Note 11 - Employee Retirement Plans

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Retirement Benefits [Text Block]

11.  Employee Retirement Plans

Defined Benefit Plans

Corning has defined benefit pension plans covering certain domestic and international employees. The Company may contribute, as necessary, an amount exceeding the minimum requirements to achieve the Company’s long-term funding targets. During the year ended December 31, 2023, voluntary cash contributions to domestic plans were not material and cash contributions of $25 million were made to international pension plans. During the year ended December 31, 2022, voluntary cash contributions were not material to domestic and international defined benefit plans. In 2024, the Company plans to make cash contributions of $11 million to international pension plans.

Corning offers postretirement plans that provide health care and life insurance benefits for retirees and eligible dependents. Certain employees may become eligible for such postretirement benefits upon reaching retirement age and service requirements. In 2023 and 2022, no voluntary cash contributions were made to domestic postretirement plans. For current retirees (including surviving spouses) and active employees eligible for the salaried retiree medical program, Corning has placed a “cap” on the amount to be contributed toward retiree medical coverage in the future. The cap is equal to 120% of the 2005 contributions toward retiree medical benefits. Once contributions toward salaried retiree medical costs reach this cap, impacted retirees will have to pay the excess amount in addition to their regular contributions for coverage. This cap was attained for post-65 retirees in 2008 and attained for pre-65 retirees in 2010. Furthermore, employees hired or rehired on or after January 1, 2007 will be eligible for Corning retiree medical benefits upon retirement; however, these employees will pay 100% of the cost.

11.  Employee Retirement Plans (Continued)

Obligations and Funded Status

The following table presents the change in benefit obligation and the funded status of the defined benefit pension and post-retirement benefit plans (in millions):

	Domestic pension benefits						International pension benefits						Postretirement benefits
	2023			2022			2023			2022			2023			2022
Change in benefit obligation
Benefit obligation at beginning of year	$	3,182		$	4,075		$	549		$	736		$	434		$	654
Service cost		80			105			18			22			5			9
Interest cost		168			98			20			11			23			15
Plan participants’ contributions														9			7
Plan amendments					28
Actuarial gain		89			(925	)		9			(137	)		(7	)		(209	)
Other (1)		14			3			(3	)		(1	)		1
Benefits paid		(222	)		(202	)		(25	)		(21	)		(40	)		(42	)
Foreign currency translation								10			(61	)
Benefit obligation at end of year	$	3,311		$	3,182		$	578		$	549		$	425		$	434
Change in plan assets
Fair value of plan assets at beginning of year	$	2,683		$	3,598		$	381		$	584		$	5		$	9
Actual gain (loss) on plan assets		281			(728	)		10			(139	)
Employer contributions		18			15			32			8			26			31
Plan participants’ contributions														9			7
Benefits paid		(222	)		(202	)		(25	)		(21	)		(40	)		(42	)
Foreign currency translation								7			(51	)
Fair value of plan assets at end of year	$	2,760		$	2,683		$	405		$	381		$	—		$	5
Funded status at end of year
Fair value of plan assets	$	2,760		$	2,683		$	405		$	381		$	—		$	5
Benefit obligations		(3,311	)		(3,182	)		(578	)		(549	)		(425	)		(434	)
Funded status of plans	$	(551	)	$	(499	)	$	(173	)	$	(168	)	$	(425	)	$	(429	)
Amounts recognized in the consolidated balance sheets consist of:
Noncurrent asset							$	24		$	26
Current liability	$	(17	)	$	(18	)		(8	)		(7	)	$	(27	)	$	(22	)
Noncurrent liability		(534	)		(481	)		(189	)		(187	)		(398	)		(407	)
Recognized liability	$	(551	)	$	(499	)	$	(173	)	$	(168	)	$	(425	)	$	(429	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial loss (gain)	$	259		$	259		$	10		$	(2	)	$	(212	)	$	(226	)
Prior service cost (credit)		34			44						(1	)		(10	)		(15	)
Amounts recognized at end of year	$	293		$	303		$	10		$	(3	)	$	(222	)	$	(241	)

(1) Other consists of domestic plan special termination benefits charge and curtailment and international plan settlements. Refer to Note 2 (Restructuring, Impairment and Other Charges and Credits) in the notes to the consolidated financial statements for more information.

11.  Employee Retirement Plans (Continued)

Across total pension benefits, an actuarial loss of $0.1 billion was recognized in 2023 primarily due to decreases in bond yields during the year, leading to domestic and international plan weighted-average discount rates that were 34 and 16 basis points lower, respectively, than the prior year. In 2022, an actuarial gain of $1.1 billion was recognized primarily due to increases in bond yields during the year, leading to domestic and international plan weighted-average discount rates that were 263 and 126 basis points higher, respectively, than the prior year. The accumulated benefit obligation for defined benefit pension plans was $3.7 billion and $3.5 billion as of  December 31, 2023 and 2022, respectively.

For the years ended December 31, 2023 and 2022, postretirement benefits actuarial gains of $7 million and $209 million, respectively, were recognized.  The decrease in actuarial gain recognized is primarily due to changes in weighted-average discount rates in response to bond yields during the year.  For the years ended December 31, 2023 and 2022, the changes in weighted-average discount rates were a decrease of 34 basis points and an increase of 259 basis points, respectively.

The following table presents information for pension plans where the projected benefit obligation or the accumulated benefit obligation exceeded the fair value of plan assets (in millions):

	December 31,
	2023		2022
Projected benefit obligation	$	3,540	$	3,406
Fair value of plan assets	$	2,791	$	2,712
Accumulated benefit obligation	$	3,376	$	3,238
Fair value of plan assets	$	2,791	$	2,712

The following table presents the components of net periodic benefit expense (income) for employee retirement plans, which other than the service cost component is recorded in other income, net in the consolidated statements of income (in millions):

	Domestic pension benefits									International pension benefits									Postretirement benefits
	2023			2022			2021			2023			2022			2021			2023			2022			2021
Service cost	$	80		$	105		$	102		$	18		$	22		$	25		$	5		$	9		$	10
Interest cost		168			98			78			20			11			10			23			15			15
Expected return on plan assets		(176	)		(210	)		(209	)		(13	)		(9	)		(7	)
Amortization of prior service cost (credit)		6			6			4						(1	)		(1	)		(5	)		(5	)		(6	)
Amortization of actuarial (gain) loss																				(22	)		(5	)		2
Recognition of actuarial (gain) loss		(16	)		29			10			1			8			1
Total net periodic benefit expense (income)	$	62		$	28		$	(15	)	$	26		$	31		$	28		$	1		$	14		$	21
Settlement charge													$	2
Curtailment charge	$	3
Special termination benefit charge		15		$	2														$	1
Total expense (income)	$	80		$	30		$	(15	)	$	26		$	33		$	28		$	2		$	14		$	21
Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income:
Curtailment effects	$	(4	)
Settlements													$	11
Current year actuarial (loss) gain		(16	)	$	16		$	(105	)	$	14			(27	)	$	(7	)	$	5		$	(209	)	$	(105	)
Amortization of actuarial gain (loss)																				22			5			(2	)
Recognition of actuarial gain (loss)		16			(29	)		(10	)		1			20			(1	)
Current year prior service cost					28
Amortization of prior service (cost) credit		(6	)		(6	)		(4	)					1			1			(8	)		5			6
Total recognized in other comprehensive (loss) income	$	(10	)	$	9		$	(119	)	$	15		$	5		$	(7	)	$	19		$	(199	)	$	(101	)

11.  Employee Retirement Plans (Continued)

Corning uses a hypothetical yield curve and associated spot rate curve to discount the plan’s projected benefit payments. Once the present value of projected benefit payments is calculated, the suggested discount rate is equal to the level rate that results in the same present value. The yield curve is based on actual high-quality corporate bonds across the full maturity spectrum, which also includes private placements and eurobonds that are denominated in U.S. currency. The curve is developed from yields on hundreds of bonds from four grading sources, Moody’s, S&P, Fitch and the Dominion Bond Rating Service. A bond will be included if at least half of the grades from these sources are Aa, non-callable bonds. The very highest 10% yields and the lowest 40% yields are excluded from the curve to eliminate outliers in the bond population.

Mortality is one of the key assumptions used in valuing liabilities of retirement plans. It is used to assign a probability of payment for benefits that are contingent upon participants’ survival. To make this assumption, benefit plan sponsors typically use a base mortality table and an improvement scale to mortality rates for future anticipated changes to historical death rates.

As of December 31, 2021, Corning updated the adjustment factors applied to its base mortality assumption (PRI-2012 white collar table and PRI-2012 blue collar table for non-union and union participants, respectively) to value its U.S. benefit plan obligation, with no change in 2022 or 2023. In addition, Corning also updated to the MP-2020 projection scale and the mortality assumption applied to disabled participants (PRI-2012 disabled mortality base table with future improvements using MP-2020) for the year ended December 31, 2020, with no change in 2022 or 2023.  As the Society of Actuaries publishes additional mortality improvement scales and base mortality tables, Corning considers these revised schedules in setting its mortality assumptions.

Measurement of postretirement benefit expense is based on assumptions used to value the postretirement benefit obligation at the beginning of the year.

The following table presents the weighted-average assumptions used to determine benefit obligations:

	Pension benefits
	Domestic									International									Postretirement benefits
	2023			2022			2021			2023			2022			2021			2023			2022			2021
Discount rate		5.16	%		5.50	%		2.87	%		2.30	%		2.46	%		1.20	%		5.24	%		5.58	%		2.99	%
Rate of compensation increase		3.97	%		3.48	%		3.50	%		3.74	%		3.73	%		3.63	%
Cash balance crediting rate		4.22	%		4.14	%		3.86	%		0.82	%		0.82	%		0.91	%
Employee contributions crediting rate		5.25	%		4.62	%		1.57	%

The following table presents the weighted-average assumptions used to determine net periodic benefit expense (income):

	Pension benefits
	Domestic									International									Postretirement benefits
	2023			2022			2021			2023			2022			2021			2023			2022			2021
Discount rate		5.50	%		2.88	%		2.50	%		2.46	%		1.20	%		1.02	%		5.58	%		2.99	%		2.69	%
Expected return on plan assets		6.75	%		6.00	%		6.00	%		3.85	%		1.64	%		1.26	%
Rate of compensation increase		3.87	%		3.50	%		4.16	%		3.73	%		3.63	%		3.55	%
Cash balance crediting rate		3.86	%		3.86	%		3.84	%		0.82	%		0.91	%		0.94	%
Employee contributions crediting rate		4.62	%		1.57	%		0.62	%

The following table presents the assumed health care trend rates:

Assumed health care trend rates as of December 31	2023		2022
Health care cost trend rate assumed for next year (pre-65 / post-65 retirees)	6.75% / 14.75%		7.00% / 4.25%
Ultimate health care trend rate	5	%	5	%
Year that the rate reaches the ultimate trend rate	2031		2031

11.  Employee Retirement Plans (Continued)

Plan Assets

The Company’s primary objective is to ensure the plan has sufficient return on assets to fund the plan’s current and future obligations as they become due. Investments are primarily made in public securities to ensure adequate liquidity to support benefit payments. Domestic and international stocks provide diversification to the portfolio. The target allocation range equity investment is 50% which includes large, mid and small-cap companies and investments in both developed and emerging markets. The target allocation for bond investments is 50%, which predominately includes corporate bonds. Long-duration fixed income assets are utilized to mitigate the sensitivity of funding ratios to changes in interest rates.

The following table presents the fair values of domestic defined benefit and post-retirement benefit plan assets, by asset category (in millions):

	December 31, 2023								December 31, 2022
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Equity securities:
U.S. companies	$	1,260	$	9	$	1,251			$	1,168	$	63	$	1,105
International companies
Fixed income:
U.S. treasury bonds		204		204						400		400
U.S. corporate bonds		946				946				1,060				1,060
Preferred securities		1				1				1				1
Private equity (1)										24					$	24
Real estate (2)		3					$	3		7						7
Cash equivalents		346		339		7				28		28
Total	$	2,760	$	552	$	2,205	$	3	$	2,688	$	491	$	2,166	$	31

(1) This category includes venture capital, leverage buyouts and distressed debt limited partnerships invested primarily in U.S. companies. The inputs are valued by discounted cash flow analysis and comparable sale analysis.

(2) This category includes industrial, office, apartments, hotels, infrastructure and retail investments which are limited partnerships predominately in the U.S. The inputs are valued by discounted cash flow analysis; comparable sale analysis and periodic external appraisals.

The following table presents the fair values of international defined benefit plan assets, by asset category (in millions):

	December 31, 2023								December 31, 2022
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Fixed income:
International fixed income	$	96	$	96					$	87	$	87
Insurance contracts		195					$	195		192					$	192
Mortgages		43						43		42						42
Cash equivalents		59		59						48		48
Other		12						12		12		1				11
Total	$	405	$	155	$	-	$	250	$	381	$	136	$	-	$	245

11.  Employee Retirement Plans (Continued)

The following table presents the changes in the fair value of the defined benefit plans’ Level 3 assets (in millions):

	Domestic						International
	Private equity			Real estate			Mortgages		Insurance contracts		Other
Balance as of December 31, 2021	$	41		$	10		$	22	$	2
Actual return on plan assets relating to assets still held at the reporting date		(8	)					1
Actual return on plan assets relating to assets sold during the reporting period								1
Asset (sales) purchases		(9	)		(3	)		18		190	$	11
Balance as of December 31, 2022	$	24		$	7		$	42	$	192	$	11
Actual return on plan assets relating to assets still held at the reporting date		(12	)					1
Actual return on plan assets relating to assets sold during the reporting period
Asset (sales) purchases		(12	)		(4	)				3		1
Balance as of December 31, 2023	$	—		$	3		$	43	$	195	$	12

Credit Risk

42% of domestic plan assets are invested in bonds with an average credit rating of AA-. These bonds are subject to both credit and default risk and changes in the risk could lead to a decline in the value of these bonds. 

Liquidity Risk

Less than 1% of the domestic securities are invested in Level 3 securities. These are long-term investments in private equity and private real estate investments that may not mature or be sellable in the near-term without significant loss.

As of  December 31, 2023 and 2022, the amount of Corning common stock included in equity securities was not significant.

Cash Flow Data

The following table presents the gross benefit payments expected to be paid for domestic and international defined benefit pension plans and the postretirement medical and life plans (in millions):

	Expected benefit payments
	Domestic pension benefits		International pension benefits		Postretirement benefits
2024	$	260	$	30	$	28
2025	$	257	$	38	$	28
2026	$	260	$	39	$	29
2027	$	267	$	39	$	29
2028	$	267	$	44	$	29
2029-2033	$	1,401	$	237	$	148

Other Benefit Plans

Corning offers defined contribution plans covering employees meeting certain eligibility requirements. Total consolidated defined contribution plan expense was $118 million, $117 million and $98 million for the years ended December 31, 2023, 2022 and 2021, respectively.