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:	2017		2016		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	592	$	421	40.6	%
Nonpension postretirement plans — cost	61		64		(5.9	)

Total	$	653	$	486	34.4	%

					Yr. to Yr.
(Dollars in millions)					Percent
For the nine months ended September 30:	2017		2016		Change
Retirement-related plans — cost
Defined benefit and contribution pension plans — cost	$	1,915	$	1,315	45.6	%
Nonpension postretirement plans — cost	182		185		(1.6	)

Total	$	2,097	$	1,500	39.8	%

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:	2017			2016			2017			2016
Service cost	$	—		$	—		$	106		$	108
Interest cost	478			512			215			257
Expected return on plan assets	(753		)	(922		)	(340		)	(468		)
Amortization of prior service costs/(credits)	4			3			(25		)	(28		)
Recognized actuarial losses	334			328			387			357
Curtailments and settlements	—			—			2			4
Multi-employer plans/other	—			—			(74		)	8

Total net periodic pension (income)/cost of defined benefit plans	63			(79		)	271			239
Cost of defined contribution plans	156			159			102			103

Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	219		$	79		$	373		$	342

(Dollars in millions)	U.S. Plans						Non-U.S. Plans
For the nine months ended September 30:	2017			2016			2017			2016
Service cost	$	—		$	—		$	308		$	318
Interest cost	1,435			1,536			622			787
Expected return on plan assets	(2,260		)	(2,767		)	(985		)	(1,419		)
Amortization of prior service costs/(credits)	12			8			(73		)	(79		)
Recognized actuarial losses	1,003			985			1,120			1,062
Curtailments and settlements	—			—			3			19
Multi-employer plan/other	—			—			(46		)	64

Total net periodic pension (income)/cost of defined benefit plans	190			(238		)	950			751
Cost of defined contribution plans	475			484			301			318

Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings	$	665		$	246		$	1,250		$	1,069

On October 12, 2012, the High Court in London issued a ruling against IBM United Kingdom Limited and IBM United Kingdom Holdings Limited, both wholly-owned subsidiaries of the company, in litigation involving one of IBM UK’s defined benefit plans. As a result of the ruling, the company recorded a pre-tax retirement-related obligation of $162 million in the fourth quarter of 2012 in selling, general and administrative expense in the Consolidated Statement of Earnings. As a result of the final Court of Appeal ruling received in August 2017, the company adjusted its obligation under the plan. This adjustment resulted in a gain of $91 million recorded in selling, general and administrative expense in the Consolidated Statement of Earnings for the three and nine months ended September 30, 2017. This gain is reflected in “Non-U.S. Plans - Multi-employer plans/other” in the tables above. See note 12, “Contingencies” for additional information.

In March 2017, the company initiated a change to the investment strategy of its U.S. defined benefit plan. The 2017 target asset allocation was modified by reducing equity securities from 20 percent to 12 percent, increasing debt securities from 70 percent to 79 percent and other investments largely remained unchanged at 10 percent of total plan assets. This change was 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 2018 expected long-term rate of return on assets from 5.75 percent to approximately 5.25 percent. See note S, “Retirement-Related Benefits,” on page 144 in the company’s 2016 Annual Report for additional information regarding the company’s investment strategy.

In 2017, the company expects to contribute approximately $400 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 Japan, Spain and the UK. This amount generally represents the legally mandated minimum contribution. Total contributions to the non-U.S. plans in the first nine months of 2017 were $301 million, of which $124 million was in cash and $176 million in U.S. Treasury securities. 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. 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:	2017			2016			2017			2016
Service cost	$	4		$	4		$	1		$	1
Interest cost	38			41			14			15
Expected return on plan assets	—			—			(2		)	(2		)
Amortization of prior service costs/(credits)	(2		)	(2		)	0			(1		)
Recognized actuarial losses	5			5			2			2
Curtailments and settlements	—			—			0			0

Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings	$	45		$	49		$	16		$	16


(Dollars in millions)	U.S. Plan						Non-U.S. Plans

For the nine months ended September 30:	2017			2016			2017			2016

Service cost	$	11		$	13		$	4		$	4
Interest cost	115			124			43			37
Expected return on plan assets	—			—			(6		)	(5		)
Amortization of prior service costs/(credits)	(6		)	(6		)	0			(4		)
Recognized actuarial losses	15			15			5			7
Curtailments and settlements	—			—			0			0

Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings	$	135		$	146		$	47		$	39

The company contributed $259 million in U.S. Treasury securities to the U.S. nonpension postretirement benefit plan during the nine months ended September 30, 2017, and $200 million in U.S. Treasury securities and $40 million in cash during the nine months ended September 30, 2016. The contribution of U.S. Treasury securities is considered a non-cash transaction in the Consolidated Statement of Cash Flows.