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EMPLOYEE BENEFITS | 12 Months Ended
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Dec. 31, 2020
EMPLOYEE BENEFITS [Abstract] |
EMPLOYEE BENEFITS | EMPLOYEE BENEFITS The Company provides various retirement benefits to eligible employees, including contributions to defined contribution plans, pension benefits associated with defined benefit plans, postretirement medical benefits and other benefits. Eligibility requirements and benefit levels vary depending on employee location. Various foreign benefit plans cover employees in accordance with local legal requirements. Defined Contribution Plans A majority of the Company's U.S. employees are covered by a noncontributory profit-sharing plan. The plan aligns Company contributions to Company performance and includes two components, a variable annual contribution based on the Company's rate of return on invested capital and an automatic contribution equal to 3% of the eligible employee's total eligible compensation. In addition, employees covered by the plan are also able to make personal contributions. The total profit-sharing plan expense was $99 million, $113 million, and $164 million for 2020, 2019 and 2018, respectively. The Company sponsors additional defined contribution plans available to certain U.S. and foreign employees for which contributions are made by the Company and participating employees. The expense associated with these defined contribution plans totaled $16 million, $19 million, and $13 million for 2020, 2019 and 2018, respectively. Postretirement Healthcare Benefits Plans The Company has a postretirement healthcare benefits plan that provides coverage for a majority of its U.S. employees hired prior to January 1, 2013, and their dependents should they elect to maintain such coverage upon retirement. Covered employees become eligible for participation when they qualify for retirement while working for the Company. Participation in the plan is voluntary and requires participants to make contributions toward the cost of the plan, as determined by the Company. The net periodic benefits costs were valued with a measurement date of January 1 for each year and consisted of the following components (in millions of dollars):
| For the Years Ended December 31,
| 2020 |  | 2019 |  | 2018
SG&A |  |  |  |  |
Service cost | $ | 5 |  |  | $ | 4 |  |  | $ | 6 |
Other income (expense) |  |  |  |  |
Interest cost | 6 |  |  | 7 |  |  | 7 |
Expected return on assets | (8) |  | (12) |  |  | (13) |
Amortization of prior service credit | (10) |  | (10) |  |  | (10) |
Amortization of unrecognized gains | (5) |  | (4) |  |  | (3) |
Net periodic (benefits) costs | $ | (12) |  |  | $ | (15) |  |  | $ | (13) |
Reconciliations of the beginning and ending balances of the postretirement benefit asset (obligation), which is calculated as of December 31 measurement date, the fair value of plan assets available for benefits and the funded status of the benefit asset (obligation) follow (in millions of dollars):
| 2020 |  | 2019
Benefit obligation at beginning of year | $ | 200 |  |  | $ | 190 |
Service cost | 5 |  |  | 4 |
Interest cost | 6 |  |  | 7 |
Plan participants' contributions | 3 |  |  | 3 |
Actuarial (gains)/losses | (38) |  |  | 5 |
Benefits paid | (9) |  |  | (9) |
Benefit obligation at end of year | $ | 167 |  |  | $ | 200 |
Plan assets available for benefits at beginning of year | $ | 198 |  |  | $ | 176 |
Actual returns on plan assets | 14 |  |  | 28 |
Plan participants' contributions | 3 |  |  | 3 |
Benefits paid | (9) |  |  | (9) |
Plan assets available for benefits at end of year | 206 |  |  | 198 |
Noncurrent postretirement benefit asset (obligation) | $ | 39 |  |  | $ | (2) |
The amounts recognized in AOCE consisted of the following (in millions of dollars):
| As of December 31,
| 2020 |  | 2019
Prior service credit | $ | 51 |  |  | $ | 61 |
Unrecognized gains | 83 |  |  | 44 |
Deferred tax (liability) | (33) |  |  | (26) |
Net accumulated gains | $ | 101 |  |  | $ | 79 |
The Company has elected to amortize the amount of net unrecognized gains over a period equal to the average remaining service period for active plan participants expected to retire and receive benefits of approximately 10.9 years for 2020. The postretirement benefit obligation was determined by applying the terms of the plan and actuarial models. These models include various actuarial assumptions, including discount rates, long-term rates of return on plan assets, healthcare cost trend rate and cost-sharing between the Company and the retirees. The Company evaluates its actuarial assumptions on an annual basis and considers changes in these long-term factors based upon market conditions and historical experience. The actuarial gains recognized during the plan year are primarily related to changes in assumptions related to certain retiree coverage elections and health reimbursement arrangement (HRA) subsidy. The following assumptions were used to determine net periodic benefit costs at January 1 of each year:
| For the Years Ended December 31,
| 2020 |  | 2019 |  | 2018
Discount rate | 3.01 | % |  | 4.08 | % |  | 3.44 | %
Long-term rate of return on plan assets, net of tax | 4.00 | % |  | 7.13 | % |  | 7.13 | %
Initial healthcare cost trend rate |  |  |  |  |
Pre age 65 | 6.06 | % |  | 6.31 | % |  | 6.56 | %
Post age 65 | NA |  | NA |  | NA
Catastrophic drug benefit | NA |  | NA |  | 12.50 | %
Ultimate healthcare cost trend rate | 4.50 | % |  | 4.50 | % |  | 4.50 | %
Year ultimate healthcare cost trend rate reached | 2026 |  | 2026 |  | 2026
HRA credit inflation index for grandfathered retirees | 2.50 | % |  | 2.50 | % |  | 2.50 | %
The following assumptions were used to determine benefit obligations at December 31:
| 2020 |  | 2019 |  | 2018
Discount rate | 2.17 | % |  | 3.01 | % |  | 4.08 | %
Expected long-term rate of return on plan assets, net of tax | 4.00 | % |  | 4.00 | % |  | 7.13 | %
Initial healthcare cost trend rate |  |  |  |  |
Pre age 65 | 5.81 | % |  | 6.06 | % |  | 6.31 | %
Post age 65 | NA |  | NA |  | NA
Catastrophic drug benefit | NA |  | NA |  | 11.50 | %
Ultimate healthcare cost trend rate | 4.50 | % |  | 4.50 | % |  | 4.50 | %
Year ultimate healthcare cost trend rate reached | 2026 |  | 2026 |  | 2026
HRA credit inflation index for grandfathered retirees | — | % |  | 2.50 | % |  | 2.50 | %
The discount rate assumptions reflect the rates available on high-quality fixed income debt instruments as of December 31, the measurement date of each year. These rates have been selected due to their similarity to the duration of the projected cash flows of the postretirement healthcare benefit plan. As of December 31, 2020, the Company decreased the discount rate from 3.01% to 2.17% to reflect the decrease in the market interest rates at December 31, 2020. The Company reviews external data and its own historical trends for healthcare costs to determine the healthcare cost trend rates. As of December 31, 2020, the initial healthcare cost trend rate was 5.81% for pre age 65. The healthcare costs trend rates decline each year until reaching the ultimate trend rate of 4.50%. The plan amendment adopted in 2017 moves all post age 65 Medicare eligible retirees to an exchange and provides a subsidy to those retirees to purchase insurance. The amount of the subsidy is based on years of service for grandfathered employees. The Company has established a Group Benefit Trust (Trust) to fund the plan obligations and process benefit payments. In 2019, the Company liquidated previously held index funds and has temporarily invested all assets of the Trust in money market funds. In 2020, the Company transitioned the Trust assets from money market funds into a liability driven investment solution which enhances the Trust's after-tax returns and de-risks the Company's exposure by more closely match-funding the underlying liability. This investment strategy reflects the long-term nature of the plan obligation and seeks to reach a balanced allocation between Fixed Income securities and Equities of 65% and 35%, respectively. The plan's assets are stated at fair value, which represents the net asset value of shares held by the plan in the registered investment companies at the quoted market prices (Level 1 input) or at significant other observable inputs (Level 2 input). The plan assets available for benefits are net of Trust liabilities, primarily related to deferred income taxes and taxes payable at December 31 (in millions of dollars):
| 2020 |  | 2019
Asset Class: |  |  |
Level 1 Inputs: |  |  |
Mutual Funds: |  |  |
Funds - Municipal/Provincial Bonds | $ | 13 |  |  | $ | — |
Funds - Corporate Bonds Fund | 5 |  |  | — |
Federal Money Market Fund | 11 |  |  | 204 |
Level 2 Inputs: |  |  |
Fixed Income: |  |  |
Corporate Bonds | 102 |  |  | — |
Government/Municipal Bonds | 8 |  |  | — |
Equity Funds | 66 |  |  | — |
Plan Assets | 205 |  |  | 204 |
Less: trust assets/(liabilities) | 1 |  |  | (6) |
Plan assets available for benefits | $ | 206 |  |  | $ | 198 |
Consistent with the new investment strategy, the after-tax expected long-term rates of return on plan assets of 4.00% at December 31, 2020 is based on the historical average of long-term rates of return and an estimated tax rate. The required use of an expected long-term rate of return on plan assets may result in recognition of income that is greater or lower than the actual return on plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns and, therefore, result in a pattern of income recognition that more closely matches the pattern of the services provided by the employees. The Company's investment policies include periodic reviews by management and trustees at least annually concerning: (1) the allocation of assets among various asset classes (e.g., domestic stocks, international stocks, short-term bonds, long-term bonds, etc.); (2) the investment performance of the assets, including performance comparisons with appropriate benchmarks; (3) investment guidelines and other matters of investment policy and (4) the hiring, dismissal or retention of investment managers. The Company forecasts the following benefit payments related to postretirement (which include a projection for expected future employee service) for the next ten years (in millions of dollars):
Year |  | Estimated Gross Benefit Payments
2021 |  | $ | 9 |
2022 |  | 9 |
2023 |  | 10 |
2024 |  | 10 |
2025 |  | 10 |
2026-2030 |  | 47 |
Total |  | $ | 95 |

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