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Pensions and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2023
Retirement Benefits [Abstract]  
Pensions and Other Postretirement Benefits Pensions and Other Postretirement Benefits
 
We have both funded and unfunded defined benefit pension plans covering eligible employees. We also provide specified health care benefits to eligible retired employees; these plans can be amended or terminated at our option.  Under our self-insured retiree health care plan, for those participants who are not Medicare-eligible, certain health care expenses are covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies.  Eligible retired participants and their spouses who are Medicare-eligible are not covered under the self-insured retiree health care plan, but instead are provided with an employer-funded health reimbursement account which can be used for reimbursement of health insurance premiums or eligible out-of-pocket medical expenses.
Pension and Other Postretirement Benefit Obligations and Plan Assets

Pension BenefitsOther Postretirement
Benefits
 2023202220232022
 ($ in millions)
Change in benefit obligations:    
Benefit obligation at beginning of year$2,051 $2,777 $326 $417 
Service cost25 40 4 6 
Interest cost108 67 17 9 
Actuarial losses (gains)122 (677)1 (70)
Plan amendments— (4)(5)— 
Benefits paid(155)(152)(33)(36)
Benefit obligation at end of year2,151 2,051 310 326 
Change in plan assets:    
Fair value of plan assets at beginning of year2,260 2,861 122 173 
Actual return on plan assets375 (470)21 (28)
Employer contributions23 21 28 13 
Benefits paid(155)(152)(33)(36)
Fair value of plan assets at end of year2,503 2,260 138 122 
Funded status at end of year$352 $209 $(172)$(204)
Amounts recognized in the Consolidated Balance Sheets:     
Other assets$652 $484 $— $— 
Other current liabilities(21)(20)— — 
Other liabilities(279)(255)(172)(204)
Net amount recognized$352 $209 $(172)$(204)
Amounts included in accumulated other comprehensive    
loss (before tax):    
Net (gain) loss$574 $623 $(28)$(19)
Prior service benefit(5)(6)(156)(177)

Our accumulated benefit obligation for our defined benefit pension plans is $2.0 billion and $1.9 billion at December 31, 2023 and 2022, respectively.  Our unfunded pension plans, included above, which in all cases have no assets, had projected benefit obligations of $300 million and $275 million at December 31, 2023 and 2022, respectively, and had accumulated benefit obligations of $273 million and $249 million at December 31, 2023 and 2022, respectively.
 
Pension and Other Postretirement Benefit Cost Components

 202320222021
 ($ in millions)
Pension benefits:   
Service cost$25 $40 $43 
Interest cost108 67 55 
Expected return on plan assets(208)(213)(193)
Amortization of net losses4 49 66 
Amortization of prior service benefit(1)— — 
Net benefit$(72)$(57)$(29)
Other postretirement benefits:   
Service cost$4 $6 $6 
Interest cost17 9 7 
Expected return on plan assets(11)(13)(12)
Amortization of net losses— — 1 
Amortization of prior service benefit(26)(25)(26)
Net benefit$(16)$(23)$(24)

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income

 2023
Pension
Benefits		Other
Postretirement 
Benefits
 ($ in millions)
Net gains arising during the year$(45)$(9)
Prior service effect of plan amendment— (5)
Amortization of net losses(4)— 
Amortization of prior service benefit1 26 
Total recognized in other comprehensive income$(48)$12 
  
Total recognized in net periodic cost and other comprehensive income$(120)$(4)
 
Net gains arising during the year for both pension benefits and other postretirement benefits were due primarily to higher actual returns on plan assets offset by a decrease in discount rates.

The estimated net losses and prior service credits for the pension plans that will be amortized from accumulated other comprehensive loss into net periodic cost over the next year are $16 million.  The estimated net gains and prior service benefit for the other postretirement benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit over the next year is $26 million.
Pension and Other Postretirement Benefits Assumptions
 
Costs for pension and other postretirement benefits are determined based on actuarial valuations that reflect appropriate assumptions as of the measurement date, ordinarily the beginning of each year.  The funded status of the plans is determined using appropriate assumptions as of each year end.  A summary of the major assumptions follows:

 202320222021
Pension funded status:   
Discount rate5.23 %5.56 %2.97 %
Future salary increases4.44 %4.44 %4.44 %
Other postretirement benefits funded status:   
Discount rate5.11 %5.45 %2.72 %
Pension cost:   
Discount rate - service cost5.75 %3.25 %3.14 %
Discount rate - interest cost5.40 %2.45 %1.95 %
Return on assets in plans8.00 %8.00 %8.00 %
Future salary increases4.44 %4.44 %4.44 %
Other postretirement benefits cost:   
Discount rate - service cost
5.56 %3.01 %2.71 %
Discount rate - interest cost5.23 %2.13 %1.57 %
Return on assets in plans7.75 %7.75 %7.75 %
Health care trend rate7.00 %6.50 %6.00 %

To determine the discount rates used to measure our benefit obligations, we utilize analyses in which the projected annual cash flows from the pension and other postretirement benefit plans were matched with yield curves based on an appropriate universe of high-quality corporate bonds.  We use the results of the yield curve analyses to select the discount rates that match the payment streams of the benefits in these plans.

We use a spot rate approach to estimate the service cost and interest cost components of net periodic benefit cost for our pension and other postretirement benefit plans.
 
Health Care Cost Trend Assumptions
 
For measurement purposes at December 31, 2023, increases in the per capita cost of pre-Medicare covered health care benefits were assumed to be 6.5% for 2024.  We assume the rate will ratably decrease to an ultimate rate of 5.0% for 2030 and remain at that level thereafter.

Asset Management
 
Thirteen investment firms manage our defined benefit pension plan’s assets under investment guidelines approved by our Benefits Investment Committee that is composed of members of our management.  Investments are restricted to domestic and international equity securities, domestic and international fixed income securities, and unleveraged exchange-traded options and financial futures.  Limitations restrict investment concentration and use of certain derivative investments.  The target asset allocation for equity is 75% of the pension plan’s assets.  Fixed income investments must consist predominantly of securities rated investment grade or higher. Equity investments must be in liquid securities listed on national exchanges.  No investment is permitted in our securities (except through commingled pension trust funds).
 
Our pension plan’s weighted-average asset allocations, by asset category, were as follows:

Percentage of Plan
Assets at December 31,
 20232022
Domestic equity securities50 %53 %
Debt securities24 %26 %
International equity securities24 %20 %
Cash and cash equivalents2 %1 %
Total100 %100 %

The other postretirement benefit plan assets consist primarily of trust-owned variable life insurance policies with an asset allocation at December 31, 2023 of 66% in equity securities and 34% in debt securities compared with 64% in equity securities and 36% in debt securities at December 31, 2022.  The target asset allocation for equity is between 50% and 75% of the plan’s assets.
 
The plans’ assumed future returns are based principally on the asset allocations and historical returns for the plans’ asset classes determined from both actual plan returns and, over longer time periods, expected market returns for those asset classes.  For 2024, we assume an 8.00% return on pension plan assets.

Fair Value of Plan Assets
 
The following is a description of the valuation methodologies used for pension plan assets measured at fair value.
 
Common stock:  Shares held by the plan at year end are valued at the official closing price as defined by the exchange or at the most recent trade price of the security at the close of the active market.
 
Common collective trusts:  The readily determinable fair value is based on the published fair value per unit of the trusts.  The common collective trusts hold equity securities, fixed income securities and cash and cash equivalents.
 
Fixed income securities:  Valued based on quotes received from independent pricing services or at an estimated price at which a dealer would pay for the security at year end using observable market-based inputs.

Commingled funds:  The readily determinable fair value is based on the published fair value per unit of the funds.  The commingled funds hold equity securities.
 
Cash and cash equivalents:  Short-term Treasury bills or notes are valued at an estimated price at which a dealer would pay for the security at year end using observable market-based inputs; money market funds are valued at the closing price reported on the active market on which the funds are traded.
 
The following table sets forth the pension plan’s assets by valuation technique level, within the fair value hierarchy. There were no level 3 valued assets at December 31, 2023 or 2022.

 December 31, 2023
 Level 1Level 2Total
 ($ in millions)
Common stock$1,192 $— $1,192 
Common collective trusts:   
International equity securities— 371 371 
Debt securities— 310 310 
Domestic equity securities— 166 166 
Fixed income securities:
Government and agencies securities— 170 170 
Corporate bonds— 93 93 
Mortgage and other asset-backed securities— 32 32 
Commingled funds— 122 122 
Cash and cash equivalents47 — 47 
Total investments$1,239 $1,264 $2,503 
 December 31, 2022
 Level 1Level 2Total
 ($ in millions)
Common stock$1,011 $— $1,011 
Common collective trusts:   
International equity securities— 336 336 
Debt securities— 291 291 
Domestic equity securities— 160 160 
Fixed income securities:
Government and agencies securities— 158 158 
Corporate bonds— 100 100 
Mortgage and other asset-backed securities— 28 28 
Commingled funds— 121 121 
Cash and cash equivalents55 — 55 
Total investments$1,066 $1,194 $2,260 
 
The following is a description of the valuation methodologies used for other postretirement benefit plan assets measured at fair value.
 
Trust-owned life insurance:  Valued at our interest in trust-owned life insurance issued by a major insurance company.  The underlying investments owned by the insurance company consist of a U.S. stock account and a U.S. bond account but may retain cash at times as well. The U.S. stock account and U.S. bond account are valued based on readily determinable fair values.
The other postretirement benefit plan assets consisted of trust-owned life insurance with fair values of $138 million and $122 million at December 31, 2023 and 2022, respectively, and are valued under level 2 of the fair value hierarchy. There were no level 1 or level 3 valued assets.
 
Contributions and Estimated Future Benefit Payments
 
In 2024, we expect to contribute approximately $22 million to our unfunded pension plans for payments to pensioners and approximately $31 million to our other postretirement benefit plans for retiree health and death benefits.  We do not expect to contribute to our funded pension plan in 2024. 

Benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:

Pension
Benefits
Other
Postretirement 
Benefits
 ($ in millions)
2024$151 $31 
2025149 30 
2026148 29 
2027148 28 
2028148 27 
Years 2029 – 2033743 127 
 
Other Postretirement Coverage
 
Under collective bargaining agreements, Norfolk Southern and certain subsidiaries participate in a multi-employer benefit plan, which provides certain postretirement health care and life insurance benefits to eligible craft employees.  Premiums under this plan are expensed as incurred and totaled $11 million, $13 million, and $21 million in 2023, 2022, 2021, respectively.
 
Section 401(k) Plans
 
Norfolk Southern and certain subsidiaries provide Section 401(k) savings plans for employees.  Under the plans, we match a portion of employee contributions, subject to applicable limitations.  Our matching contributions, recorded as an expense, totaled $25 million, $22 million, and $23 million in 2023, 2022, 2021, respectively.