its target mix.

The following table sets forth the fair value of our defined benefit plans’ assets by asset fair value hierarchy level.



	Asset Fair Value as of December 29, 2018
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	5	$	—	$	—	$	5
Equities:
Domestic	34		—		—		34
International	1		—		—		1
Mutual fund:
International equities	21		—		—		21
Long-term debt securities:
Corporate debt securities:
Domestic	—		236		—		236
International	—		33		—		33
U.S. government securities	—		8		—		8
Other	—		2		—		2
	$	61	$	279	$	—	340
Common collective trust funds:
Cash equivalents							9
Domestic equities							156
International equities							40
Treasury STRIPS							291
Total investments measured at net asset value as a practical expedient							496
Total defined benefit plans’ assets							$	836



	Asset Fair Value as of December 30, 2017
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	8	$	—	$	—	$	8
Equities:
Domestic	34		—		—		34
International	1		—		—		1
Mutual funds:
Domestic equities	37		—		—		37
International equities	32		—		—		32
Long-term debt securities:
Corporate debt securities:
Domestic	—		224		—		224
International	—		26		—		26
U.S. government securities	—		155		—		155
Government agencies securities	—		8		—		8
Other	—		4		—		4
	$	112	$	417	$	—	529
Common collective trust funds:
Cash equivalents							10
Domestic equities							249
International equities							63
Total investments measured at net asset value as a practical expedient							322
Total defined benefit plans’ assets							$	851

A description of the valuation methodologies used for assets measured at fair value is as follows:


•	Cash and cash equivalents are valued at original cost plus accrued interest.


•	Equities are valued at the closing price reported on the active market on which individual securities are traded.


•	Mutual funds are valued at the closing price reported on the active market on which individual funds are traded.


•	Long-term debt securities are valued at the estimated price a dealer will pay for the individual securities.


•	Common collective trust funds are measured at the net asset value at the December 31, 2018 and 2017 measurement dates. This class represents investments in common collective trust funds that invest in:


◦	Equity securities, which may include common stocks, options and futures in actively managed funds; and


◦	Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) representing zero coupon Treasury securities with long-term maturities.

Estimated future benefit payments, under Company sponsored plans as of December 29, 2018, were as follows:



	Pension Benefits		Other Postretirement Plans
2019	$	49	$	1
2020	48		1
2021	48		1
2022	47		1
2023	45		1
Subsequent five years	232		2

Due to the $35 million additional, voluntary contribution to the defined benefit plan during fiscal year 2018, the Company does not expect to make a significant contribution to the Retirement Plans in fiscal year 2019.

Other Company Sponsored Benefit Plans —Certain employees are eligible to participate in the Company's 401(k) savings plan. This plan provides that, under certain circumstances and subject to applicable IRS limits, the Company may match participant contributions of up to 100% of the first 3% of a participant’s eligible compensation, and 50% of the next 2% of a participant’s eligible compensation, for a maximum employer matching contribution of 4%. The Company made employer matching contributions to the 401(k) plan of $47 million, $46 million and $44 million for fiscal years 2018, 2017 and 2016, respectively. The Company, at its discretion, may make additional contributions to the 401(k) plan. The Company made no discretionary contributions under the 401(k) plan in fiscal years 2018, 2017 and 2016.

Multiemployer Pension Plans —The Company also contributes to various multiemployer pension plans under the terms of collective bargaining agreements that cover certain of its union-represented employees. The Company does not administer these multiemployer pension plans.

The risks of participating in multiemployer pension plans differ from traditional single-employer defined benefit plans as follows:


•	Assets contributed to a multiemployer pension plan by one employer may be used to provide benefits to the employees of other participating employers.


•	If a participating employer stops contributing to a multiemployer pension plan, the unfunded obligations of the plan may be borne by the remaining participating employers.


•	If the Company elects to stop participation in a multiemployer pension plan, or if the number of the Company’s employees participating in a plan is reduced to a certain degree over certain periods of time, the Company may be required to pay a withdrawal liability based upon the underfunded status of the plan.

The Company’s participation in multiemployer pension plans for the year ended December 29, 2018, is outlined in the tables below. The Company considers significant plans to be those plans to which the Company contributed more than 5% of total contributions to the plan in a given plan year, or for which the Company believes its estimated withdrawal liability, should it decide to voluntarily withdraw from the plan, may be material to the Company. For each plan that is considered individually significant to the Company, the following information is provided.


•	The EIN/Plan Number column provides the Employee Identification Number (“EIN”) and the three-digit plan number (“PN”) assigned to a plan by the Internal Revenue Service (“IRS”).

•

The most recent Pension Protection Act (“PPA”) zone status available for 2018 and 2017 is for the plan years beginning in 2017 and 2016, respectively. The zone status is based on information provided to participating employers by each plan and is certified by the plan’s actuary. A plan in the red zone has been determined to be in critical status, or critical and declining status, based on criteria established under the Internal Revenue Code (the “Code”), and is generally less than 65% funded. Plans are generally considered “critical and declining” if they are projected to become insolvent within 20 years. A plan in the yellow zone has been determined to be in endangered status, based on criteria established under the Code, and is generally less than 80% but more than 65% funded. A plan in the green zone has been determined to be neither in critical status nor in endangered status, and is generally at least 80% funded.


•	The FIP/RP Status Pending/Implemented column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. In addition to regular plan contributions, participating employers may be subject to a surcharge if the plan is in the red zone.


•	The Surcharge Imposed column indicates whether a surcharge has been imposed on participating employers contributing to the plan.


•	The Expiration Dates column indicates the expiration dates of the collective-bargaining agreements to which the plans are subject.

Pension Fund

EIN/

Plan Number

PPA

Zone Status

FIP/RP Status

Pending/

Implemented

Surcharge

Imposed

Expiration Dates

2018

2017

Minneapolis Food Distributing

Industry Pension Plan

41-6047047/001

Green

Implemented

4/1/21

Teamster Pension Trust Fund of

Philadelphia and Vicinity

23-1511735/001

Yellow

Implemented

2/13/22

Local 703 I.B. of T. Grocery and
Food Employees’ Pension Plan ⁽¹⁾

36-6491473/001

Green

N/A

6/30/18

United Teamsters Trust Fund A

13-5660513/001

Yellow

Implemented

5/30/19

Warehouse Employees Local

169 and Employers Joint

Pension Fund⁽²⁾

23-6230368/001

Red

Implemented

2/13/22


(1)	The collective bargaining agreement for this pension fund is operating under an extension.


(2)	Local 169 filed a Notice of Critical and Declining Status in 2017.

The following table provides information about the Company’s contributions to its multiemployer pension plans. For plans that are not individually significant to the Company, the total amount of the Company's contributions is aggregated. Prior year contribution amounts have been reclassified to other funds (below) for plans no longer considered significant in 2018.



	Contributions⁽¹⁾⁽²⁾						Contributions That Exceed 5% of Total Plan Contributions⁽³⁾
	2018		2017		2016		2017	2016
Pension Fund
Minneapolis Food Distributing Industry Pension Plan	5		5		5		Yes	Yes
Teamster Pension Trust Fund of Philadelphia and Vicinity	4		4		3		No	No
Local 703 I.B. of T. Grocery and Food Employees’ Pension Plan	2		1		1		Yes	Yes
United Teamsters Trust Fund A	2		2		2		Yes	Yes
Warehouse Employees Local 169 and Employers Joint Pension Fund	1		1		1		Yes	Yes
Other Funds	21		21		21		—	—
	$	35	$	34	$	33


(1)	Contributions made to these plans during the Company’s fiscal year, which may not coincide with the plans’ fiscal years.


(2)	Contributions do not include payments related to multiemployer pension plan withdrawals/settlements.


(3)	Indicates whether the Company was listed in the respective multiemployer pension plan Form 5500 for the applicable plan year as having made more than 5% of total contributions to the plan.

If the Company elects to voluntarily withdraw from a multiemployer pension plan, it may be responsible for its proportionate share of the respective plan’s unfunded vested liability. Based on the latest information available from plan administrators, the Company estimates its aggregate withdrawal liability from the multiemployer pension plans in which it participates to be approximately $110 million as of December 29, 2018. Actual withdrawal liabilities incurred by the Company, if it were to withdraw from one or more plans, could be materially different from the estimates noted here, based on better or more timely information from plan administrators or other changes affecting the respective plan’s funded status.