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RETIREMENT AND POSTRETIREMENT BENEFIT PLANS
 12 Months Ended
Dec. 31, 2021
Retirement Benefits [Abstract]  
RETIREMENT AND POSTRETIREMENT BENEFIT PLANS RETIREMENT AND POSTRETIREMENT BENEFIT PLANS
DEFINED BENEFIT PENSION 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 were 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 consolidated and combined statements of operations, and the Company did 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 consolidated and 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 consolidated and combined balance sheet.

In addition, 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 in all periods presented. All balances related to these plans are reflected in deferred charges and other assets and other liabilities in the consolidated and combined balance sheet.

U.S. PENSION PLAN

The Sylvamo defined benefit pension plan was transferred with a projected benefit obligation (“PBO”) and assets of approximately $261 million and $253 million, respectively, as of September 1, 2021. As of December 31, 2021, the defined benefit pension plan is 95% funded, with a PBO and assets of approximately $263 million and $250 million, respectively. The plan net unfunded obligation has been recorded in other liabilities in the consolidated and combined balance sheet.

INTERNATIONAL PLANS

As part of the separation, International Paper transferred certain international pension plans in Belgium, France and Poland to the Company for the Company’s active employees participating in these plans. As of December 31, 2021, the net unfunded pension liability for these plans was $12 million, comprised of a PBO of $16 million and assets of $4 million. The plan net unfunded obligation has been recorded in other liabilities in the consolidated and combined balance sheet.

The defined benefit pension plans in the UK and Brazil were accounted for as single-employer plans in all periods presented. As of December 31, 2021, the net pension asset was $9 million, comprised of a PBO of $168 million and assets of $177 million. The net pension asset for these plans has been recorded in deferred charges and other assets in the consolidated and combined balance sheet.

As the Brazil and UK defined benefit pension plans were accounted for as single-employer plans in all periods presented, the following tables reflect balances related to those plans for the full twelve-month period in 2019, 2020, and 2021. However, all other defined benefit pension plan balances and costs are reflected as direct to the employer as of September 1, 2021. The transfer of these balances is shown within pension plan transfer from Parent, and the changes in the projected benefit obligation
and pension assets reflect only four months of net periodic pension expense for those plans which were not single-employer throughout all periods presented.

OBLIGATIONS AND FUNDED STATUS

The following table shows the changes in the benefit obligation and plan assets and the plans’ funded status. The transfer of the PBO and assets which were accounted for as multi-employer until October 1, 2021, are reflected within the Pension plan transfer from Parent line below, and three months of activity after the spin-off date is reflected within the table for 2021.
In millions
20212020
Change in projected benefit obligation:
Benefit obligation, January 1
$171 $165 
Pension plan transfer from Parent287 — 
Service cost
2 1 
Interest cost
6 4 
Actuarial loss (gain)
— 7 
Benefits paid
(5)(5)
Expenses paid from assets(1)— 
Effect of foreign currency exchange rate movements
2 (1)
Benefit obligation, December 31
$462 $171 
Change in plan assets:
Fair value of plan assets, January 1
$171 $163 
Pension plan transfer from Parent252 — 
Actual return on plan assets
2 11 
Company contributions
10 4 
Benefits paid
(5)(5)
Expenses paid from assets(1)— 
Effect of foreign currency exchange rate movements
2 (2)
Fair value of plan assets, December 31
$431 $171 
Funded status, December 31
$(31)$— 
Amounts recognized in the consolidated and combined balance sheets:
Non-current asset
$8 $5 
Non-current liability
(39)(5)
$(31)$— 
Amounts recognized in accumulated other comprehensive income under ASC 715 (pre-tax):
Net prior service cost$2 $— 
Net actuarial loss
106 63 
$108 $63 
The following table summarizes obligation and asset information:
In millions as of December 31
20212020
Projected benefit obligation
$462 $171 
Accumulated benefit obligation
446 168 
Fair value of plan assets
431 171 

NET PERIODIC PENSION EXPENSE

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.

Net periodic pension expense comprised the following:
In millions
202120202019
Service cost
$2 $1 $1 
Interest cost6 4 5 
Expected return on plan assets
(11)(8)(9)
Actuarial loss (gain)
2 1 1 
Net periodic pension expense (benefit)
$(1)$(2)$(2)

The components of net periodic pension expense are included in cost of products sold and selling and administrative expenses in the consolidated and combined statements of operations.

ASSUMPTIONS

The Company evaluates its actuarial assumptions annually as of December 31 (the measurement date) and considers changes in these long-term factors based upon market conditions and the requirements for employers’ accounting for pensions. These assumptions are used to calculate benefit obligations as of December 31 of the current year and pension expense to be recorded in the following year (i.e., the discount rate used to determine the benefit obligation as of December 31, 2021 is also the discount rate used to determine net pension expense for the 2022 year).
Major actuarial assumptions used in determining the benefit obligations and net periodic pension cost for our defined benefit plans are presented in the following table:
202120202019
Actuarial assumptions used to determine benefit obligations as of December 31:
Discount rate
2.79 %2.27 %2.80 %
Rate of compensation increase
3.36 %3.54 %3.39 %
Actuarial assumptions used to determine net periodic pension cost for years ended December 31:
Discount rate
2.79 %2.76 %4.23 %
Expected long-term rate of return on plan assets
5.38 %4.84 %6.59 %
Rate of compensation increase
2.85 %3.42 %3.63 %
PLAN ASSETS
The plans maintain a strategic asset allocation policy that designates target allocations by asset class. Investments are diversified across classes and within each class to minimize the risk of large losses. Derivatives, including swaps, forward and futures contracts, may be used as asset class substitutes or for hedging or other risk management purposes. Periodic reviews are made of investment policy objectives and investment manager performance. The target allocations for each asset class in 2021 included 25% in equity securities, 70% in debt securities and 5% in other investment types. Each category of investments is diversified and comprised of the following:

•Equity investments - developed market and emerging market equity securities primarily held in mutual funds
•Debt securities - corporate bonds and government securities, both primarily held within common collective trusts and index funds
•Other investments - represents primarily mark-to-market derivatives, cash and cash equivalents and private equity-like investments.
The fair values of Sylvamo’s pension plan assets at December 31, 2020 for the direct plans consisted primarily of diversified investment funds classified as Level 2 assets. The fair value of pension plan assets at December 31, 2021 by asset class are shown below for the material plans which include the U.S. and U.K. pension plans.
Fair Value Measurement at December 31, 2021
Asset Class 
TotalQuoted Prices in Active Markets For Identical Assets (Level 1)Significant Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
In millions
Cash and cash equivalents
$17 $17 $— $— 
Equities - developed markets
88 — 88 — 
Equities - emerging markets8 — 8 — 
Government securities59 23 36 — 
Corporate bonds137 — 137 — 
Other fixed income securities91 — 91 — 
Derivatives2 1 1 — 
Other
4 — 4 — 
Total Investments
$406 $41 $365 $— 

FUNDING AND CASH FLOWS

The Company’s funding policy for the pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plans, tax deductibility, cash flow generated by the Company, and other factors. The Company continually reassesses the amount and timing of any discretionary contributions. Generally, the non-U.S. pension plans are funded using the projected benefit as a target, except in certain countries where funding of benefit plans is not required.

At December 31, 2021, projected future pension benefit payments, excluding any termination benefits, were as follows:

In millions
2022$6 
20237 
20249 
202511 
202613 
2027-203196 

OTHER POSTRETIREMENT BENEFITS

Certain of the Company’s Brazilian employees are eligible for retiree health care and life insurance benefits. The accumulated benefit obligation for this plan as of December 31, 2021 and 2020 was $8 million and $17 million, respectively, which is recorded within other liabilities in the consolidated and combined balance sheets. The year over year change in the accumulated benefit obligation is primarily due to certain retirees electing not to participate in the plan, resulting in an experience gain.

DEFERRED COMPENSATION AND NON-QUALIFIED PENSION PLAN

As part of our separation from International Paper and pursuant to the Employee Matters Agreement between us and International Paper, we have assumed responsibility for certain deferred compensation and non-qualified pension plan balances related to our employees. These employees previously participated in plans sponsored by International Paper. As our employees become eligible for and these benefits are paid, we will be reimbursed by International Paper. We have recorded a receivable of $24 million reflected within deferred charges and other assets of our consolidated and combined balance sheet as of December 31, 2021 related to the plans. The deferred compensation savings plan liability of $18 million as of December 31, 2021 is recorded within accounts payable in the combined balance sheet. The non-qualified pension plan is included within the
pension obligation and funded status presented above, and the liability is recorded in other liabilities in the combined balance sheet.