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RETIREMENT AND POSTRETIREMENT BENEFIT PLANS | 12 Months Ended
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Dec. 31, 2019
Retirement Benefits [Abstract] |
RETIREMENT AND POSTRETIREMENT BENEFIT PLANS |
NOTE 15 - RETIREMENT AND POSTRETIREMENT BENEFIT PLANS
Occidental has various benefit plans for its salaried, domestic union and nonunion hourly, and certain foreign national employees. In conjunction with the Acquisition, Occidental acquired certain Anadarko contributory and non-contributory defined benefit pension plans, which include both qualified and supplemental plans, and plans that provide health care and life insurance benefits for certain retired employees. The Anadarko pension and postretirement obligations were remeasured as of the Acquisition date. The remeasurement resulted in an increase to the benefit obligation of $193 million. The disclosures below exclude the plans related to the Africa Assets classified as held for sale as of December 31, 2019. During the third quarter of 2018, Occidental adopted a postretirement benefit plan design change, which replaced the previous self-insured benefit with a Medicare Advantage PPA plan for Medicare-eligible retirees. As a result of this change, the postretirement benefit obligation was remeasured as of August 31, 2018. The remeasurement resulted in a decrease to the benefit obligation of $178 million with a corresponding offset to accumulated other comprehensive income. DEFINED CONTRIBUTION PLANS All domestic employees and certain foreign national employees are eligible to participate in one or more of the defined contribution retirement or savings plans that provide for periodic contributions by Occidental based on plan-specific criteria, such as base pay, level and employee contributions. Certain salaried employees participate in a supplemental retirement plan that restores benefits lost due to governmental limitations on qualified retirement benefits. The accrued liabilities for the supplemental retirement plan were $279 million and $201 million as of December 31, 2019, and 2018, respectively, and Occidental expensed $211 million in 2019, $152 million in 2018 and $130 million in 2017 under the provisions of these defined contribution and supplemental retirement plans. DEFINED BENEFIT PLANS Participation in defined benefit plans is limited. Approximately 4,000 domestic and 600 foreign national employees, mainly union, nonunion hourly and certain employees that joined Occidental from acquired operations with grandfathered benefits, are currently accruing benefits under these plans. Pension costs for Occidental’s defined benefit pension plans, determined by independent actuarial valuations, are generally funded by payments to trust funds, which are administered by independent trustees. POSTRETIREMENT AND OTHER BENEFIT PLANS Occidental provides medical and dental benefits and life insurance coverage for certain active, retired and disabled employees and their eligible dependents. Occidental generally funds the benefits as they are paid during the year. These benefit costs, including the postretirement costs, were approximately $220 million in 2019, $182 million in 2018 and $181 million in 2017. OBLIGATIONS AND FUNDED STATUS The following tables show the amounts recognized in Occidental’s consolidated balance sheets at December 31, 2019 and 2018, related to its pension and postretirement benefit plans:
|  | Pension Benefits |  | Postretirement Benefits
millions |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Amounts recognized in the consolidated balance sheet: |  |  |  |  |  |  |  |
Long-term receivables and other assets, net |  | $ | 85 |  |  | $ | 60 |  |  | $ | — |  |  | $ | — |
Accrued liabilities |  | (96 | ) |  | (25 | ) |  | (72 | ) |  | (45 | )
Deferred credits and other liabilities — pension and postretirement obligations |  | (704 | ) |  | (46 | ) |  | (1,103 | ) |  | (763 | )
|  | $ | (715 | ) |  | $ | (11 | ) |  | $ | (1,175 | ) |  | $ | (808 | )
Accumulated other comprehensive loss included the following after-tax balances: |  |  |  |  |  |  |  |
Net (gain) loss |  | $ | (25 | ) |  | $ | 91 |  |  | $ | 184 |  |  | $ | 151 |
Prior service credit |  | — |  |  | — |  |  | (67 | ) |  | (72 | )
|  | $ | (25 | ) |  | $ | 91 |  |  | $ | 117 |  |  | $ | 79 |
The following tables show the funding status, obligations and plan asset fair values of Occidental related to its pension and postretirement benefit plans for the years ended December 31:
|  | Pension Benefits |  | Postretirement Benefits
millions |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Changes in the benefit obligation: |  |  |  |  |  |  |  |
Benefit obligation — beginning of year |  | $ | 349 |  |  | $ | 391 |  |  | $ | 808 |  |  | $ | 999 |
Service cost — benefits earned during the period |  | 45 |  |  | 5 |  |  | 24 |  |  | 23 |
Interest cost on projected benefit obligation |  | 39 |  |  | 15 |  |  | 36 |  |  | 34 |
Actuarial (gain) loss |  | (33 | ) |  | (19 | ) |  | 45 |  |  | (90 | )
Foreign currency exchange rate gain |  | — |  |  | (3 | ) |  | — |  |  | — |
Curtailment (gain) loss |  | (136 | ) |  | — |  |  | 10 |  |  | — |
Special termination benefits |  | 49 |  |  | — |  |  | — |  |  | — |
Benefits paid |  | (95 | ) |  | (40 | ) |  | (51 | ) |  | (57 | )
Participant contributions |  | — |  |  | — |  |  | 2 |  |  | — |
Plan amendments |  | — |  |  | — |  |  | — |  |  | (101 | )
Additions due to the Acquisition |  | 2,136 |  |  | — |  |  | 301 |  |  | — |
Benefit obligation — end of year |  | $ | 2,354 |  |  | $ | 349 |  |  | $ | 1,175 |  |  | $ | 808 |
Changes in plan assets: |  |  |  |  |  |  |  |
Fair value of plan assets — beginning of year |  | $ | 338 |  |  | $ | 403 |  |  | $ | — |  |  | $ | — |
Actual return on plan assets |  | 122 |  |  | (33 | ) |  | — |  |  | — |
Participant contributions |  | — |  |  | — |  |  | 2 |  |  | — |
Employer contributions |  | 41 |  |  | 8 |  |  | 49 |  |  | — |
Benefits paid |  | (95 | ) |  | (40 | ) |  | (51 | ) |  | — |
Additions due to the Acquisition |  | 1,233 |  |  | — |  |  | — |  |  | — |
Fair value of plan assets — end of year |  | $ | 1,639 |  |  | $ | 338 |  |  | $ | — |  |  | $ | — |
Unfunded status: |  | $ | (715 | ) |  | $ | (11 | ) |  | $ | (1,175 | ) |  | $ | (808 | )
The following table sets forth details of the obligations and assets of Occidental’s defined benefit pension plans for the years December 31:
|  | Accumulated Benefit Obligation in Excess of Plan Assets |  | Plan Assets in Excess of Accumulated Benefit Obligation
millions |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Projected benefit obligation |  | $ | 2,175 |  |  | $ | 173 |  |  | $ | 179 |  |  | $ | 176 |
Accumulated benefit obligation |  | $ | 1,918 |  |  | $ | 169 |  |  | $ | 179 |  |  | $ | 176 |
Fair value of plan assets |  | $ | 1,375 |  |  | $ | 98 |  |  | $ | 264 |  |  | $ | 240 |
COMPONENTS OF NET PERIODIC BENEFIT COST The following table sets forth the components of net periodic benefit costs for the years ended December 31:
|  | Pension Benefits |  | Postretirement Benefits
millions |  | 2019 |  |  | 2018 |  |  | 2017 |  |  | 2019 |  |  | 2018 |  |  | 2017 |
Net periodic benefit costs: |  |  |  |  |  |  |  |  |  |  |  |
Service cost — benefits earned during the period |  | $ | 45 |  |  | $ | 5 |  |  | $ | 6 |  |  | $ | 24 |  |  | $ | 23 |  |  | $ | 21 |
Interest cost on projected benefit obligation |  | 39 |  |  | 15 |  |  | 17 |  |  | 36 |  |  | 34 |  |  | 38 |
Expected return on plan assets |  | (50 | ) |  | (25 | ) |  | (24 | ) |  | — |  |  | — |  |  | — |
Recognized actuarial loss |  | 9 |  |  | 7 |  |  | 10 |  |  | 8 |  |  | 14 |  |  | 14 |
Recognized prior service credit |  | — |  |  | — |  |  | — |  |  | (8 | ) |  | — |  |  | — |
Liability (gain) loss due to curtailment |  | (91 | ) |  | — |  |  | — |  |  | 6 |  |  | — |  |  | — |
Special termination benefits |  | 49 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Other costs and adjustments |  | (2 | ) |  | 1 |  |  | 3 |  |  | — |  |  | (2 | ) |  | 1 |
Net periodic benefit cost |  | $ | (1 | ) |  | $ | 3 |  |  | $ | 12 |  |  | $ | 66 |  |  | $ | 69 |  |  | $ | 74 |
The service cost component of net periodic benefit cost is included in selling, general and administrative, oil and gas operating expense, chemical and midstream costs, and exploration expense on Occidental’s Consolidated Statements of Operations. All other components of net periodic benefit cost are included in other operating and non-operating expense. The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from Accumulated Other Comprehensive Income (AOCI) into net periodic benefit cost over the next fiscal year are $3 million and zero, respectively. The estimated net loss and prior service credit for the defined benefit postretirement plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year are $12 million and $(8) million, respectively. ADDITIONAL INFORMATION The following table sets forth the weighted-average assumptions used to determine Occidental’s benefit obligation and net periodic benefit cost for domestic plans for the years ended December 31:
|  | Pension Benefits |  | Postretirement Benefits
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Benefit Obligation Assumptions: |  |  |  |  |  |  |  |
Discount rate |  | 3.10 | % |  | 4.09 | % |  | 3.26 | % |  | 4.29 | %
Net Periodic Benefit Cost Assumptions: |  |  |  |  |  |  |  |
Discount rate for January 1 - August 31 expense |  | 3.21 | % |  | 3.45 | % |  | 3.41 | % |  | 3.61 | %
Discount rate for September 1 - December 31 expense |  | 3.21 | % |  | 3.45 | % |  | 3.41 | % |  | 4.14 | %
Assumed long-term rate of return on assets |  | 6.50 | % |  | 6.50 | % |  | — |  |  | — |
Rates of increase in compensation levels |  | 5.44 | % |  | — |  |  | — |  |  | — |
For domestic pension plans and postretirement benefit plans, Occidental based the discount rate on AA-AAA Universe yield curve in 2019 and 2018. The assumed long-term rate of return on assets is estimated with regard to current market factors but within the context of historical returns for the asset mix that exists at year end. Assumed rates of compensation increases for active participants in certain plans and vary by age group. In 2019, Occidental adopted the Society of Actuaries 2019 Pri-2012 Private Retirement Plans Mortality Tables with Mortality Improvement Scale, which updated the mortality assumptions that private defined-benefit plans in the United States use in the actuarial valuations that determine a plan sponsor’s pension obligations. The new mortality assumption reflects additional data that the Social Security Administration has released since the previous mortality tables and improvement scales were released. This additional data shows a lower degree of mortality improvement than previously reflected. The changes in the mortality assumption results in a decrease of $15 million and $9 million in the pension and postretirement benefit obligation, respectively, at December 31, 2019. For pension plans outside the United States, Occidental based its discount rate on rates indicative of government or investment grade corporate debt in the applicable country, taking into account hyperinflationary environments when necessary. The discount rates used for the foreign pension plans ranged from 1.0% to 8.8% at December 31, 2019 and from 1.0% to 8.9% at December 31, 2018. The average rate of increase in future compensation levels ranged from 1.0% to 8.0% in 2019, depending on local economic conditions. The postretirement benefit obligation was determined by application of the terms of medical and dental benefits and life insurance coverage, including the effect of established maximums on covered costs, together with relevant actuarial assumptions and health care cost trend rates. Health care cost trend rates for Medicare advantaged prescription drug (MAPD) plans of 4.3% to 21.5% in 2019, between (7.7)% and (6.2)% in 2020, 9.6% in 2021, then grading down to 4.5% in 2028 and beyond. The negative trend rates for the MAPD plans reflect the repeal of the Health Insurer Fee effective in 2021. Health care cost trend rates used for non-MAPD plans are 6.7% to 7.5% in 2019, then grading down to 4.5% in 2028 and beyond. A 1% increase or a 1% decrease in these assumed health care cost trend rates would result in an increase of $131 million or a reduction of $103 million, respectively, in the postretirement benefit obligation and increase of $13 million or a reduction of $9 million in the annual service and interest costs as of December 31, 2019. The actuarial assumptions used could change in the near term as a result of changes in expected future trends and other factors that, depending on the nature of the changes, could cause increases or decreases in the plan assets and liabilities. FAIR VALUE OF PENSION PLAN ASSETS Pension plan assets are monitored by Occidental’s Pension and Retirement Trust and Investment Committee or by the Investment Subcommittee of the Anadarko Petroleum Corporation Administrative & Investment Committee (collectively, the Investment Committees), in their roles as fiduciaries. The Investment Committees select and employ various external professional investment management firms to manage specific investments across the spectrum of asset classes. The Investment Committees employ a total return investment approach that uses a diversified blend of investments across several categories (equity securities, fixed-income securities, real estate, hedge funds, and private equity) to optimize the long-term return of plan assets at a prudent level of risk. Equity investments are diversified across U.S. and non-U.S. stocks, as well as differing styles and market capitalizations. Investment performance is measured and monitored on an ongoing basis through quarterly investment portfolio and manager guideline compliance reviews, annual liability measurements and periodic studies. The fair values of Occidental’s pension plan assets by asset category were as follows:
millions |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
December 31, 2019 |  |  |  |  |  |  |  |
Asset Class: |  |  |  |  |  |  |  |
U.S. government securities |  | $ | 13 |  |  | $ | — |  |  | $ | — |  |  | $ | 13 |
Corporate bonds (a) |  | — |  |  | 60 |  |  | — |  |  | 60 |
Mutual funds: |  |  |  |  |  |  |  |
Bond funds |  | 46 |  |  | — |  |  | — |  |  | 46 |
International funds |  | 68 |  |  | — |  |  | — |  |  | 68 |
Common and preferred stocks (b) |  | 173 |  |  | — |  |  | — |  |  | 173 |
Other |  | — |  |  | 29 |  |  | — |  |  | 29 |
Investments measured at fair value |  | $ | 300 |  |  | $ | 89 |  |  | $ | — |  |  | $ | 389 |
Investments measured at net asset value (c) |  | — |  |  | — |  |  | — |  |  | 1,253 |
Total pension plan assets (d) |  | $ | 300 |  |  | $ | 89 |  |  | $ | — |  |  | $ | 1,642 |
December 31, 2018 |  |  |  |  |  |  |  |
Asset Class: |  |  |  |  |  |  |  |
U.S. government securities |  | $ | 17 |  |  | $ | — |  |  | $ | — |  |  | $ | 17 |
Corporate bonds (a) |  | — |  |  | 66 |  |  | — |  |  | 66 |
Common/collective trusts (e) |  | — |  |  | 9 |  |  | — |  |  | 9 |
Mutual funds: |  |  |  |  |  |  |  |
Bond funds |  | 31 |  |  | — |  |  | — |  |  | 31 |
Blend funds |  | 48 |  |  | — |  |  | — |  |  | 48 |
Common and preferred stocks (b) |  | 141 |  |  | — |  |  | — |  |  | 141 |
Other |  | — |  |  | 31 |  |  | — |  |  | 31 |
Total pension plan assets (d) |  | $ | 237 |  |  | $ | 106 |  |  | $ | — |  |  | $ | 343 |
(a) | This category represents investment grade bonds of U.S. and non-U.S. issuers from diverse industries.
(b) | This category included investment funds that primarily invest in U.S. and non-U.S. common stocks and fixed-income securities.
(c) | This category represents direct investments in common and preferred stocks from diverse U.S. and non-U.S. industries.
(d) | Certain investments measured at fair value using the net asset value per share (or its equivalent) have not been categorized in the fair value hierarchy. Amounts presented in this table are intended to reconcile the fair value hierarchy to the pension plan assets.
(e) | Amounts exclude net payables of approximately $3 million and $5 million as of December 31, 2019 and 2018, respectively.
Occidental expects to contribute $179 million in cash to its defined benefit pension plans during 2020. Estimated future benefit payments, which reflect expected future service, as appropriate, are as follows for the years ended December 31:
millions |  | Pension Benefits |  | Postretirement Benefits |
2020 |  | $ | 810 |  |  | $ | 73 |
2021 |  | $ | 113 |  |  | $ | 72 |
2022 |  | $ | 125 |  |  | $ | 71 |
2023 |  | $ | 128 |  |  | $ | 70 |
2024 |  | $ | 124 |  |  | $ | 68 |
2025 - 2029 |  | $ | 625 |  |  | $ | 321 |

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