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Pension and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2022
Retirement Benefits [Abstract]  
Pension and Other Postretirement Benefits Pension and Other Postretirement Benefits
Retirement Plan Summary Information
The Company maintains multiple pension plans, both contributory and non-contributory, covering employees at certain locations. Eligibility requirements for participation in the plans vary and benefits generally are based on the participant's compensation and years of service, as defined in the respective
plan. The Company's funding policy generally is to contribute in accordance with cost accounting standards that affect government contractors, subject to the Tax Code and regulations thereunder. With respect to U.S. qualified pension plans, we intend to contribute annually not less than the required minimum funding thresholds. For all periods presented, the Company made no discretionary pension contributions. Plan assets are invested primarily in equities, bonds (both corporate and U.S. government), U.S. government-sponsored entity instruments, cash and cash equivalents and real estate.
The Company also provides postretirement medical benefits for certain retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company's postretirement benefit plans. The Company's contractual arrangements with the U.S. government provide for the recovery of contributions to a Voluntary Employees' Beneficiary Association (“VEBA”) trust and, for non-funded plans, recovery of claims on a pay-as-you-go basis, subject to the Tax Code and regulations thereunder, with the retiree generally paying a portion of the costs through contributions, deductibles and coinsurance provisions.
The Company also maintains certain non-contributory and unfunded supplemental retirement plans. Eligibility for participation in the supplemental retirement plans is limited, and benefits generally are based on the participant's compensation and/or years of service.
The following tables provide certain information regarding the Company's pension, postretirement and supplemental retirement plans as of December 31, 2022 and 2021:
Defined Benefit Pension PlansPostretirement Benefit PlansSupplemental Retirement Plans
(Dollars in millions)202220212022202120222021
Change in benefit obligation:
Benefit obligation at beginning of year$215$226$2$2$22$23
Service cost——————
Interest cost65——11
Plan participants' contributions——————
Actuarial (gain) loss(45)(3)——(5)(1)
Benefits paid(9)(13)(1)—(1)(1)
(Gain) loss due to settlement(5)—————
Plan amendments——————
Exchange rate differences and other——————
Benefit obligation at end of year$162$215$1$2$17$22
Change in plan assets:
Fair value of plan assets at beginning of year$166$151$1$1$12$11
Actual return on plan assets(33)15——(1)1
Plan participants' contributions——————
Employer contributions313——11
Benefits paid(9)(13)——(1)(1)
(Loss) gain due to settlement(3)—————
Exchange rate differences and other——————
Fair value of plan assets at end of year124166111112
Contributions between measurement date and year end——————
Funded status of the plans at year end$(38)$(49)$—$(1)$(6)$(10)
The amounts recognized in the Consolidated Balance Sheet, as of December 31, 2022 and 2021 consist of:
Defined Benefit Pension PlansPostretirement Benefit PlansSupplemental Retirement Plans
(Dollars in millions)202220212022202120222021
Noncurrent assets$—$—$1$1$—$—
Current liabilities——————
Noncurrent liabilities(38)(49)(1)(2)(6)(10)
Net liability recognized
$(38)$(49)$—$(1)$(6)$(10)
Amounts recognized in accumulated other comprehensive income (before taxes) at December 31, 2022 and 2021 consist of:
Defined Benefit Pension PlansPostretirement Benefit Plans Supplemental Retirement Plans
(Dollars in millions)202220212022202120222021
Prior service cost$—$—$—$—$—$—
Net actuarial loss (gain)3140(1)(1)26
Total amount recognized in accumulated other comprehensive losses (earnings)
$31$40$(1)$(1)$2$6
The aggregate accumulated benefit obligation (“ABO”) for the Company's defined benefit pension plans combined was $179 million and $237 million at December 31, 2022 and 2021, respectively. The ABO represents benefits accrued without assuming future compensation increases to plan participants and is approximately equal to our projected benefit obligation (“PBO”).The table below presents information for the pension plans with an ABO and PBO in excess of the fair value of plan assets at December 31, 2022 and 2021.
(Dollars in millions)20222021
Projected benefit obligation$179 $237 
Accumulated benefit obligation179 237 
Fair value of plan assets135 178 
The following table summarizes the weighted average actuarial assumptions used to determine our benefit obligations at December 31, 2022 and 2021:
Defined Benefit Pension PlansPostretirement Benefit PlansSupplemental Retirement Plans
202220212022202120222021
Rate assumptions
Discount rate5.0 %2.8 %4.9 %2.6 %5.1 %2.8 %
Increase in future compensation levelsN/AN/AN/AN/AN/AN/A
Expected long-term return on plan assets7.2 %5.9 %7.2 %5.9 %N/AN/A
Health care trend rate assumed for next yearN/AN/A5.3 %4.6 %N/AN/A
Ultimate health care trend rateN/AN/A4.2 %4.3 %N/AN/A
Year rate reaches ultimate trend rateN/AN/A20372031N/AN/A
The following table summarizes the components of net periodic benefit cost for the Company's pension, postretirement and supplemental retirement plans for the years ended December 31, 2022 and 2021 and 2020. Net actuarial gains and losses are amortized to expense when they exceed the 10%
accounting corridor, based on the greater of the plan assets or benefit obligations, over the average future lifetime for all plans that are frozen, and over the average remaining service period for active plans.
Defined Benefit Pension PlansPostretirement Benefit PlansSupplemental Retirement Plans
(Dollars in millions)202220212020202220212020202220212020
Service cost$— $— $— $— $— $— $— $— $— 
Interest cost$6 $5 $7 $— $— $— $1 $1 $1 
Expected return on plan assets$(7)$(7)$(8)$— $— $— $— $— $— 
Amortization of net actuarial loss (gain)$1 $2 $3 $— $(1)$(1)$— $— $— 
Amortization of prior service cost$— $— $— $— $— $— $— $— $— 
Settlement expense (income)$1 $— $3 $— $— $— $— $— 
Net periodic benefit cost
$1 $— $5 $— $(1)$(1)$1 $1 $1 
The following table summarizes the other changes in plan assets and benefit obligations recognized in other comprehensive earnings for the Company's pension, postretirement and supplemental retirement benefit plans for the years ended December 31, 2022 and 2021 and 2020:
Defined Benefit Pension PlansPostretirement Benefit PlansSupplemental Retirement Plans
(Dollars in millions)202220212020202220212020202220212020
Net actuarial (gain) loss$(8)$(11)$(21)$— $— $(1)$(4)$(1)$(1)
Prior service cost — — — — — — — — — 
Amortization of net actuarial (loss) gain from prior years(2)(2)(6)— 1 1 — — — 
Amortization of prior service cost— — — — — — — — — 
Other(1)
— — — — — — — — — 
Total recognized in other comprehensive income
$(10)$(13)$(27)$— $1 $— $(4)$(1)$(1)
________________
(1) Includes foreign exchange translation.
The following table summarizes the weighted average actuarial assumptions used to determine our net periodic cost of the plans for the years ended December 31, 2022, 2021 and 2020:
Defined Benefit Pension PlansPostretirement Benefit PlansSupplemental Retirement Plans
202220212020202220212020202220212020
Rate assumptions
Discount rate2.8 %2.8 %2.7 %2.6 %2.1 %2.8 %2.8 %2.4 %2.4 %
Expected long - term return on plan assets5.9 %6.4 %6.3 %5.9 %6.4 %5.8 %N/AN/AN/A
Increase in future compensation levelsN/AN/AN/AN/AN/AN/AN/AN/AN/A
Health care trend rate assumed for next yearN/AN/AN/A5.5 %5.8 %6.0 %N/AN/AN/A
Ultimate health care trend rateN/AN/AN/A4.2 %4.5 %4.5 %N/AN/AN/A
Year rate reaches ultimate trend rateN/AN/AN/A203120302029N/AN/AN/A

The expected long-term return on plan assets assumption represents the average rate that the Company expects to earn over the long-term on the assets of the Company's benefit plans, including those from dividends, interest income and capital appreciation. The assumption has been determined based on expectations regarding future rates of return for the plans' investment portfolio, with consideration given to the allocation of investments by asset class and historical rates of return for each individual asset class.
Pension related expenses are reflected in the Costs of revenues and General and administrative expenses on the Consolidated Statement of Earnings.
A one percentage increase or decrease in healthcare trend rates in the table above would have an insignificant impact to our service and interest cost and the postretirement medical obligations.
Plan Assets
The Retirement Committee has been authorized by the Company’s management to manage the strategic oversight of our defined benefit plan assets held in trust. The Retirement Committee has adopted an investment policy and provides oversight of a third party investment manager who reports to the Retirement Committee on a regular basis. The outsourced third party manager develops investment strategies and makes all of the day to day investment decisions related to the defined benefit plan assets in accordance with the investment policy and target asset allocation targets, therein. Presently all of the plans are governed by a single investment policy and are uniformly invested. As part of the policy statement the Company has implemented a glide path which adjusts the percentage of assets invested in return seeking assets based upon the attainment of specific funding percentages. The non-return seeking assets are invested primarily in bonds with maturities closely matching the anticipated payment of benefits. As the funding percentage increase the glide path reduce the amount of the assets invested in return seeking assets.
The table below represents all of the Company's funded pension plans' and postretirement benefit plans' weighted-average asset allocation at December 31, 2022 and 2021 by asset category:
Asset Allocation
20222021
Asset Category
Equity securities37 %41 %
Debt securities49 %47 %
Real estate6 %6 %
Other, primarily cash and cash equivalents, and hedge funds8 %6 %
The table below presents the target allocation ranges for each major asset category for the Company's benefit plans for the years ended December 31, 2022 and 2021.
Target Asset Allocation Range
20222021
Asset Category
Equity securities
30% - 50%
40% - 60%
Debt securities
45% - 65%
30% - 50%
Real estate
—% - 10%
5% - 10%
Other, primarily cash and cash equivalents and hedge funds
—% - 10%
5% - 10%
The following tables provides the fair value of plan assets held by our defined benefit plan by asset category and by fair value hierarchy level. Certain investments are measured at their NAV per share and
do not have readily determined fair values. As such, these investments are not subject to leveling in the fair value hierarchy.
December 31, 2022
(Dollars in millions)Level 1Level 2Level 3Total
Asset category
Investments measured at fair value:
Cash and cash equivalents$10 $— $— $10 
Equity securities5 — — 5 
Debt securities— — — — 
Total$15 $— $— $15 
Investments measured at NAV:
Collective trust funds— — — 121 
Equity and fixed income funds— — — — 
Total
$15 $— $— $136 
December 31, 2021
(Dollars in millions)Level 1Level 2Level 3Total
Asset category
Investments measured at fair value:
Cash and cash equivalents$11 $— $— $11 
Equity securities6 — — 6 
Debt securities— — — — 
Total$17 $— $— $17 
Investments measured at NAV:
Collective trust funds— — — 162 
Equity and fixed income funds— — — — 
Total
$17 $— $— $179 
For the year ended December 31, 2023, the Company expects to contribute $8 million to its pension plans and an inconsequential amount to its postretirement plans.
The following table presents expected pension and postretirement benefit payments over the next 10 years:
(Dollars in millions)Defined Benefit Pension PlansPostretirement Benefit PlansSupplemental Retirement Plans
Year Ending December 31,
2023$11 $— $1 
202412—1
202512—1
202612—1
202712—1
2028-20325916
Defined Contribution Plans
The Company maintains defined contribution plans covering substantially all domestic full-time eligible employees. The Company's contributions to these plans for the years ended December 31, 2022, 2021 and 2020 amounted to $22 million, $22 million and $21 million, respectively.