Pension and Other Postretirement Employee Benefit Plans

12 Months Ended

Dec. 31, 2018

Retirement Benefits [Abstract]

Pension and Other Postretirement Employee Benefit Plans

Pension and other postretirement employee benefit plans

The Firm has various defined benefit pension plans and OPEB plans that provide benefits to its employees in the U.S. and certain non-U.S. locations. The Firm also provides a qualified defined contribution plan in the U.S. and maintains other similar arrangements in certain non-U.S. locations.

The principal defined benefit pension plan in the U.S. is a qualified noncontributory plan that provides benefits to substantially all U.S. employees. In connection with changes to the U.S. Retirement Savings Program during the fourth quarter of 2018, the Firm announced that it will freeze the U.S. defined benefit pension plan. Commencing on January 1, 2020 (and January 1, 2019 for new hires), pay credits will be directed to the U.S. defined contribution plan. Interest credits will continue to accrue. As a result, a curtailment was triggered and a remeasurement of the U.S. defined benefit pension obligation and plan assets occurred as of November 30, 2018. The plan design change resulted in an increase to pension expense of $21 million representing the immediate recognition of the prior service cost, but did not have a material impact on the U.S. defined benefit pension plan or the Firm’s Consolidated Financial Statements.

The Firm also has defined benefit pension plans that are offered in certain non-U.S. locations based on factors such as eligible compensation, age and/or years of service. It is the Firm’s policy to fund the pension plans in amounts sufficient to meet the requirements under applicable laws. The Firm does not anticipate at this time any contribution to the U.S. defined benefit pension plan in 2019. The 2019 contributions to the non-U.S. defined benefit pension plans are expected to be $45 million of which $30 million are contractually required.

The Firm also has a number of nonqualified noncontributory defined benefit pension plans that are unfunded. These plans provide supplemental defined pension benefits to certain employees.

The Firm offers postretirement medical and life insurance benefits to certain U.S. retirees and postretirement medical benefits to qualifying U.S. and U.K. employees.

The Firm defrays the cost of its U.S. OPEB obligation through corporate-owned life insurance (“COLI”) purchased on the lives of eligible employees and retirees. While the Firm owns the COLI policies, COLI proceeds (death benefits, withdrawals and other distributions) may be used only to reimburse the Firm for its net postretirement benefit claim payments and related administrative expense. The Firm has generally funded its postretirement benefit obligations through contributions to the relevant trust on a pay-as-you go basis. On December 21, 2017, the Firm contributed $600 million of cash to the trust as a prefunding of a portion of its postretirement benefit obligations. The U.K. OPEB plan is unfunded.   

Pension and OPEB accounting generally requires that the difference between plan assets at fair value and the benefit obligation be measured and recorded on the balance sheet. Plans that are overfunded (excess of plan assets over benefit obligation) are recorded in other assets and plans that are underfunded (excess benefit obligation over plan assets) are recorded within other liabilities. Gains or losses resulting from changes in the benefit obligation and the value of plan assets are recorded in other comprehensive income (“OCI”) and recognized as part of the net periodic benefit cost over subsequent periods as discussed in the Gains and losses section of this Note. Additionally, income statement items related to pension and OPEB plans (other than benefits earned during the period) are aggregated and reported net within other expense.

The following table presents the changes in benefit obligations, plan assets, the net funded status, and the pretax pension and OPEB amounts recorded in AOCI on the Consolidated balance sheets for the Firm’s defined benefit pension and OPEB plans, and the weighted-average actuarial annualized assumptions for the projected and accumulated postretirement benefit obligations.

As of or for the year ended December 31,	Defined benefit pension plans								OPEB plans(h)
(in millions)	2018				2017				2018			2017
Change in benefit obligation
Benefit obligation, beginning of year	$	(16,700	)		$	(15,594	)		$	(684	)	$	(708	)
Benefits earned during the year	(354		)		(330		)		—			—
Interest cost on benefit obligations	(556		)		(598		)		(24		)	(28		)
Plan amendments	(29		)		—				—			—
Plan curtailment	123				—				—			—
Employee contributions	(7		)		(7		)		(15		)	(16		)
Net gain/(loss)	938			(g)	(721		)	(g)	40			(4		)
Benefits paid	873				841				69			76
Plan settlements	15				30				—			—
Expected Medicare Part D subsidy receipts	NA				NA				—			(1		)
Foreign exchange impact and other	185				(321		)		2			(3		)
Benefit obligation, end of year(a)	$	(15,512	)		$	(16,700	)		$	(612	)	$	(684	)
Change in plan assets
Fair value of plan assets, beginning of year	$	19,603			$	17,703			$	2,757		$	1,956
Actual return on plan assets	(548		)		2,356				(28		)	233
Firm contributions	75				78				2			602
Employee contributions	7				7				15			—
Benefits paid	(873		)		(841		)		(113		)	(34		)
Plan settlements	(15		)		(30		)		—			—
Foreign exchange impact and other	(197		)		330				—			—
Fair value of plan assets, end of year (a)(b)(c)	$	18,052			$	19,603			$	2,633		$	2,757
Net funded status (d)(e)	$	2,540			$	2,903			$	2,021		$	2,073
Accumulated benefit obligation, end of year	$	(15,494	)		$	(16,530	)		NA			NA
Pretax pension and OPEB amounts recorded in AOCI
Net gain/(loss)	$	(3,134	)		$	(2,800	)		$	184		$	271
Prior service credit/(cost)	(23		)		6				—			—
Accumulated other comprehensive income/(loss), pretax, end of year	$	(3,157	)		$	(2,794	)		$	184		$	271
Weighted-average actuarial assumptions used to determine benefit obligations
Discount Rate (f)	0.60 - 4.30 %				0.60 - 3.70 %				4.20		%	3.70		%
Rate of compensation increase (f)	2.25 – 3.00				2.25 – 3.00				NA			NA
Interest crediting rate(f)	1.81 - 4.90%				1.81 - 4.90%				NA			NA
Health care cost trend rate:
Assumed for next year	NA				NA				5.00			5.00
Ultimate	NA				NA				5.00			5.00
Year when rate will reach ultimate	NA				NA				2019			2018

(a) At December 31, 2018 and 2017, included non-U.S. benefit obligations of $(3.3) billion and $(3.8) billion, and plan assets of $3.5 billion and $3.9 billion, respectively, predominantly in the U.K.

(b) At both December 31, 2018 and 2017, approximately $302 million of U.S. defined benefit pension plan assets included participation rights under participating annuity contracts.

(c) At December 31, 2018 and 2017, defined benefit pension plan amounts that were not measured at fair value included $340 million and $377 million, respectively, of accrued receivables, and $503 million and $587 million, respectively, of accrued liabilities, for U.S. plans.

(d) Represents plans with an aggregate overfunded balance of $5.1 billion and $5.6 billion at December 31, 2018 and 2017, respectively, and plans with an aggregate underfunded balance of $547 million and $612 million at December 31, 2018 and 2017, respectively.

(e) For pension plans with a projected benefit obligation exceeding plan assets, the projected benefit obligation and fair value of plan assets was $1.3 billion and $762 million at December 31, 2018, respectively and $1.4 billion and $811 million at December 31, 2017, respectively. For pension plans with an accumulated benefit obligation exceeding plan assets, the accumulated benefit obligation and fair value of plan assets was $1.3 billion and $762 million at December 31, 2018, respectively, and $1.4 billion and $811 million at December 31, 2017, respectively. For OPEB plans with a projected benefit obligation exceeding plan assets, the projected benefit obligation was $26 million and $32 million at December 31, 2018 and December 31, 2017, respectively, they had no plan assets.

(f) For the U.S. defined benefit pension plans, the discount rate assumption is 4.30% and 3.70% for 2018 and 2017, respectively, and the rate of compensation increase and the interest crediting rate are 2.30% and 4.90%, respectively, for both 2018 and 2017.

(g) At December 31, 2018 and 2017, the gain/(loss) was primarily attributable to the change in the discount rate.

(h)

Includes an unfunded postretirement benefit obligation of $26 million and $32 million at December 31, 2018 and 2017, respectively, for the U.K. plan.Gains and losses

For the Firm’s defined benefit pension plans, fair value is used to determine the expected return on plan assets. Amortization of net gains and losses is included in annual net periodic benefit cost if, as of the beginning of the year, the net gain or loss exceeds 10% of the greater of the PBO or the fair value of the plan assets. Any excess is amortized over the average future service period of defined benefit pension plan participants, which for the U.S. defined benefit pension plan is currently eight years and for the non-U.S. defined benefit pension plans is the period appropriate for the affected plan. In addition, prior service costs are amortized over the average remaining service period of active employees expected to receive benefits under the plan when the prior service cost is first recognized. Due to the curtailment of the principal U.S. defined benefit pension plan in 2018, all related prior service cost was recognized in the annual net periodic benefit cost.

For the Firm’s OPEB plans, a calculated value that recognizes changes in fair value over a five-year period is used to determine the expected return on plan assets. This value is referred to as the market-related value of assets. Amortization of net gains and losses, adjusted for gains and losses not yet recognized, is included in annual net periodic benefit cost if, as of the beginning of the year, the net gain or loss exceeds 10% of the greater of the accumulated postretirement benefit obligation or the market-related value of assets. Any excess net gain or loss is amortized over the average expected lifetime of retired participants, which is currently eleven years; however, prior service costs resulting from plan changes are amortized over the average years of service remaining to full eligibility age, which is currently one year.

The following table presents the components of net periodic benefit costs reported in the Consolidated statements of income for the Firm’s U.S. and non-U.S. defined benefit pension, defined contribution and OPEB plans, and in other comprehensive income for the defined benefit pension and OPEB plans, and the weighted-average annualized actuarial assumptions for the net periodic benefit cost.

	Pension plans									OPEB plans
Year ended December 31, (in millions)	2018			2017			2016			2018			2017			2016
Components of net periodic benefit cost
Benefits earned during the year	$	354		$	330		$	332		$	—		$	—		$	—
Interest cost on benefit obligations	556			598			629			24			28			31
Expected return on plan assets	(981		)	(968		)	(1,030		)	(103		)	(97		)	(105		)
Amortization:
Net (gain)/loss	103			250			257			—			—			—
Prior service cost/(credit)	(23		)	(36		)	(36		)	—			—			—
Curtailment (gain)/loss	21			—			—			—			—			—
Settlement (gain)/loss	2			2			4			—			—			—
Net periodic defined benefit cost(a)	$	32		$	176		$	156		$	(79	)	$	(69	)	$	(74	)
Other defined benefit pension plans(b)	20			24			25			NA			NA			NA
Total defined benefit plans	$	52		$	200		$	181		$	(79	)	$	(69	)	$	(74	)
Total defined contribution plans	872			814			789			NA			NA			NA
Total pension and OPEB cost included in noninterest expense	$	924		$	1,014		$	970		$	(79	)	$	(69	)	$	(74	)
Changes in plan assets and benefit obligations recognized in other comprehensive income
Prior service (credit)/cost arising during the year	29			—			—			—			—			—
Net (gain)/loss arising during the year	467			(669		)	395			91			(133		)	(29		)
Amortization of net loss	(103		)	(250		)	(257		)	—			—			—
Amortization of prior service (cost)/credit	23			36			36			—			—			—
Curtailment gain/(loss)	(21		)	—			—			—			—			—
Settlement gain/(loss)	(2		)	(2		)	(4		)	—			—			—
Foreign exchange impact and other	(30		)	54			(77		)	(4		)	—			—
Total recognized in other comprehensive income	$	363		$	(831	)	$	93		$	87		$	(133	)	$	(29	)
Total recognized in net periodic benefit cost and other comprehensive income	$	395		$	(655	)	$	249		$	8		$	(202	)	$	(103	)
Weighted-average assumptions used to determine net periodic benefit costs
Discount rate(c)	0.60 - 4.50 %			0.60 - 4.30 %			0.90 – 4.50%			3.70		%	4.20		%	4.40		%
Expected long-term rate of return on plan assets (c)	0.70 - 5.50			0.70 - 6.00			0.80 – 6.50			4.00			5.00			5.75
Rate of compensation increase (c)	2.25 - 3.00			2.25 - 3.00			2.25 – 4.30			NA			NA			NA
Interest crediting rate(c)	1.81- 4.90%			1.81- 4.90%			1.56- 4.90%			NA			NA			NA
Health care cost trend rate
Assumed for next year	NA			NA			NA			5.00			5.00			5.50
Ultimate	NA			NA			NA			5.00			5.00			5.00
Year when rate will reach ultimate	NA			NA			NA			2018			2017			2017

(a) Effective January 1, 2018, benefits earned during the year are reported in compensation expense; all other components of net periodic defined benefit costs are reported within other expense in the Consolidated statements of income.

(b) Includes various defined benefit pension plans which are individually immaterial.

(c)

The rate assumptions for the U.S. defined benefit pension plans are at the upper end of the range, except for the rate of compensation increase, which is 2.30% for both 2018 and 2017, and 3.50% for 2016.Plan assumptions

The Firm’s expected long-term rate of return for defined benefit pension and OPEB plan assets is a blended weighted average, by asset allocation of the projected long-term returns for the various asset classes, taking into consideration local market conditions and the specific allocation of plan assets. Returns on asset classes are developed using a forward-looking approach and are not strictly based on historical returns. Consideration is also given to current market conditions and the short-term portfolio mix of each plan.

The discount rate used in determining the benefit obligation under the U.S. defined benefit pension and OPEB plans was provided by the Firm’s actuaries. This rate was selected by reference to the yields on portfolios of bonds with maturity dates and coupons that closely match each of the plan’s projected cash flows. The discount rate for the U.K. defined benefit pension plan represents a rate of appropriate duration from the analysis of yield curves provided by the Firm’s actuaries.

At December 31, 2018, the Firm increased the discount rates used to determine its benefit obligations for the U.S. defined benefit pension and OPEB plans in light of curr

ent market interest rates, which will decrease expense by approximately $20 million in 2019. The 2019 expected long-term rate of return on U.S. defined benefit pension plan assets and U.S. OPEB plan assets are 5.50% and 4.30%, respectively. As of December 31, 2018, the interest crediting rate assumption was 4.90%.

The following table represents the effect of a 25-basis point decline in the two listed rates below on estimated 2019 defined benefit pension and OPEB plan expense, as well as the effect on the postretirement benefit obligations.

(in millions)	Defined benefit pension and OPEB plan expense		Benefit obligation
Expected long-term rate of return	$	51	NA
Discount rate	$	50	$	490

Investment strategy and asset allocation

The assets of the Firm’s defined benefit pension plans are held in various trusts and are invested in well-diversified portfolios of equity and fixed income securities, cash and cash equivalents, and alternative investments. The trust-owned assets of the Firm’s U.S. OPEB plan are invested primarily in fixed income securities. COLI policies used to defray the cost of the Firm’s U.S. OPEB plan are invested in separate accounts of an insurance company and are allocated to investments intended to replicate equity and fixed income indices.

The investment policies for the assets of the Firm’s defined benefit pension plans are to optimize the risk-return relationship as appropriate to the needs and goals of each plan using a global portfolio of various asset classes diversified by market segment, economic sector, and issuer. Assets are managed by a combination of internal and external investment managers. The Firm regularly reviews the asset allocations and asset managers, as well as other factors that impact the portfolios, which are rebalanced when deemed necessary.

Investments held by the plans include financial instruments which are exposed to various risks such as interest rate, market and credit risks. Exposure to a concentration of credit risk is mitigated by the broad diversification of both U.S. and non-U.S. investment instruments. Additionally, the investments in each of the collective investment funds and/or registered investment companies are further diversified into various financial instruments. As of December 31, 2018, assets held by the Firm’s defined benefit pension and OPEB plans do not include JPMorgan Chase common stock, except through indirect exposures through investments in third-party stock-index funds. The plans hold investments in funds that are sponsored or managed by affiliates of JPMorgan Chase in the amount of $3.7 billion and $6.0 billion, as of December 31, 2018 and 2017, respectively.

The following table presents the weighted-average asset allocation of the fair values of total plan assets at December 31 for the years indicated, as well as the respective approved asset allocation ranges by asset class.

Defined benefit pension plans(a)							OPEB plan(d)
	Asset		% of plan assets				Asset		% of plan assets
December 31,	Allocation		2018		2017		Allocation		2018		2017
Asset class
Debt securities(b)	27-100%		48	%	42	%	30-70%		61	%	61	%
Equity securities	10-45		37		42		30-70		39		39
Real estate	0-10		2		3		—		—		—
Alternatives (c)	0-35		13		13		—		—		—
Total	100	%	100	%	100	%	100	%	100	%	100	%

(a) Represents the U.S. defined benefit pension plan only, as that is the most significant plan.

(b) Debt securities primarily includes cash and cash equivalents, corporate debt, U.S. federal, state, local and non-U.S. government, and mortgage-backed securities.

(c) Alternatives primarily include limited partnerships.

(d)

Represents the U.S. OPEB plan only, as the U.K. OPEB plan is unfunded.Fair value measurement of the plans’ assets and liabilities

For information on fair value measurements, including descriptions of level 1, 2, and 3 of the fair value hierarchy and the valuation methods employed by the Firm, refer to Note 2.

Pension and OPEB plan assets and liabilities measured at fair value
	Defined benefit pension plans
	2018										2017
December 31, (in millions)	Level 1		Level 2			Level 3		Total fair value			Level 1		Level 2			Level 3		Total fair value
Cash and cash equivalents	$	343	$	1		$	—	$	344		$	173	$	1		$	—	$	174
Equity securities	5,342		162			2		5,506			6,407		194			2		6,603
Mutual funds	—		—			—		—			325		—			—		325
Collective investment funds(a)	161		—			—		161			778		—			—		778
Limited partnerships(b)	40		—			—		40			60		—			—		60
Corporate debt securities(c)	—		3,540			3		3,543			—		2,644			4		2,648
U.S. federal, state, local and non-U.S. government debt securities	1,191		743			—		1,934			1,096		784			—		1,880
Mortgage-backed securities	82		272			3		357			92		100			2		194
Derivative receivables	—		143			—		143			—		203			—		203
Other(d)	885		80			302		1,267			2,353		60			302		2,715
Total assets measured at fair value(e)	$	8,044	$	4,941		$	310	$	13,295		$	11,284	$	3,986		$	310	$	15,580
Derivative payables	$	—	$	(96	)	$	—	$	(96	)	$	—	$	(141	)	$	—	$	(141	)
Total liabilities measured at fair value(e)	$	—	$	(96	)	$	—	$	(96	)	$	—	$	(141	)	$	—	$	(141	)

(a) At December 31, 2018 and 2017, collective investment funds primarily included a mix of short-term investment funds, U.S. and non-U.S. equity investments (including index) and real estate funds.

(b) Unfunded commitments to purchase limited partnership investments for the plans were $521 million and $605 million for 2018 and 2017, respectively.

(c) Corporate debt securities include debt securities of U.S. and non-U.S. corporations.

(d) Other consists primarily of mutual funds, money market funds and participating and non-participating annuity contracts. Mutual funds and money market funds are primarily classified within level 1 of the fair value hierarchy given they are valued using market observable prices. Participating and non-participating annuity contracts are classified within level 3 of the fair value hierarchy due to a lack of market mechanisms for transferring each policy and surrender restrictions.

(e) At December 31, 2018 and 2017, excludes $5.0 billion and $4.4 billion of certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient, which are not required to be classified in the fair value hierarchy, $340 million and $377 million of defined benefit pension plan receivables for investments sold and dividends and interest receivables, $479 million and $561 million of defined benefit pension plan payables for investments purchased, and $24 million and $26 million of other liabilities, respectively.

The assets of the U.S. OPEB plan consisted of $561 million and $600 million in corporate debt securities, U.S. federal, state, local and non-U.S. government debt securities and other classified in level 1 and level 2 of the valuation hierarchy and in cash and cash equivalents classified in level 1 of the valuation hierarchy and $2.1 billion and $2.2 billion of COLI policies classified in level 3 of the valuation hierarchy at December 31, 2018 and 2017, respectively.

Changes in level 3 fair value measurements using significant unobservable inputs
(in millions)	Fair value, Beginning balance		Actual return on plan assets					Purchases, sales and settlements, net			Transfers in and/or out of level 3		Fair value, Ending balance
			Realized gains/(losses)		Unrealized gains/(losses)
Year ended December 31, 2018    U.S. defined benefit pension plan        Annuity contracts and other (a)	$	310	$	—	$	—		$	(1	)	$	1	$	310
U.S. OPEB plan        COLI policies	$	2,157	$	—	$	(85	)	$	—		$	—	$	2,072
Year ended December 31, 2017    U.S. defined benefit pension plan        Annuity contracts and other (a)	$	396	$	—	$	1		$	(87	)	$	—	$	310
U.S. OPEB plan        COLI policies	$	1,957	$	—	$	200		$	—		$	—	$	2,157

(a)

Substantially all are participating and non-participating annuity contracts.Estimated future benefit payments

The following table presents benefit payments expected to be paid, which include the effect of expected future service, for the years indicated. The OPEB medical and life insurance payments are net of expected retiree contributions.

Year ended December 31, (in millions)	Defined benefit pension plans		OPEB before Medicare Part D subsidy		Medicare Part D subsidy
2019	$	939	$	62	$	1
2020	932		60		1
2021	921		57		1
2022	920		55		1
2023	919		52		—
Years 2024–2028	4,529		223		2