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Employee Benefit Plans
 12 Months Ended
Dec. 31, 2018
Retirement Benefits [Abstract]  
Employee Benefit Plans
Defined Benefit Plans
PPG has defined benefit pension plans that cover certain employees worldwide. The principal defined benefit pension plans are those in the U.S., Canada, the Netherlands and the U.K. These plans in the aggregate represent approximately 92% of the projected benefit obligation at December 31, 2018, of which the U.S. defined benefit pension plans represent the largest component.
U.S. defined benefit plans
As of January 1, 2006, the Company closed the salaried defined benefit plans to new entrants. The defined benefit plan of certain hourly employees was closed to new entrants in 2006 or thereafter. Eligible employees participate in a defined contribution retirement plan. In 2011, the Company approved amendments related to certain U.S. defined benefit plans so that depending upon the affected employee’s combined age and years of service to PPG, certain employees stopped or will stop accruing benefits either in 2011 or at the end of 2020. The affected employees will participate in the Company’s defined contribution retirement plans from the date their benefits under their respective defined benefit plans are frozen. The Company has amended other defined benefit plans in other countries in a similar way and plans to continue reviewing and potentially changing other PPG defined benefit plans in the future.
Postretirement medical
PPG sponsors welfare benefit plans that provide postretirement medical and life insurance benefits for certain U.S. and Canadian employees and their dependents of which the U.S. welfare benefit plans represent approximately 86% of the projected benefit obligation at December 31, 2018. Salaried and certain hourly employees in the U.S. hired on or after October 1, 2004, or rehired on or after October 1, 2012 are not eligible for postretirement medical benefits.
The U.S. welfare benefit plans include an Employee Group Waiver Plan (“EGWP”) for certain Medicare-eligible retirees and their dependents which includes a fully-insured Medicare Part D prescription drug plan. As such, PPG is not eligible to receive the federal subsidy provided under the Medicare Act of 2003 for these retirees and their dependents.
These plans in the U.S. and Canada require retiree contributions based on retiree-selected coverage levels for certain retirees and their dependents and provide for sharing of future benefit cost increases between PPG and participants based on management discretion. The Company has the right to modify, amend or terminate certain of these benefit plans in the future.
In 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.  Beginning January 1, 2017, PPG’s contribution for health care coverage related to Medicare-eligible retirees is in the form of a tax-free account known as a Health Reimbursement Arrangement (HRA). The HRA can be used to pay for health care and prescription drug plan premiums and certain out-of-pocket medical costs; unused funds can be carried over to future years.
The announcement of these plan design changes triggered a remeasurement of PPG’s retiree medical benefit obligation using prevailing interest rates. The plan design change resulted in a $306 million reduction in the Company's postretirement benefit obligation. PPG accounted for the plan design change prospectively, and the plan design change will be amortized to periodic postretirement benefit cost over a 5.6 year period.
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 on the accompanying consolidated balance sheet for the Company’s defined benefit pension and other postretirement benefit plans:
 
Defined Benefit Pension Plans
 
United States
International
Total PPG
($ in millions)
2018

2017

2018

2017

2018

2017

Projected benefit obligation, January 1

$1,706


$1,692


$1,756


$1,560


$3,462


$3,252

Service cost
17

19

11

14

28

33

Interest cost
57

60

40

38

97

98

Actuarial losses (gains) - net
(129
)
124

(117
)
61

(246
)
185

Benefits paid
(70
)
(104
)
(55
)
(63
)
(125
)
(167
)
Plan transfers
—

—

(8
)
—

(8
)
—

Foreign currency translation adjustments
—

—

(88
)
165

(88
)
165

Settlements and curtailments
—

(84
)
(24
)
(1
)
(24
)
(85
)
Former glass business changes, net
—

—

—

(1
)
—

(1
)
Other
1

(1
)
3

(17
)
4

(18
)
Projected benefit obligation, December 31

$1,582


$1,706


$1,518


$1,756


$3,100


$3,462

Market value of plan assets, January 1

$1,196


$1,115


$1,687


$1,446


$2,883


$2,561

Actual return on plan assets
(82
)
156

(53
)
133

(135
)
289

Company contributions
75

54

24

33

99

87

Participant contributions
—

—

—

1

—

1

Benefits paid
(49
)
(47
)
(53
)
(62
)
(102
)
(109
)
Plan settlements
—

(82
)
(24
)
(13
)
(24
)
(95
)
Foreign currency translation adjustments
—

—

(95
)
149

(95
)
149

Other
—

—

(8
)
—

(8
)
—

Market value of plan assets, December 31

$1,140


$1,196


$1,478


$1,687


$2,618


$2,883

Funded Status

($442
)

($510
)

($40
)

($69
)

($482
)

($579
)
Amounts recognized in the Consolidated Balance Sheet:
 
 
 
 
 
 
Other assets (long-term)
—

—

189

173

189

173

Accounts payable and accrued liabilities
(18
)
(16
)
(8
)
(7
)
(26
)
(23
)
Accrued pensions
(424
)
(494
)
(221
)
(235
)
(645
)
(729
)
Net liability recognized

($442
)

($510
)

($40
)

($69
)

($482
)

($579
)

 
Other Postretirement Benefit Plans
 
United States
International
Total PPG
($ in millions)
2018

2017

2018

2017

2018

2017

Projected benefit obligation, January 1

$641


$692


$112


$100


$753


$792

Service cost
9

10

1

—

10

10

Interest cost
21

21

3

3

24

24

Actuarial losses (gains) - net
(38
)
(39
)
(9
)
12

(47
)
(27
)
Benefits paid
(45
)
(43
)
(4
)
(5
)
(49
)
(48
)
Foreign currency translation adjustments
—

—

(8
)
8

(8
)
8

Former glass business changes, net
—

—

—

(8
)
—

(8
)
Other
(1
)
—

(1
)
2

(2
)
2

Projected benefit obligation, December 31

$587


$641


$94


$112


$681


$753

Amounts recognized in the Consolidated Balance Sheet:
 
 
 
 
 
 
Accounts payable and accrued liabilities
(48
)
(48
)
(4
)
(6
)
(52
)
(54
)
Other postretirement benefits
(539
)
(593
)
(90
)
(106
)
(629
)
(699
)
Net liability recognized

($587
)

($641
)

($94
)

($112
)

($681
)

($753
)
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, 2018 and 2017 was $2,944 million and $3,382 million, respectively.
The following table details the pension plans where the benefit liability exceeds the fair value of the plan assets:
 
Pensions
($ in millions)
2018

 
2017

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

$1,935

 

$2,544

Fair value of plan assets

$1,269

 

$1,792

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

$1,883

 

$2,434

Fair value of plan assets

$1,269

 

$1,749


Net actuarial losses and prior service cost/(credit) deferred in accumulated other comprehensive loss
 
Pensions
 
Other Postretirement Benefits
($ in millions)
2018

2017

 
2018

2017

Accumulated net actuarial losses

$800


$835

 

$113


$180

Accumulated prior service cost (credit)
2

—

 
(178
)
(239
)
Total

$802


$835

 

($65
)

($59
)

The accumulated net actuarial losses for pensions and other postretirement benefits relate primarily to historical declines in the discount rate as well as updated mortality assumptions. The accumulated net actuarial losses exceed 10% of the higher of the market value of plan assets or the PBO at the beginning of the year, therefore, amortization of such excess has been included in net periodic benefit costs for pension and other postretirement benefits in each of the last three years. The amortization period is the average remaining service period of active employees expected to receive benefits unless a plan is mostly inactive in which case the amortization period is the average remaining life expectancy of the plan participants. Accumulated prior service cost (credit) is amortized over the future service periods of those employees who are active at the dates of the plan amendments and who are expected to receive benefits.
The net decrease in Accumulated other comprehensive loss (pre-tax) in 2018 relating to defined benefit pension and other postretirement benefits is primarily attributable to pension and other postretirement plan design changes, as follows:
($ in millions)
Pensions

 
Other Postretirement Benefits

Net actuarial loss (gain) arising during the year

$39

 

($47
)
New prior service cost
2

 
1

Amortization of actuarial loss
(63
)
 
(19
)
Amortization of prior service credit
—

 
60

Foreign currency translation adjustments
(10
)
 
(1
)
Impact of settlements and curtailments
(1
)
 
—

Net change

($33
)
 

($6
)
 
The 2018 net actuarial gain related to the Company’s pension and other postretirement benefit plans of $8 million was primarily due to an increase in the weighted average discount rate used to determine the benefit obligation at December 31, 2018, partially offset by asset performance losses on plan assets for the year.
Net periodic benefit cost
Effective January 1, 2018, PPG adopted ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." See Note 1, "Summary of Significant Accounting Policies" for more information.
 
Pensions
 
Other Postretirement Benefits
($ in millions)
2018

2017

2016

 
2018

2017

2016

Service cost

$28


$33


$48

 

$10


$10


$15

Interest cost
97

98

142

 
24

24

31

Expected return on plan assets
(150
)
(141
)
(213
)
 
—

—

—

Amortization of prior service credit
—

—

(1
)
 
(60
)
(59
)
(31
)
Amortization of actuarial losses
63

75

110

 
19

12

19

Settlements, curtailments, and special termination benefits
5

60

1,015

 
—

—

—

Net periodic benefit cost/(income)

$43


$125


$1,101

 

($7
)

($13
)

$34


Service cost for net periodic pension and other postretirement benefit costs is included in Cost of sales, exclusive of depreciation and amortization, Selling, general and administrative, and Research and development, net in the accompanying consolidated statements of income. All other components of net periodic benefit cost are now recorded in Other charges, except for pension settlement charges, in the accompanying consolidated statements of income.
Key assumptions
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, 2018 and 2017:
 
United States
 
International
 
Total PPG
 
2018

2017

 
2018

2017

 
2018

2017

Discount rate
4.4
%
3.7
%
 
2.9
%
2.5
%
 
3.7
%
3.2
%
Rate of compensation increase
1.5
%
1.5
%
 
0.9
%
1.1
%
 
1.2
%
1.3
%

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, 2018:
 
2018

 
2017

 
2016

Discount rate
3.2
%
 
3.6
%
 
3.6
%
Expected return on assets
5.4
%
 
5.4
%
 
6.1
%
Rate of compensation increase
1.2
%
 
1.3
%
 
1.6
%

These assumptions for each plan are reviewed on an annual basis. In determining the expected return on plan asset assumption, the Company evaluates the mix of investments that comprise each plan’s assets and external forecasts of future long-term investment returns. The Company compares the expected return on plan assets assumption to actual historic returns to ensure reasonability. For 2018, the return on plan assets assumption for PPG’s U.S. defined benefit pension plans was 7.4%. A change in the rate of return of 1 percentage point, with other assumptions held constant, would impact 2018 net periodic pension expense by $12 million. The global expected return on plan assets assumption to be used in determining 2019 net periodic pension expense will be 5.4% (7.4% for the U.S. plans only).
The discount rate used in accounting for pensions and other postretirement benefits is determined by reference to a current yield curve and by considering the timing and amount of projected future benefit payments. In 2016, the Company changed the method it uses to estimate the service and interest cost components of net periodic benefit cost for pension and other postretirement benefit costs for substantially all of its U.S. and foreign plans. Historically, the service and interest cost components were estimated using a single weighted-average discount rate derived from the yield curve used to measure the projected benefit obligation at the beginning of the period. The Company has elected to use a full yield curve approach (“Split-rate” method) in the estimation of these components of benefit cost by applying specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The Company made this change to improve the correlation between projected benefit cash flows and the corresponding yield curve spot rates and to provide a more precise measurement of service and interest costs. This change does not affect the measurement of the Company’s total benefit obligations. The Company accounted for this change as a change in estimate and, accordingly, began recognizing its effect in fiscal year 2016. A change in the discount rate of 1 percentage point, with all other assumptions held constant, would impact 2019 net periodic benefit expense for our defined benefit pension and other postretirement benefit plans by $19 million and $22 million, respectively.
In 2018, the Company updated mortality tables used to calculate its U.S. defined benefit pension and other postretirement benefit liabilities. The Company considered the available mortality tables released by the Society of Actuaries’ Retirement Plans Experience Committee and performed a review of its own mortality history, as well the industry in which the Company operates to assess future improvements in mortality rates based on its U.S. population. The Company chose to value its U.S. defined benefit pension and other postretirement benefit liabilities using a slightly modified assumption of future mortality which better approximates our plan participant population.
The weighted-average healthcare cost trend rate (inflation) used for 2018 was 5.8% declining to a projected 4.5% in the year 2024. For 2019, the assumed weighted-average healthcare cost trend rate used will be 5.6% declining to a projected 4.4% between 2018 and 2039 for medical and prescription drug costs, respectively. These assumptions are reviewed on an annual basis. In selecting rates for current and long-term health care cost assumptions, the Company takes into consideration a number of factors, including the Company’s actual health care cost increases, the design of the Company’s benefit programs, the demographics of the Company’s active and retiree populations and external expectations of future medical cost inflation rates.
Contributions to defined benefit pension plans
($ in millions)
2018

2017

2016

U.S. defined benefit pension plans(a)

$75


$54


$134

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

$24


$33


$54

(a)
During 2016, U.S. contributions totaling $12 million associated with the former glass segment were recast as cash flows from operations - discontinued operations and are excluded from the table above.
(b)
During 2016, non-U.S. contributions totaling $4 million associated with the former European fiberglass business were recast as cash flows from operations - discontinued operations and are excluded from the table above.
PPG made voluntary contributions of $75 million to its U.S. defined benefit pension plans in 2018. Contributions made to PPG’s non-U.S. defined benefit pension plans in 2018 and 2017 were required by local funding requirements. PPG expects to make mandatory contributions to its non-U.S. plans in the range of $20 million to $30 million in 2019. PPG may make voluntary contributions to its defined benefit pension plans in 2019 and beyond.
Benefit payments
The estimated benefits expected to be paid under the Company’s defined benefit pension and other postretirement benefit plans are:
($ in millions)
Pensions

 
Other Postretirement Benefits

2019

$136

 

$53

2020

$139

 

$53

2021

$145

 

$53

2022

$147

 

$52

2023

$153

 

$51

2024 to 2028

$826

 

$228


U.S. Qualified Pension
Beginning in 2012, the Company initiated a lump sum payout program that gave certain terminated vested participants in certain U.S. defined benefit pension plans the option to take a one-time lump sum cash payment in lieu of receiving a future monthly annuity.  During 2017, PPG paid $87 million in lump sum benefits to terminated vested participants who elected to participate in the program.  As the lump-sum payments were in excess of the expected 2017 service and interest costs for the qualified pension plans, PPG remeasured the periodic benefit obligation of the qualified plans and recorded a settlement charge totaling $35 million ($22 million after-tax).
U.S. Non-qualified Pension
In the first quarter 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).
Plan assets
Each PPG sponsored defined benefit pension plan is managed in accordance with the requirements of local laws and regulations governing defined benefit pension plans for the exclusive purpose of providing pension benefits to participants and their beneficiaries. Investment committees comprised of PPG managers have fiduciary responsibility to oversee the management of pension plan assets by third party asset managers. Pension plan assets are held in trust by financial institutions and managed on a day-to-day basis by the asset managers. The asset managers receive a mandate from each investment committee that is aligned with the asset allocation targets established by each investment committee to achieve the plan’s investment strategies. The performance of the asset managers is monitored and evaluated by the investment committees throughout the year. 
Pension plan assets are invested to generate investment earnings over an extended time horizon to help fund the cost of benefits promised under the plans while mitigating investment risk. The asset allocation targets established for each pension plan are intended to diversify the investments among a variety of asset categories and among a variety of individual securities within each asset category to mitigate investment risk and provide each plan with sufficient liquidity to fund the payment of pension benefits to retirees.
The following summarizes the weighted average target pension plan asset allocation as of December 31, 2018 and 2017 for all PPG defined benefit plans:
Asset Category
2018
 
2017
Equity securities
15-45%
 
15-45%
Debt securities
30-65%
 
30-65%
Real estate
0-10%
 
0-10%
Other
20-40%
 
20-40%
 
The fair values of the Company’s pension plan assets at December 31, 2018 and 2017, by asset category, are as follows:
 
December 31, 2018
 
December 31, 2017
($ 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

$43


$94


$—


$137

 

$—


$83


$—


$83

Small cap
23

—

—

23

 
29

—

—

29

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

103

—

218

 
115

79

—

194

Debt securities:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
3

19

—

22

 
—

11

—

11

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

220

77

297

 
—

201

86

287

Developed and emerging markets(2)
—

4

—

4

 
—

43

—

43

Diversified(5)
—

142

—

142

 
—

124

—

124

Government
 
 
 
 
 
 
 
 
 
U.S.(4)
68

8

—

76

 
68

1

—

69

Developed markets
—

6

—

6

 
—

101

—

101

Other(6)
—

14

359

373

 
—

14

418

432

Real estate, hedge funds, and other
—

304

359

663

 
—

185

498

683

Total assets in the fair value hierarchy

$252


$914


$795


$1,961

 

$212


$842


$1,002


$2,056

Common-collective trusts(7)
—

—

—

657

 
—

—

—

827

Total Investments

$252


$914


$795


$2,618

 

$212


$842


$1,002


$2,883

(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.
(7)
Certain investments that are measured at net asset value per share (or its equivalent) are not required to be classified in the fair value hierarchy.
The change in the fair value of the Company’s Level 3 pension assets for the years ended December 31, 2018 and 2017 was as follows:
($ in millions)
Real Estate

 
Other Debt Securities

 
Hedge Funds and Other Assets

 
Total

January 1, 2017

$129

 

$16

 

$370

 

$515

Realized gains
11

 
45

 
3

 
59

Unrealized losses
—

 
—

 
5

 
5

Transfers (out)/in, net
(5
)
 
355

 
36

 
386

Foreign currency losses
3

 
2

 
32

 
37

December 31, 2017

$138

 

$418

 

$446

 

$1,002

Realized gains (losses)
9

 
(29
)
 
10

 
(10
)
Unrealized losses
—

 
—

 
(28
)
 
(28
)
Transfers (out)/in, net
(6
)
 
(12
)
 
(119
)
 
(137
)
Foreign currency loss
(4
)
 
(18
)
 
(10
)
 
(32
)
December 31, 2018

$137

 

$359

 

$299

 

$795


Real estate properties are externally appraised at least annually by reputable, independent appraisal firms. Property valuations are also reviewed on a regular basis and are adjusted if there has been a significant change in circumstances related to the property since the last valuation.
Other debt securities consist of insurance contracts, which are externally valued by insurance companies based on the present value of the expected future cash flows.
Hedge funds consist of a wide range of investments which target a relatively stable investment return. The underlying funds are valued at different frequencies, some monthly and some quarterly, based on the value of the underlying investments. Other assets consist primarily of small investments in private equity funds and senior secured debt obligations of non-investment grade borrowers.
U.S. pension annuity contracts
In June 2016, the Company entered into a Definitive Purchase Agreement by and among the Company, Massachusetts Mutual Life Insurance Company (“MassMutual”) and State Street Bank & Trust Company (“State Street”), as independent fiduciary to the Company’s United States defined benefit pension plans (the “Plans”), and a Definitive Purchase Agreement by and among the Company, Metropolitan Life Insurance Company (“MetLife”) and State Street.
In August 2016, pursuant to the two Definitive Purchase Agreements, the Plans purchased group annuity contracts that irrevocably transferred to the two insurance companies certain pension benefit obligations for approximately 13,200 of the Company’s retirees in the United States who started receiving their monthly retirement benefit payments on or before April 1, 2016. The value of the benefit obligation of each affected former salaried employee’s retirement benefit obligation is irrevocably guaranteed by, and split equally between, MassMutual and MetLife. Pursuant to these Definitive Purchase Agreements, MassMutual serves as the lead administrator. The value of each affected former hourly employee’s retirement benefit obligation is irrevocably guaranteed by MetLife, and MetLife will serve as the administrator. The amount of each affected retiree’s annuity payment is equal to the amount of such individual’s pension benefit. The purchase of group annuity contracts was funded directly by the assets of the Plans. By irrevocably transferring the obligations and assets to MassMutual and MetLife, the Company reduced its overall pension projected benefit obligation by approximately $1.6 billion and recognized a non-cash pension settlement charge of approximately $535 million after-tax ($857 million pre-tax).
Following the transfer of the aforementioned U.S. retiree obligations and assets to third party insurers, PPG contributed $29 million and $146 million to its U.S. plans in 2017 and 2016, respectively. These contributions were funded using cash on hand. 
During 2016, in advance of the purchase of group annuity contracts, PPG merged two of its qualified defined benefit pension plans that contained retired plan participants into one surviving plan. In conjunction with the merger and purchase of group annuity contracts, PPG remeasured its qualified pension plan benefit obligations using prevailing discount rates as of July 31, 2016 which averaged 3.6% as compared to a 4.5% discount rate as of December 31, 2015. The remeasurement increased the Company's cumulative pension benefit obligation of its remaining plans by $306 million and increased the Company's full year 2016 qualified defined benefit pension expense by approximately $10 million.
Canadian pension annuity contracts
In 2016, the Company purchased group annuity contracts that transferred pension benefit obligations for certain of the Company’s retirees and terminated vested participants in Canada who started receiving their monthly retirement benefit payments on or before April 1, 2016 to Sun Life Assurance Company of Canada (“Sun Life”) and The Canada Life Assurance Company (“Canada Life”). The amount of each affected retiree’s annuity payment is equal to the amount of such individual’s pension benefit. The purchase of group annuity contracts was funded directly by the assets of the Canadian plans. By transferring the obligations and assets to Sun Life and Canada Life, the Company reduced its overall pension projected benefit obligation by approximately $200 million and recognized a non-cash pension settlement charge of $47 million after-tax ($64 million pre-tax). The Company made voluntary contributions aggregating $7 million to the Canadian plans in 2016 related to the pension annuity contracts. These contributions were funded using cash on hand. 
Sale of the flat glass business
In 2016, PPG completed the sale of its flat glass business as discussed in Note 3, “Acquisitions and Divestitures.” PPG transferred to Vitro certain defined benefit pension liabilities resulting in a settlement charge of $11 million which was included in Income from discontinued operations, net of tax. This transaction lowered the projected benefit obligation of PPG’s defined benefit pension plan by approximately $100 million. PPG transferred pension assets of $55 million in 2016 in connection with the sale and transferred an additional $20 million of pension assets in 2018 as a result of finalization of the pension transfer.
Sale of the European fiber glass business
In 2016, PPG completed the sale of its European fiber glass business as discussed in Note 3, “Acquisitions and Divestitures.” PPG transferred to NEG certain defined benefit pension liabilities resulting in a net settlement charge of $46 million. This amount is included in Income from discontinued operations, net of tax in 2016.This transaction lowered the projected benefit obligation of PPG’s defined benefit pension plans by approximately $340 million. In 2016, PPG transferred pension assets of approximately $250 million in connection with the sale.
Retained liabilities and legacy settlement charges
PPG has retained certain liabilities for defined benefit pension and postretirement benefits earned for service up to the date of sale of its former automotive glass and service business for employees who were active as of the divestiture date and for individuals who were retirees of the business as of the divestiture date, totaling $313 million and $369 million at December 31, 2018 and 2017, respectively. PPG recognized expense of $1 million, $2 million, and $20 million related to these obligations in 2018, 2017, and 2016, respectively.
There have been multiple PPG facility closures in Canada. These various plant closures have resulted in partial and full windups, and related settlement charges, of pension plans for various hourly and salary employees employed by these locations. The charges are recorded for the individual plans when a particular windup is approved by the Canadian pension authorities and the Company has made all contributions to the individual plan and has discharged the liability through either lump sum payments to participants or purchasing annuities. The Company may incur additional charges related to this matter in the future.
During 2016, PPG completed the wind-up of two legacy Canadian plans and recorded after-tax wind-up charges totaling $34 million ($47 million pre-tax). Cash contributions made in conjunction with these windups were approximately $1 million.
Other Plans
Defined contribution plans
The Company has defined contribution plans for certain employees in the U.S., China, United Kingdom, Australia, Italy, and other countries. For the years ended December 31, 2018, 2017, and 2016, the Company recognized expense for its defined contribution retirement plans of $63 million, $57 million and $70 million, respectively. The Company’s annual cash contributions to its defined contribution retirement plans approximated the expense recognized in each year.
Employee savings plan
PPG’s Employee Savings Plan (“Savings Plan”) covers substantially all employees in the U.S., Puerto Rico and Canada. The Company makes matching contributions to the Savings Plan, at management’s discretion, based upon participants’ savings, subject to certain limitations. For most participants not covered by a collective bargaining agreement, Company-matching contributions are established each year at the discretion of the Company and are applied to participant savings up to a maximum of 6% of eligible participant compensation. For those participants whose employment is covered by a collective bargaining agreement, the level of Company-matching contribution, if any, is determined by the relevant collective bargaining agreement. The Company-matching contribution remained at 100% for 2018.
In 2016, the Company terminated its U.S. defined contribution plan and subsequently merged the plan into the Savings Plan. Under the combined plan, eligible employees will continue to receive a contribution equal to between 2% and 5% of annual compensation, based on age and years of service.
Compensation expense and cash contributions related to the Company match of participant contributions to the Savings Plan for 2018, 2017, and 2016 totaled $47 million, $46 million and $48 million, respectively. A portion of the Savings Plan qualifies under the Internal Revenue Code as an Employee Stock Ownership Plan. Accordingly, dividends received on PPG shares held in that portion of the Savings Plan totaling $13 million, $14 million, and $14 million for 2018, 2017, and 2016, respectively, are deductible for U.S. Federal tax purposes.
Deferred compensation plan
The Company has a deferred compensation plan for certain key managers which allows them to defer a portion of their compensation in a phantom PPG stock account or other phantom investment accounts. The amount deferred earns a return based on the investment options selected by the participant. The amount owed to participants is an unfunded and unsecured general obligation of the Company. Upon retirement, death, disability, termination of employment, scheduled payment or unforeseen emergency, the compensation deferred and related accumulated earnings are distributed in accordance with the participant’s election in cash or in PPG stock, based on the accounts selected by the participant.
The plan provides participants with investment alternatives and the ability to transfer amounts between the phantom non-PPG stock investment accounts. To mitigate the impact on compensation expense of changes in the market value of the liability, the Company has purchased a portfolio of marketable securities that mirror the phantom non-PPG stock investment accounts selected by the participants, except the money market accounts. These investments are carried by PPG at fair market value, and the changes in market value of these securities are also included in Income before income taxes in the consolidated statement of income. Trading occurs in this portfolio to align the securities held with the participant’s phantom non-PPG stock investment accounts, except the money market accounts.
The (benefit) cost of the deferred compensation plan, comprised of dividend equivalents accrued on the phantom PPG stock account, investment income and the change in market value of the liability, was $(1) million, $19 million and $7 million in 2018, 2017 and 2016, respectively. These amounts are included in Selling, general and administrative in the consolidated statements of income. The change in market value of the investment portfolio was (expense) income of $(2) million, $18 million, and $5 million in 2018, 2017 and 2016, respectively, and is also included in Selling, general and administrative in the consolidated statements of income.
The Company’s obligations under this plan, which are included in Accounts payable and accrued liabilities and Other liabilities on the consolidated balance sheet, totaled $110 million and $121 million as of December 31, 2018 and 2017, respectively, and the investments in marketable securities, which are included in Investments and Other current assets on the accompanying consolidated balance sheet, were $73 million and $83 million as of December 31, 2018 and 2017, respectively.