RETIREMENT BENEFITS

Pension and Postretirement Plans

The Company has several non-contributory defined benefit pension plans covering certain U.S. employees and has various defined benefit pension and termination indemnity plans covering employees outside the U.S.

The U.S. qualified defined benefit plan was frozen effective January 1, 2008 for most employees. Accordingly, no additional compensation-based contributions have been credited to the cash balance portion of the plan for existing plan participants after 2007. However, certain employees covered under the prior final pay plan formula continue to accrue benefits. The Company also offers postretirement health care and life insurance benefits to certain eligible U.S. retired employees, as well as to certain eligible employees outside the U.S.

The Company also sponsors a number of non-contributory, nonqualified pension plans. These plans, which are unfunded, provide supplemental defined pension benefits to certain U.S. employees. With the exception of certain employees covered under the prior final pay plan formula, the benefits under these plans were frozen in prior years.

The plan obligations, plan assets and periodic plan expense for the Company’s most significant pension and postretirement benefit plans (Significant Plans) are measured and disclosed quarterly, instead of annually. The Significant Plans captured approximately 90% of the Company’s global pension and postretirement plan obligations as of December 31, 2016. All other plans (All Other Plans) are measured annually with a December 31 measurement date.

Net (Benefit) Expense

The following table summarizes the components of net (benefit) expense recognized in the Consolidated Statement of Income for the Company’s pension and postretirement plans, for Significant Plans and All Other Plans:



	Pension plans																		Postretirement benefit plans
	U.S. plans									Non-U.S. plans									U.S. plans									Non-U.S. plans
In millions of dollars	2016			2015			2014			2016			2015			2014			2016			2015			2014			2016			2015			2014
Qualified plans
Benefits earned during the year	$	3		$	4		$	6		$	154		$	168		$	178		$	—		$	—		$	—		$	10		$	12		$	15
Interest cost on benefit obligation	520			553			541			282			317			376			25			33			33			94			108			120
Expected return on plan assets	(886		)	(893		)	(878		)	(287		)	(323		)	(384		)	(9		)	(3		)	(1		)	(86		)	(105		)	(121		)
Amortization of unrecognized
Prior service (benefit) cost	—			(3		)	(3		)	(1		)	2			1			—			—			—			(10		)	(11		)	(12		)
Net actuarial loss	160			139			105			69			73			77			(1		)	—			—			30			43			39
Curtailment loss (gain)⁽¹⁾	13			14			—			(2		)	—			14			—			—			—			—			(1		)	—
Settlement loss (gain)⁽¹⁾	—			—			—			6			44			53			—			—			—			—			—			—
Special termination benefits⁽¹⁾	—			—			—			—			—			9			—			—			—			—			—			—
Net qualified plans (benefit) expense	$	(190	)	$	(186	)	$	(229	)	$	221		$	281		$	324		$	15		$	30		$	32		$	38		$	46		$	41
Nonqualified plans expense	$	40		$	43		$	45		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Total net (benefit) expense	$	(150	)	$	(143	)	$	(184	)	$	221		$	281		$	324		$	15		$	30		$	32		$	38		$	46		$	41


(1)	Losses and gains due to curtailment, settlement and special termination benefits relate to repositioning and divestiture actions.

The estimated net actuarial loss and prior service (benefit) cost that will be amortized from Accumulated other comprehensive income (loss) into net expense in 2017 are approximately $233 million and $(2) million, respectively, for defined benefit pension plans.

For postretirement plans, the estimated 2017 net actuarial loss and prior service (benefit) cost amortizations are approximately $28 million and $(9) million, respectively.

Contributions

The Company’s funding practice for U.S. and non-U.S. pension and postretirement plans is generally to fund to minimum funding requirements in accordance with applicable local laws and regulations. The Company may increase its contributions above the minimum required contribution, if appropriate. In addition, management has the ability to change its funding practices. For the U.S. pension plans, there were no required minimum cash contributions for 2016 or 2015.

The following table summarizes the actual Company contributions for the years ended December 31, 2016 and 2015, as well as estimated expected Company contributions for 2017. Expected contributions are subject to change, since contribution decisions are affected by various factors, such as market performance, tax considerations, and regulatory requirements.



	Pension plans⁽¹⁾												Postretirement benefit plans⁽¹⁾
	U.S. plans⁽²⁾						Non-U.S. plans						U.S. plans						Non-U.S. plans
In millions of dollars	2017		2016		2015		2017		2016		2015		2017		2016		2015		2017		2016		2015
Contributions made by the Company	$	—	$	500	$	—	$	90	$	82	$	92	$	—	$	—	$	174	$	4	$	4	$	4
Benefits paid directly by the Company	71		56		52		44		44		42		—		6		61		5		5		5


(1)	Amounts reported for 2017 are expected amounts.


(2)	The U.S. pension plans include benefits paid directly by the Company for the nonqualified pension plans.

Funded Status and Accumulated Other Comprehensive Income

The following tables summarize the funded status and amounts recognized in the Consolidated Balance Sheet for the Company’s pension and postretirement plans:



	Pension plans												Postretirement benefit plans
In millions of dollars	U.S. plans						Non-U.S. plans						U.S. plans						Non-U.S. plans
	2016			2015			2016			2015			2016			2015			2016			2015
Change in projected benefit obligation
Qualified plans
Projected benefit obligation at beginning of year	$	13,231		$	14,060		$	6,534		$	7,252		$	817		$	917		$	1,291		$	1,527
Benefits earned during the year	3			4			154			168			—			—			10			12
Interest cost on benefit obligation	520			553			282			317			25			33			94			108
Plan amendments	—			—			(28		)	6			—			—			—			—
Actuarial loss (gain)	351			(649		)	589			(28		)	(105		)	(55		)	3			(88		)
Benefits paid, net of participants’ contributions	(722		)	(751		)	(323		)	(294		)	(64		)	(90		)	(59		)	(57		)
Expected government subsidy	—			—			—			—			13			12			—			—
Divestitures	—			—			(22		)	(147		)	—			—			—			—
Settlement (gain) loss⁽¹⁾	—			—			(38		)	(61		)	—			—			—			—
Curtailment (gain) loss⁽¹⁾	13			14			(15		)	(8		)	—			—			(4		)	—
Foreign exchange impact and other	(125		)	—			(611		)	(671		)	—			—			(194		)	(211		)
Qualified plans	$	13,271		$	13,231		$	6,522		$	6,534		$	686		$	817		$	1,141		$	1,291
Nonqualified plans	729			712			—			—			—			—			—			—
Projected benefit obligation at year end	$	14,000		$	13,943		$	6,522		$	6,534		$	686		$	817		$	1,141		$	1,291


(1)	Curtailment and settlement (gains) losses relate to repositioning and divestiture activities.



	Pension plans												Postretirement benefit plans
	U.S. plans						Non-U.S. plans						U.S. plans						Non-U.S. plans
In millions of dollars	2016			2015			2016			2015			2016			2015			2016			2015
Change in plan assets
Qualified plans
Plan assets at fair value at beginning of year	$	12,137		$	13,071		$	6,104		$	7,057		$	166		$	10		$	1,133		$	1,384
Actual return on plan assets	572			(183		)	967			56			8			(1		)	122			(5		)
Company contributions	500			—			126			134			6			235			9			9
Plan participants’ contributions	—			—			5			5			49			49			—			—
Divestitures	—			—			(5		)	(131		)	—			—			—			—
Settlements	—			—			(38		)	(61		)	—			—			—			—
Benefits paid, net of government subsidy	(722		)	(751		)	(329		)	(299		)	(100		)	(127		)	(59		)	(57		)
Foreign exchange impact and other	(124		)	—			(681		)	(657		)	—			—			(190		)	(198		)
Qualified plans	$	12,363		$	12,137		$	6,149		$	6,104		$	129		$	166		$	1,015		$	1,133
Nonqualified plans	—			—			—			—			—			—			—			—
Plan assets at fair value at year end	$	12,363		$	12,137		$	6,149		$	6,104		$	129		$	166		$	1,015		$	1,133

Funded status of the plans
Qualified plans⁽¹⁾	$	(908	)	$	(1,094	)	$	(373	)	$	(430	)	$	(557	)	$	(651	)	$	(126	)	$	(158	)
Nonqualified plans⁽²⁾	(729		)	(712		)	—			—			—			—			—			—
Funded status of the plans at year end	$	(1,637	)	$	(1,806	)	$	(373	)	$	(430	)	$	(557	)	$	(651	)	$	(126	)	$	(158	)

Net amount recognized
Qualified plans
Benefit asset	$	—		$	—		$	711		$	726		$	—		$	—		$	166		$	115
Benefit liability	(908		)	(1,094		)	(1,084		)	(1,156		)	(557		)	(651		)	(292		)	(273		)
Qualified plans	$	(908	)	$	(1,094	)	$	(373	)	$	(430	)	$	(557	)	$	(651	)	$	(126	)	$	(158	)
Nonqualified plans	(729		)	(712		)	—			—			—			—			—			—
Net amount recognized on the balance sheet	$	(1,637	)	$	(1,806	)	$	(373	)	$	(430	)	$	(557	)	$	(651	)	$	(126	)	$	(158	)

Amounts recognized in Accumulated other comprehensive income (loss)
Qualified plans
Net transition obligation	$	—		$	—		$	(1	)	$	(1	)	$	—		$	—		$	—		$	—
Prior service benefit	—			—			29			5			—			—			98			125
Net actuarial gain (loss)	(6,612		)	(6,107		)	(1,302		)	(1,613		)	106			3			(399		)	(547		)
Qualified plans	$	(6,612	)	$	(6,107	)	$	(1,274	)	$	(1,609	)	$	106		$	3		$	(301	)	$	(422	)
Nonqualified plans	(296		)	(266		)	—			—			—			—			—			—
Net amount recognized in equity (pretax)	$	(6,908	)	$	(6,373	)	$	(1,274	)	$	(1,609	)	$	106		$	3		$	(301	)	$	(422	)

Accumulated benefit obligation
Qualified plans	$	13,268		$	13,226		$	6,090		$	6,049		$	686		$	817		$	1,141		$	1,291
Nonqualified plans	726			706			—			—			—			—			—			—
Accumulated benefit obligation at year end	$	13,994		$	13,932		$	6,090		$	6,049		$	686		$	817		$	1,141		$	1,291


(1)	The U.S. qualified pension plan is fully funded under specified Employee Retirement Income Security Act (ERISA) funding rules as of January 1, 2017 and no minimum required funding is expected for 2017.


(2)	The nonqualified plans of the Company are unfunded.

The following table shows the change in Accumulated other comprehensive income (loss) related to the Company’s pension, postretirement and post employment plans:



In millions of dollars	2016			2015			2014

Beginning of year balance, net of tax⁽¹⁾⁽²⁾	$	(5,116	)	$	(5,159	)	$	(3,989	)
Actuarial assumptions changes and plan experience	(854		)	898			(3,404		)
Net asset gain (loss) due to difference between actual and expected returns	400			(1,457		)	833
Net amortizations	232			236			202
Prior service (cost) credit	28			(6		)	13
Curtailment/settlement gain⁽³⁾	17			57			67
Foreign exchange impact and other	99			291			459
Change in deferred taxes, net	30			24			660
Change, net of tax	$	(48	)	$	43		$	(1,170	)
End of year balance, net of tax⁽¹⁾⁽²⁾	$	(5,164	)	$	(5,116	)	$	(5,159	)


(1)	See Note 19 to the Consolidated Financial Statements for further discussion of net Accumulated other comprehensive income (loss) balance.


(2)	Includes net-of-tax amounts for certain profit sharing plans outside the U.S.


(3)	Curtailment and settlement gains relate to repositioning and divestiture activities.

At December 31, 2016 and 2015, the aggregate projected benefit obligation (PBO), the aggregate accumulated benefit obligation (ABO), and the aggregate fair value of plan assets are presented for all defined benefit pension plans with a PBO in excess of plan assets and for all defined benefit pension plans with an ABO in excess of plan assets as follows:



	PBO exceeds fair value of plan assets								ABO exceeds fair value of plan assets
	U.S. plans⁽¹⁾				Non-U.S. plans				U.S. plans⁽¹⁾				Non-U.S. plans
In millions of dollars	2016		2015		2016		2015		2016		2015		2016		2015
Projected benefit obligation	$	14,000	$	13,943	$	2,484	$	3,918	$	14,000	$	13,943	$	2,282	$	2,369
Accumulated benefit obligation	13,994		13,932		2,168		3,488		13,994		13,932		2,012		2,047
Fair value of plan assets	12,363		12,137		1,399		2,762		12,363		12,137		1,224		1,243


(1)	At December 31, 2016 and 2015, for both the U.S. qualified plan and nonqualified plans, the aggregate PBO and the aggregate ABO exceeded plan assets.

Plan Assumptions

The Company utilizes a number of assumptions to determine plan obligations and expenses. Changes in one or a combination of these assumptions will have an impact on the Company’s pension and postretirement PBO, funded status and (benefit) expense. Changes in the plans’ funded status resulting from changes in the PBO and fair value of plan assets will have a corresponding impact on Accumulated other comprehensive income (loss).

The actuarial assumptions at the respective years ended December 31 in the table below are used to measure the year-end PBO and the net periodic (benefit) expense for the subsequent year (period). Since Citi’s Significant Plans are measured on a quarterly basis, the year-end rates for those plans are used to calculate the net periodic (benefit) expense for the subsequent year’s first quarter. As a result of the quarterly measurement process, the net periodic (benefit) expense for the Significant Plans is calculated at each respective quarter end based on the preceding quarter-end rates (as shown below for the U.S. and non-U.S. pension and postretirement plans). The actuarial assumptions for All Other Plans are measured annually.

Certain assumptions used in determining pension and postretirement benefit obligations and net benefit expense for the Company’s plans are shown in the following table:



At year end	2016	2015
Discount rate
U.S. plans
Qualified pension	4.10%	4.40%
Nonqualified pension	4.00	4.35
Postretirement	3.90	4.20
Non-U.S. pension plans
Range	0.25 to 72.50	0.25 to 42.00
Weighted average	4.40	4.76
Non-U.S. postretirement plans
Range	1.75 to 11.05	2.00 to 13.20
Weighted average	8.27	7.90
Future compensation increase rate⁽¹⁾
Non-U.S. pension plans
Range	1.25 to 70.00	1.00 to 40.00
Weighted average	3.21	3.24
Expected return on assets
U.S. plans	6.80	7.00
Non-U.S. pension plans
Range	1.00 to 11.50	1.60 to 11.50
Weighted average	4.55	4.95
Non-U.S. postretirement plans
Range	8.00 to 10.30	8.00 to 10.70
Weighted average	8.02	8.01


(1)	Not material for U.S. plans



During the year	2016	2015	2014
Discount rate
U.S. plans
Qualified pension	4.40%/3.95%/ 3.65%/3.55%	4.00%/3.85%/ 4.45%/4.35%	4.75%/4.55%/ 4.25%/4.25%
Nonqualified pension	4.35/3.90/ 3.55/3.45	3.90/3.70/ 4.30/4.25	4.75
Postretirement	4.20/3.75/ 3.40/3.30	3.80/3.65/ 4.20/4.10	4.35/4.15/ 3.95/4.00
Non-U.S. pension plans⁽¹⁾
Range	0.25 to 42.00	1.00 to 32.50	1.60 to 29.25
Weighted average	4.76	4.74	5.60
Non-U.S. postretirement plans⁽¹⁾
Range	2.00 to 13.20	2.25 to 12.00	3.50 to 11.90
Weighted average	7.90	7.50	8.65
Future compensation increase rate ⁽²⁾
Non-U.S. pension plans⁽¹⁾
Range	1.00 to 40.00	0.75 to 30.00	1.00 to 26.00
Weighted average	3.24	3.27	3.40
Expected return on assets
U.S. plans	7.00	7.00	7.00
Non-U.S. pension plans⁽¹⁾
Range	1.60 to 11.50	1.30 to 11.50	1.20 to 11.50
Weighted average	4.95	5.08	5.68
Non-U.S. postretirement plans⁽¹⁾
Range	8.00 to 10.70	8.50 to 10.40	8.50 to 8.90
Weighted average	8.01	8.51	8.50

(1) Reflects rates utilized to determine the first quarter expense for Significant non-U.S. pension and postretirement plans.


(2)	Not material for U.S. plans

Discount Rate

The discount rates for the U.S. pension and postretirement plans were selected by reference to a Citigroup-specific analysis using each plan’s specific cash flows and compared with high-quality corporate bond indices for reasonableness. The discount rates for the non-U.S. pension and postretirement plans are selected by reference to high-quality corporate bond rates in countries that have developed corporate bond markets. However, where developed corporate bond markets do not exist, the discount rates are selected by reference to local government bond rates with a premium added to reflect the additional risk for corporate bonds in certain countries.

Effective December 31, 2016, the established rounding convention was to the nearest 5 basis points for the top five non-U.S. countries, 10 basis points for Japan, and 25 basis points for all other countries.

Expected Rate of Return

The Company determines its assumptions for the expected rate of return on plan assets for its U.S. pension and postretirement plans using a “building block” approach, which focuses on ranges of anticipated rates of return for each asset class. A weighted average range of nominal rates is then determined based on target allocations to each asset class. Market performance over a number of earlier years is evaluated covering a wide range of economic conditions to determine whether there are sound reasons for projecting any past trends.

The Company considers the expected rate of return to be a long-term assessment of return expectations and does not anticipate changing this assumption unless there are significant changes in investment strategy or economic conditions. This contrasts with the selection of the discount rate and certain other assumptions, which are reconsidered annually (or quarterly for the Significant Plans) in accordance with GAAP.

The expected rate of return for the U.S. pension and postretirement plans was 6.80% at December 31, 2016, and was 7.00% at December 31, 2015 and 2014. The expected return on assets reflects the expected annual appreciation of the plan assets and reduces the Company’s annual pension expense. The expected return on assets is deducted from the sum of service cost, interest cost and other components of pension expense to arrive at the net pension (benefit) expense. Net pension (benefit) expense for the U.S. pension plans for 2016, 2015 and 2014 reflects deductions of $886 million, $893 million and $878 million of expected returns, respectively.

The following table shows the expected rates of return used in determining the Company’s pension expense compared to the actual rate of return on plan assets during 2016, 2015 and 2014 for the U.S. pension and postretirement plans:



	2016		2015		2014
Expected rate of return	7.00	%	7.00	%	7.00	%
Actual rate of return⁽¹⁾	4.90		(1.70	)	7.80


(1)	Actual rates of return are presented net of fees.

For the non-U.S. pension plans, pension expense for 2016 was reduced by the expected return of $287 million, compared with the actual return of $967 million. Pension expense for 2015 and 2014 was reduced by expected returns of $323 million and $384 million, respectively.

Mortality Tables

At December 31, 2016, the Company maintained the Retirement Plan 2014 (RP-2014) mortality table and adopted the Mortality Projection 2016 (MP-2016) projection table for the U.S. plans.



U.S. plans	2016⁽²⁾	2015⁽³⁾
Mortality⁽¹⁾
Pension	RP-2014/MP-2016	RP-2014/MP-2015
Postretirement	RP-2014/MP-2016	RP-2014/MP-2015


(1)	The RP-2014 table is the white-collar RP-2014 table, with a 4% increase in rates to reflect the lower life expectancy of Citi plan participants.


(2)	The MP-2016 projection scale is projected from 2011, with convergence to 0.75% ultimate rate of annual improvement by 2032.


(3)	The MP-2015 projection scale is projected from 2011, with convergence to 0.5% ultimate rate of annual improvement by 2029.

Sensitivities of Certain Key Assumptions

The following tables summarize the effect on pension expense of a one-percentage-point change in the discount rate:



	One-percentage-point increase
In millions of dollars	2016			2015			2014
U.S. plans	$	31		$	26		$	28
Non-U.S. plans	(33		)	(32		)	(39		)

	One-percentage-point decrease
In millions of dollars	2016			2015			2014
U.S. plans	$	(47	)	$	(44	)	$	(45	)
Non-U.S. plans	37			44			56

Since the U.S. qualified pension plan was frozen, most of the prospective service cost has been eliminated and the gain/loss amortization period was changed to the life expectancy for inactive participants. As a result, pension expense for the U.S. qualified pension plan is driven more by interest costs than service costs, and an increase in the discount rate would increase pension expense, while a decrease in the discount rate would decrease pension expense.

The following tables summarize the effect on pension expense of a one-percentage-point change in the expected rates of return:



	One-percentage-point increase
In millions of dollars	2016			2015			2014
U.S. plans	$	(127	)	$	(128	)	$	(129	)
Non-U.S. plans	(61		)	(63		)	(67		)



	One-percentage-point decrease
In millions of dollars	2016		2015		2014
U.S. plans	$	127	$	128	$	129
Non-U.S. plans	61		63		67

Health Care Cost Trend Rate

Assumed health care cost trend rates were as follows:



	2016	2015
Health care cost increase rate for U.S. plans
Following year	6.50%	7.00%
Ultimate rate to which cost increase is assumed to decline	5.00	5.00
Year in which the ultimate rate is reached⁽¹⁾	2023	2020

(1) Weighted average for plans with different following year and ultimate rates.



	2016	2015
Health care cost increase rate for Non-U.S. plans (weighted average)
Following year	6.86%	6.87%
Ultimate rate to which cost increase is assumed to decline	6.85	6.36
Range of years in which the ultimate rate is reached	2017–2029	2016–2029

A one-percentage-point change in assumed health care cost trend rates would have the following effects:



	One-percentage- point increase				One- percentage- point decrease
In millions of dollars	2016		2015		2016			2015
U.S. plans
Effect on benefits earned and interest cost for postretirement plans	$	1	$	2	$	(1	)	$	(2	)
Effect on accumulated postretirement benefit obligation for postretirement plans	30		45		(26		)	(38		)

	One-percentage- point increase				One- percentage- point decrease
In millions of dollars	2016		2015		2016			2015
Non-U.S. plans
Effect on benefits earned and interest cost for postretirement plans	$	12	$	15	$	(10	)	$	(12	)
Effect on accumulated postretirement benefit obligation for postretirement plans	144		156		(118		)	(128		)

Plan Assets

Citigroup’s pension and postretirement plans’ asset allocations for the U.S. plans and the target allocations by asset category based on asset fair values, are as follows:



	Target asset allocation	U.S. pension assets at December 31,				U.S. postretirement assets at December 31,
Asset category⁽¹⁾	2017	2016		2015		2016		2015
Equity securities⁽²⁾	0–30%	18	%	19	%	18	%	19	%
Debt securities	20–72	47		46		47		46
Real estate	0–10	5		4		5		4
Private equity	0–12	4		6		4		6
Other investments	12–29	26		25		26		25
Total		100	%	100	%	100	%	100	%


(1)	Asset allocations for the U.S. plans are set by investment strategy, not by investment product. For example, private equities with an underlying investment in real estate are classified in the real estate asset category, not private equity.


(2)	Equity securities in the U.S. pension and postretirement plans do not include any Citigroup common stock at the end of 2016 and 2015.

Third-party investment managers and advisers provide their services to Citigroup’s U.S. pension and postretirement plans. Assets are rebalanced as the Company’s Pension Plan Investment Committee deems appropriate. Citigroup’s investment strategy, with respect to its assets, is to maintain a globally diversified investment portfolio across several asset classes that, when combined with Citigroup’s contributions to the plans, will maintain the plans’ ability to meet all required benefit obligations.

Citigroup’s pension and postretirement plans’ weighted-average asset allocations for the non-U.S. plans and the actual ranges, and the weighted-average target allocations by asset category based on asset fair values, are as follows:



	Non-U.S. pension plans
	Target asset allocation	Actual range at December 31,		Weighted-average at December 31,
Asset category⁽¹⁾	2017	2016	2015	2016		2015
Equity securities	0–63%	0–69%	0–68%	14	%	16	%
Debt securities	0–100	0–100	0–100	79		77
Real estate	0–18	0–18	0–18	1		1
Other investments	0–100	0–100	0–100	6		6
Total				100	%	100	%


(1)	Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.



	Non-U.S. postretirement plans
	Target asset allocation	Actual range at December 31,		Weighted-average at December 31,
Asset category⁽¹⁾	2017	2016	2015	2016		2015
Equity securities	0–39%	0–38%	0–41%	38	%	41	%
Debt securities	57–100	57–100	56–100	58		56
Other investments	0–3	0–4	0–3	4		3
Total				100	%	100	%


(1)	Similar to the U.S. plans, asset allocations for certain non-U.S. plans are set by investment strategy, not by investment product.

Fair Value Disclosure

For information on fair value measurements, including descriptions of Levels 1, 2 and 3 of the fair value hierarchy and the valuation methodology utilized by the Company, see Note 1 and Note 25 to the Consolidated Financial Statements. ASU 2015-07 removed the requirement to categorize within the fair value hierarchy investments for which fair value is measured using the NAV per share practical expedient.

Certain investments may transfer between the fair value hierarchy classifications during the year due to changes in valuation methodology and pricing sources. There were no significant transfers of investments between Level 1 and Level 2 during 2016 and 2015.

Plan assets by detailed asset categories and the fair value hierarchy are as follows:



	U.S. pension and postretirement benefit plans⁽¹⁾
In millions of dollars	Fair value measurement at December 31, 2016
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	639		$	—		$	—	$	639
Non-U.S. equities	773			—			—		773
Mutual funds	216			—			—		216
Commingled funds	—			866			—		866
Debt securities	1,297			2,845			—		4,142
Annuity contracts	—			—			3		3
Derivatives	8			543			—		551
Other investments	—			—			2		2
Total investments	$	2,933		$	4,254		$	5	$	7,192
Cash and short-term investments	$	19		$	1,239		$	—	$	1,258
Other investment liabilities	(9		)	(553		)	—		(562		)
Net investments at fair value	$	2,943		$	4,940		$	5	$	7,888
Other investment receivables redeemed at NAV									$	100
Securities valued at NAV									4,504
Total net assets									$	12,492


(1)	The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2016, the allocable interests of the U.S. pension and postretirement plans were 99.0% and 1.0%, respectively.



	U.S. pension and postretirement benefit plans⁽¹⁾
In millions of dollars	Fair value measurement at December 31, 2015
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	694		$	—		$	—	$	694
Non-U.S. equities	816			—			—		816
Mutual funds	223			—			—		223
Commingled funds	—			915			—		915
Debt securities	1,172			2,761			—		3,933
Annuity contracts	—			—			27		27
Derivatives	6			521			—		527
Other investments	—			—			147		147
Total investments	$	2,911		$	4,197		$	174	$	7,282
Cash and short-term investments	$	138		$	1,064		$	—	$	1,202
Other investment liabilities	(10		)	(515		)	—		(525		)
Net investments at fair value	$	3,039		$	4,746		$	174	$	7,959
Other investment receivables redeemed at NAV									$	18
Securities valued at NAV									4,326
Total net assets									$	12,303


(1)	The investments of the U.S. pension and postretirement plans are commingled in one trust. At December 31, 2015, the allocable interests of the U.S. pension and postretirement plans were 98.6% and 1.4%, respectively.



	Non-U.S. pension and postretirement benefit plans
In millions of dollars	Fair value measurement at December 31, 2016
Asset categories	Level 1			Level 2			Level 3		Total
U.S. equities	$	4		$	11		$	—	$	15
Non-U.S. equities	87			174			1		262
Mutual funds	2,345			406			—		2,751
Commingled funds	22			—			—		22
Debt securities	3,406			1,206			7		4,619
Real estate	—			3			1		4
Annuity contracts	—			1			36		37
Derivatives	—			43			—		43
Other investments	1			—			159		160
Total investments	$	5,865		$	1,844		$	204	$	7,913
Cash and short-term investments	$	116		$	2		$	—	$	118
Other investment liabilities	(1		)	(960		)	—		(961		)
Net investments at fair value	$	5,980		$	886		$	204	$	7,070
Securities valued at NAV									$	92
Total net assets									$	7,162



	Non-U.S. pension and postretirement benefit plans
In millions of dollars	Fair value measurement at December 31, 2015
Asset categories	Level 1		Level 2			Level 3		Total
U.S. equities	$	5	$	11		$	—	$	16
Non-U.S. equities	74		222			47		343
Mutual funds	2,935		—			—		2,935
Commingled funds	26		—			—		26
Debt securities	2,995		1,215			5		4,215
Real estate	—		3			1		4
Annuity contracts	—		1			41		42
Other investments	1		—			163		164
Total investments	$	6,036	$	1,452		$	257	$	7,745
Cash and short-term investments	$	73	$	2		$	—	$	75
Other investment liabilities	—		(690		)	—		(690		)
Net investments at fair value	$	6,109	$	764		$	257	$	7,130
Securities valued at NAV								$	107
Total net assets								$	7,237

Level 3 Rollforward

The reconciliations of the beginning and ending balances during the year for Level 3 assets are as follows:



In millions of dollars	U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2015		Realized gains (losses)			Unrealized gains (losses)			Purchases, sales, and issuances			Transfers in and/or out of Level 3		Ending Level 3 fair value at Dec. 31, 2016
Annuity contracts	$	27	$	—		$	(3	)	$	(21	)	$	—	$	3
Other investments	147		8			(10		)	(143		)	—		2
U.S. equities	—		(2		)	2			—			—		—
Total investments	$	174	$	6		$	(11	)	$	(164	)	$	—	$	5



In millions of dollars	U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2014⁽¹⁾		Realized gains (losses)			Unrealized gains (losses)			Purchases, sales, and issuances			Transfers in and/or out of Level 3		Ending Level 3 fair value at Dec. 31, 2015
Annuity contracts	$	59	$	—		$	(4	)	$	(28	)	$	—	$	27
Other investments	161		(1		)	(9		)	(4		)	—		147
Total investments	$	220	$	(1	)	$	(13	)	$	(32	)	$	—	$	174


(1)	Beginning balance was adjusted to exclude $2,496 million of investments valued at NAV.



In millions of dollars	Non-U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2015		Unrealized gains (losses)			Purchases, sales, and issuances			Transfers in and/or out of Level 3			Ending Level 3 fair value at Dec. 31, 2016
Non-U.S. equities	$	47	$	(3	)	$	(2	)	$	(41	)	$	1
Debt securities	5		—			2			—			7
Real estate	1		—			—			—			1
Annuity contracts	41		(4		)	(1		)	—			36
Other investments	163		4			(8		)	—			159
Total investments	$	257	$	(3	)	$	(9	)	$	(41	)	$	204



In millions of dollars	Non-U.S. pension and postretirement benefit plans
Asset categories	Beginning Level 3 fair value at Dec. 31, 2014⁽¹⁾		Unrealized gains (losses)			Purchases, sales, and issuances		Transfers in and/or out of Level 3			Ending Level 3 fair value at Dec. 31, 2015
Non-U.S. equities	$	48	$	(1	)	$	—	$	—		$	47
Debt securities	6		(1		)	—		—			5
Real estate	—		—			—		1			1
Annuity contracts	32		2			4		3			41
Other investments	165		(2		)	2		(2		)	163
Total investments	$	251	$	(2	)	$	6	$	2		$	257


(1)	Beginning balance was adjusted to exclude $5 million of investments valued at NAV.

Investment Strategy

The Company’s global pension and postretirement funds’ investment strategy is to invest in a prudent manner for the exclusive purpose of providing benefits to participants. The investment strategies are targeted to produce a total return that, when combined with the Company’s contributions to the funds, will maintain the funds’ ability to meet all required benefit obligations. Risk is controlled through diversification of asset types and investments in domestic and international equities, fixed-income securities and cash and short-term investments. The target asset allocation in most locations outside the U.S. is primarily in equity and debt securities. These allocations may vary by geographic region and country depending on the nature of applicable obligations and various other regional considerations. The wide variation in the actual range of plan asset allocations for the funded non-U.S. plans is a result of differing local statutory requirements and economic conditions. For example, in certain countries local law requires that all pension plan assets must be invested in fixed-income investments, government funds, or local-country securities.

Significant Concentrations of Risk in Plan Assets

The assets of the Company’s pension plans are diversified to limit the impact of any individual investment. The U.S. qualified pension plan is diversified across multiple asset classes, with publicly traded fixed income, hedge funds, publicly traded equity, and private equity representing the most significant asset allocations. Investments in these four asset classes are further diversified across funds, managers, strategies, vintages, sectors and geographies, depending on the specific characteristics of each asset class. The pension assets for the Company’s non-U.S. Significant Plans are primarily invested in publicly traded fixed income and publicly traded equity securities.

Oversight and Risk Management Practices

The framework for the Company’s pension oversight process includes monitoring of retirement plans by plan fiduciaries and/or management at the global, regional or country level, as appropriate. Independent Risk Management contributes to the risk oversight and monitoring for the Company’s U.S. qualified pension plan and non-U.S. Significant Pension Plans. Although the specific components of the oversight process are tailored to the requirements of each region, country and plan, the following elements are common to the Company’s monitoring and risk management process:


•	periodic asset/liability management studies and strategic asset allocation reviews;


•	periodic monitoring of funding levels and funding ratios;


•	periodic monitoring of compliance with asset allocation guidelines;


•	periodic monitoring of asset class and/or investment manager performance against benchmarks; and


•	periodic risk capital analysis and stress testing.

Estimated Future Benefit Payments

The Company expects to pay the following estimated benefit payments in future years:



	Pension plans				Postretirement benefit plans
In millions of dollars	U.S. plans		Non-U.S. plans		U.S. plans		Non-U.S. plans
2017	$	893	$	357	$	62	$	57
2018	798		337		60		61
2019	810		359		58		66
2020	838		388		56		71
2021	857		404		55		76
2022–2026	4,455		2,352		247		475

Prescription Drugs

In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (Act of 2003) was enacted. The Act of 2003 established a prescription drug benefit under Medicare known as “Medicare Part D,” and a federal subsidy to sponsors of U.S. retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The benefits provided to certain participants are at least actuarially equivalent to Medicare Part D and, accordingly, the Company is entitled to a subsidy.

The subsidy reduced the accumulated postretirement benefit obligation (APBO) by approximately $5 million as of December 31, 2016 and 2015 and the postretirement expense by approximately $0.2 million for 2016 and 2015.

The following table shows the estimated future benefit payments from the Medicare Part D subsidy of the U.S. postretirement plan.



In millions of dollars	Expected U.S. postretirement benefit payments
	Before Medicare Part D subsidy		Medicare Part D subsidy		After Medicare Part D subsidy
2017	$	62	$	—	$	62
2018	60		—		60
2019	58		—		58
2020	56		—		56
2021	55		—		55
2022–2026	248		1		247

Certain provisions of the Patient Protection and Affordable Care Act of 2010 improved the Medicare Part D option known as the Employer Group Waiver Plan (EGWP) with respect to the Medicare Part D subsidy. The EGWP provides prescription drug benefits that are more cost effective for Medicare-eligible participants and large employers. Effective April 1, 2013, the Company began sponsoring and implementing an EGWP for eligible retirees. The Company subsidy received under the EGWP for 2016 and 2015 was $12.9 million and $11.6 million, respectively.

The other provisions of the Act of 2010 are not expected to have a significant impact on Citigroup’s pension and postretirement plans.

Post Employment Plans

The Company sponsors U.S. post employment plans that provide income continuation and health and welfare benefits to certain eligible U.S. employees on long-term disability.

As of December 31, 2016 and 2015, the plans’ funded status recognized in the Company’s Consolidated Balance Sheet was $(157) million and $(183) million, respectively. The amounts recognized in Accumulated other comprehensive income (loss) as of December 31, 2016 and 2015 were $34 million and $45 million, respectively. Effective January 1, 2014, the Company made changes to its post employment plans that limit the period for which future disabled employees are eligible for continued Company-subsidized medical benefits.

The following table summarizes the components of net expense recognized in the Consolidated Statement of Income for the Company’s U.S. post employment plans.



	Net expense
In millions of dollars	2016			2015			2014
Service related expense
Interest cost on benefit obligation	$	3		$	4		$	5
Amortization of unrecognized
Prior service (benefit) cost	(31		)	(31		)	(31		)
Net actuarial loss	5			12			14
Total service related benefit	$	(23	)	$	(15	)	$	(12	)
Non-service related expense	$	21		$	3		$	37
Total net (benefit) expense	$	(2	)	$	(12	)	$	25

The following table summarizes certain assumptions used in determining the post employment benefit obligations and net benefit expense for the Company’s U.S. post employment plans.



	2016	2015
Discount rate	3.40%	3.70%
Health care cost increase rate
Following year	6.50%	7.00%
Ultimate rate to which cost increase is assumed to decline	5.00	5.00
Year in which the ultimate rate is reached	2023	2020

Defined Contribution Plans

The Company sponsors defined contribution plans in the U.S. and in certain non-U.S. locations, all of which are administered in accordance with local laws. The most significant defined contribution plan is the Citi Retirement Savings Plan (formerly known as the Citigroup 401(k) Plan) sponsored by the Company in the U.S.

Under the Citi Retirement Savings Plan, eligible U.S. employees received matching contributions of up to 6% of their eligible compensation for 2016 and 2015, subject to statutory limits. Additionally, for eligible employees whose eligible compensation is $100,000 or less, a fixed contribution of up to 2% of eligible compensation is provided. All Company contributions are invested according to participants’ individual elections. The following table summarizes the Company contributions for the defined contribution plans:



	U.S. plans
In millions of dollars	2016		2015		2014
Company contributions	$	371	$	380	$	383

	Non U.S. plans
In millions of dollars	2016		2015		2014
Company contributions	$	268	$	282	$	302