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PENSION AND OTHER POSTRETIREMENT BENEFITS
 12 Months Ended
Dec. 31, 2021
Retirement Benefits [Abstract]  
PENSION AND OTHER POSTRETIREMENT BENEFITS PENSION AND OTHER POSTRETIREMENT BENEFITS
 
PENSION PLANS
We sponsor Canadian and US contributory and non-contributory registered defined benefit and defined contribution pension plans, which provide benefits covering substantially all employees. The Canadian Plans provide defined benefit and defined contribution pension benefits to our Canadian employees. The US Plans provide defined benefit pension benefits to our US employees. We also sponsor supplemental non-contributory defined benefit pension plans, which provide non-registered benefits for certain employees in Canada and the US.

Defined Benefit Pension Plan Benefits
Benefits payable from the defined benefit pension plans are based on each plan participant’s years of service and final average remuneration. Some benefits are partially inflation-indexed after a plan participant’s retirement. Our contributions are made in accordance with independent actuarial valuations. Participant contributions to contributory defined benefit pension plans are based upon each plan participant’s current eligible remuneration.

Defined Contribution Pension Plan Benefits
Our contributions are based on each plan participant’s current eligible remuneration. Our contributions for some defined contribution pension plans are also based on age and years of service. Our defined contribution pension benefit costs are equal to the amount of contributions required to be made by us.
Benefit Obligations, 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 assets or liabilities for our defined benefit pension plans:
 CanadaUS
December 31,2021202020212020
(millions of Canadian dollars)    
Change in projected benefit obligation    
Projected benefit obligation at beginning of year4,855 4,446 1,243 1,230 
Service cost 139 148 44 44 
Interest cost101 128 17 31 
Participant contributions28 31 — — 
Actuarial (gain)/loss1
(329)292 (21)95 
Benefits paid(194)(190)(84)(128)
Foreign currency exchange rate changes— — (11)(23)
Other— — (4)(6)
Projected benefit obligation at end of year2
4,600 4,855 1,184 1,243 
Change in plan assets
Fair value of plan assets at beginning of year4,077 3,827 1,062 1,104 
Actual return on plan assets505 288 151 83 
Employer contributions120 121 43 27 
Participant contributions28 31 — — 
Benefits paid(194)(190)(84)(128)
Foreign currency exchange rate changes— — (8)(18)
Other— — (4)(6)
Fair value of plan assets at end of year3
4,536 4,077 1,160 1,062 
Underfunded status at end of year(64)(778)(24)(181)
Presented as follows:
Deferred amounts and other assets250 35 98 — 
Accounts payable and other(9)(9)(4)(3)
Other long-term liabilities (305)(804)(118)(178)
 (64)(778)(24)(181)
1Primarily due to increase in the discount rate used to measure the benefit obligations (2020 - primarily due to decrease in the discount rate used to measure the benefit obligations).                            
2The accumulated benefit obligation for our Canadian pension plans was $4.3 billion and $4.5 billion as at December 31, 2021 and 2020, respectively. The accumulated benefit obligation for our US pension plans was $1.1 billion and $1.2 billion as at December 31, 2021 and 2020, respectively.
3Assets in the amount of $13 million (2020 - $11 million) and $84 million (2020 - $59 million), related to our Canadian and United States non-registered supplemental pension plan obligations, are held in grantor trusts and rabbi 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.
Certain of our pension plans have accumulated benefit obligations in excess of the fair value of plan assets. For these plans, the accumulated benefit obligation and fair value of plan assets were as follows:
 CanadaUS
December 31,2021202020212020
(millions of Canadian dollars)
Accumulated benefit obligation440 4,094 115 1,207 
Fair value of plan assets247 3,621 — 1,062 

Certain of our pension plans have projected benefit obligations in excess of the fair value of plan assets. For these plans, the projected benefit obligation and fair value of plan assets were as follows:
 CanadaUS
December 31,2021202020212020
(millions of Canadian dollars)
Projected benefit obligation1,272 4,434 121 1,243 
Fair value of plan assets1,020 3,621 — 1,062 

Amount Recognized in Accumulated Other Comprehensive Income
The amount of pre-tax AOCI relating to our pension plans are as follows:
 CanadaUS
December 31,2021202020212020
(millions of Canadian dollars)    
Net actuarial loss226 542 92 233 
Prior service credit— — (1)(1)
Total amount recognized in AOCI1
226 542 91 232 
1 Excludes amounts related to cumulative translation adjustment.

Net Periodic Benefit Cost and Other Amounts Recognized in Comprehensive Income
The components of net periodic benefit cost and other amounts recognized in pre-tax Comprehensive income related to our pension plans are as follows:
CanadaUS
Year ended December 31, 202120202019202120202019
(millions of Canadian dollars)
Service cost139 148 149 44 44 45 
Interest cost1
101 128 139 17 31 41 
Expected return on plan assets1
(252)(260)(245)(73)(88)(78)
Amortization/settlement of net actuarial loss1
54 42 41 11 1 2 
Amortization/curtailment of prior service credit1
— — — — (1)(1)
Net periodic benefit (credit)/cost42 58 84 (1)(13)9 
Defined contribution benefit cost7 6 8 — — — 
Net pension (credit)/cost recognized in Earnings49 64 92 (1)(13)9 
Amount recognized in OCI:
Effect of plan combination— — — — — (6)
 Amortization/settlement of net actuarial loss(25)(21)(26)(11)(1)(2)
Amortization/curtailment of prior service credit— — — — 1 1 
Net actuarial (gain)/loss arising during the year(291)118 115 (99)100 8 
Total amount recognized in OCI(316)97 89 (110)100 1 
Total amount recognized in Comprehensive income(267)161 181 (111)87 10 
1 Reported within Other income/(expense) in the Consolidated Statements of Earnings.
Actuarial Assumptions
The weighted average assumptions made in the measurement of the projected benefit obligation and net periodic benefit cost of our pension plans are as follows:
 CanadaUS
202120202019202120202019
Projected benefit obligation
Discount rate3.2 %2.6 %3.0 %2.6 %2.2 %3.0 %
Rate of salary increase2.9 %2.3 %3.2 %2.8 %2.7 %2.9 %
Cash balance interest credit rateN/AN/AN/A4.3 %4.3 %4.5 %
Net periodic benefit cost
Discount rate2.6 %3.0 %3.8 %2.2 %3.0 %3.9 %
Rate of return on plan assets6.2 %6.8 %7.0 %7.3 %7.9 %8.0 %
Rate of salary increase2.3 %3.2 %3.2 %2.7 %2.9 %2.9 %
Cash balance interest credit rateN/AN/AN/A4.3 %4.5 %4.5 %

OTHER POSTRETIREMENT BENEFIT PLANS
We sponsor funded and unfunded defined benefit OPEB Plans, which provide non-contributory supplemental health, dental, life and health spending account benefit coverage for certain qualifying retired employees.
Benefit Obligations, Plan Assets and Funded Status
The following table details the changes in the accumulated postretirement benefit obligation, the fair value of plan assets and the recorded assets or liabilities for our defined benefit OPEB plans:
 CanadaUS
December 31,2021202020212020
(millions of Canadian dollars)    
Change in accumulated postretirement benefit obligation
    
Accumulated postretirement benefit obligation at beginning of year
321 293 254 288 
Service cost 6 5 1 2 
Interest cost7 8 3 7 
Participant contributions— — 8 4 
Actuarial (gain)/loss1
(51)21 (69)17 
Benefits paid(9)(6)(22)(28)
Plan amendments — — — (33)
Foreign currency exchange rate changes— — (3)(4)
Other— — 1 1 
Accumulated postretirement benefit obligation at end of year
274 321 173 254 
Change in plan assets
Fair value of plan assets at beginning of year— — 188 188 
Actual return on plan assets— — 22 14 
Employer contributions9 6 6 12 
Participant contributions— — 8 4 
Benefits paid(9)(6)(22)(28)
Foreign currency exchange rate changes— — (3)(3)
Other— — 2 1 
Fair value of plan assets at end of year— — 201 188 
Overfunded/(underfunded) status at end of year(274)(321)28 (66)
Presented as follows:
Deferred amounts and other assets— — 71 19 
Accounts payable and other(12)(13)— (6)
Other long-term liabilities (262)(308)(43)(79)
 (274)(321)28 (66)
1 Primarily due to increase in the discount rate used to measure the benefit obligations (2020 - primarily due to decrease in the discount rate used to measure the benefit obligations).
Certain of our OPEB plans have accumulated benefit obligations in excess of the fair value of plan assets. For these plans, the accumulated benefit obligation and fair value of plan assets were as follows:
 CanadaUS
December 31,2021202020212020
(millions of Canadian dollars)
Accumulated benefit obligation274 321 94 191 
Fair value of plan assets— — 51 106 

Amount Recognized in Accumulated Other Comprehensive Income
The amount of pre-tax AOCI relating to our OPEB plans are as follows:
 CanadaUS
December 31,2021202020212020
(millions of Canadian dollars)    
Net actuarial (gain)/loss(35)15 (104)(7)
Prior service credit(1)(1)(37)(44)
Total amount recognized in AOCI1
(36)14 (141)(51)
1 Excludes amounts related to cumulative translation adjustment.

Net Periodic Benefit Cost and Other Amounts Recognized in Comprehensive Income
The components of net periodic benefit cost and other amounts recognized in pre-tax Comprehensive income related to our OPEB plans are as follows:
 CanadaUS
Year ended December 31,202120202019202120202019
(millions of Canadian dollars)      
Service cost6 5 5 1 2 2 
Interest cost1
7 8 10 3 7 10 
Expected return on plan assets1
— — — (10)(12)(12)
Amortization/settlement of net actuarial gain1
— (1)(7)(1)(1)— 
Amortization/curtailment of prior service credit1
— — (1)(7)(2)(2)
Net periodic benefit (credit)/cost recognized in Earnings13 12 7 (14)(6)(2)
Amount recognized in OCI:
Amortization/settlement of net actuarial gain— 1 7 1 1 — 
Amortization/curtailment of prior service credit— — 1 7 2 2 
Net actuarial (gain)/loss arising during the year(50)21 15 (80)15 (8)
Prior service credit— — — — (33)— 
Total amount recognized in OCI(50)22 23 (72)(15)(6)
Total amount recognized in Comprehensive income(37)34 30 (86)(21)(8)
1 Reported within Other income/(expense) in the Consolidated Statements of Earnings.
Actuarial Assumptions
The weighted average assumptions made in the measurement of the accumulated postretirement benefit obligation and net periodic benefit cost of our OPEB plans are as follows:
 CanadaUS
202120202019202120202019
Accumulated postretirement benefit obligation
Discount rate3.2 %2.6 %3.1 %2.4 %2.0 %2.8 %
Net periodic benefit cost
Discount rate2.6 %3.1 %3.8 %2.0 %2.8 %4.0 %
Rate of return on plan assetsN/AN/AN/A6.0 %6.7 %6.7 %

Assumed Health Care Cost Trend Rates
The assumed rates for the next year used to measure the expected cost of benefits are as follows:
CanadaUS
2021202020212020
Health care cost trend rate assumed for next year4.0 %4.0 %7.0 %6.8 %
Rate to which the cost trend is assumed to decline (ultimate trend rate)
4.0 %4.0 %4.5 %4.5 %
Year that the rate reaches the ultimate trend rateN/AN/A20372037

PLAN ASSETS
We manage the investment risk of our pension funds by setting a long-term asset mix policy for each plan after consideration of: (i) the nature of pension plan liabilities; (ii) the investment horizon of the plan; (iii) the going concern and solvency funded status and cash flow requirements of the plan; (iv) our operating environment and financial situation and our ability to withstand fluctuations in pension contributions; and (v) the future economic and capital markets outlook with respect to investment returns, volatility of returns and correlation between assets.

The overall expected rate of return on plan assets is based on the asset allocation targets with estimates for returns based on long-term expectations.

The asset allocation targets and major categories of plan assets are as follows:
 CanadaUS
TargetDecember 31,TargetDecember 31,
Asset CategoryAllocation20212020Allocation20212020
Equity securities43.8 %46.7 %47.2 %45.0 %52.5 %55.6 %
Fixed income securities28.9 %29.8 %29.6 %20.1 %18.4 %17.2 %
Alternatives1
27.3 %23.5 %23.2 %34.9 %29.1 %27.2 %
1Alternatives include investments in private debt, private equity, infrastructure and real estate funds. Fund values are based on the net asset value of the funds that invest directly in the aforementioned underlying investments. The values of the investments have been estimated using the capital accounts representing the plan's ownership interest in the funds.
Pension Plans
The following table summarizes the fair value of plan assets for our pension plans recorded at each fair value hierarchy level:
 CanadaUS
Level 11
Level 22
Level 33
Total
Level 11
Level 22
Level 33
Total
(millions of Canadian dollars)        
December 31, 2021
Cash and cash equivalents180 — — 180 10 — — 10 
Equity securities
Canada198 228 — 426 — — — — 
US1 — — 1 — — — — 
Global— 1,693 — 1,693 — 609 — 609 
Fixed income securities
Government258 459 — 717 — 86 — 86 
Corporate— 453 — 453 — 118 — 118 
Alternatives4
— — 1,064 1,064 — — 337 337 
Forward currency contracts— 2 — 2 — — — — 
Total pension plan assets at fair value
637 2,835 1,064 4,536 10 813 337 1,160 
December 31, 2020
Cash and cash equivalents213 — — 213 5 — — 5 
Equity securities
Canada178 188 — 366 — — — — 
US2 — — 2 — — — — 
Global— 1,556 — 1,556 — 590 — 590 
Fixed income securities
Government207 378 — 585 — 75 — 75 
Corporate— 410 — 410 — 103 — 103 
Alternatives4
— — 912 912 — — 289 289 
Forward currency contracts— 33 — 33 — — — — 
Total pension plan assets at fair value
600 2,565 912 4,077 5 768 289 1,062 
1Level 1 assets include assets with quoted prices in active markets for identical assets.
2Level 2 assets include assets with significant observable inputs.
3Level 3 assets include assets with significant unobservable inputs.
4Alternatives include investments in private debt, private equity, infrastructure and real estate funds.

Changes in the net fair value of pension plan assets classified as Level 3 in the fair value hierarchy were as follows:
CanadaUS
December 31,2021202020212020
(millions of Canadian dollars)   
Balance at beginning of year912 852 289 276 
Unrealized and realized gains/(losses)77 (27)38 7 
Purchases and settlements, net75 87 10 6 
Balance at end of year1,064 912 337 289 
OPEB Plans
The following table summarizes the fair value of plan assets for our US funded OPEB plans recorded at each fair value hierarchy level:
Level 11
Level 22
Level 33
Total
(millions of Canadian dollars)    
December 31, 2021
Cash and cash equivalents4 — — 4 
Equity securities
US— 39 — 39 
Global— 75 — 75 
Fixed income securities
Government47 6 — 53 
Corporate— 8 — 8 
Alternatives4
— — 22 22 
Total OPEB plan assets at fair value51 128 22 201 
December 31, 2020
Equity securities
US— 35 — 35 
Global— 79 — 79 
Fixed income securities
Government38 6 — 44 
Corporate— 8 — 8 
Alternatives4
— — 22 22 
Total OPEB plan assets at fair value38 128 22 188 
1Level 1 assets include assets with quoted prices in active markets for identical assets.
2Level 2 assets include assets with significant observable inputs.
3Level 3 assets include assets with significant unobservable inputs.
4Alternatives includes investments in private debt, private equity, infrastructure and real estate.

Changes in the net fair value of US funded OPEB plan assets classified as Level 3 in the fair value hierarchy were as follows:
December 31,20212020
(millions of Canadian dollars)
Balance at beginning of year22 18 
Unrealized and realized gains2 1 
Purchases and settlements, net(2)3 
Balance at end of year22 22 

EXPECTED BENEFIT PAYMENTS
Year ending December 31,202220232024202520262027-2031
(millions of Canadian dollars)      
Pension
Canada
197 203 208 212 217 1,163 
US80 78 78 76 77 374 
OPEB
Canada
12 12 12 13 13 67 
US17 15 14 13 12 51 
 
EXPECTED EMPLOYER CONTRIBUTIONS
In 2022, we expect to contribute approximately $110 million and $4 million to the Canadian and US pension plans, respectively, and $12 million and $6 million to the Canadian and US OPEB plans, respectively.

RETIREMENT SAVINGS PLANS
In addition to the pension and OPEB plans discussed above, we also have defined contribution employee savings plans available to US employees. Employees may participate in a matching contribution where we match a certain percentage of before-tax employee contributions of up to 6.0% of eligible pay per pay period. For the years ended December 31, 2021, 2020 and 2019, pre-tax employer matching contribution costs were $27 million each year, respectively.