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EMPLOYEE RETIREMENT PLANS | 12 Months Ended
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Dec. 31, 2024
Retirement Benefits [Abstract] |
EMPLOYEE RETIREMENT PLANS | EMPLOYEE RETIREMENT PLANS Defined Contribution Plans The Company has defined contribution plans covering substantially all Employees. Contributions to these plans are primarily based on Employee elective deferrals as well as their eligible compensation and Company performance. The Company sponsors Employee savings plans under section 401(k) of the Internal Revenue Code of 1986, as amended. The Southwest Airlines Pilots Retirement Saving Plan has non-elective Company contributions. Before May 31, 2024, the Southwest Airlines Co. 401(k) Plan (the "401(k) Plan") included Company matching contributions and the Southwest Airlines Co. ProfitSharing Plan (the "ProfitSharing Plan") was a defined contribution plan under which the Company contributed a percentage of its annual net profits annually, as defined. Employee contributions to the ProfitSharing Plan were not permitted. Effective May 31, 2024, the Profitsharing Plan's net assets were transferred and merged into the 401(k) Plan, which was subsequently renamed the Southwest Airlines Co. Retirement Savings Plan (the "Retirement Savings Plan"). As of the time of the merger, participants can now elect to invest in the Southwest Airlines Company Stock Fund for future investment contributions - including deferrals, matching contributions, or profitsharing contributions, within specified limits. The Retirement Savings Plan also has non-elective contributions for certain eligible workgroups that have negotiated such items as part of ratified collective bargaining contracts. Amounts associated with the Company's defined contribution plans expensed in 2024, 2023, and 2022, reflected as a component of Salaries, wages, and benefits, were $843 million, $941 million, and $793 million, respectively. Defined Benefit Plan In 2024, the Company began offering a market based cash balance defined benefit plan covering eligible Pilots. The Company's funding obligation for the qualified plan is governed by the Employee Retirement Income Security Act of 1974 (ERISA) and any applicable regulations. The plan provides pay credits equal to 1 percent of eligible wages for qualifying participants, which are invested in a designated portfolio with a conservative allocation of 40 percent equity and 60 percent fixed income assets. Participants’ hypothetical account balances reflect market-based interest credits, calculated monthly based on the actual returns (positive or negative) of the designated portfolio. Participants' benefits consist of the sum of the pay credits and the market-based returns (or losses) accrued on the invested contributions. Any accrued amounts exceeding IRS-defined limits are paid in cash to eligible participants. As a defined benefit plan, participants are guaranteed a distribution equivalent to no less than the sum of the original pay credits to be distributed in the form of a single life annuity, if unmarried, or 50 percent joint and survivor, if married. Postretirement Benefit Plans The Company provides postretirement benefits to qualified retirees in the form of medical and dental coverage. Employees must meet minimum levels of service and age requirements as set forth by the Company, or as specified in collective-bargaining agreements with specific workgroups. Employees meeting these requirements, as defined, may use accrued unused sick time to pay for medical and dental premiums from the age of retirement until age 65. The following table shows the change in the accumulated market based cash balance plan and postretirement benefit obligations for the years ended December 31, 2024 and 2023:
|  | Market Based Cash Balance Plan |  | Postretirement Benefits
|  | December 31, |  | December 31,
(in millions) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Accumulated Benefit Obligation at beginning of period |  | $ | — |  |  | $ | — |  |  | $ | 269 |  |  | $ | 241 |
Service cost |  | 31 |  |  | — |  |  | 16 |  |  | 14 |
Interest cost |  | — |  |  | — |  |  | 14 |  |  | 12 |
Benefits paid |  | — |  |  | — |  |  | (18) |  |  | (9) |
Actuarial (gain) loss |  | (1) |  |  | — |  |  | (35) |  |  | 11 |
Plan Amendments |  | — |  |  | — |  |  | 11 |  |  | — |
Accumulated Benefit Obligation at end of period |  | $ | 30 |  |  | $ | — |  |  | $ | 257 |  |  | $ | 269 |
Fair value of plan assets at beginning of period |  | — |  |  | — |  |  | — |  |  | — |
Actual gain/(loss) on plan assets |  | — |  |  | — |  |  | — |  |  | — |
Employer contributions |  | 31 |  |  | — |  |  | 20 |  |  | 9 |
Benefits paid |  | $ | — |  |  | $ | — |  |  | $ | (20) |  |  | $ | (9) |
Fair value of plan assets at end of period |  | $ | 31 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
During 2024, the Company recorded $36 million in combined actuarial gains as a decrease to the market based cash balance and postretirement benefit plans with an offset to AOCI. These 2024 actuarial gains are reflected above and resulted from changes in certain key assumptions used to determine the Company’s year-end obligation. The assumption change that resulted in the largest portion of the actuarial gains was an increase in the discount rate used. Benefits earned under the market based cash balance plan are expected to be paid from funded benefit plan assets, while the postretirement benefits are funded from current assets. The following table shows the estimated future benefit payments expected to be paid:
|  | Market Based Cash Balance Plan |  | Postretirement Benefits |  | Total
(in millions) |  |  |
2025 |  | $ | 1 |  |  | $ | 16 |  |  | $ | 17 |
2026 |  | 3 |  | 17 |  | 20
2027 |  | 7 |  | 18 |  | 25
2028 |  | 12 |  | 20 |  | 32
2029 |  | 18 |  | 21 |  | 39
Next 5 yrs thereafter |  | 147 |  | 126 |  | 273
The following table reconciles the combined funded status of the market based cash balance and postretirement benefit plans to the accrued benefit plan cost recognized in Other noncurrent liabilities on the Company’s Consolidated Balance Sheet as of December 31, 2024 and 2023.
(in millions) |  | 2024 |  | 2023
Funded status |  | $ | (256) |  |  | $ | (269) |
Unrecognized net actuarial gain |  | (179) |  |  | (151) |
Unrecognized prior service cost |  | 13 |  |  | 2 |
Accumulated other comprehensive income |  | 165 |  |  | 149 |
Consolidated Balance Sheet liability |  | $ | (257) |  |  | $ | (269) |
The consolidated periodic benefit cost for the years ended December 31, 2024, 2023, and 2022, included the following:
|  | Market Based Cash Balance Plan |  | Postretirement Benefits
(in millions) |  | 2024 |  | 2024 |  | 2023 |  | 2022
Service cost |  | $ | 11 |  |  | $ | 16 |  |  | $ | 14 |  |  | $ | 19 |
Interest cost |  | — |  |  | 14 |  |  | 12 |  |  | 9 |
Amortization of net gain |  | — |  |  | (7) |  |  | (10) |  |  | (2) |
Net periodic benefit cost |  | $ | 11 |  |  | $ | 23 |  |  | $ | 16 |  |  | $ | 26 |
Service cost is recognized within Salaries, wages, and benefits expense, and all other costs are recognized in Other (gains) losses, net in the Consolidated Statement of Income. Unrecognized prior service cost is expensed using a straight-line amortization of the cost over the average future service of Employees expected to receive benefits under the plans. Actuarial gains are amortized utilizing the minimum amortization method. The following actuarial assumptions were used to account for the Company’s market based cash balance and postretirement plans at December 31, 2024, 2023, and 2022:
|  | Market Based Cash Balance Plan |  | Postretirement Benefits
|  | 2024 |  | 2024 |  | 2023 |  | 2022
Weighted-average discount rate |  | 5.25 | % |  | 5.65 | % |  | 5.20 | % |  | 5.60 | %
Assumed healthcare cost trend rate (a) |  | n/a |  | 8.15 | % |  | 6.25 | % |  | 6.50 | %
Weighted average expected long-term rate of return |  | 5.25 | % |  | n/a |  | n/a |  | n/a
(a)The assumed healthcare cost trend rate is expected to be 8.15% for 2025, then decline gradually to 4.5% by 2034 and remain level thereafter. The selection of a discount rate is made annually and is selected by the Company based upon comparison of the expected future cash flows associated with the Company’s future payments under its consolidated benefit obligations to a yield curve created using high quality bonds that closely match those expected future cash flows. This rate for postretirement benefits increased during 2024 due to market conditions. The assumed healthcare trend rate is also reviewed at least annually and is determined based upon both historical experience with the Company’s benefits paid and expectations of how those trends may or may not change in future years. The expected long-term rate of return on plan assets is based on historical market and volatility data and expected market conditions, reflecting a target asset allocation of 40 percent equities and 60 percent fixed income. The Company reviews the rate of return on plan assets assumption annually. The annual investment performance for one particular year does not, by itself, significantly influence the Company's evaluation.

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