PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of Changes in Projected Benefit Obligation, Plan Assets and Funded Status

The following table details the changes in the projected benefit obligation, the fair value of plan assets and the recorded asset or liability for our defined benefit pension plans:



	Canada				United States
December 31,	2018		2017		2018		2017
(millions of Canadian dollars)
Change in projected benefit obligation
Projected benefit obligation at beginning of year	4,033		2,270		1,279		508
Service cost	149		156		45		48
Interest cost	130		116		38		35
Participant contributions	25		6		—		—
Actuarial (gain)/loss	(146	)	145		(103	)	57
Benefits paid	(184	)	(165	)	(60	)	(42	)
Plan settlements	—		—		(65	)	(59	)
Transfer out	(10	)	—		—		—
Acquired in Merger Transaction	—		1,505		—		811
Foreign currency exchange rate changes	—		—		105		(63	)
Other	—		—		(25	)	(16	)
Projected benefit obligation at end of year¹	3,997		4,033		1,214		1,279
Change in plan assets
Fair value of plan assets at beginning of year	3,619		2,019		1,097		361
Actual return/(loss) on plan assets	(42	)	308		(48	)	113
Employer contributions	113		161		40		57
Participant contributions	25		6		—		—
Benefits paid	(184	)	(165	)	(60	)	(42	)
Plan settlements	—		—		(65	)	(59	)
Transfer out	(8	)	—		—		—
Acquired in Merger Transaction	—		1,290				731
Foreign currency exchange rate changes	—		—		91		(51	)
Other	—		—		(10	)	(13	)
Fair value of plan assets at end of year²	3,523		3,619		1,045		1,097
Underfunded status at end of year	(474	)	(414	)	(169	)	(182	)
Presented as follows:
Deferred amounts and other assets	29		38		—		—
Accounts payable and other	(9	)	(60	)	(4	)	(3	)
Other long-term liabilities	(494	)	(392	)	(165	)	(179	)
	(474	)	(414	)	(169	)	(182	)


1	The accumulated benefit obligation for our Canadian pension plans was $3.7 billion as at December 31, 2018 and 2017. The accumulated benefit obligation for our United States pension plans was $1.2 billion as at December 31, 2018 and 2017.

Assets in the amount of $7 million (2017 - $9 million) and $39 million (2017 - $40 million), related to our Canadian and United States non-registered supplemental pension plan obligations, are held in grantor trusts that, in accordance with federal tax regulations, are not restricted from creditors. These assets are committed for the future settlement of benefit obligations included in the underfunded status as at the end of the year, however they are excluded from plan assets for accounting purposes.

For these plans, the projected benefit obligations, accumulated benefit obligations and the fair value of plan assets were as follows:



	Canada		United States
December 31,	2018	2017	2018	2017
(millions of Canadian dollars)
Projected benefit obligations	1,422	1,444	1,214	1,280
Accumulated benefit obligations	1,299	1,306	1,179	1,217
Fair value of plan assets	1,064	1,131	1,045	1,098

Schedule of Amount Recognized in Accumulated Other Comprehensive Income

The amounts of pre-tax AOCI relating to our pension plans are as follows:



	Canada		United States
December 31,	2018	2017	2018		2017
(millions of Canadian dollars)
Net actuarial loss	435	334	133		112
Prior service credit	—	—	(3	)	—
Total amount recognized in AOCI¹	435	334	130		112

1 Includes amounts related to cumulative translation adjustment.

The amounts of pre-tax AOCI relating to our OPEB plans are as follows:



	Canada				United States
December 31,	2018		2017		2018		2017
(millions of Canadian dollars)
Net actuarial (gain)/loss	(29	)	17		(15	)	(15	)
Prior service credit	(2	)	(2	)	(15	)	(11	)
Total amount recognized in AOCI¹	(31	)	15		(30	)	(26	)

1 Includes amounts related to cumulative translation adjustment.

Schedule of Net Benefit Costs Recognized

The components of net benefit cost and other amounts recognized in pre-tax OCI related to our pension plans are as follows:



		Canada							United States
Year ended December 31,		2018		2017		2016			2018		2017		2016
(millions of Canadian dollars)
Service cost		149		156		129			45		48		26
Interest cost		130		116		73			38		35		16
Expected return on plan assets		(245	)	(201	)	(127	)		(88	)	(57	)	(21	)
Amortization/settlement of net actuarial loss		25		29		32			7		10		3
Amortization/curtailment of prior service cost		—		—		—			3		—		—
Net defined benefit costs		59		100		107		—	5		36		24
Defined contribution benefit costs		11		11		3			19		15		—
Net benefit cost recognized in Earnings		70		111		110			24		51		24
Amount recognized in OCI:
	Amortization/settlement of net actuarial loss	(11	)	(14	)	(14	)		(7	)	(9	)	(6	)
	Amortization/curtailment of prior service cost	—		—		—			(3	)	—		—
	Net actuarial loss arising during the year	112		38		28			28		—		16
Total amount recognized in OCI		101		24		14			18		(9	)	10
Total amount recognized in Comprehensive income		171		135		124			42		42		34

The components of net benefit cost and other amounts recognized in pre-tax OCI related to our OPEB plans are as follows:



	Canada						United States
Year ended December 31,	2018		2017		2016		2018		2017		2016
(millions of Canadian dollars)
Service cost	8		7		4		3		5		4
Interest cost	10		10		6		10		10		5
Expected return on plan assets	—		—		—		(12	)	(10	)	(6	)
Amortization/settlement of net actuarial gain	—		—		—		(1	)	—		—
Amortization/curtailment of prior service (credit)/cost	—		1		—		(4	)	—		—
Net benefit cost recognized in Earnings	18		18		10		(4	)	5		3
Amount recognized in OCI:
Amortization/settlement of net actuarial gain/(loss)	—		(1	)	(1	)	1		1		(1	)
Amortization/curtailment of prior service credit	—		—		—		4		—		—
Net actuarial (gain)/loss arising during the year	(46	)	(8	)	2		(1	)	(42	)	12
Prior service (credit)/cost	—		(3	)	—		(8	)	1		(12	)
Total amount recognized in OCI	(46	)	(12	)	1		(4	)	(40	)	(1	)
Total amount recognized in Comprehensive income	(28	)	6		11		(8	)	(35	)	2

Schedule of Actuarial Assumptions Used

The weighted average assumptions made in the measurement of the accumulated postretirement benefit obligations and net benefit cost of our OPEB plans are as follows:



	Canada						United States
	2018		2017		2016		2018		2017		2016
Accumulated postretirement benefit obligations
Discount rate	3.8	%	3.6	%	4.0	%	4.0	%	3.5	%	3.6	%
Net OPEB cost
Discount rate	3.6	%	4.0	%	4.2	%	3.3	%	4.0	%	3.8	%
Rate of return on plan assets	N/A		N/A		N/A		5.7	%	6.0	%	6.0	%

The weighted average assumptions made in the measurement of the projected benefit obligations and net benefit cost of our pension plans are as follows:



	Canada						United States
	2018		2017		2016		2018		2017		2016
Projected benefit obligations
Discount rate	3.8	%	3.6	%	4.0	%	3.9	%	3.5	%	4.0	%
Rate of salary increase	3.2	%	3.2	%	3.7	%	2.8	%	3.1	%	3.3	%
Net benefit cost
Discount rate	3.6	%	4.0	%	4.2	%	3.4	%	4.0	%	4.1	%
Rate of return on plan assets	6.8	%	6.5	%	6.5	%	7.4	%	7.2	%	7.2	%
Rate of salary increase	3.2	%	3.7	%	3.6	%	2.9	%	3.3	%	3.2	%

Schedule of Other Postretirement Benefits

The following table details the changes in the accumulated postretirement benefit obligation, the fair value of plan assets and the recorded asset or liability for our defined benefit OPEB plans:



	Canada				United States
December 31,	2018		2017		2018		2017
(millions of Canadian dollars)
Change in accumulated postretirement benefit obligation
Accumulated postretirement benefit obligation at beginning of year	321		179		337		133
Service cost	8		7		3		5
Interest cost	10		10		10		10
Participant contributions	—		—		6		4
Actuarial gain	(45	)	(8	)	(25	)	(34	)
Benefits paid	(11	)	(10	)	(29	)	(19	)
Plan amendments	—		(3	)	(8	)	1
Acquired in Merger Transaction	—		146		—		254
Foreign currency exchange rate changes	—		—		27		(17	)
Other	(1	)	—		(16	)	—
Accumulated postretirement benefit obligation at end of year	282		321		305		337
Change in plan assets
Fair value of plan assets at beginning of year	—		—		213		115
Actual return/(loss) on plan assets	—		—		(13	)	21
Employer contributions	11		10		8		1
Participant contributions	—		—		6		4
Benefits paid	(11	)	(10	)	(29	)	(19	)
Acquired in Merger Transaction	—		—		—		102
Foreign currency exchange rate changes	—		—		16		(11	)
Other	—		—		(20	)	—
Fair value of plan assets at end of year	—		—		181		213
Underfunded status at end of year	(282	)	(321	)	(124	)	(124	)
Presented as follows:
Deferred amounts and other assets	—		—		2		7
Accounts payable and other	(12	)	(12	)	(7	)	(7	)
Other long-term liabilities	(270	)	(309	)	(119	)	(124	)
	(282	)	(321	)	(124	)	(124	)

Schedule of Assumed Health Care Cost Trend Rates

The assumed rates for the next year used to measure the expected cost of benefits are as follows:



	Canada				United States
	2018		2017		2018		2017
Health care cost trend rate assumed for next year	5.6	%	5.5	%	7.4	%	7.4	%
Rate to which the cost trend is assumed to decline (the ultimate trend rate)	4.4	%	4.4	%	4.5	%	4.5	%
Year that the rate reaches the ultimate trend rate	2034		2034		2037		2037

Schedule of Effect of One-Percentage-Point Change in Assumed Health Care Cost Trend Rates

A 1% change in the assumed health care cost trend rate would have the following effects for the year ended and as at December 31, 2018:



	Canada			United States
	1% Increase	1% Decrease		1% Increase	1% Decrease
(millions of Canadian dollars)
Effect on total service and interest costs	1	(1	)	1	(1	)
Effect on accumulated postretirement benefit obligation	20	(16	)	18	(17	)

Schedule of Allocation of Plan Assets

The asset allocation targets and major categories of plan assets are as follows:



	Canada					United States
	Target	December 31,				Target	December 31,
Asset Category	Allocation	2018		2017		Allocation	2018		2017
Equity securities	40.0 - 70.0%	45.8	%	52.0	%	52.5 - 70.0%	51.7	%	47.1	%
Fixed income securities	27.5 - 60.0%	33.4	%	34.2	%	27.5 - 30.0%	32.9	%	47.7	%
Other	0.0 - 20.0%	20.7	%	13.8	%	0.0 - 20.0%	15.4	%	5.2	%

Schedule of Changes in Fair Value of Plan Assets

Changes in the net fair value of plan assets classified as Level 3 in the fair value hierarchy were as follows:

Pension



	Canada		United States
December 31,	2018	2017	2018	2017
(millions of Canadian dollars)
Balance at beginning of year	340	281	56	40
Unrealized and realized gains	77	26	9	5
Purchases and settlements, net	145	33	65	11
Balance at end of year	562	340	130	56

The following tables summarize the fair value of plan assets for our pension and OPEB plans recorded at each fair value hierarchy level.

Pension



	Canada							United States
	Level 1¹		Level 2²		Level 3³	Total		Level 1¹	Level 2²		Level 3³	Total
(millions of Canadian dollars)
December 31, 2018
Cash and cash equivalents	246		—		—	246		56	—		—	56
Equity securities
Canada	623		—		—	623		1	—		—	1
United States	(1	)	—		—	(1	)	50	—		—	50
Global	993		—		—	993		489	—		—	489
Fixed income securities
Government	661		—		—	661		265	—		—	265
Corporate	457		—		60	517		54	—		25	79
Infrastructure and real estate⁴	—		—		502	502		—	—		105	105
Forward currency contracts	—		(18	)	—	(18	)	—	—		—	—
Total pension plan assets at fair value	2,979		(18	)	562	3,523		915	—		130	1,045
December 31, 2017
Cash and cash equivalents	169		—		—	169		2	—		—	2
Equity securities
Canada	842		425		—	1,267		—	—		—	—
United States	427		—		—	427		343	—		—	343
Global	189		—		—	189		122	52		—	174
Fixed income securities
Government	933		—		—	933		—	—		—	—
Corporate	301		3		—	304		522	1		—	523
Infrastructure and real estate⁴	—		—		340	340		—	—		56	56
Forward currency contracts	—		(10	)	—	(10	)	—	(1	)	—	(1	)
Total pension plan assets at fair value	2,861		418		340	3,619		989	52		56	1,097

OPEB



	Canada				United States
	Level 1¹	Level 2²	Level 3³	Total	Level 1¹	Level 2²	Level 3³	Total
(millions of Canadian dollars)
December 31, 2018
Cash and cash equivalents	—	—	—	—	7	—	—	7
Equity securities
United States	—	—	—	—	63	—	—	63
Global	—	—	—	—	35	—	—	35
Fixed income securities
Government	—	—	—	—	68	—	—	68
Corporate	—	—	—	—	3	—	2	5
Infrastructure and real estate	—	—	—	—	—	—	3	3
Total OPEB plan assets at fair value	—	—	—	—	176	—	5	181
December 31, 2017
Cash and cash equivalents	—	—	—	—	1	—	—	1
Equity securities
United States	—	—	—	—	80	—	—	80
Global	—	—	—	—	36	—	—	36
Fixed income securities
Government	—	—	—	—	96	—	—	96
Total OPEB plan assets at fair value	—	—	—	—	213	—	—	213


1	Level 1 assets include assets with quoted prices in active markets for identical assets.


2	Level 2 assets include assets with significant observable inputs.


3	Level 3 assets include assets with significant unobservable inputs.


4	The fair values of the infrastructure and real estate investments are established through the use of valuation models.

Schedule of Expected Benefit Payments and Employer Contributions



Year ended December 31,	2019	2020	2021	2022	2023	2023-2027
(millions of Canadian dollars)
Pension
Canada	174	180	187	194	201	1,104
United States	124	96	97	98	95	438
OPEB
Canada	13	12	13	13	13	39
United States	26	26	25	24	23	98