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Employee Benefit Plans (Tables)
 12 Months Ended
Dec. 31, 2017
Changes in Projected Benefit Obligations, Plan Assets and Funded Status
The following table sets forth the changes in projected benefit obligations (“PBO”) (as calculated as of December 31), plan assets, the funded status and the amounts recognized in the accompanying consolidated balance sheet for the Company’s defined benefit pension and other postretirement benefit plans:
 
Pensions
Other Postretirement Benefits
($ in millions)
2017

2016

2017

2016

Projected benefit obligation, January 1

$3,252


$5,349


$792


$1,084

Service cost
33

48

10

15

Interest cost
98

142

24

31

Plan amendments
—

—

—

(306
)
Actuarial losses (gains) - net
185

538

(27
)
13

Benefits paid
(167
)
(233
)
(48
)
(53
)
Foreign currency translation adjustments
165

(141
)
8

2

Settlements and curtailments
(85
)
(2,354
)
—

—

Former glass business changes, net
(1
)
(96
)
(8
)
6

Other
(18
)
(1
)
2

—

Projected benefit obligation, December 31

$3,462


$3,252


$753


$792

Market value of plan assets, January 1

$2,561


$4,627

 

 

Actual return on plan assets
289

470

 

 

Company contributions
87

204

 

 

Participant contributions
1

1

 

 

Benefits paid
(109
)
(205
)
 

 

Plan transfers
—

(3
)
 
 
Plan settlements
(95
)
(2,338
)
 
 
Plan expenses and other-net
—

—

 

 

Foreign currency translation adjustments
149

(134
)
 

 

Former glass business changes, net
—

(61
)
 
 
Market value of plan assets, December 31

$2,883


$2,561

 

 

Funded Status

($579
)

($691
)

($753
)

($792
)
Amounts recognized in the Consolidated Balance Sheet:
Other assets (long-term)
173

110

—

—

Accounts payable and accrued liabilities
(23
)
(61
)
(54
)
(61
)
Accrued pensions
(729
)
(740
)
—

—

Other postretirement benefits
—

—

(699
)
(724
)
Liabilities held for sale
—

—

—

(7
)
Net liability recognized

($579
)

($691
)

($753
)

($792
)

The PBO is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future pay increases. The accumulated benefit obligation (“ABO”) is the actuarial present value of benefits attributable to employee service rendered to date, but does not include the effects of estimated future pay increases. The ABO for all defined benefit pension plans as of December 31, 2017 and 2016 was $3,382 million and $3,171 million, respectively.
The following table details the pension plans where the benefit liability exceeds the fair value of the plan assets:
 
Pensions
($ in millions)
2017

 
2016

Plans with PBO in Excess of Plan Assets:
 
 
 
Projected benefit obligation

$2,544

 

$2,406

Fair value of plan assets

$1,792

 

$1,609

Plans with ABO in Excess of Plan Assets:
 
 
 
Accumulated benefit obligation

$2,434

 

$2,302

Fair value of plan assets

$1,749

 

$1,575
Accumulated Other Comprehensive Loss Pretax Amounts Not Yet Reflected in Net Periodic Benefit Cost
($ in millions)
Pensions
 
Other Postretirement Benefits
 
2017

2016

 
2017

2016

Accumulated net actuarial losses

$835


$918

 

$180


$226

Accumulated prior service cost (credit)
—

1

 
(239
)
(298
)
Total

$835


$919

 

($59
)

($72
)
Change in Accumulated Other Comprehensive Loss (Pretax) Relating to Defined Benefit Pension and Other Postretirement Benefits
The net decrease in accumulated other comprehensive loss (pre-tax) in 2017 relating to defined benefit pension and other postretirement benefits is primarily attributable to pension settlement charges and other postretirement plan design changes,
as follows:
($ in millions)
Pensions

 
Other Postretirement Benefits

Net actuarial loss (gain) arising during the year

$38

 

($35
)
New prior service cost (credit)
(2
)
 
1

Amortization of actuarial loss
(75
)
 
(12
)
Amortization of prior service (cost) credit
(1
)
 
59

Foreign currency translation adjustments
19

 
—

Impact of settlements and curtailments
(63
)
 
—

Net change

($84
)
 

$13
Net Periodic Benefit Cost
 
Pensions
 
Other Postretirement Benefits
($ in millions)
2017

2016

2015

 
2017

2016

2015

Service cost

$33


$48


$57

 

$10


$15


$16

Interest cost
98

142

196

 
24

31

45

Expected return on plan assets
(141
)
(213
)
(287
)
 
—

—

—

Amortization of prior service credit
—

(1
)
(2
)
 
(59
)
(31
)
(9
)
Amortization of actuarial losses
75

110

119

 
12

19

32

Settlements, curtailments, and special termination benefits
60

1,015

8

 
—

—

—

Net periodic benefit cost/(income)

$125


$1,101


$91

 

($13
)

$34


$84
Effect of One Percentage Point Increase or Decrease in Health Care Cost Trend Rates
If these 2018 health care cost trend rates were increased or decreased by one percentage point per year, such increase or decrease would have the following effects:
 
One-Percentage Point
($ in millions)
Increase

 
Decrease

Increase (decrease) in the aggregate of service and interest cost components of annual expense

$1

 

($1
)
Increase (decrease) in the benefit obligation

$25

 

($15
)
Schedule of Contributions to Defined benefit Plans
Contributions to defined benefit pension plans
($ in millions)
2017

2016

2015

U.S. defined benefit pension plans(a)

$54


$134


$224

Non-U.S. defined benefit pension plans(b)

$33


$54


$39

(a)
During 2016 and 2015, U.S. contributions totaling $12 million and $26 million associated with the former glass segment were recast as cash flows from operations - discontinued operations and are excluded from the
Schedule of Expected Benefit Payments
The estimated benefits expected to be paid under the Company’s defined benefit pension and other postretirement benefit plans are:
($ in millions)
Pensions

 
Other Postretirement Benefits

2018

$147

 

$54

2019

$147

 

$54

2020

$156

 

$53

2021

$161

 

$53

2022

$166

 

$52

2023 to 2027

$901

 

$231
Weighted Average Target Pension Plan Asset Allocations
The following summarizes the weighted average target pension plan asset allocation as of December 31, 2017 and 2016 for all PPG defined benefit plans:
Asset Category
2017
 
2016
Equity securities
15-45%
 
30-65%
Debt securities
30-65%
 
30-65%
Real estate
0-10%
 
0-10%
Other
20-40%
 
0-20%
Fair Values of the Company's Pension Plan Assets by Asset Category
The fair values of the Company’s pension plan assets at December 31, 2017 and 2016, by asset category, are as follows:
 
December 31, 2017
 
December 31, 2016
($ in millions)
Level 1(1)

Level 2(1)

Level 3(1)

Total

 
Level 1(1)

Level 2(1)

Level 3(1)

Total

Asset Category
 
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
 
 
 
Large cap

$—


$83


$—


$83

 

$—


$80


$—


$80

Small cap
29

—

—

29

 
—

—

—

—

PPG common stock
—

—

—

—

 
53

—

—

53

Non-U.S.
 
 
 
 
 
 
 
 
 
Developed and emerging markets(2)
115

79

—

194

 
80

75

—

155

Debt securities:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
—

11

—

11

 
—

6

—

6

Corporate(3)
 
 
 
 
 
 
 
 
 
U.S.(4)
—

201

86

287

 
—

5

86

91

Developed and emerging markets(2)
—

43

—

43

 
—

42

—

42

Diversified(5)
—

124

—

124

 
—

71

—

71

Government
 
 
 
 
 
 
 
 
 
U.S.(4)
68

1

—

69

 
—

—

—

—

Developed markets
—

101

—

101

 
—

78

—

78

Other(6)
—

14

418

432

 
—

—

15

15

Real estate, hedge funds, and other
—

185

498

683

 
—

172

414

586

Total assets in the fair value hierarchy

$212


$842


$1,002


$2,056

 

$133


$529


$515


$1,177

Common-collective trusts(7)
—

—

—

827

 
—

—

—

1,384

Total Investments

$212


$842


$1,002


$2,883

 

$133


$529


$515


$2,561

(1)
These levels refer to the accounting guidance on fair value measurement described in Note 10, “Financial Instruments, Hedging Activities and Fair Value Measurements.”
(2)
These amounts represent holdings in investment grade debt or equity securities of issuers in both developed markets and emerging economies.
(3)
This category represents investment grade debt securities from a diverse set of industry issuers.
(4)
These investments are primarily long duration fixed income securities.
(5)
This category represents commingled funds invested in diverse portfolios of debt securities.
(6)
This category includes mortgage-backed and asset backed debt securities, municipal bonds and other debt securities including derivatives.
Change in the Fair Value of the Company's Level 3 Pension Assets
The change in the fair value of the Company’s Level 3 pension assets for the years ended December 31, 2017 and 2016 was as follows:
($ in millions)
Real Estate

 
Other Debt Securities

 
Hedge Funds and Other Assets

 
Total

January 1, 2016

$209

 

$21

 

$405

 

$635

Realized gains
28

 
1

 
—

 
29

Unrealized losses
(15
)
 
—

 
(1
)
 
(16
)
Transfers (out)/in
(88
)
 
(5
)
 
16

 
(77
)
Foreign currency losses
(5
)
 
(1
)
 
(50
)
 
(56
)
December 31, 2016

$129

 

$16

 

$370

 

$515

Realized gains
11

 
45

 
3

 
59

Unrealized losses
—

 
—

 
5

 
5

Transfers (out)/in
(5
)
 
355

 
36

 
386

Foreign currency loss
3

 
2

 
32

 
37

December 31, 2017

$138

 

$418

 

$446

 

$1,002
Benefit Obligations  
Weighted Average Assumptions Used for the Defined Benefit Pension and Other Postretirement Plans
The following weighted average assumptions were used to determine the benefit obligation for the Company’s defined benefit pension and other postretirement plans as of December 31, 2017 and 2016:
 
2017

 
2016

Discount rate(1)
3.2
%
 
3.7
%
Rate of compensation increase
1.3
%
 
1.6
%

(1)
The discount rate for U.S. defined benefit pension and other postretirement plans was 3.7% and 4.3% as of December 31, 2017 and 2016, respectively.
Benefit Costs  
Weighted Average Assumptions Used for the Defined Benefit Pension and Other Postretirement Plans
The following weighted average assumptions were used to determine the net periodic benefit cost for the Company’s defined benefit pension and other postretirement benefit plans for the three years in the period ended December 31, 2017:
 
2017

 
2016

 
2015

Discount rate
3.6
%
 
3.6
%
 
3.8
%
Expected return on assets
5.4
%
 
6.1
%
 
6.1
%
Rate of compensation increase
1.3
%
 
1.6
%
 
2.0
%