NONPENSION POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

Postretirement

The Company sponsors a number of plans to provide health care and other welfare benefits to retired employees in the United States and Canada, who have met certain age and service requirements. The majority of these plans are funded or unfunded defined benefit plans, although the Company does participate in a limited number of multiemployer or other defined contribution plans for certain employee groups. The Company contributes to voluntary employee benefit association (VEBA) trusts to fund certain U.S. retiree health and welfare benefit obligations. Beginning in 2015, the Company used a December 31 measurement date for these plans and, when necessary, adjusts for plan contributions and significant events between December 31 and its fiscal year-end.

Obligations and funded status

The aggregate change in accumulated postretirement benefit obligation, plan assets, and funded status is presented in the following tables.



(millions)	2016			2015
Change in accumulated benefit obligation
Beginning of year	$	1,163		$	1,288
Service cost	21			29
Interest cost	39			48
Actuarial (gain) loss	2			(53		)
Benefits paid	(65		)	(57		)
Curtailments	—			—
Amendments	—			(84		)
Foreign currency adjustments	1			(8		)
End of year	$	1,161		$	1,163
Change in plan assets
Fair value beginning of year	$	1,084		$	1,204
Actual return on plan assets	111			(65		)
Employer contributions	15			14
Benefits paid	(74		)	(69		)
Fair value end of year	$	1,136		$	1,084
Funded status	$	(25	)	$	(79	)
Amounts recognized in the Consolidated Balance Sheet consist of
Other non-current assets	$	17		$	—
Other current liabilities	(2		)	(2		)
Other liabilities	(40		)	(77		)
Net amount recognized	$	(25	)	$	(79	)
Amounts recognized in accumulated other comprehensive income consist of
Prior service credit	(86		)	(95		)
Net amount recognized	$	(86	)	$	(95	)

Expense

Components of postretirement benefit expense (income) were:



(millions)	2016			2015			2014
Service cost	$	21		$	29		$	28
Interest cost	39			48			55
Expected return on plan assets	(90		)	(100		)	(98		)
Amortization of unrecognized prior service credit	(9		)	(5		)	(3		)
Recognized net (gain) loss	(19		)	112			133
Curtailment	—			—			(28		)
Postretirement benefit expense:
Defined benefit plans	(58		)	84			87
Defined contribution plans	17			14			14
Total	$	(41	)	$	98		$	101

The estimated prior service credit that will be amortized from accumulated other comprehensive income into nonpension postretirement benefit expense over the next fiscal year is expected to be approximately $9 million.

Assumptions

The weighted-average actuarial assumptions used to determine benefit obligations were:



	2016		2015		2014
Discount rate	4.0	%	4.2	%	4.0	%

The weighted-average actuarial assumptions used to determine annual net periodic benefit cost were:



	2016		2015		2014
Discount rate	4.2	%	4.0	%	4.8	%
Long-term rate of return on plan assets	8.5	%	8.5	%	8.5	%

The Company determines the overall discount rate and expected long-term rate of return on VEBA trust obligations and assets in the same manner as that described for pension trusts in Note 10.

The assumed health care cost trend rate is 4.75% for 2017, decreasing to 4.5% by the year 2018 and remaining at that level thereafter. These trend rates reflect the Company’s historical experience and management’s expectations regarding future trends. A one percentage point change in assumed health care cost trend rates would have the following effects:



(millions)	One percentage point increase		One percentage point decrease
Effect on total of service and interest cost components	$	7	$	(4	)
Effect on postretirement benefit obligation	111		(77		)

Plan assets

The fair value of Plan assets as of December 31, 2016 summarized by level within fair value hierarchy described in Note 10, are as follows:



(millions)	Total Level 1		Total Level 2		Total Level 3		Total NAV (practical expedient)(a)		Total
Cash and cash equivalents	$	4	$	6	$	—	$	—	$	10
Corporate stock, common:
Domestic	143		—		—		—		143
International	6		1		—		—		7
Mutual funds:
Domestic equity	—		57		—		—		57
International equity	—		30		—		—		30
Domestic debt	—		53		—		—		53
Collective trusts:
Domestic equity	—		—		—		272		272
International equity	—		—		—		210		210
Limited partnerships	—		—		—		177		177
Bonds, corporate	—		117		—		—		117
Bonds, government	—		48		—		—		48
Bonds, other	—		10		—		—		10
Other	—		2		—		—		2
Total	$	153	$	324	$	—	$	659	$	1,136

(a) Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

The fair value of Plan assets at January 2, 2016 are summarized as follows:



(millions)	Total Level 1		Total Level 2		Total Level 3		Total NAV (practical expedient)(a)		Total
Cash and cash equivalents	$	9	$	13	$	—	$	—	$	22
Corporate stock, common:
Domestic	195		—		—		—		195
International	5		—		—		—		5
Mutual funds:
Domestic equity	—		52		—		—		52
International equity	—		111		—		—		111
Domestic debt	—		54		—		—		54
Collective trusts:
Domestic equity	—		—		—		150		150
International equity	—		—		—		148		148
Limited partnerships	—		—		—		166		166
Bonds, corporate	—		120		—		—		120
Bonds, government	—		48		—		—		48
Bonds, other	—		12		—		—		12
Other	—		1		—		—		1
Total	$	209	$	411	$	—	$	464	$	1,084

(a) Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

The Company’s asset investment strategy for its VEBA trusts is consistent with that described for its pension trusts in Note 10. The current target asset allocation is 75% equity securities and 25% debt securities. The Company currently expects to contribute approximately $16 million to its VEBA trusts during 2017.

There were no Level 3 assets during 2016 and 2015.

Postemployment

Under certain conditions, the Company provides benefits to former or inactive employees, including salary continuance, severance, and long-term disability, in the United States and several foreign locations. The Company’s postemployment benefit plans are unfunded. Actuarial assumptions used are generally consistent with those presented for pension benefits in Note 10. The aggregate change in accumulated postemployment benefit obligation and the net amount recognized were:



(millions)	2016			2015
Change in accumulated benefit obligation
Beginning of year	$	108		$	104
Service cost	7			7
Interest cost	3			4
Actuarial (gain)loss	(25		)	—
Benefits paid	(6		)	(6		)
Amendments	—			—
Foreign currency adjustments	—			(1		)
End of year	$	87		$	108
Funded status	$	(87	)	$	(108	)
Amounts recognized in the Consolidated Balance Sheet consist of
Other current liabilities	$	(8	)	$	(8	)
Other liabilities	(79		)	(100		)
Net amount recognized	$	(87	)	$	(108	)
Amounts recognized in accumulated other comprehensive income consist of
Net prior service cost	$	6		$	6
Net experience loss	(1		)	27
Net amount recognized	$	5		$	33

Components of postemployment benefit expense were:



(millions)	2016		2015		2014
Service cost	$	7	$	7	$	7
Interest cost	3		4		4
Amortization of unrecognized prior service cost	1		1		—
Recognized net loss	3		3		3
Postemployment benefit expense	$	14	$	15	$	14

The estimated net experience loss and net prior service cost that will be amortized from accumulated other comprehensive income into postemployment benefit expense over the next fiscal year is less than $1 million and $1 million, respectively.

Benefit payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:



(millions)	Postretirement		Postemployment
2017	$	73	$	9
2018	73		7
2019	73		7
2020	73		7
2021	74		7
2022-2026	387		37