RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

9 Months Ended

Sep. 30, 2021

Retirement Benefits [Abstract]

RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

Defined Benefit Plans

Direct Pension Plans

The Company has sponsored and maintained certain defined benefit pension plans for participating employees in the United Kingdom and Brazil. The Company’s participation in these plans have been accounted for using the single-employer method.

Service cost is the actuarial present value of benefits attributed by the plans’ benefit formula to services rendered by employees during the year. Interest cost represents the increase in the projected benefit obligation, which is a discounted amount, due to the passage of time. The expected return on plan assets reflects the computed amount of current-year earnings from the investment of plan assets using an estimated long-term rate of return.

Non-service cost components of net periodic pension expense for the Company’s direct plans comprised the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2021		2020		2021		2020
Interest cost	$	1	$	1	$	3	$	3
Expected return on plan assets	(3)		(2)		(7)		(6)
Actuarial loss (gain)	—		—		1		1
Net periodic pension expense (benefit)	$	(2)	$	(1)	$	(3)	$	(2)

For direct plans, service cost was not material in all periods. The components of net periodic pension expense other than the service cost component are included in cost of products sold in the condensed combined statements of operations.

Multiemployer Plans

Certain of the Company’s employees participated in defined benefit pension plans sponsored by International Paper through August 31, 2021, which included participants of other International Paper operations, that are accounted for by International Paper in accordance with accounting guidance for defined benefit pension plans. Accordingly, net periodic pension expense for Company employees was allocated to the Company based upon a percent of salaries and reported in the condensed combined statements of operations, and the Company does not record an asset or liability to recognize the funded or unfunded status of the Plans. The service and non-service cost components of net periodic pension expense for these employees is recorded within cost of products sold and selling and administrative expenses in the condensed combined statements of operations.

As part of our separation from International Paper, the Company established and sponsored pension plans for the benefit of the Company’s employees. Pension assets and obligations relating to the employees of the Company that participated in plans sponsored by International Paper were transferred into pension plans sponsored by the Company. The Company is accounting for these plans as direct to the Company beginning on September 1, 2021. The assets and liabilities were remeasured on September 1, 2021 and all balances related to plans sponsored by the Company are reflected in deferred charges and other assets and other liabilities in the condensed combined balance sheet.

U.S. Pension Plan

The Sylvamo defined benefit pension plan is 97% funded, with a projected benefit obligation (“PBO”) and assets transferred of approximately $272 million and $263 million, respectively, as of September 1, 2021. The plan net unfunded obligation which transferred to the Company in connection with the separation has been recorded in other liabilities in the condensed combined balance sheet.

International Plans

As part of the separation, International Paper transferred certain international pension plans in Belgium, France and Poland (“International Plans”) to the Company for the Company’s active employees participating in these plans. The net unfunded pension liability transferred related to the International Plans was approximately $13 million, comprised of a PBO of $15 million and assets of $2 million, as of September 1, 2021. The International Plans have been accounted for as multi-employer plans in these condensed combined financial statements. The International Plans’ obligations and assets which transferred to the Company in connection with the separation have been recorded in the condensed combined balance sheets. The plan net unfunded obligation which transferred to the Company in connection with the separation has been recorded in other liabilities in the condensed combined balance sheet.