POSTRETIREMENT BENEFIT PLANS

12 Months Ended

Dec. 31, 2019

NOTE 13. POSTRETIREMENT BENEFIT PLANS

PENSION BENEFITS AND RETIREE HEALTH AND LIFE BENEFITS.

We sponsor a number of pension and retiree health and life insurance benefit plans that we present in three categories, principal pension plans, other pension plans and principal retiree benefit plans. Smaller pension plans with pension assets or obligations less than $50 million and other retiree benefit plans are not presented. We use a December 31 measurement date for these plans.

Principal pension plans represent the GE Pension Plan and the GE Supplementary Pension Plan. The GE Pension Plan is a defined benefit plan that covers approximately 245,500 retirees and beneficiaries, approximately 97,000 vested former employees and approximately 31,500 active employees. This plan has been closed to new participants since 2012.

The GE Supplementary Pension Plan is an unfunded plan that provides supplementary benefits to higher-level, longer-service employees. The GE Supplementary Pension Plan annuity benefit has been closed to new participants since 2011 and has been replaced by an installment benefit.

Other pension plans in 2019 included 44 U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million which cover approximately 57,000 retirees and beneficiaries, approximately 54,000 vested former employees and approximately 22,000 active employees. Principal retiree benefit plans provide health and life insurance benefits to certain eligible participants, and these participants share in the cost of the healthcare benefits. Principal retiree benefit plans cover approximately 176,000 retirees and dependents.

In October 2019, we approved changes to our principal pension plans. The GE Pension Plan benefits for approximately 20,000 employees with salaried benefits will be frozen effective January 1, 2021, and thereafter these employees will receive increased company contributions in the company sponsored defined contribution plan in lieu of participation in a defined benefit plan. As a result, we recognized a non-cash pre-tax curtailment loss of $298 million in the fourth quarter of 2019 as non-operating benefit costs. In addition, the GE Supplementary Pension Plan benefits for approximately 700 employees who became executives before 2011 will be frozen effective January 1, 2021, and thereafter these employees will accrue the installment benefit currently offered to new executives since 2011. The change in the GE Supplementary Pension Plan reduced the projected benefit obligation by $297 million and has been treated as a plan amendment that is being amortized over future periods.

As result, we remeasured the pension assets and obligations for the principal pension plans as of October 1, 2019, which resulted in a net actuarial loss of $4,735 million, which was recorded in Accumulated other comprehensive income. The net actuarial loss was primarily due to a reduction in the discount rate since December 31, 2018, offset by our asset performance up to the remeasurement date and the impact of the freeze for the GE Pension Plan.

Finally, we offered approximately 100,000 former U.S. employees with a vested benefit in the GE Pension Plan a limited-time option to take a lump sum distribution in lieu of future monthly payments. In December 2019, lump sum distributions of $2,657 million were made from the GE Pension Trust.

At December 31, 2019, we completed our annual year-end measurement of the funded status of the principal pension plans which resulted in a net actuarial gain of $3,898 million which was recorded in Accumulated Other Comprehensive Income. The net actuarial gain was primarily due to the impact of the lump-sum distributions, an increase in the discount rate since the remeasurement date, asset performance in the fourth quarter and updated mortality assumptions.

For the year ended December 31, 2019, we recognized a net actuarial loss of $837 million which is a result of a $4,735 million net actuarial loss from remeasurement as of October 1, 2019 and a $3,898 million net actuarial gain from our annual year-end measurement.



COST OF OUR BENEFITS PLANS AND ASSUMPTIONS
	2019									2018									2017
(Dollars in millions)	Principal pension			Other pension			Principal retiree benefit			Principal pension			Other pension			Principal retiree benefit			Principal pension			Other pension			Principal retiree benefit

Components of expense (income)
Service cost - operating	$	654		$	246		$	58		$	888		$	323		$	63		$	1,055		$	542		$	94
Interest cost	2,780			542			202			2,658			548			196			2,856			561			224
Expected return on plan assets	(3,428		)	(1,144		)	(21		)	(3,248		)	(1,285		)	(29		)	(3,390		)	(1,176		)	(36		)
Amortization of net actuarial loss (gain)	3,439			319			(118		)	3,785			312			(79		)	2,812			418			(80		)
Amortization of prior service cost (credit)	135			3			(232		)	143			(9		)	(230		)	290			(5		)	(171		)
Curtailment / settlement loss (gain)(a)	349			13			(38		)	34			1			—			64			24			4
Non-operating	3,275			(267		)	(207		)	3,372			(433		)	(142		)	2,632			(178		)	(59		)
Net periodic expense (income)	$	3,929		$	(21	)	$	(149	)	$	4,260		$	(110	)	$	(79	)	$	3,687		$	364		$	35
Weighted-average assumptions used to determine benefit obligations
Discount rate	3.36		%	1.97		%	3.05		%	4.34		%	2.75		%	4.12		%	3.64		%	2.41		%	3.43		%
Compensation increases	2.95			3.16			3.75			3.60			3.16			3.60			3.55			3.09			3.55
Initial healthcare trend rate(b)	N/A			N/A			5.90			N/A			N/A			6.00			N/A			N/A			6.00
Weighted-average assumptions used to determine benefit cost
Discount rate(c)	4.07			2.75			4.12			3.64			2.41			3.43			4.11			2.55			3.75
Expected rate of return on plan assets	6.75			6.76			7.00			6.75			6.75			7.00			7.50			6.75			7.00

(a) For 2019, principal pension principally the curtailment loss due to GE Pension Plan freeze announced in October 2019.

(b) For 2019, ultimately declining to 5% for 2030 and thereafter.

(c) Weighted average 2019 discount rate for principal pension was 4.07%. Discount rate was 4.34% for January 1, 2019 through September 30, 2019 and then changed to 3.24% for the remainder of 2019 due to the remeasurement of the plans for the U.S. pension changes announced in October 2019.

The components of net periodic benefit costs, other than the service cost component, are included in Non-operating benefit costs in our consolidated Statement of Earnings (Loss).



PLAN FUNDED STATUS AND AMOUNTS RECORDED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
	2019												2018
(in millions)	Principal pension				Other pension				Principal retiree benefit				Principal pension				Other pension				Principal retiree benefit
Change in benefit obligations
Balance at January 1	$	68,500			$	21,091			$	5,153			$	74,985			$	23,066			$	6,006
Service cost	654				246				58				888				323				63
Interest cost	2,780				542				202				2,658				548				196
Participant contributions	77				29				61				90				37				60
Plan amendments	(42		)	(a)	(17		)		(23		)		—				82				—
Actuarial loss (gain)	7,073			(b)	2,422			(e)	275			(e)	(6,263		)	(e)	(879		)	(e)	(593		)	(f)
Benefits paid	(3,788		)		(1,043		)		(533		)		(3,729		)		(1,002		)		(569		)
Curtailments	(838		)		(32		)		(33		)		—				(11		)		—
Settlements	(2,657		)	(c)	—				—				—				—				—
Acquisitions (dispositions) / other - net	(3		)		(1,030		)		—				(129		)		(90		)		(10		)
Exchange rate adjustments	—				713				—				—				(983		)		—
Balance at December 31	$	71,756		(d)	$	22,921			$	5,160		(g)	$	68,500		(d)	$	21,091			$	5,153		(g)
Change in plan assets
Balance at January 1	50,009				17,537				362				50,361				19,306				518
Actual gain (loss) on plan assets	8,694				2,229				57				(2,996		)		(245		)		(17		)
Employer contributions	298				716				342				6,283				475				370
Participant contributions	77				29				61				90				37				60
Benefits paid	(3,788		)		(1,043		)		(533		)		(3,729		)		(1,002		)		(569		)
Settlements	(2,657		)	(c)	—				—				—				—				—
Acquisitions (dispositions) / other - net	—				(1,030		)		—				—				(185		)		—
Exchange rate adjustments	—				704				—				—				(849		)		—
Balance at December 31	$	52,633			$	19,142			$	289			$	50,009			$	17,537			$	362
Funded status - deficit(h)	$	19,123			$	3,779			$	4,871			$	18,491			$	3,554			$	4,791
Amounts recorded in the consolidated Statement of Financial Position
Non-current assets - other	—				475				—				—				746				—
Current liabilities - other	(296		)		(123		)		(355		)		(280		)		(117		)		(378		)
Non-current liabilities - compensation and benefits	(18,827		)		(4,131		)		(4,516		)		(18,211		)		(4,183		)		(4,413		)
Net amount recorded	$	(19,123	)		$	(3,779	)		$	(4,871	)		$	(18,491	)		$	(3,554	)		$	(4,791	)
Amounts recorded in Accumulated other comprehensive income (loss)
Prior service cost (credit)	67				(16		)		(2,376		)		596				7				(2,584		)
Actuarial loss (gain)	7,961				4,665				(833		)		10,430				3,740				(1,196		)
Total recorded in Accumulated other comprehensive income (loss)	$	8,028			$	4,649			$	(3,209	)		$	11,026			$	3,747			$	(3,780	)


(a)	GE Supplementary Pension Plan amendment for the U.S. pension changes announced in October 2019 offset by other plan amendments adopted in 2019.


(b)	Principally associated with discount rate changes offset by impact of the one-time lump sum payments.


(c)	Payments made to former employees from the GE Pension Trust for the one-time lump sum payments.


(d)	The PBO for the GE Supplementary Pension Plan, which is an unfunded plan, was $6,691 million and $6,110 million at year-end 2019 and 2018, respectively.


(e)	Principally associated with discount rate changes.


(f)	Principally due to discount rate changes and favorable cost trends.


(g)	The benefit obligation for retiree health plans was $3,306 million and $3,425 million at December 31, 2019 and 2018, respectively.

(h)

Total unfunded status for principal pension plan, other pension plans and principal retiree benefit plans was $27,773 million and $26,836 million at December 31, 2019 and 2018, respectively. Of these amounts, $14,340 million and $13,292 million at December 31, 2019 and 2018, respectively, related to plans that are not subject to regulatory funding requirements and the benefits for these plans are funded as they become due.

ASSUMPTIONS USED IN CALCULATIONS. We determine the discount rate using the weighted-average yields on high-quality fixed-income securities that have maturities consistent with the timing of benefit payments. Lower discount rates increase the size of the benefit obligation and generally increase pension expense in the following year; higher discount rates reduce the size of the benefit obligation and generally reduce subsequent-year pension expense.

The compensation assumption is used to estimate the annual rate at which pay of plan participants will grow. If the rate of growth assumed increases, the size of the pension obligations will increase, as will the amount recorded in Accumulated other comprehensive income (loss) in our consolidated Statement of Financial Position and amortized into earnings in subsequent periods.

The expected return on plan assets is the estimated long-term rate of return that will be earned on the investments used to fund the pension obligations. To determine this rate, we consider the composition of our plan investments, our historical returns earned, and our expectations about the future. Based on our analysis, we have assumed a 6.75% long-term expected return on GE Pension Plan assets for cost recognition in 2019 and 2018. This is a reduction from the 7.50% we assumed in 2017.

The healthcare trend assumptions apply to our pre-65 retiree medical plans. Our post-65 retiree plan has a fixed subsidy and therefore is not subject to healthcare inflation.

We evaluate these assumptions annually. We evaluate other assumptions periodically, such as retirement age, mortality and turnover, and update them as necessary to reflect our actual experience and expectations for the future. Differences between our actual results and what we assumed are recorded in Accumulated other comprehensive income each period. These differences are amortized into earnings over the remaining average future service of active participating employees or the expected life of inactive participants, as applicable.

THE COMPOSITION OF OUR PLAN ASSETS. The fair value of our pension plans' investments is presented below. The inputs and valuation techniques used to measure the fair value of these assets are described in Note 1 and have been applied consistently.



	2019				2018
(In millions)	Principal pension		Other pension		Principal pension		Other pension

Global equity	$	6,826	$	3,484	$	6,015	$	4,323
Debt securities
Fixed income and cash investment funds	4,398		8,089		2,069		6,320
U.S. corporate(a)	8,025		365		8,734		397
Other debt securities(b)	6,076		424		5,264		472
Real estate	2,309		140		2,218		175
Private equities and other investments	23		452		557		369
Total	27,657		12,954		24,857		12,056
Plan assets measured at net asset value
Global equity	14,616		1,450		12,558		1,228
Debt securities	3,744		914		6,400		883
Real estate	1,167		1,930		1,261		1,704
Private equities and other investments	5,449		1,894		4,933		1,666
Total plan assets at fair value	$	52,633	$	19,142	$	50,009	$	17,537


(a)	Primarily represented investment-grade bonds of U.S. issuers from diverse industries.


(b)	Primarily represented investments in residential and commercial mortgage-backed securities, non-U.S. corporate and government bonds and U.S. government, federal agency, state and municipal debt.

GE Pension Plan investments with a fair value of $2,838 million and $2,990 million in 2019 and 2018, respectively, were classified within Level 3 and primarily relate to real estate. The remaining investments were substantially all considered Level 1 and 2. Other pension plans investments with a fair value of $105 million and $116 million in 2019 and 2018, respectively, were classified within Level 3. Principal retiree benefit plan investments with a fair value of $289 million and $362 million at December 31, 2019 and 2018, respectively, comprised global equity and debt securities which are considered Level 1 and 2. There were no Level 3 principal retiree benefit plan investments held in 2019 and 2018. Plan assets that were measured at fair value using NAV as practical expedient were excluded from the fair value hierarchy.



ASSET ALLOCATION OF PENSION PLANS	2019 Target allocation				2019 Actual allocation
	Principal Pension		Other Pension (weighted average)		Principal Pension		Other Pension (weighted average)

Global equity	30.0 - 47.0	%	23	%	41	%	27	%
Debt securities (including cash equivalents)	21.0 - 65.0		55		42		51
Real estate	3.5 - 13.5		9		7		11
Private equities & other investments	6.0 - 16.0		13		10		11

Plan fiduciaries of the GE Pension Plan set investment policies and strategies for the GE Pension Trust and oversee its investment allocation, which includes selecting investment managers and setting long-term strategic targets. The primary strategic investment objectives are balancing investment risk and return and monitoring the plan’s liquidity position in order to meet the near-term benefit payment and other cash needs. Target allocation percentages are established at an asset class level by plan fiduciaries. Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range.

GE securities represented 0.6% and 0.5% of the GE Pension Trust assets at December 31, 2019 and 2018, respectively. The GE Pension Plan has a broadly diversified portfolio of investments in equities, fixed income, private equities and real estate; these investments are both U.S. and non-U.S. in nature. The plan utilizes derivatives to implement investment strategies as well as for hedging asset and liability risks. As of December 31, 2019, no sector concentration of assets exceeded 15% of total GE Pension Plan assets.

OUR FUNDING POLICY. Our policy for funding the GE Pension Plan is to contribute amounts sufficient to meet minimum funding requirements under employee benefit and tax laws. We may decide to contribute additional amounts beyond this level. We made contributions of $6,000 million to the GE Pension Plan in 2018. Our 2018 contributions satisfied our minimum ERISA funding requirement of $1,500 million and the remaining $4,500 million was a voluntary contribution to the plan. This voluntary contribution was sufficient to satisfy our minimum ERISA funding requirement for 2019 and 2020. In October 2019, we announced our intent to contribute approximately $4,000 million to $5,000 million to the GE Pension Plan in 2020. We expect this amount to equal our estimated future minimum ERISA funding requirements at least through 2022.

We expect to pay approximately $305 million for benefit payments under our GE Supplementary Pension Plan and administrative expenses of our principal pension plans and expect to contribute approximately $500 million to other pension plans in 2020. We fund retiree health benefits on a pay-as-you-go basis and the retiree life insurance trust at our discretion. We expect to contribute approximately $360 million in 2020 to fund such benefits.



EXPECTED FUTURE BENEFIT PAYMENTS OF OUR BENEFIT PLANS (In millions)	Principal pension		Other pension		Principal retiree benefit

2020	$	3,795	$	1,030	$	495
2021	3,875		1,005		475
2022	3,930		1,015		455
2023	3,965		1,035		435
2024	3,980		1,050		415
2025 - 2029	19,965		5,550		1,775

DEFINED CONTRIBUTION PLAN. We have a defined contribution plan for eligible U.S. employees that provides discretionary contributions. Defined contribution costs were $355 million, $410 million and $460 million for the years ended December 31, 2019, 2018, and 2017, respectively.



COST OF POSTRETIREMENT BENEFIT PLANS AND CHANGES IN OTHER COMPREHENSIVE INCOME
For the years ended December 31	2019									2018									2017
(In millions, pre-tax)	Principal pension			Other pension			Principal retiree benefit			Principal pension			Other pension			Principal retiree benefit			Principal pension			Other pension			Principal retiree benefit

Cost (income) of postretirement benefit plans	$	3,929		$	(21	)	$	(149	)	$	4,260		$	(110	)	$	(79	)	$	3,687		$	364		$	35
Changes in other comprehensive income
Prior service cost (credit) - current year	(42		)	(17		)	(23		)	—			82			—			—			—			(8		)
Actuarial loss (gain) - current year	971			1,252			240			(111		)	464			(543		)	474			(639		)	(128		)
Reclassifications out of AOCI
Curtailment / settlement gain (loss)	(353		)	(12		)	4			(45		)	(2		)	—			(64		)	(20		)	(4		)
Amortization of net actuarial gain (loss)	(3,439		)	(319		)	118			(3,785		)	(312		)	79			(2,812		)	(418		)	80
Amortization of prior service credit (cost)	(135		)	(3		)	232			(143		)	9			230			(290		)	5			171
Total changes in other comprehensive income	(2,998		)	901			571			(4,084		)	241			(234		)	(2,692		)	(1,072		)	111
Cost of postretirement benefit plans and changes in other comprehensive income	$	931		$	880		$	422		$	176		$	131		$	(313	)	$	995		$	(708	)	$	146