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Pensions and Other Postretirement Benefits (Tables)
 12 Months Ended
Dec. 31, 2021
Retirement Benefits [Abstract]  
Schedule of allocation of plan assets The Company's 2021 Policy and actual asset allocation for the Company's pension plans based on fair value are as follows:
Actual plan asset allocation
Policy20212020
Cash and short-term investments2 %2 %3 %
Bonds and mortgages37 %37 %37 %
Emerging market debt2 %2 %2 %
Private debt3 %3 %3 %
Equities 35 %40 %38 %
Real estate4 %2 %2 %
Resource and royalties (1)
5 %5 %3 %
Infrastructure4 %3 %3 %
Specialty portfolio (2)
2 %2 %— %
Absolute return12 %11 %10 %
Alternative risk premia— %1 %1 %
Investment-related liabilities(6)%(8)%(2)%
Total100 %100 %100 %
(1)    Asset class description has been changed from oil and gas to resource and royalties.
(2)    In 2021, the specialty portfolio was approved as a new investment strategy.
Fair value of plan assets by class
The following tables present the fair value of plan assets by asset class as at December 31, 2021 and 2020:
Fair value measurements at December 31, 2021
In millionsTotalLevel 1Level 2Level 3NAV
Cash and short-term investments (1)
$410 $114 $296 $— $— 
Bonds (2)
Canada, U.S. and supranational603 — 603 — — 
Provinces of Canada and municipalities5,343 — 5,343 — — 
Corporate1,493 — 1,493 — — 
Emerging market debt (3)
365 — 365 — — 
Mortgages (4)
19 — 19 — — 
Private debt (5)
723 — — — 723 
Public equities (6)
Canadian571 571 — — — 
U.S.4,388 4,383 5 — — 
International2,951 2,951 — — — 
Private equities (7)
625 — — — 625 
Real estate (8)
370 — — 272 98 
Resource and royalties (9)
978 293 8 677 — 
Infrastructure (10)
654 — 69 — 585 
Absolute return funds (11)
Multi-strategy1,173 — — — 1,173 
Fixed income50 — — — 50 
Commodity77 — — — 77 
Equity295 — — — 295 
Global macro708 — — — 708 
Downside protection74 74 — — — 
Alternative risk premia (12)
239 — — — 239 
Total investments (13)
$22,109 $8,386 $8,201 $949 $4,573 
Investment-related liabilities (14)
(1,780)
Other (15)
87 
Total plan assets$20,416 
Level 1: Fair value based on quoted prices in active markets for identical assets.
Level 2: Fair value based on other significant observable inputs.
Level 3: Fair value based on significant unobservable inputs.
NAV: Investments measured at net asset value as a practical expedient.                  Footnotes to the tables follow on the following page.
Fair value measurements at December 31, 2020
In millionsTotalLevel 1Level 2Level 3NAV
Cash and short-term investments (1)
$594 $41 $553 $— $— 
Bonds (2)
Canada, U.S. and supranational642 — 642 — — 
Provinces of Canada and municipalities5,103 — 5,103 — — 
Corporate1,472 — 1,472 — — 
Emerging market debt (3)
406 — 406 — — 
Mortgages (4)
21 — 21 — — 
Private debt (5)
575 — — — 575 
Public equities (6)
Canadian555 555 — — — 
U.S.3,249 3,214 35 — — 
International3,477 3,477 — — — 
Private equities (7)
303 — — — 303 
Real estate (8)
381 — — 279 102 
Resource and royalties (9)
649 128 17 504 — 
Infrastructure (10)
571 — 65 — 506 
Absolute return funds (11)
Multi-strategy1,032 — — — 1,032 
Fixed income68 — — — 68 
Global macro697 — — — 697 
Downside protection92 92 — — — 
Alternative risk premia (12)
191 — — — 191 
Total investments (13)
$20,078 $7,507 $8,314 $783 $3,474 
Investment-related liabilities (14)
(441)
Other (15)
86 
Total plan assets$19,723 
Level 1: Fair value based on quoted prices in active markets for identical assets.
Level 2: Fair value based on other significant observable inputs.
Level 3: Fair value based on significant unobservable inputs.
NAV: Investments measured at net asset value as a practical expedient.                  Footnotes to the tables follow on the following table.
Reconciliation of the fair value of investments categorized as Level 3
The following table reconciles the beginning and ending balances of the fair value of investments classified as Level 3:
Fair value measurements based on significant unobservable inputs (Level 3)
In millions
Real estate (8)
Resource and royalties (9)
Total
Balance at December 31, 2019$329 $707 $1,036 
Actual return relating to assets still held at the reporting date
(54)(188)(242)
Purchases
6 — 6 
Sales
(1)— (1)
Disbursements
(1)(15)(16)
Balance at December 31, 2020279 504 783 
Actual return relating to assets still held at the reporting date
(13)191 178 
Purchases
6 — 6 
Disbursements
— (18)(18)
Balance at December 31, 2021$272 $677 $949 
(1)Cash and short-term investments with related accrued interest are valued at cost, which approximates fair value, and are categorized as Level 1 and Level 2 respectively.
(2)Bonds are valued using mid-market prices obtained from independent pricing data suppliers. When prices are not available from independent sources, the fair value is based on the present value of future cash flows using current market yields for comparable instruments.
(3)Emerging market debt funds are valued based on the net asset value which is readily available and published by each fund's independent administrator.
(4)Mortgages are valued based on the present value of future net cash flows using current market yields for comparable instruments.
(5)Private debt investments are valued based on the net asset value as reported by each fund's manager, generally based on the present value of future net cash flows using current market yields for comparable instruments. In 2021, $16 million of private debt investments are included as part of the specialty portfolio strategy.
(6)The fair value of public equity investments is based on quoted prices in active markets.
(7)Private equity investments are valued based on the net asset value as reported by each fund's manager, generally using discounted cash flow analysis or earnings multiples. In 2021, $295 million of private equity investments are included as part of the specialty portfolio strategy.
(8)The fair value of real estate investments categorized as Level 3 includes immoveable properties. Land is valued based on the fair value of comparable assets, and income producing properties are valued based on the present value of estimated future net cash flows or the fair value of comparable assets. Independent valuations of all immoveable properties are performed triennially on a rotational basis. The fair value of real estate investments categorized as NAV consists mainly of investments in real estate private equity funds and is based on the net asset value as reported by each fund's manager, generally using a discounted cash flow analysis or earnings multiples.
(9)Resource and royalties investments categorized as Level 1 are valued based on quoted prices in active markets. Resource and royalties participations traded on a secondary market are valued based on the most recent transaction price and are categorized as Level 2. Investments in resource and royalties categorized as Level 3 consist of operating resource and royalties properties and the fair value is based on estimated future net cash flows that are discounted using prevailing market rates for transactions in similar assets. Estimated future net cash flows are based on forecasted resource and royalties prices and projected annual production and costs.
(10)The fair value of infrastructure investments categorized as Level 2 is based on the present value of future cash flows using current market yields for comparable instruments. The fair value of infrastructure funds categorized as NAV is based on the net asset value as reported by each fund's manager, generally using a discounted cash flow analysis or earnings multiples.
(11)Absolute return investments are valued using the net asset value as reported by each fund's independent administrator. All absolute return investments have contractual redemption frequencies, ranging from monthly to annually, and redemption notice periods varying from 5 to 90 days. In 2021, $39 million of absolute return investments are included as part of the specialty portfolio strategy.
(12)Alternative risk premia investments are valued using the net asset value as reported by each fund's independent administrator or fund manager. All funds have contractual redemption frequencies ranging from daily to annually, and redemption notice periods varying from 5 to 60 days.
(13)Derivative financial instruments, which are included in total investments, are valued using quoted market prices when available and are categorized as Level 1, or based on valuation techniques using market data, when quoted market prices are not available and are categorized as Level 2. Derivatives are included in the investment asset categories based on their underlying exposure.
(14)Investment-related liabilities include securities sold under repurchase agreements. The securities sold under repurchase agreement do not meet the conditions to remove from the assets and are therefore maintained on the books with an offsetting liability recorded to represent the financing nature of this transaction. These agreements are recorded at cost, which together with accrued interest approximates fair value due to their short-term nature.
(15)Other consists of operating assets of $134 million (2020 - $262 million) and liabilities of $47 million (2020 - $176 million) required to administer the Trusts' investment assets and the plans' benefit and funding activities. Such assets are valued at cost and have not been assigned to a fair value category.
Schedule of obligations and funded status
Obligations and funded status for defined benefit pension and other postretirement benefit plans
PensionsOther postretirement benefits
In millionsYear ended December 31,2021202020212020
Change in benefit obligation
Projected benefit obligation at beginning of year$19,499 $18,609 $228 $227 
Curtailments(52)— — — 
Interest cost392 532 5 6 
Actuarial (gain) loss on projected benefit obligation (1)
(1,206)1,208 (7)9 
Current service cost197 175 2 2 
Plan participants' contributions61 59 — — 
Foreign currency changes(3)(7)(2)— 
Benefit payments, settlements and transfers(1,075)(1,077)(14)(16)
Projected benefit obligation at the end of the year (2)
$17,813 $19,499 $212 $228 
Component representing future salary increases(179)(271)— — 
Accumulated benefit obligation at end of year$17,634 $19,228 $212 $228 
Change in plan assets
Fair value of plan assets at beginning of year$19,723 $18,424 $— $— 
Employer contributions104 93 — — 
Plan participants' contributions61 59 — — 
Foreign currency changes(2)(6)— — 
Actual return on plan assets1,605 2,230 — — 
Benefit payments, settlements and transfers(1,075)(1,077)— — 
Fair value of plan assets at end of year (2)
$20,416 $19,723 $— $— 
Funded status - Excess (deficiency) of fair value of plan assets
over projected benefit obligation at end of year
$2,603 $224 $(212)$(228)
(1)Substantially all of the pensions' actuarial gain for the year ended December 31, 2021 and actuarial loss for the year ended December 31, 2020 is the result of the change in the end of year discount rate of the current year versus the prior year (60 basis points increase for 2021 and 55 basis points decrease for 2020).
(2)For the CN Pension Plan, as at December 31, 2021, the projected benefit obligation was $16,557 million (2020 - $18,075 million) and the fair value of plan assets was $19,485 million (2020 - $18,774 million). The measurement date of all plans is December 31.
Amounts recognized in the consolidated balance sheet
Amounts recognized in the Consolidated Balance Sheets
PensionsOther postretirement benefits
In millionsDecember 31,2021202020212020
Noncurrent assets - Pension asset$3,050 $777 $— $— 
Current liabilities (Note 14)
— — (14)(14)
Noncurrent liabilities - Pension and other postretirement benefits(447)(553)(198)(214)
Total amount recognized$2,603 $224 $(212)$(228)
Amounts recognized in accumulated other comprehensive loss
Amounts recognized in Accumulated other comprehensive loss (Note 20)
PensionsOther postretirement benefits
In millionsDecember 31,2021202020212020
Net actuarial gain (loss)$(2,092)$(4,165)$3 $— 
Prior service credit (cost)$— $— $3 $4 
Information for the pension plans with an accumulated benefit obligation in excess of plan assets
Information for defined benefit pension plans with an accumulated benefit obligation in excess of plan assets
Pensions
In millionsDecember 31,20212020
Accumulated benefit obligation (1)
$542 $724 
Fair value of plan assets (1)
$111 $242 
(1)    All of the Company's other postretirement benefit pension plans have an accumulated benefit obligation in excess of plan assets.
Information for the pension plans with a projected benefit obligation in excess of plan assets
Information for defined benefit pension plans with a projected benefit obligation in excess of plan assets
Pensions
In millionsDecember 31,20212020
Projected benefit obligation$661 $900 
Fair value of plan assets$214 $347 
Components of net periodic benefit cost (income)
Components of net periodic benefit cost (income) for defined benefit pension and other postretirement benefit plans
PensionsOther postretirement benefits
In millionsYear ended December 31,202120202019202120202019
Current service cost$197 $175 $143 $2 $2 $2 
Other components of net periodic benefit cost (income)
Interest cost392 532 596 5 6 8 
Settlement loss2 2 5 — — — 
Expected return on plan assets(1,061)(1,095)(1,085)— — — 
Amortization of prior service cost— 3 3 (1)— — 
Amortization of net actuarial loss (gain)269 242 155 (4)(5)(3)
Total Other components of net periodic benefit cost (income)$(398)$(316)$(326)$— $1 $5 
Net periodic benefit cost (income)$(201)$(141)$(183)$2 $3 $7 
Weighted-average assumptions used in accounting for pensions and other postretirement benefits
Weighted-average assumptions used in accounting for defined benefit pension and other postretirement benefit plans
PensionsOther postretirement benefits
December 31,202120202019202120202019
To determine projected benefit obligation
Discount rate (1)
3.15 %2.55 %3.10 %3.06 %2.53 %3.14 %
Rate of compensation increase (2)
2.75 %2.75 %2.75 %2.75 %2.75 %2.75 %
To determine net periodic benefit cost (income)
Rate to determine current service cost (3)
3.02 %3.20 %3.93 %2.95 %3.35 %4.25 %
Rate to determine interest cost (3)
2.10 %2.86 %3.47 %1.90 %2.84 %3.68 %
Rate of compensation increase (2)
2.75 %2.75 %2.75 %2.75 %2.75 %2.75 %
Expected return on plan assets (4)
6.79 %7.00 %7.00 %N/AN/AN/A
(1)    The Company's discount rate assumption, which is set annually at the end of each year, is determined by management with the aid of third-party actuaries. The discount rate is used to measure the single amount that, if invested at the measurement date in a portfolio of high-quality debt instruments with a rating of AA or better, would provide the necessary cash flows to pay for pension benefits as they become due. For the Canadian pension and other postretirement benefit plans, future expected benefit payments are discounted using spot rates based on a derived AA corporate bond yield curve for each maturity year.
(2)    The rate of compensation increase is determined by the Company based upon its long-term plans for such increases.
(3)    The Company uses the spot rate approach to measure current service cost and interest cost for all defined benefit pension and other postretirement benefit plans. Under the spot rate approach, individual spot discount rates along the same yield curve used in the determination of the projected benefit obligation are applied to the relevant projected cash flows at the relevant maturity. The rates to determine current service cost and interest cost were 2.88% and 1.95% for the January to October 2021 period and 3.69% and 2.83% for the November to December 2021 period.
(4)    The expected long-term rate of return is determined based on expected future performance for each asset class and is weighted based on the investment policy. For the January to October and November to December periods of 2021, the Company used a long-term rate of return assumption of 6.75% and 7.00% respectively on the market-related value of plan assets prevailing for those same periods to compute net periodic benefit cost (income). The Company has elected to use a market-related value of assets whereby realized and unrealized gains/losses and appreciation/depreciation in the value of the investments are recognized over a period of five years, while investment income is recognized immediately. The increase to the expected long-term rate of return on plan assets by 25 basis points to 7.00% for the November to December period of 2021 reflects management's current view of long-term investment returns. In 2022, the Company will maintain the expected long-term rate of return on plan assets of 7.00% as management's current view of long-term investment returns remains unchanged from what was existing on October 31, 2021.
Estimated future benefit payments
Expected future benefit payments
The following table provides the expected benefit payments for pensions and other postretirement benefits for the next five years and the subsequent five-year period:
In millionsPensionsOther postretirement
benefits
2022$1,053 $14 
2023$1,055 $13 
2024$1,046 $13 
2025$1,040 $12 
2026$1,032 $11 
Years 2027 to 2031
$5,009 $53