8. Retirement-Related Benefits: The company offers defined benefit pension plans, defined contribution pension plans, as well as nonpension postretirement plans primarily consisting of retiree medical benefits. The following tables provide the pre-tax cost for all retirement-related plans.

					Yr. to Yr.
(Dollars in millions)					Percent
For the three months ended September 30:	2016		2015		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	421	$	505	(16.6	)%
Nonpension postretirement plans — cost	64		68		(4.8	)

Total	$	486	$	573	(15.2	)%

					Yr. to Yr.
(Dollars in millions)					Percent
For the nine months ended September 30:	2016		2015		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	1,315	$	1,747	(24.7	)%
Nonpension postretirement plans — cost	185		206		(10.3	)

Total	$	1,500	$	1,953	(23.2	)%

The following tables provide the components of the cost/(income) for the company’s pension plans.

Cost/(Income) of Pension Plans

(Dollars in millions)	U.S. Plans						Non-U.S. Plans
For the three months ended September 30:	2016			2015			2016			2015
Service cost	$	—		$	—		$	108		$	116
Interest cost	512			507			257			270
Expected return on plan assets	(922		)	(988		)	(468		)	(481		)
Amortization of prior service costs/(credits)	3			2			(28		)	(24		)
Recognized actuarial losses	328			414			357			392
Curtailments and settlements	—			—			4			11
Multi-employer plans/other costs	—			—			8			16

Total net periodic pension (income)/cost of defined benefit plans	(79		)	(65		)	239			300
Cost of defined contribution plans	159			162			103			109

Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	79		$	96		$	342		$	409

(Dollars in millions)	U.S. Plans						Non-U.S. Plans
For the nine months ended September 30:	2016			2015			2016			2015
Service cost	$	—		$	—		$	318		$	339
Interest cost	1,536			1,521			787			810
Expected return on plan assets	(2,767		)	(2,965		)	(1,419		)	(1,446		)
Amortization of prior service costs/(credits)	8			7			(79		)	(74		)
Recognized actuarial losses	985			1,241			1,062			1,186
Curtailments and settlements	—			—			19			19
Multi-employer plan/other costs	—			—			64			272

Total net periodic pension (income)/cost of defined benefit plans	(238		)	(196		)	751			1,107
Cost of defined contribution plans	484			500			318			335

Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	246		$	304		$	1,069		$	1,443

On March 24, 2014, the Supreme Court of Spain issued a ruling against IBM Spain in litigation involving its defined benefit and defined contribution plans. As a result of the ruling, the company recorded pre-tax retirement-related obligations of $233 million in 2015 ($230 million in the first quarter of 2015) in selling, general and administrative expense in the Consolidated Statement of Earnings. These obligations are reflected in “Non-U.S. Plans - Multi-employer plans/other costs” in the table above.

In March 2016, the company initiated a change to the investment strategy of its U.S. defined benefit plan. The 2016 target asset allocation was modified by reducing equity securities from 34 percent to 21 percent, other investments from 10 percent to 9 percent and increasing debt securities from 56 percent to 70 percent of total plan assets. This change is designed to reduce the risk associated with the potential negative impact that equity markets might have on the funded status of the U.S. defined benefit plan. The change is expected to reduce the 2017 expected long-term rate of return on assets from 7.00 percent to approximately 6.25 percent. See note S, “Retirement-Related Benefits,” on page 118 in the company’s recast 2015 Annual Report on Form 8-K dated June 13, 2016 for additional information regarding the company’s investment strategy.

In 2016, the company now expects to contribute approximately $600 million to its non-U.S. defined benefit and multi-employer plans, the largest of which will be contributed to the defined benefit pension plans in the UK and Japan. This amount generally represents the legally mandated minimum contribution. Total net contributions to the non-U.S. plans in the first nine months of 2016 were $261 million, of which $97 million was in cash and $164 million in U.S. Treasury securities. Total net contributions to the non-U.S. plans in the first nine months of 2015 were $271 million in cash. The contribution of U.S. Treasury securities is considered a non-cash transaction in the Consolidated Statement of Cash Flows.

The following tables provide the components of the cost/(income) for the company’s nonpension postretirement plans.

Cost of Nonpension Postretirement Plans

(Dollars in millions)	U.S. Plan						Non-U.S. Plans
For the three months ended September 30:	2016			2015			2016			2015
Service cost	$	4		$	6		$	1		$	2
Interest cost	41			41			15			12
Expected return on plan assets	—			—			(2		)	(2		)
Amortization of prior service costs/(credits)	(2		)	(2		)	(1		)	(1		)
Recognized actuarial losses	5			10			2			2
Curtailments and settlements	—			—			0			0

Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings	$	49		$	55		$	16		$	13

(Dollars in millions)	U.S. Plan						Non-U.S. Plans
For the nine months ended September 30:	2016			2015			2016			2015
Service cost	$	13		$	18		$	4		$	5
Interest cost	124			122			37			39
Expected return on plan assets	—			—			(5		)	(5		)
Amortization of prior service costs/(credits)	(6		)	(6		)	(4		)	(4		)
Recognized actuarial losses	15			29			7			7
Curtailments and settlements	—			—			0			0

Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings	$	146		$	164		$	39		$	42

The company contributed $240 million to the U.S. nonpension postretirement benefit plan of which $40 million was in cash and $200 million was in U.S. Treasury securities during the nine months ended September 30, 2016, and $308 million in cash during the nine months ended September 30, 2015. The contribution of U.S. Treasury securities is considered a non-cash transaction in the Consolidated Statement of Cash Flows.