We have defined benefit pension plans covering certain of our North American employees. In May 2019, the U.S. qualified pension plan was amended such that all employees who were not participants in the plan as of December 31, 2019, will not become participants after such date. All benefit accruals were frozen as of December 31, 2019 for all plan participants with less than eleven years of service as of December 31, 2019. For participants with more than eleven years of service as of December 31, 2019, benefit accruals will be frozen as of December 31, 2022. Participants will continue to accrue interest at a fixed rate of 6% per year.

We also sponsor postretirement medical and life insurance plans, which are available to most of our retired U.S. employees. These plans are contributory and are not funded. The measurement date of the assets and liabilities is the month-end date that is closest to our fiscal year end.

The following tables set forth the plans’ changes in benefit obligations and plan assets, funded status, and amounts recognized in the Consolidated Balance Sheets:

The Canadian qualified pension plan’s assets exceeded its accumulated benefit obligation for both 2021 and 2020. In 2021, the U.S. qualified pension plan’s assets exceeded its accumulated benefit obligation. Our non-qualified pension plans have an accumulated benefit obligation in excess of plan assets, as these plans are unfunded. Accordingly, the table below reflects the U.S. non-qualified plans for 2021 and 2020 and the U.S. qualified plan for 2020.

The actuarial gains recognized during 2021 were primarily driven from an increase in discount rates applied against future expected benefit payments and resulted in a decrease in the benefit obligation for the pension benefit plans. This was partially offset by lower actual return as compared with the expected return on plan assets.

The following weighted-average assumptions were used to determine the benefit obligations under the plans:

Pension expense is actuarially calculated annually based on data available at the beginning of each year. The expected return on plan assets is determined by multiplying the expected long-term rate of return on assets by the market-related value of plan assets for the U.S. qualified pension plan and market value for the Canadian qualified pension plan. The market-related value of plan assets is a calculated value that recognizes investment gains and losses in fair value related to equities over three or five years, depending on which computation results in a market-related value closer to market value. Market-related value for the U.S. qualified plan was $652 million and $661 million for 2021 and 2020, respectively.

Assumptions used in the calculation of net benefit cost include the discount rate selected and disclosed at the end of the previous year, as well as other assumptions detailed in the table below:

The expected long-term rate of return on invested plan assets is based on the plans’ weighted-average target asset allocation, as well as historical and future expected performance of those assets. The target asset allocation is selected to obtain an investment return that is sufficient to cover the expected benefit payments and to reduce the variability of our future contributions.

The following are the components of net periodic pension benefit cost and net periodic postretirement benefit income.

Service cost is recognized as a component of SG&A and the remaining pension and postretirement expense components are recognized as part of Other income, net.

Beginning in 2001, new retirees were charged the expected full cost of the medical plan, and then-existing retirees will incur 100% of the expected future increases in medical plan costs. Any changes in the health care cost trend rates assumed would not affect the accumulated benefit obligation or net benefit income, since retirees will incur 100% of such expected future increases.

We maintain a Supplemental Executive Retirement Plan (“SERP”), which is an unfunded plan that includes provisions for the continuation of medical and dental insurance benefits to certain executive officers and other key employees of the Company (“SERP Medical Plan”). The SERP Medical Plan’s accumulated projected benefit obligation at January 29, 2022 was $11 million. The following initial and ultimate cost trend rate assumptions were used to determine the benefit obligations under the SERP Medical Plan:

The following initial and ultimate cost trend rate assumptions were used to determine the net periodic cost under the SERP Medical Plan:

The mortality assumption used to value the 2021 U.S. pension obligations was the Pri-2012 mortality table with generational projection using MP-2021 for both males and females, while in the prior year the obligation was valued using the Pri-2012 mortality table with generational projection using MP-2020. For years ended January 29, 2022 and January 30, 2021, we used the 2014 CPM Private Sector mortality table projected generationally with Scale CPM-B for both males and females to value its Canadian pension obligations. For the SERP Medical Plan, the mortality assumption used to value the 2021 obligation was updated to the PriH-2012 table with generational projection using MP-2021, while in the prior year the obligation was valued using the PriH-2012 table with generational projection using MP-2020.

The target composition of our Canadian qualified pension plan assets is 95% fixed-income securities and 5% equities. We believe plan assets are invested in a conservative manner with the same overall objective and investment strategy as noted below for the U.S. pension plan. The bond portfolio is comprised of government and corporate bonds chosen to match the duration of the pension plan’s benefit payment obligations. This current asset allocation will limit future volatility with regard to the funded status of the plan.

The target composition of our U.S. qualified pension plan assets is 70% fixed-income securities, 28.5% equities, and 1.5% real estate. We may alter the asset allocation targets from time to time depending on market conditions and the funding requirements of the pension plan. This current asset allocation has and is expected to limit volatility with regard to the funded status of the plan, but may result in higher pension expense due to the lower long-term rate of return associated with fixed-income securities. Due to market conditions and other factors, actual asset allocations may vary from the target allocation outlined above.

We believe plan assets are invested in a conservative manner with an objective of providing a total return that, over the long term, provides sufficient assets to fund benefit obligations, taking into account our expected contributions and the level of funding risk deemed appropriate. Our investment strategy seeks to diversify assets among classes of investments with differing rates of return, volatility, and correlation in order to reduce funding risk. Diversification within asset classes is also utilized to ensure that there are no significant concentrations of risk in plan assets and to reduce the effect that the return on any single investment may have on the entire portfolio.

Significant portions of plan assets are invested in commingled trust funds. These funds are valued at the net asset value of units held by the plan at year end. Stocks traded on U.S. and Canadian security exchanges are valued at closing market prices on the measurement date. The fair values of the Canadian pension plan assets at January 29, 2022 and January 30, 2021 were as follows:

The fair values of the U.S. pension plan assets at January 29, 2022 were as follows:


($ in millions)	Level 1		Level 2		Level 3		2021 Total		2020 Total*
Cash equivalents	$	—	$	4	$	—	$	4	$	4
Equity securities:
U.S. large-cap ⁽¹⁾		—		93		—		93		117
U.S. mid/small-cap ⁽¹⁾		—		24		—		24		34
International ⁽²⁾		—		58		—		58		84
Corporate stock ⁽³⁾		18		—		—		18		17
Fixed-income securities:
Long duration corporate and government bonds ⁽⁴⁾		—		282		—		282		269
Intermediate duration corporate and government bonds ⁽⁵⁾		—		143		—		143		119
Other types of investments:
Real estate securities ⁽⁶⁾		—		9		—		9		22
Total assets at fair value	$	18	$	613	$	—	$	631	$	666

*	Each category of plan assets is classified within the same level of the fair value hierarchy for 2021 and 2020.

(1)	These categories consist of various managed funds that invest primarily in common stocks, as well as other equity securities and a combination of other funds.

(2)	This category comprises two managed funds that invest primarily in international common stocks, as well as other equity securities and a combination of other funds.

(3)	This category consists of the Company’s common stock.

(4)	This category consists of various fixed-income funds that invest primarily in long-term bonds, as well as a combination of other funds, that together are designed to exceed the performance of related long-term market indices.

(5)	This category consists of two fixed-income funds that invest primarily in intermediate duration bonds, as well as a combination of other funds, that together are designed to exceed the performance of related indices.

(6)	This category consists of one fund that invests in global real estate securities.

Contributions and Expected Payments

We were not required to make any contributions to the U.S. qualified pension plan in 2021 and 2020. We do not anticipate making any contributions to the U.S. qualified pension plan in 2022 due to the strong funded status of the plan, however we continually evaluate the amount and timing of any potential contributions based on market conditions and other factors. We paid $3 million and $1 million in pension benefits related to our non-qualified pension plans during 2021 and 2020, respectively.

Estimated future benefit payments for each of the next five years and the five years thereafter are as follows:


	Pension		Postretirement
($ in millions)	Benefits		Benefits
2022	$	69	$	1
2023		52		1
2024		50		1
2025		47		—
2026		46		—
2027-2031		203		3

Savings Plans

We have two qualified savings plans, a 401(k) plan that is available to employees whose primary place of employment is the U.S., and another plan that is available to employees whose primary place of employment is in Puerto Rico. Eligible team members may contribute to the plans following 28 days of employment and are eligible for matching contributions upon completion of one year of service consisting of at least 1,000 hours. As of January 1, 2022, the savings plans allow eligible employees to contribute up to 40% of their compensation on a pre-tax basis, subject to a maximum of $20,500 for the U.S. plan and $15,000 for the Puerto Rico plan. Prior to January 1, 2020, we matched 25% of employees’ pre-tax contributions on up to the first 4% of the employees’ compensation (subject to certain limitations). Effective January 1, 2020, we match 100% of employees’ pre-tax contributions on up to the first 1% and 50% of the next 5% of the employees’ compensation (subject to certain limitations). Prior to January 1, 2020, such matching contributions were vested incrementally over the first five years of participation for both plans. Effective January 1, 2020, matching contributions are vested over two years. The charge to operations for matching contributions was $14 million, $13 million, and $4 million for 2021, 2020, and 2019, respectively.

With the acquisition of WSS in 2021, we became the sponsor of the 401(k) plan for WSS employees. Eligible team members may contribute to the plan following three months of employment and are eligible for matching contributions upon completion of one year of service consisting of at least 1,000 hours. The charge for matching contributions was an insignificant amount in 2021.