17. Retirement and Deferred Compensation Plans

Defined Benefit Pension and Other Postretirement Benefit Plans

We maintain defined benefit pension plans in which certain agents are participants. These defined benefit pension plans are closed to new entrants and existing participants do not accrue any additional benefits. We comply with applicable minimum funding requirements and elected to contribute $8 million for the year ended December 31, 2018. We do not expect to be required to make any contributions to these pension plans in 2019. We sponsor other postretirement benefit plans that provide health care and life insurance to certain retired agents. Total net periodic cost (recovery) for these plans was $6 million, $5 million and $3 million during 2018, 2017 and 2016, respectively. In 2019, we expect to make benefit payments of approximately $10 million for these plans.

Information (in millions) with respect to these plans was as follows:


	As of or For the Years Ended December 31,
	2018			2017			2018			2017

							Other Postretirement
	Pension Plans						Benefit Plans
Fair value of plan assets	$	107		$	111		$	8		$	7
Projected benefit obligation		112			119			10			12
Funded status	$	(5	)	$	(8	)	$	(2	)	$	(5	)

Amounts Recognized on the
Consolidated Balance Sheets
Other assets	$	-		$	-		$	-		$	-
Other liabilities		(5	)		(8	)		(2	)		(5	)
Net amount recognized	$	(5	)	$	(8	)	$	(2	)	$	(5	)

Weighted-Average Assumptions
Benefit obligations:
Weighted-average discount rate		4.50%			4.00%			4.50%			4.00%
Net periodic benefit cost:
Weighted-average discount rate		4.00%			4.50%			4.00%			4.50%
Expected return on plan assets		4.50%			4.75%			6.50%			6.50%

The weighted average discount rate was determined based on a corporate yield curve as of December 31, 2018, and projected benefit obligation cash flows. The expected return on plan assets was determined based on historical and expected future returns of the various asset categories, using the plans’ target plan allocation. We reevaluate these assumptions each plan year.

The following summarizes our fair value measurements of our benefit plans’ assets (in millions) on a recurring basis by asset category:


	As of December 31,
	2018		2017

Fixed maturity securities:
Corporate bonds	$	1	$	1
U.S. government bonds		87		105
U.S. government mortgage-backed
securities		-		3
Cash and invested cash		19		2
Other investments		8		7
Total	$	115	$	118

See “Fair Value Measurement” in Note 1 for discussion on how we categorize our pension plans’ assets into the three-level fair value hierarchy. See “Financial Instruments Carried at Fair Value” in Note 22 for a summary of our fair value measurement of our pension plans’ assets by the three-level fair value hierarchy.

Participation in Defined Benefit Pension and Other Postretirement Benefit Plans

We participate in defined benefit pension plans that are sponsored by LNC for certain employees and non-employee directors. These defined benefit pension plans are closed to new entrants, and existing participants do not accrue any additional benefits. We also participate in other postretirement benefit plans sponsored by LNC that provide health care and life insurance to certain retired employees. Our expense (benefit) for these plans was $(4) million, $7 million and $9 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Defined Contribution Plans

We sponsor tax-qualified defined contribution plans for eligible agents that are administered in accordance with the plan documents and various limitations under section 401(a) of the Internal Revenue Code of 1986. We also participate in defined contribution plans sponsored by LNC for eligible employees. Our expense for these plans was $90 million, $85 million and $83 million, for the years ended December 31, 2018, 2017 and 2016, respectively.

Deferred Compensation Plans

We sponsor non-qualified, unfunded, deferred compensation plans for certain current and former agents. Certain current employees participate in non-qualified, unfunded, deferred compensation plans sponsored by LNC. The results of certain notional investment options within some of the plans are hedged by total return swaps. Our expenses increase or decrease in direct proportion to the change in market value of the participants’ investment options. Participants of certain plans are able to select LNC stock as a notional investment option; however, it is not hedged by the total return swaps and is a primary source of expense volatility related to these plans. Our expense for these plans was $12 million, $27 million and $22 million for the years ended December 31, 2018, 2017 and 2016, respectively. For further discussion of total return swaps related to our deferred compensation plans, see Note 6.

Information (in millions) with respect to these plans was as follows:


	As of December 31,
	2018		2017
Total liabilities (1)	$	487	$	517
Investments dedicated to fund liabilities (2)		170		182

⁽¹⁾

Reported in other liabilities on our Consolidated Balance Sheets.

⁽²⁾

Reported in other assets on our Consolidated Balance Sheets.