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Employee Benefit Plans | 12 Months Ended
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Dec. 31, 2022
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 between 2003 and 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. The CSX Pension Plan, the largest plan based on benefit obligation, was closed to new participants beginning in 2020. 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.
| As of
Pension Plan Participants: | January 1, 2022
Active Employees | 2,767 |
Retirees and Beneficiaries | 11,460 |
Other(a) | 3,586 |
Total | 17,813 |
(a) The Other category consists mostly of terminated but vested former employees. 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 nonqualified pension benefits on a pay-as-you-go basis. No qualified pension plan contributions were made during 2022, 2021 and 2020. No contributions to the Company's qualified pension plans are expected in 2023. Future expected benefit payments are as follows:
Expected Cash Flows (Dollars in Millions): | Pension Benefits
2023 | $ | 193 |
2024 | 188 |
2025 | 185 |
2026 | 183 |
2027 | 181 |
2028-2032 | 879 |
Total | $ | 1,809 |
Plan Assets The Company outsources investment management related to pension plan assets. The CSX Investment Committee (the “Investment Committee”), whose members are selected by the Executive Vice President and Chief Financial Officer, is responsible for setting policy and oversight of investment management. The Investment Committee and investment manager utilize 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. NOTE 9. Employee Benefit Plans, continued The current asset allocation targets 60% growth-oriented investments and 40% immunizing investments. The growth-oriented portfolio consists of return-seeking investments that are diversified across geography, market capitalization, and asset class. The immunizing portfolio is comprised of a customized mix of fixed income and cash investments designed to reduce liability risk. Allocations are evaluated for levels within 5% 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 2022 |  | December 2021
|  |  | Percent of |  |  |  | Percent of
(Dollars in Millions) | Amount |  | Total Assets |  | Amount |  | Total Assets
Equity | $ | 1,249 |  |  | 54 | % |  | $ | 1,559 |  |  | 52 | %
Fixed Income | 144 |  |  | 6 |  |  | 204 |  |  | 7 |
Cash and Cash Equivalents | 41 |  |  | 2 |  |  | 49 |  |  | 1 |
Growth-Oriented | $ | 1,434 |  |  | 62 | % |  | $ | 1,812 |  |  | 60 | %
Fixed Income | 777 |  |  | 33 |  |  | 1,145 |  |  | 38 |
Cash and Cash Equivalents | 116 |  |  | 5 |  |  | 59 |  |  | 2 |
Immunizing | $ | 893 |  |  | 38 | % |  | $ | 1,204 |  |  | 40 | %
Total | $ | 2,327 |  |  | 100 | % |  | $ | 3,016 |  |  | 100 | %
Under the supervision of the Investment Committee, the investment manager selects investments or fund managers 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 2022 and 2021 plan years are as follows:
| Pension Benefits
| Plan Year |  | Plan Year
(Dollars in Millions) | 2022 |  | 2021
Actuarial Present Value of Benefit Obligation |  |  |
Accumulated Benefit Obligation | $ | 2,285 |  |  | $ | 2,909 |
Projected Benefit Obligation | 2,368 |  |  | 3,022 |
Change in Projected Benefit Obligation: |  |  |
Projected Benefit Obligation at Beginning of Plan Year | $ | 3,022 |  |  | $ | 3,257 |
Service Cost (a) | 36 |  |  | 45 |
Interest Cost | 64 |  |  | 55 |
Actuarial Gain | (570) |  |  | (142) |
Benefits Paid | (184) |  |  | (193) |
Benefit Obligation at End of Plan Year | $ | 2,368 |  |  | $ | 3,022 |
Change in Plan Assets: |  |  |
Fair Value of Plan Assets at Beginning of Plan Year | $ | 3,016 |  |  | $ | 3,000 |
Actual (Loss) Return on Plan Assets | (523) |  |  | 187 |
Non-qualified Employer Contributions | 18 |  |  | 22 |
Benefits Paid | (184) |  |  | (193) |
Fair Value of Plan Assets at End of Plan Year | $ | 2,327 |  |  | $ | 3,016 |
Funded Status at End of Plan Year | $ | (41) |  |  | $ | (6) |
(a)Service cost for 2022 and 2021 includes capitalized service costs of $4 million each year. In 2022, the $570 million net actuarial gain for pension benefits was driven by a 224 basis point increase in the weighted average discount rate. The $142 million net actuarial gain for pension benefits in 2021 was driven by a 35 basis points increase in the weighted average discount rate. 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 plan by recording a liability (underfunded plan) or asset (overfunded plan) for the difference between the projected benefit obligation and the fair value of plan assets at the plan measurement date. Amounts related to pension 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
| December |  | December
(Dollars in Millions) | 2022 |  | 2021
Amounts Recorded in Consolidated |  |  |
Balance Sheets: |  |  |
Long-term Assets | $ | 164 |  |  | $ | 255 |
Current Liabilities | (17) |  |  | (17) |
Long-term Liabilities | (188) |  |  | (244) |
Net Amount Recognized in Consolidated Balance Sheets | $ | (41) |  |  | $ | (6) |
Long-term assets as of December 2022 and 2021 in the preceding table relate to qualified pension plans where assets exceed projected benefit obligations. Current and long-term liabilities relate to plans where projected benefits obligations exceed assets. The following table shows the value of plan assets for only those plans with a net liability status.
| Aggregate |
(Dollars in Millions) | Fair Value | Aggregate
Benefit Obligations in Excess of Plan Assets | of Plan Assets | Benefit Obligation
Projected Benefit Obligation | $ | — |  | $ | (205) |
Accumulated Benefit Obligation | — |  | (195) |
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. The following table describes the components of expense/(income) related to net benefit expense recorded on the income statement.
| Pension Benefits Years Ended
(Dollars in Millions) | 2022 |  | 2021 |  | 2020
Service Cost Included in Labor and Fringe | $ | 32 |  |  | $ | 41 |  |  | $ | 43 |
Interest Cost | 64 |  |  | 55 |  |  | 82 |
Expected Return on Plan Assets | (188) |  |  | (186) |  |  | (176) |
Amortization of Net Loss | 50 |  |  | 73 |  |  | 54 |
Total Income Included in Other Income - Net | $ | (74) |  |  | $ | (58) |  |  | $ | (40) |
Net Periodic Benefit (Credit)/Cost | $ | (42) |  |  | $ | (17) |  |  | $ | 3 |
Settlement Loss (Gain) | 1 |  |  | — |  |  | (1) |
Total Periodic Benefit (Credit)/Cost | $ | (41) |  |  | $ | (17) |  |  | $ | 2 |
Pension 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 benefits.
(Dollars in Millions) | Pension Benefits
Components of Other Comprehensive | Years Ended
Loss (Income) | 2022 |  | 2021
Recognized in the Balance Sheet |  |  |
Losses (Gains) | $ | 141 |  |  | $ | (143) |
Expense Recognized in the Income Statement |  |  |
Amortization of Net Losses | $ | 50 |  |  | $ | 73 |
Settlement Loss | 1 |  |  | — |
As of December 2022, the balance to be amortized related to the Company's pension obligations is a pre-tax loss of $727 million. This amount is included in accumulated other comprehensive loss, a component of shareholders’ equity. NOTE 9. Employee Benefit Plans, continued 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, with the assistance of the outsourced investment manager, balances market expectations obtained from various investment managers 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 benefits expense by using individual spot rates matched with separate cash flows for each future year. The weighted averages of assumptions used by the Company to value its pension obligations were as follows:
| Pension Benefits
| 2022 |  | 2021
Expected Long-term Return on Plan Assets: |  |  |
Benefit Cost for Current Plan Year | 6.75 | % |  | 6.75 | %
Benefit Cost for Subsequent Plan Year | 6.75 | % |  | 6.75 | %
Discount Rates: |  |  |
Benefit Cost for Plan Year |  |  |
Service Cost for Plan Year | 2.98 | % |  | 2.69 | %
Interest Cost for Plan Year | 2.18 | % |  | 1.70 | %
Benefit Obligation at End of Plan Year | 5.02 | % |  | 2.78 | %
Salary Scale Inflation | 4.80 | % |  | 4.60 | %
Cash Balance Plan Interest Credit Rate | 3.75 | % |  | 3.75 | %
NOTE 9. Employee Benefit Plans, continued Post-retirement Medical Plan 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. The accumulated post-retirement benefit obligation related to this plan was $61 million and $81 million, respectively, as of December 31, 2022 and 2021. Through 2032, total future expected benefit payments related to this plan were $55 million. Expenses in 2022, 2021 and 2020 related to this plan were not material. 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 $13 million, $21 million and $20 million in 2022, 2021 and 2020, 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 $28 million, $29 million and $39 million for 2022, 2021 and 2020, respectively, and is included in labor and fringe expense on the consolidated income statement. Under the terms of collective bargaining agreements that cover union-represented employees, Quality Carriers contributes to three multi-employer pension plans. These plans provide defined benefits to retired participants. All three of these pension plans are in Pension Protection Act zone “red”, meaning they are at least 65% underfunded. Formal rehabilitation plans have been adopted. As of December 31, 2022, based on information provided to the Company from the administrators of these plans, Quality Carriers’ portion of the contingent liability in the case of a full withdrawal or termination from these plans is approximately $336 million, of which $328 million relates to the Central States Southeast and Southwest Areas Pension Plan. The Company has withdrawn from one of the plans, resulting in an immaterial withdrawal liability, but does not currently intend to withdraw from the remaining multi-employer pension plans. Required monthly contributions to these plans are not material.

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