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Employee Benefit Plans | 12 Months Ended
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Dec. 31, 2019
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] |
Employee Benefit Plans | Employee Benefit Plans The Company sponsors defined benefit pension plans principally for salaried, management personnel. For employees hired prior to 2003, the plans provide eligible employees with retirement benefits based predominantly on years of service and compensation rates near retirement. For employees hired in 2003 to 2019, benefits are determined based on a cash balance formula, which provides benefits by utilizing interest and pay credits based upon age, service and compensation. Beginning in 2020, the CSX Pension Plan is closed to new participants. In addition to these plans, the Company sponsors a post-retirement medical plan and a life insurance plan that provide certain benefits to full-time, salaried, management employees hired prior to 2003, upon their retirement if certain eligibility requirements are met. Changes to the post-retirement medical and life insurance plans were communicated to participants in October 2018. Beginning January 2019, both the life insurance benefit for eligible active employees and health savings account contributions made by the Company to eligible retirees younger than 65 were eliminated. Beginning in 2020, the employer-funded health reimbursement arrangements for eligible retirees 65 years or older have been eliminated. As a result of these plan amendments, the company recognized a decrease of $102 million in the post-retirement benefit liability and a corresponding gain in other comprehensive income in 2018. These changes did not result in a curtailment loss as there was no material impact to service costs for active plan participants. The Company engages independent actuaries to compute the amounts of liabilities and expenses relating to these plans subject to the assumptions that the Company determines are appropriate based on historical trends, current market rates and future projections. These amounts are reviewed by management. In order to perform this valuation, the actuaries are provided with the details of the population covered at the beginning of the year, summarized in the table below, and projects that population forward to the end of the year.
| Summary of Participants as of
| January 1, 2019
| Pension Plans |  | Post-retirement Medical Plan
Active Employees | 3,521 |  |  | 616 |
Retirees and Beneficiaries | 12,016 |  |  | 8,393 |
Other(a) | 4,012 |  |  | 40 |
Total | 19,549 |  |  | 9,049 |
(a) For pension plans, the other category consists mostly of terminated but vested former employees. For post-retirement plans, the other category consists of employees on long-term disability that have not yet retired. NOTE 9. Employee Benefit Plans, continued The benefit obligation for these plans represents the liability of the Company for current and retired employees and is affected primarily by the following:
• | service cost (benefits attributed to employee service during the period);
• | interest cost (interest on the liability due to the passage of time);
• | actuarial gains/losses (experience during the year different from that assumed and changes in plan assumptions); and
• | benefits paid to participants.
Cash Flows Plan assets are amounts that have been segregated and restricted to provide qualified pension plan benefits and include amounts contributed by the Company and amounts earned from invested contributions, net of benefits paid. Qualified pension plan obligations are funded in accordance with regulatory requirements and with an objective of meeting or exceeding minimum funding requirements necessary to avoid restrictions on flexibility of plan operation and benefit payments. The Company funds the cost of the post-retirement medical and life insurance benefits as well as nonqualified pension benefits on a pay-as-you go basis. No qualified pension plan contributions were made during 2019, 2018 and 2017. No contributions to the Company's qualified pension plans are expected in 2020. Future expected benefit payments are as follows:
| Expected Cash Flows
(Dollars in Millions) | Pension Benefits |  | Post-retirement Benefits
2020 | $ | 193 |  |  | $ | 20 |
2021 | 188 |  |  | 12 |
2022 | 186 |  |  | 10 |
2023 | 184 |  |  | 9 |
2024 | 182 |  |  | 9 |
2025-2029 | 897 |  |  | 34 |
Total | $ | 1,830 |  |  | $ | 94 |
NOTE 9. Employee Benefit Plans, continued Plan Assets The CSX Investment Committee (the “Investment Committee”), whose members are selected by the Chief Financial Officer, is responsible for oversight and investment of plan assets. The Investment Committee utilizes an investment asset allocation strategy that is monitored on an ongoing basis and updated periodically in consideration of plan or employee changes, or changing market conditions. Periodic studies provide an extensive modeling of asset investment return in conjunction with projected plan liabilities and seek to evaluate how to maximize return within the constraints of acceptable risk. The current asset allocation targets 60% equity investments and 40% fixed income investments and cash. Within equity, a further target is currently established for 37% of total plan assets in domestic equity and 23% in international equity. Allocations are evaluated for levels within 3% of targeted allocations and are adjusted quarterly as necessary. The distribution of pension plan assets as of the measurement date is shown in the table below, and these assets are reported net of pension liabilities on the balance sheet.
| December 2019 |  | December 2018
|  |  | Percent of |  |  |  | Percent of
(Dollars in Millions) | Amount |  | Total Assets |  | Amount |  | Total Assets
Equity | $ | 1,770 |  |  | 63 | % |  | $ | 1,698 |  |  | 70 | %
Fixed Income | 818 |  |  | 29 |  |  | 704 |  |  | 29 |
Cash and Cash Equivalents | 237 |  |  | 8 |  |  | 29 |  |  | 1 |
Total | $ | 2,825 |  |  | 100 | % |  | $ | 2,431 |  |  | 100 | %
Under the supervision of the Investment Committee, individual investments or fund managers are selected in accordance with standards of prudence applicable to asset diversification and investment suitability. The Company also selects fund managers with differing investment styles and benchmarks their investment returns against appropriate indices. Fund investment performance is continuously monitored. Acceptable performance is determined in the context of the long-term return objectives of the fund and appropriate asset class benchmarks. Within the Company's equity funds, domestic stock is diversified among large and small capitalization stocks. International stock is diversified in a similar manner as well as in developed versus emerging markets stocks. Guidelines established with individual managers limit investment by industry sectors, individual stock issuer concentration and the use of derivatives and CSX securities. Fixed income securities guidelines established with individual managers specify the types of allowable investments, such as government, corporate and asset-backed bonds, target certain allocation ranges for domestic and foreign investments and limit the use of certain derivatives. Additionally, guidelines stipulate minimum credit quality constraints and any prohibited securities. For detailed information regarding the fair value of pension assets, see Note 13, Fair Value Measurements. NOTE 9. Employee Benefit Plans, continued Benefit Obligation, Plan Assets and Funded Status Changes in benefit obligation and the fair value of plan assets for the 2019 and 2018 calendar plan years are as follows:
| Pension Benefits |  | Post-retirement Benefits
| Plan Year |  | Plan Year |  | Plan Year |  | Plan Year
(Dollars in Millions) | 2019 |  | 2018 |  | 2019 |  | 2018
Actuarial Present Value of Benefit Obligation |  |  |  |  |  |  |
Accumulated Benefit Obligation | $ | 2,963 |  |  | $ | 2,623 |  |  | N/A |  |  | N/A |
Projected Benefit Obligation | 3,122 |  |  | 2,758 |  |  | $ | 117 |  |  | $ | 118 |
Change in Projected Benefit Obligation: |  |  |  |  |  |  |  |  |  |  |
Projected Benefit Obligation at Beginning of Plan Year | $ | 2,758 |  |  | $ | 3,002 |  |  | $ | 118 |  |  | $ | 250 |
Service Cost (a) | 34 |  |  | 36 |  |  | 1 |  |  | 2 |
Interest Cost | 103 |  |  | 92 |  |  | 2 |  |  | 7 |
Plan Participants' Contributions | — |  |  | — |  |  | 7 |  |  | 5 |
Post-retirement Plan Amendment | — |  |  | — |  |  | — |  |  | (102 | )
Actuarial Loss (Gain) | 418 |  |  | (173 | ) |  | 22 |  |  | (10 | )
Benefits Paid | (191 | ) |  | (199 | ) |  | (33 | ) |  | (34 | )
Benefit Obligation at End of Plan Year | $ | 3,122 |  |  | $ | 2,758 |  |  | $ | 117 |  |  | $ | 118 |
Change in Plan Assets: |  |  |  |  |  |  |  |  |  |  |
Fair Value of Plan Assets at Beginning of Plan Year | $ | 2,431 |  |  | $ | 2,833 |  |  | $ | — |  |  | $ | — |
Actual Return on Plan Assets Gain (Loss) | 568 |  |  | (220 | ) |  | — |  |  | — |
Non-qualified Employer Contributions | 17 |  |  | 17 |  |  | 26 |  |  | 30 |
Plan Participants' Contributions | — |  |  | — |  |  | 7 |  |  | 4 |
Benefits Paid | (191 | ) |  | (199 | ) |  | (33 | ) |  | (34 | )
Fair Value of Plan Assets at End of Plan Year | 2,825 |  |  | 2,431 |  |  | — |  |  | — |
Funded Status at End of Plan Year | $ | (297 | ) |  | $ | (327 | ) |  | $ | (117 | ) |  | $ | (118 | )
(a) | Service cost for each 2019 and 2018 includes capitalized service costs of $3 million.
NOTE 9. Employee Benefit Plans, continued For qualified plan funding purposes, assets and discounted liabilities are measured in accordance with the Employee Retirement Income Security Act ("ERISA"), as well as other related provisions of the Internal Revenue Code and related regulations. Under these funding provisions and the alternative measurements available thereunder, the Company estimates its unfunded obligation for qualified plans on an annual basis. In accordance with Compensation-Retirement Benefits Topic in the ASC, an employer must recognize the funded status of a pension or other post-retirement benefit plan by recording a liability (underfunded plan) or asset (overfunded plan) for the difference between the projected benefit obligation (or the accumulated post-retirement benefit obligation for a post-retirement benefit plan) and the fair value of plan assets at the plan measurement date. Amounts related to pension and post-retirement benefits recorded in other long-term assets, labor and fringe benefits payable and other long-term liabilities on the balance sheet are as follows:
| Pension Benefits |  | Post-retirement Benefits
| December |  | December |  | December |  | December
(Dollars in Millions) | 2019 |  | 2018 |  | 2019 |  | 2018
Amounts Recorded in Consolidated |  |  |  |  |  |  |
Balance Sheets: |  |  |  |  |  |  |
Long-term Assets (a) | $ | 25 |  |  | $ | 13 |  |  | $ | — |  |  | $ | — |
Current Liabilities | (17 | ) |  | (16 | ) |  | (20 | ) |  | (34 | )
Long-term Liabilities | (305 | ) |  | (324 | ) |  | (97 | ) |  | (84 | )
Net Amount Recognized in |  |  |  |  |  |  |  |  |  |  |
Consolidated Balance Sheets | $ | (297 | ) |  | $ | (327 | ) |  | $ | (117 | ) |  | $ | (118 | )
(a) | Long-term assets as of December 2019 and 2018 relate to qualified pension plans where assets exceed projected benefit obligations.
The funded status, or amount by which the benefit obligation exceeds the fair value of plan assets, represents a liability. At December 2019, the status of CSX plans with a net liability only is disclosed below. The total fair value of all plan assets as of December 2019 was $2.8 billion, which includes the qualified pension plans with net assets.
| Aggregate |
(Dollars in Millions) | Fair Value | Aggregate
Benefit Obligations in Excess of Plan Assets | of Plan Assets | Benefit Obligation
Projected Benefit Obligation | $ | 2,715 |  | $ | (3,037 | )
Accumulated Benefit Obligation | 2,715 |  | (2,878 | )
NOTE 9. Employee Benefit Plans, continued Net Benefit Expense Only the service cost component of net periodic benefit costs is included in labor and fringe expense on the consolidated income statement. All other components of net periodic benefit cost are included in other income - net or, if related to prior year restructuring activities, in restructuring charge - non-operating. The following table describes the components of expense/(income) related to net benefit expense recorded on the income statement.
| Pension Benefits Fiscal Years |  | Post-retirement Benefits Fiscal Years
(Dollars in Millions) | 2019 |  | 2018 |  | 2017 |  | 2019 |  | 2018 |  | 2017
Service Cost Included in Labor and Fringe | $ | 31 |  |  | $ | 32 |  |  | $ | 36 |  |  | $ | 1 |  |  | $ | 2 |  |  | $ | 2 |
Interest Cost | 103 |  |  | 92 |  |  | 92 |  |  | 2 |  |  | 7 |  |  | 7 |
Expected Return on Plan Assets | (171 | ) |  | (176 | ) |  | (171 | ) |  | — |  |  | — |  |  | — |
Amortization of Net Loss | 30 |  |  | 41 |  |  | 41 |  |  | — |  |  | — |  |  | — |
Amortization of Prior Service Cost | — |  |  | — |  |  | — |  |  | (7 | ) |  | (2 | ) |  | — |
Total Income Included in Other Income - Net | (38 | ) |  | (43 | ) |  | (38 | ) |  | (5 | ) |  | 5 |  |  | 7 |
Net Periodic Benefit (Credit) Expense | $ | (7 | ) |  | $ | (11 | ) |  | $ | (2 | ) |  | $ | (4 | ) |  | $ | 7 |  |  | $ | 9 |
Restructuring Charge - Non Operating(a) | — |  |  | — |  |  | 60 |  |  | — |  |  | — |  |  | 13 |
Settlement (Gain) Loss | — |  |  | (1 | ) |  | 11 |  |  | — |  |  | — |  |  | — |
Total (Credit) Expense | $ | (7 | ) |  | $ | (12 | ) |  | $ | 69 |  |  | $ | (4 | ) |  | $ | 7 |  |  | $ | 22 |
(a) Charges related to special termination benefits and curtailment costs were the result of the management workforce reductions in first quarter 2017. See Restructuring Charge in Note 1, Nature of Operations and Significant Accounting Policies. As a result of the management workforce reduction programs initiated in 2017, $85 million in charges were incurred related to special termination benefits, curtailment and settlement changes. In 2017, the Company recorded special termination pension benefits of $56 million and remeasured the pension and other post-retirement benefits assets and obligations and recorded a curtailment loss of $4 million and $13 million, respectively, in restructuring charge - non-operating on the income statement. Pension settlement (gains) losses were recognized as a result of lump-sum payments to retirees exceeding the sum of the plan’s service and interest cost. The Company recorded an $11 million net settlement loss in 2017, of which a $12 million loss resulted from the retirements of former executives and is reported in restructuring charge - non-operating on the income statement. The other settlement gains in 2018 and 2017 were from one of the Company’s qualified pension plans with insignificant balances and were recorded in other income - net on the income statement. NOTE 9. Employee Benefit Plans, continued Pension and Other Post-retirement Benefits Adjustments The following table shows the pre-tax change in other comprehensive loss (income) attributable to certain components of net benefit expense and the change in benefit obligation for CSX for pension and other post-employment benefits.
(Dollars in Millions) | Pension Benefits |  | Post-retirement Benefits
Components of Other Comprehensive | December |  | December |  | December |  | December
Loss (Income) | 2019 |  | 2018 |  | 2019 |  | 2018
Recognized in the Balance Sheet |  |  |  |  |  |  |
Losses (Gains) | $ | 21 |  |  | $ | 223 |  |  | $ | 22 |  |  | $ | (112 | )
Expense (Income) Recognized in the Income Statement |  |  |  |  |  |  |  |  |  |  |
Amortization of Net Losses (a) | $ | 30 |  |  | $ | 41 |  |  | $ | — |  |  | $ | — |
Settlement (Gain) Loss | — |  |  | (1 | ) |  | — |  |  | — |
Amortization of Prior Service Costs | — |  |  | — |  |  | (7 | ) |  | (2 | )
(a) | Amortization of net losses estimated to be expensed for 2020 is approximately $57 million for pension benefits.
As of December 2019, the balances to be amortized related to the Company's pension obligations is a pre-tax loss of $879 million and related to post-retirement obligations is a pre-tax gain of $74 million. These amounts are included in accumulated other comprehensive loss, a component of shareholders’ equity. Assumptions The expected long-term average rate of return on plan assets reflects the average rate of earnings expected on the funds invested, or to be invested, to provide for benefits included in the projected benefit obligation. In estimating that rate, the Company gives appropriate consideration to the returns being earned by the plan assets in the funds and the rates of return expected to be available for reinvestment as well as the current and projected asset mix of the funds. Management balances market expectations obtained from various investment managers and economists with both market and actual plan historical returns to develop a reasonable estimate of the expected long-term rate of return on assets. This assumption is reviewed annually and adjusted as deemed appropriate. The Company measures the service cost and interest cost components of the net pension and post-retirement benefits expense by using individual spot rates matched with separate cash flows for each future year. NOTE 9. Employee Benefit Plans, continued The weighted averages of assumptions used by the Company to value its pension and post-retirement obligations were as follows:
| Pension Benefits |  | Post-retirement Benefits |
| 2019 |  | 2018 |  | 2019 |  | 2018 |
Expected Long-term Return on Plan Assets: |  |  |  |  |  |  |  |
Benefit Cost for Current Plan Year | 6.75 | % |  | 6.75 | % |  | N/A |  |  | N/A |  |
Benefit Cost for Subsequent Plan Year | 6.75 | % |  | 6.75 | % |  | N/A |  |  | N/A |  |
Discount Rates: |  |  |  |  |  |  |  |
Benefit Cost for Plan Year |  |  |  |  |  |  |  |
Service Cost for Plan Year | 4.40 | % |  | 3.74 | % |  | 4.14 | % |  | 4.14 | % | (a)
Interest Cost for Plan Year | 3.87 | % |  | 3.15 | % |  | 3.51 | % |  | 3.45 | % | (a)
Benefit Obligation at End of Plan Year | 3.13 | % |  | 4.24 | % |  | 2.87 | % |  | 3.98 | % |
Salary Scale Inflation | 4.60 | % |  | 4.60 | % |  | N/A |  |  | N/A |  |
(a) | The post-retirement benefits service cost and interest cost for 2018 were based on a weighted average discount rate of 3.68% and 2.79%, respectively, prior to the post-retirement plan amendments approved in 2018 and were increased to 4.14% and 3.45%, respectively, after the Company remeasured the other post-retirement benefits obligation in the fourth quarter of 2018.
The impact of the health care cost trend rate is immaterial to the post-retirement benefit cost and obligation due to the plan's health reimbursement arrangement that covers Medicare-eligible retirees. Other Plans Under collective bargaining agreements, the Company participates in a multi-employer benefit plan, which provides certain post-retirement health care and life insurance benefits to eligible contract employees. Premiums under this plan are expensed as incurred and amounted to $26 million, $30 million and $40 million in 2019, 2018 and 2017, respectively. The Company maintains savings plans for virtually all full-time salaried employees and certain employees covered by collective bargaining agreements. Expense associated with these plans was $41 million, $41 million and $39 million for 2019, 2018 and 2017, respectively, and is included in labor and fringe expense on the consolidated income statement.

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