Postretirement Benefits

12 Months Ended

Oct. 31, 2020

Retirement Benefits [Abstract]

Postretirement Benefits

Postretirement Benefits

Defined Benefit Plans

We provide postretirement benefits to a substantial portion of our employees and retirees. Costs associated with postretirement benefits include pension and postretirement health care expenses for employees, retirees, surviving spouses and dependents.

Obligations and Funded Status

A summary of the changes in benefit obligations and plan assets is as follows:

	Pension Benefits						Health and Life Insurance Benefits
(in millions)	2020			2019			2020			2019
Change in benefit obligations
Benefit obligations at beginning of year	$	3,347		$	3,344		$	1,087		$	1,245
Service cost	8			7			3			3
Interest on obligations	84			121			28			49
Actuarial loss (gain)	64			405			(457		)	(138		)
Plan amendment	—			4			—			—
Settlements	(11		)	(263		)	—			—
Currency translation	(1		)	(5		)	—			—
Plan participants' contributions	—			—			37			35
Subsidy receipts	—			—			37			37
Benefits paid	(249		)	(266		)	(136		)	(144		)
Benefit obligations at end of year	$	3,242		$	3,347		$	599		$	1,087
Change in plan assets
Fair value of plan assets at beginning of year	$	2,013		$	2,162		$	283		$	297
Actual return on plan assets	58			232			7			20
Settlements	(11		)	(263		)	—			—
Currency translation	(1		)	(5		)	—			—
Employer contributions(A)	35			136			1			1
Benefits paid	(233		)	(249		)	(39		)	(35		)
Fair value of plan assets at end of year	$	1,861		$	2,013		$	252		$	283
Funded status at year end	$	(1,381	)	$	(1,334	)	$	(347	)	$	(804	)

_________________________

(A) Employer contributions as of October 31, 2019 consisted of $140 million, net of a $4 million return of plan assets to the Company.

	Pension Benefits						Health and Life Insurance Benefits
(in millions)	2020			2019			2020			2019
Amounts recognized in our Consolidated Balance Sheets consist of:
Noncurrent asset	$	5		$	3		$	—		$	—
Current liability	(18		)	(18		)	(10		)	(20		)
Noncurrent liability	(1,368		)	(1,319		)	(337		)	(784		)
Net liability recognized	$	(1,381	)	$	(1,334	)	$	(347	)	$	(804	)
Amounts recognized in our accumulated other comprehensive loss consist of:
Net actuarial loss (gain)	$	2,133		$	2,086		$	(478	)	$	(33	)
Net prior service cost	3			4			—			—
Net amount recognized	$	2,136		$	2,090		$	(478	)	$	(33	)

The underfunded status of our pension plans on a U.S. GAAP basis increased $47 million during 2020 primarily due to a decrease in the discount rate, partially offset by changes in demographic assumptions.

The decrease in the underfunded status of our health and life insurance benefits is primarily driven by updated per capita cost and trend assumptions due to favorable contract negotiations with insurers. Contributing to the improved funded status is an enhanced gainshare feature on the Medicare Advantage benefit in the amount of $248 million that will offset certain retiree healthcare costs and $180 million is attributable to improved pricing and rebates on prescription drugs.

The accumulated benefit obligation for pension benefits, a measure that excludes the effect of prospective salary and wage increases, was $3.2 billion and $3.3 billion at October 31, 2020 and 2019, respectively.

The cumulative postretirement benefit adjustment included in the Consolidated Statement of Stockholders' Deficit is net of deferred taxes related to our postretirement benefit plans of $197 million and $464 million, at October 31, 2020 and 2019, respectively.

Information for pension plans with accumulated benefit obligations in excess of plan assets were as follows:

	As of October 31,
(in millions)	2020		2019
Projected benefit obligations	$	3,234	$	3,325
Accumulated benefit obligations	3,217		3,307
Fair value of plan assets	1,849		1,991

Generally, the pension plans are non-contributory. Our policy is to fund the pension plans in accordance with applicable U.S. and Canadian government regulations and to make additional contributions from time to time. As of October 31, 2020, we have met all regulatory funding requirements. In 2020 and 2019, we contributed $35 million and $140 million, respectively, to our pension plans to meet regulatory funding requirements. During the first quarter of 2019, we accelerated the payment of a substantial portion of our 2019 minimum required funding. In 2020, we deferred $157 million of previously expected contributions until the first quarter of 2021 under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). We expect to contribute approximately $320 million to our pension plans during 2021.

We primarily fund OPEB obligations, such as retiree medical, in accordance with the 1993 Settlement Agreement, which requires us to fund a portion of the plans' annual service cost to a retiree benefit trust (the "Base Trust"). The 1993 Settlement Agreement resolved a class action lawsuit originally filed in 1992 regarding the restructuring of our then applicable retiree health care and life insurance benefits. In 2020, we contributed $1 million to our OPEB plans to meet legal funding requirements. We expect to contribute $1 million to our OPEB plans during 2021.

We have certain unfunded pension plans, under which we make payments directly to employees. Benefit payments of $16 million and $17 million for October 31, 2020 and 2019, respectively, are included within the amount of Benefits paid in the Change in benefit obligation section above, but are not included in the Change in plan assets section, because the payments are made directly by us and not by separate trusts that are used in the funding of our other pension plans.

We also have certain OPEB benefits that are paid from Company assets (instead of trust assets). Payments from Company assets, net of participant contributions and subsidy receipts, result in differences between benefits paid as presented under Change in benefit obligation and Change in plan assets of $23 million and $37 million for 2020 and 2019, respectively.

Components of Net Periodic Benefit Expense and Other Amounts Recognized in Other Comprehensive Loss

The components of our postretirement benefits expense included in our Consolidated Statements of Operations consist of the following:

	For the Years Ended October 31,
(in millions)	2020		2019		2018
Pension expense	$	63	$	232	$	72
Health and life insurance expense	11		31		33
Total postretirement benefits expense	$	74	$	263	$	105

Components of Net Periodic Benefit Expense

Net periodic benefit expense included in our Consolidated Statements of Operations, and other amounts recognized in our Consolidated Statements of Stockholders' Deficit, for the years ended October 31 is comprised of the following:

	For the Years Ended October 31,
	Pension Benefits									Health and Life Insurance Benefits
(in millions)	2020			2019			2018			2020			2019			2018
Service cost for benefits earned during the period	$	8		$	7		$	7		$	3		$	3		$	4
Interest on obligation	84			121			108			28			49			43
Amortization of cumulative loss (gain)	97			94			106			(1		)	(1		)	9
Amortization of prior service cost (benefit)	1			—			—			—			—			—
Settlements	7			143			9			—			—			—
Premiums on pension insurance	11			10			3			—			—			—
Expected return on assets	(145		)	(143		)	(161		)	(19		)	(20		)	(23		)
Net periodic benefit expense	$	63		$	232		$	72		$	11		$	31		$	33
Other Changes in plan assets and benefit obligations recognized in other comprehensive loss (income)
Actuarial net loss (gain)	$	151		$	316		$	(61	)	$	(445	)	$	(138	)	$	(139	)
Prior service cost	—			4			—			—			—			—
Amortization of cumulative (loss) gain	(97		)	(94		)	(106		)	1			1			(9		)
Amortization of prior service benefit (cost)	(1		)	—			—			—			—			—
Settlements	(7		)	(143		)	(9		)	—			—			—
Total recognized in other comprehensive income	$	46		$	83		$	(176	)	$	(444	)	$	(137	)	$	(148	)
Total net postretirement benefits (income) expense and other comprehensive loss (income)	$	109		$	315		$	(104	)	$	(433	)	$	(106	)	$	(115	)

Components of net periodic benefit cost other than service cost are included in Other expense, net in our Consolidated Statements of Operations.

For the year ended October 31, 2019, we adopted ASU No. 2017-07 "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." This ASU requires that an employer disaggregate the service cost component from the other components of net periodic benefit cost. As a result, we have reclassified certain net periodic benefit costs from SG&A expenses to Other expense, net in our Consolidated Statements of Operations. The guidance, which required retrospective application, resulted in a reclassification of $94 million for the year ended October 31, 2018.

For the years ended October 31, 2020, 2019 and 2018, we purchased group annuity contracts for certain retired pension plan participants resulting in plan remeasurements. The purchase of the group annuity contracts was funded directly by the assets of our pension plans. As a result, in 2020, 2019 and 2018, net actuarial gains of $2 million, net actuarial losses of $11 million and net actuarial losses of $2 million, respectively, were recognized as components of Accumulated other comprehensive loss and non-cash pension settlement accounting expenses of $7 million, $142 million and $9 million, respectively, were recognized in Other expense, net in our Consolidated Statements of Operations.

In 2020 and 2019, respectively, in accordance with the intraperiod tax allocation rules, we recorded a net benefit of $75 million and $5 million, respectively, related to domestic continuing operations in Income tax expense in our Consolidated Statements of Operations, and an offsetting reduction in Other comprehensive income due to the remeasurement of certain pension and OPEB plans.

The estimated amounts for the defined benefit pension plans and the other postretirement benefit plans that will be amortized from AOCL into net periodic benefit expense over the next fiscal year are as follows:

(in millions)	Pension Benefits		Health and Life Insurance Benefits
Amortization of prior service cost	$	1	$	—
Amortization of cumulative losses/(gains)	107		(40		)

Cumulative unrecognized actuarial gains and losses for postretirement benefit plans, where substantially all of the plan participants are inactive, are amortized over the average remaining life expectancy of the inactive plan participants. Otherwise, cumulative gains and losses are amortized over the average remaining service period of active employees.

Plan amendments unrelated to negotiated labor contracts are amortized over the average remaining service period of active employees or the remaining life expectancy of the inactive participants based upon the nature of the amendment and the participants impacted. Plan amendments arising from negotiated labor contracts are amortized over the length of the contract.

Assumptions

The weighted average rate assumptions used in determining benefit obligations for the years ended October 31, 2020 and 2019 are:

	Pension Benefits				Health and Life Insurance Benefits
	2020		2019		2020		2019
Discount rate used to determine present value of benefit obligation at end of year	2.6	%	3.1	%	2.5	%	3.1	%
Expected rate of increase in future compensation levels	3.5	%	3.5	%	—		—

The weighted average rate assumptions used in determining net postretirement benefits expense for 2020, 2019, and 2018 were:

	Pension Benefits						Health and Life Insurance Benefits
	2020		2019		2018		2020		2019		2018
Discount rate used to determine service cost	3.3	%	4.6	%	3.9	%	3.3	%	4.6	%	3.9	%
Discount rate used to determine interest cost	2.6	%	4.0	%	3.0	%	2.7	%	4.1	%	3.1	%
Expected long-term rate of return on plan assets	7.2	%	7.4	%	7.2	%	7.3	%	7.5	%	7.5	%
Expected rate of increase in future compensation levels	3.5	%	3.5	%	3.5	%	—		—		—

The actuarial assumptions used to compute the net postretirement benefits expense (income) are based upon information available as of the beginning of the year, specifically market interest rates, past experience, and our best estimate of future economic conditions. Changes in these assumptions may impact the measurement of future benefit costs and obligations. In computing future costs and obligations, we must make assumptions about such things as employee mortality and turnover, expected salary and wage increases, discount rates, expected returns on plan assets, and expected future cost increases. Three of these items have a significant impact on the level of expense recognized: (i) discount rates, (ii) expected rates of return on plan assets, and (iii) healthcare cost trend rates.

We determine the discount rate for our pension and OPEB obligations by matching anticipated future benefit payments for the plans to a high-quality corporate bond yield curve to establish a weighted average discount rate for each plan.

We determine our assumption as to expected return on plan assets by evaluating historical performance, investment community forecasts, and current market conditions. We consider the current asset mix as well as our targeted asset mix when establishing the expected return on plan assets.

Health care cost trend rates have been established through a review of actual recent cost trends and projected future trends. Our retiree medical and drug cost trend assumptions are our best estimate of expected inflationary increases to healthcare costs. Due to the number of former employees and their beneficiaries included in our retiree population (approximately 25,000), the trend assumptions are based upon both our specific trends and nationally expected trends.

The weighted average rate of increase in the per capita cost of postretirement health care benefits provided through U.S. plans representing 80% of our other postretirement benefit obligation, is projected to be 3.1% in 2021 and was estimated as 10.1% for 2020. The 3.1% is assumed to increase to 10.1% in 2022 and then decrease to 5% by the year 2026 and remain at that level thereafter.

The OPEB liability estimate is impacted by the level of premiums paid to and gainshare received from insurers, rebates from pharmaceutical companies and government subsidies received on prescription drugs. Future levels of subsidies could also be impacted by the outcome of our Retiree Health Care Litigation, which could be material.

The effect of changing the health care cost trend rate by one-percentage point for each future year is as follows:

(in millions)	One-Percentage Point Increase		One-Percentage Point Decrease
Effect on total of service and interest cost components	$	5	$	(4	)
Effect on postretirement benefit obligation	77		(57		)

Plan Assets

The accounting guidance on fair value measurements specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques (Level 1, 2 and 3). See Note 14, Fair Value Measurements, for a discussion of the fair value hierarchy.

The following describes the methods and significant assumptions used to estimate fair value of the investments:

• Cash and short-term investments—Valued at cost plus earnings from investments for the period, which approximates fair market value due to the short-term duration. Cash equivalents are valued at net asset value as provided by the administrator of the fund.

• U.S. Government and agency securities—Valued at the closing price reported on the active market on which the security is traded or valued by the trustee at year-end using various pricing services of financial institutions, including Interactive Data Corporation, Standard & Poor's and SIX Telekurs.

• Corporate debt securities—Valued by the trustee at year-end using various pricing services of financial institutions, including Interactive Data Corporation, Standard & Poor's and SIX Telekurs.

• Common and preferred stock—Valued at the closing price reported on the active market on which the security is traded.

• Collective trusts, Partnerships/joint venture interests, Real estate and Hedge funds—Valued at the net asset value provided by the administrator of the fund. The net asset value is based on the value of the underlying assets owned by the fund, minus its liabilities, divided by the number of units outstanding.

• Insurance Linked Securities—Valued at the net asset value provided by the administrator of the fund. The net asset value is based on the value of the underlying assets owned by the fund, minus its liabilities, then divided by the number of units outstanding.

• Derivatives—Valued monthly for the trustee using various pricing services of financial institutions, including Interactive Data Corporation, Standard & Poor’s and SIX Telekurs. Valued monthly by the trustee using various providers of derivatives pricing, most notably Numerix, Markit and Super Derivatives.

Pension Assets

The fair value of the pension plan assets by category is summarized below:

	As of October 31, 2020										As of October 31, 2019
(in millions)	Level 1		Level 2		Level 3		NAV		Total		Level 1		Level 2		Level 3		NAV		Total
Asset Category
Cash and Cash Equivalents	$	54	$	—	$	—	$	—	$	54	$	68	$	—	$	—	$	—	$	68
Collective Trusts and Other(A)
U.S. Equity	—		286		—		—		286		281		—		—		—		281
International Equity	—		240		—		—		240		283		—		—		—		283
Global Equity	—		211		—		—		211		219		—		—		—		219
Fixed Income - Long Duration Credit	—		320		—		—		320		—		296		—		—		296
Fixed Income - Long Duration Government	—		140		—		—		140		—		173		—		—		173
Fixed Income - Intermediate Duration Government	—		22		—		—		22		—		79		—		—		79
Fixed Income - High Yield	—		89		—		—		89		—		154		—		—		154
Fixed Income - Canadian Bond	—		11		—		—		11		—		20		—		—		20
Global Real Estate	—		157		—		—		157		—		138		—		—		138
Insurance linked Securities	—		—		—		24		24		—		—		—		34		34
Hedge Fund of Funds	—		—		—		181		181		—		—		—		187		187
Private Equity	—		—		—		17		17		—		—		—		23		23
Private Credit	—		—		—		89		89		—		—		—		47		47
Real Estate	—		—		—		19		19		—		—		—		9		9
Total(B)	$	54	$	1,476	$	—	$	330	$	1,860	$	851	$	860	$	—	$	300	$	2,011

___________________

(A) In the fourth quarter of 2020, we utilized a valuation perspective for the Collective Trust whereby we valued those instruments in their entirety. In prior years we used a "look through" approach to individual components of the trust instrument to determine an aggregate fair value. As result of this change, the Collective Trust components are classified as Level 2 in the current period as compared to Level 1 in prior periods.

(B) In addition, the table above includes the fair value of Canadian pension assets translated at the exchange rates as of October 31, 2020 and 2019, respectively, while the change in the plan asset table includes the fair value of Canadian pension assets translated at historical foreign currency rates.

Other Postretirement Benefits

The fair value of other postretirement benefit plan assets by category is summarized below:

	As of October 31, 2020										As of October 31, 2019
(in millions)	Level 1		Level 2		Level 3		NAV		Total		Level 1		Level 2		Level 3		NAV		Total
Asset Category
Cash and Cash Equivalents	$	11	$	—	$	—	$	—	$	11	$	8	$	—	$	—	$	—	$	8
Fixed Income
U.S. Credit Bonds	—		46		—		—		46		—		58		—		—		58
Collective Trusts and Other(A)
U.S. Equity	—		51		—		—		51		58		—		—		—		58
International Equity	—		51		—		—		51		57		—		—		—		57
Fixed Income - Multi-Asset Credit	—		28		—		—		28		9		19		—		—		28
Real Estate (REITs)	—		—		—		20		20		—		—		—		26		26
Insurance Linked Securities	—		—		—		4		4		—		—		—		6		6
Hedge Fund of Funds	—		—		—		37		37		—		—		—		37		37
Private Equity	—		—		—		4		4		—		—		—		5		5
Total	$	11	$	176	$	—	$	65	$	252	$	132	$	77	$	—	$	74	$	283

_________________________

(A) In the fourth quarter of 2020, we utilized a valuation perspective for the Collective Trust whereby we valued those instruments in their entirety. In prior years we used a "look through" approach to individual components of the trust instrument to determine an aggregate fair value. As result of this change, the Collective Trust components are classified as Level 2 in the current period as compared to Level 1 in prior periods.

The investment strategy of the postretirement pension plans (the "Plans") is based on many factors including broad economic factors, historical and prospective information regarding capital market performance, investment strategies available to an asset pool of this size, the current regulatory environment, the Plans’ liabilities and the expected interaction between assets and liabilities. The primary objective of the strategy is to manage assets in such a way that will allow the eventual satisfaction of obligations to the Plans’ participants and beneficiaries. To meet the primary objective the portfolios will be structured to provide liquidity to meet the Plans’ benefit payment obligations and administration expenses, offer a reasonable probability of achieving growth in assets that will assist in closing the Plans’ funding gap and enable the Plans to satisfy their liabilities.

Given the relationship between risk and return a moderately aggressive risk profile was implemented. Primary emphasis is to strike a balance between portfolio stability and portfolio appreciation.

In line with the Plans' return objectives and risk parameters, target asset allocations are approximately 70% return-seeking assets and 30% liability-hedging assets. The return-seeking assets include long only equities (both active and passive, domestic and international, across the capitalization range) to capture long-term growth opportunities, hedge fund of funds to diversify the equity beta, return seeking credit (including high yield debt, emerging market debt and bank loans) to provide a meaningful level of absolute return and diversify equity beta, global real estate to diversify the equity beta and private equity. The liability-hedging assets are invested in high-quality, investment grade bonds with durations that approximate the durations of the liabilities. The objective of the liability hedging assets is to dampen the Plans’ surplus volatility.

All assets are managed by external investment managers. Each investment manager is expected to prudently manage the assets in a manner consistent with the investment objectives, guidelines, and constraints outlined in their Investment Management Agreements and the Investment Policy Statement. Managers are not permitted to invest outside of the asset class mandate (i.e., equity, fixed income, alternatives) or strategy for which they are appointed.

Expected Future Benefit Payments

The expected future benefit payments for the years ending October 31, 2021 through 2025 and the five years ending October 31, 2030 are estimated as follows:

(in millions)	Pension Benefit Payments		Other Postretirement Benefit Payments(A)
2021	$	249	$	31
2022	243		40
2023	236		46
2024	229		46
2025	222		45
2026 through 2030	995		199

________________________

(A) Payments are net of expected participant contributions and expected federal subsidy receipts.

Defined Contribution Plans and Other Contractual Arrangements

Our defined contribution plans cover a substantial portion of domestic salaried employees and certain domestic represented employees. The defined contribution plans contain a 401(k) feature and provide most participants with a matching contribution from the Company. In light of recent developments relating to the COVID-19 pandemic, we have implemented cash conservation initiatives including a delay in certain 401(k) company matching contributions until 2021. The matching contribution delay was effective March 1, 2020. Prior to this, the matching contributions for non-represented employees were deposited monthly. Many participants covered by the plans receive annual Company contributions to their retirement accounts based on an age-weighted percentage of the participant's eligible compensation for the calendar year. Defined contribution expense pursuant to these plans was $33 million, $35 million, and $33 million in 2020, 2019, and 2018, respectively.

In accordance with the 1993 Settlement Agreement, an independent Retiree Supplemental Benefit Trust (the "Supplemental Trust") was established. The Supplemental Trust, and the benefits it provides to certain retirees pursuant to a certain Retiree Supplemental Benefit Program under the 1993 Settlement Agreement ("Supplemental Benefit Program"), is not part of our consolidated financial statements.

Our contingent profit sharing obligations under a certain Supplemental Benefit Trust Profit Sharing Plan ("Supplemental Benefit Trust Profit Sharing Plan") will continue until certain funding targets defined by the 1993 Settlement Agreement are met. As noted within the Profit Sharing Disputes section of Note 15, Commitments and Contingencies, the Company requested the Court reform the 1993 Settlement Agreement to provide clarity regarding certain “Profit Sharing Cessation Date” provisions, which relate to the timing and impact of the cessation of the Company’s Profit Sharing Plan contributions. We are currently unable to determine whether we have achieved the certain funding targets that may result in profit sharing cessation. Upon profit sharing cessation, the company may have ongoing responsibilities related to amortized actuarial and investment losses. In 2020, we did not record any profit sharing accruals based on the operating performance of the entities that are included in the determination of qualifying profits. In 2019, we recorded $21 million. For more information on pending arbitration regarding the Supplemental Benefit Trust Profit Sharing Plan, see Note 15, Commitments and Contingencies.