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Retirement Plans
 12 Months Ended
Dec. 31, 2023
Retirement Benefits [Abstract]  
Retirement Plans Retirement Plans

Defined Contribution Plans

Devon sponsors defined contribution plans covering its employees. Such plans include its 401(k) plan and enhanced contribution plan. Devon makes matching contributions and additional retirement contributions, with the matching contributions being primarily based upon percentages of annual compensation and years of service. In addition, each plan is subject to regulatory limitations by the U.S. government. Devon contributed $38 million, $37 million and $33 million to these plans in 2023, 2022 and 2021, respectively.

Defined Benefit Plans

Devon has various non-contributory defined benefit pension plans, including qualified plans and nonqualified plans covering eligible employees and former employees meeting certain age and service requirements. Benefits under the defined benefit plans have been closed to new employees and effective, as of December 31, 2020, Devon’s benefits committee approved a freeze of all future benefit accruals under the plans.

Benefits are primarily funded from assets held in the plans’ trusts.

Devon’s investment objective for its plans’ assets is to achieve stability of the funded status while providing long-term growth of invested capital and income to ensure benefit payments can be funded when required. Devon has established certain investment strategies, including target allocation percentages and permitted and prohibited investments, designed to mitigate risks inherent with investing. Devon’s target allocations for its plan assets are 90% fixed income and 10% equity. See the following discussion for Devon’s pension assets by asset class.

Fixed-income – Devon’s fixed-income securities consist of U.S. Treasury obligations, bonds issued by investment-grade companies from diverse industries and asset-backed securities. These fixed-income securities do not consistently trade actively in an established market. The fair values of these Level 2 securities are estimated based upon rates available for securities with similar terms and maturity when active trading is not available and were $418 million and $384 million at December 31, 2023 and 2022, respectively.

Equity – Devon’s equity securities include commingled global equity funds that invest in large, mid and small capitalization stocks across the world’s developed and emerging markets and international large cap equity securities. These equity securities can be sold on demand but are not actively traded. The fair values of these securities are based upon the net asset values provided by the investment managers and were $44 million and $49 million at December 31, 2023 and 2022, respectively.

Other – Devon’s other securities include short-term investment funds that invest both long and short term using a variety of investment strategies. The fair value of these securities is based upon the net asset values provided by investment managers and were $14 million and $25 million at December 31, 2023 and 2022, respectively.

Defined Postretirement Plans

Devon also has defined benefit postretirement plans that provide benefits for substantially all qualifying retirees. Benefit obligations for such plans are estimated based on Devon’s future cost-sharing intentions. Devon’s funding policy for the plans is to fund the benefits as they become payable with available cash and cash equivalents.

Benefit Obligations and Funded Status

The following table summarizes the benefit obligations, assets, funded status and balance sheet impacts associated with Devon’s defined pension and postretirement plans. Devon’s benefit obligations and plan assets are measured each year as of December 31. The accumulated benefit obligation for pension plans approximated the projected benefit obligation at December 31, 2023 and 2022.

 

 

Pension Benefits

 

 

Postretirement Benefits

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Change in benefit obligation:

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligation at beginning of year

 

$

629

 

 

$

880

 

 

$

7

 

 

$

12

 

Interest cost

 

 

34

 

 

 

19

 

 

 

—

 

 

 

—

 

Actuarial loss (gain)

 

 

46

 

 

 

(215

)

 

 

1

 

 

 

(4

)

Participant contributions

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1

 

Benefits paid

 

 

(54

)

 

 

(55

)

 

 

(2

)

 

 

(2

)

Benefit obligation at end of year

 

 

655

 

 

 

629

 

 

 

7

 

 

 

7

 

Change in plan assets:

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of year

 

 

458

 

 

 

671

 

 

 

—

 

 

 

—

 

Actual return on plan assets

 

 

58

 

 

 

(172

)

 

 

—

 

 

 

—

 

Employer contributions

 

 

14

 

 

 

14

 

 

 

1

 

 

 

1

 

Participant contributions

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1

 

Benefits paid

 

 

(54

)

 

 

(55

)

 

 

(2

)

 

 

(2

)

Fair value of plan assets at end of year

 

 

476

 

 

 

458

 

 

 

—

 

 

 

—

 

Funded status at end of year

 

$

(179

)

 

$

(171

)

 

$

(7

)

 

$

(7

)

Amounts recognized in balance sheet:

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

(13

)

 

$

(14

)

 

$

(1

)

 

$

(1

)

Other long-term liabilities

 

 

(166

)

 

 

(157

)

 

 

(6

)

 

 

(6

)

Net amount

 

$

(179

)

 

$

(171

)

 

$

(7

)

 

$

(7

)

Amounts recognized in accumulated other
   comprehensive earnings:

 

 

 

 

 

 

 

 

 

 

 

 

Net actuarial loss (gain)

 

$

198

 

 

$

189

 

 

$

(14

)

 

$

(15

)

Prior service cost

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1

 

Total

 

$

198

 

 

$

189

 

 

$

(13

)

 

$

(14

)

Certain of Devon’s pension plans have a combined projected benefit obligation or accumulated benefit obligation in excess of plan assets at December 31, 2023, and December 31, 2022, as presented in the table below.

 

 

 

December 31,

 

 

 

2023

 

 

2022

 

Projected and accumulated benefit obligation

 

$

655

 

 

$

629

 

Fair value of plan assets

 

$

476

 

 

$

458

 

 

The following table presents the components of net periodic benefit cost and other comprehensive earnings.

 

 

Pension Benefits

 

 

Postretirement Benefits

 

 

 

2023

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

2021

 

Net periodic benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest cost

 

$

34

 

 

$

19

 

 

$

18

 

 

$

—

 

 

$

—

 

 

$

—

 

Expected return on plan assets

 

 

(27

)

 

 

(31

)

 

 

(34

)

 

 

—

 

 

 

—

 

 

 

—

 

Recognition of net actuarial loss (gain) (1)

 

 

6

 

 

 

6

 

 

 

4

 

 

 

(1

)

 

 

(1

)

 

 

(1

)

Total net periodic benefit cost (2)

 

 

13

 

 

 

(6

)

 

 

(12

)

 

 

(1

)

 

 

(1

)

 

 

(1

)

Other comprehensive loss (earnings):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss (gain) arising in current year

 

 

16

 

 

 

(11

)

 

 

28

 

 

 

—

 

 

 

(4

)

 

 

(1

)

Prior service cost arising in current year

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Recognition of net actuarial (loss) gain, including
   settlement expense, in net periodic benefit cost

 

 

(6

)

 

 

(6

)

 

 

(23

)

 

 

1

 

 

 

1

 

 

 

1

 

Total other comprehensive loss (earnings)

 

 

10

 

 

 

(17

)

 

 

5

 

 

 

1

 

 

 

(3

)

 

 

1

 

Total

 

$

23

 

 

$

(23

)

 

$

(7

)

 

$

—

 

 

$

(4

)

 

$

—

 

 

(1)
These net periodic benefit costs were reclassified out of other comprehensive earnings in the current period.
(2)
The service cost component of net periodic benefit cost is included in G&A expense and the remaining components of net periodic benefit costs are included in other, net in the accompanying consolidated statements of comprehensive earnings.

Assumptions

 

 

 

Pension Benefits

 

Postretirement Benefits

 

 

2023

 

2022

 

2021

 

2023

 

2022

 

2021

Assumptions to determine benefit obligations:

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

5.01%

 

5.78%

 

2.71%

 

4.96%

 

5.71%

 

2.34%

Assumptions to determine net periodic benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate - service cost

 

N/A

 

N/A

 

N/A

 

5.81%

 

2.83%

 

2.51%

Discount rate - interest cost

 

5.61%

 

2.18%

 

2.11%

 

5.49%

 

1.57%

 

1.01%

Expected return on plan assets

 

6.21%

 

4.80%

 

5.00%

 

N/A

 

N/A

 

N/A

Discount rate – Future pension and post-retirement obligations are discounted based on the rate at which obligations could be effectively settled, considering the timing of expected future cash flows related to the plans. This rate is based on high-quality bond yields, after allowing for call and default risk.

Expected return on plan assets – This was determined by evaluating input from external consultants and economists, as well as long-term inflation assumptions and consideration of target allocation of investment types.

Mortality rate – Devon utilized the Society of Actuaries produced mortality tables.

Other assumptions – For measurement of the 2023 benefit obligation for the other postretirement medical plans, a 6.6% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2024. The rate was assumed to decrease annually to an ultimate rate of 5% in the year 2031 and remain at that level thereafter.

Expected Cash Flows

Devon expects benefit plan payments to average approximately $52 million a year for the next five years and $244 million total for the five years thereafter. Of these payments to be paid in 2024, $15 million is expected to be funded from Devon’s available cash, cash equivalents and other assets.