Pensions and Other Postretirement Benefits

Net periodic pension and other postretirement benefit costs are included in "Cost of sales, exclusive of depreciation and amortization," "Selling, general and administrative," and "Research and development" in the accompanying condensed consolidated statements of income.

The net periodic pension and other postretirement benefit costs for the three and six months ended June 30, 2017 and 2016 were as follows:



	Pension
	Three Months Ended June 30						Six Months Ended June 30
($ in millions)	2017			2016			2017			2016
Service cost	$	8		$	12		$	17		$	25
Interest cost	25			41			49			84
Expected return on plan assets	(36		)	(65		)	(70		)	(132		)
Amortization of actuarial losses	19			29			38			58
Amortization of prior service credit	—			(1		)	—			(1		)
Pension settlement charge	—			—			22			—
Net periodic benefit cost	$	16		$	16		$	56		$	34



	Other Postretirement Benefits
	Three Months Ended June 30						Six Months Ended June 30
($ in millions)	2017			2016			2017			2016
Service cost	$	3		$	3		$	5		$	7
Interest cost	5			9			12			19
Amortization of actuarial losses	1			5			6			9
Amortization of prior service credit	(17		)	(2		)	(30		)	(4		)
Net periodic benefit (income) cost	$	(8	)	$	15		$	(7	)	$	31

PPG expects its 2017 net periodic pension and other postretirement benefit cost, excluding settlement losses, to be approximately $55 million, with pension expense representing approximately $70 million and other postretirement benefit cost representing a benefit of approximately $15 million.

Contributions to Defined Benefit Pension Plans



	Three Months Ended June 30				Six Months Ended June 30
($ in millions)	2017		2016		2017		2016
U.S. defined benefit pension contributions	$	—	$	—	$	29	$	—
Non-U.S. defined benefit pension mandatory contributions	$	3	$	7	$	8	$	13

PPG expects to make mandatory contributions to its non-U.S. pension plans in the range of $20 million to $25 million during the remaining six months of 2017 and may make voluntary contributions to its defined benefit pension plans in 2017 and beyond.

U.S. Non-qualified Pension

During the first quarter of 2017, PPG made lump-sum payments to certain retirees who had participated in PPG's U.S. non-qualified pension plan (the "Nonqualified Plan") totaling approximately $40 million. As the lump-sum payments were in excess of the expected 2017 service and interest costs for the Nonqualified Plan, PPG remeasured the periodic benefit obligation of the Nonqualified Plan as of March 1, 2017 and recorded a settlement charge totaling $22 million ($14 million after-tax) during the first quarter 2017. Any additional 2017 lump-sum payments from the Nonqualified Plan will trigger a further remeasurement and settlement charge.

U.S. Postretirement Medical

In August 2016, the Company communicated plan design changes to certain Medicare-eligible retiree plan participants. Effective January 1, 2017, the Company-sponsored Medicare-eligible plans were replaced by a Medicare private exchange. By offering retiree health coverage through a private Medicare exchange, PPG is able to provide Medicare-eligible participants with more choice of plans and plan designs, greater flexibility, and different price points for coverage.

The announcement of these plan design changes triggered a remeasurement of PPG’s retiree medical benefit obligation using prevailing interest rates and resulted in a $306 million reduction in the Company's postretirement benefit obligation. PPG is accounting for the plan design change prospectively, and the plan change will reduce net periodic postretirement benefit cost by $54 million annually for the next 5 years.

As of January 1, 2017, PPG’s contribution for Medicare-eligible retirees are in the form of a tax-free account known as a Health Reimbursement Arrangement (HRA). The HRA can be used to pay for healthcare and prescription drug plan premiums and certain out-of-pocket medical costs; unused funds can be carried over to future years. PPG has the right to amend, modify, or terminate this benefit plan at any time.