RETIREMENT PLANS

Defined Benefit Pension Plans and Other Postretirement Benefit Plans

Eastman maintains defined benefit pension plans that provide eligible employees with retirement benefits. In addition, Eastman provides a subsidy for life insurance, health care, and dental benefits to eligible retirees hired prior to January 1, 2007, and a subsidy for health care and dental benefits to retirees' eligible survivors. Costs recognized for these benefits are recorded using estimated amounts, which may change as actual costs derived for the year are determined.

For additional information regarding retirement plans, see Note 11, "Retirement Plans", to the consolidated financial statements in Part II, Item 8 of the Company's 2015 Annual Report on Form 10-K.

Components of net periodic benefit (credit) cost were as follows:



	Third Quarter
	Pension Plans												Other Postretirement Benefit Plans
	2016						2015						2016			2015
(Dollars in millions)	U.S.			Non-U.S.			U.S.			Non-U.S.
Components of net periodic benefit (credit) cost:
Service cost	$	9		$	3		$	10		$	3		$	2		$	2
Interest cost	18			5			21			7			7			9
Expected return on assets	(34		)	(7		)	(38		)	(9		)	(1		)	(1		)
Amortization of:
Prior service credit, net	(1		)	—			(1		)	—			(11		)	(6		)
Mark-to-market pension and other postretirement benefits loss⁽¹⁾	—			30			—			—			—			—
Net periodic benefit (credit) cost	$	(8	)	$	31		$	(8	)	$	1		$	(3	)	$	4


	First Nine Months
	Pension Plans												Other Postretirement Benefit Plans
	2016						2015						2016			2015
(Dollars in millions)	U.S.			Non-U.S.			U.S.			Non-U.S.
Components of net periodic benefit (credit) cost:
Service cost	$	29		$	9		$	29		$	11		$	5		$	6
Interest cost	55			17			65			20			21			29
Expected return on assets	(102		)	(23		)	(111		)	(28		)	(4		)	(4		)
Curtailment gain⁽²⁾	—			—			—			(7		)	—			—
Amortization of:
Prior service credit, net	(3		)	—			(3		)	—			(31		)	(18		)
Mark-to-market pension and other postretirement benefits loss⁽¹⁾	—			30			—			2			—			—
Net periodic benefit (credit) cost	$	(21	)	$	33		$	(20	)	$	(2	)	$	(9	)	$	13


⁽¹⁾	In third quarter 2016, a change to a UK pension plan triggered an interim remeasurement of the plan obligation and resulted in a $30 million mark-to-market loss and in 2015 the closure of the Workington, UK acetate tow manufacturing site triggered an interim remeasurement of a UK pension plan obligation both included in Other in Note 18, "Segment Information".


⁽²⁾	Gain in the Fibers segment due to the closure of the Workington, UK acetate tow manufacturing site.

The Company contributed $50 million and $90 million to its U.S. defined benefit pension plans in first nine months 2016 and 2015, respectively.

In third quarter 2016, the Company announced a change to a UK defined benefit pension plan which triggered an interim remeasurement of the plan obligation resulting in a mark-to-market ("MTM") loss of $30 million. The MTM loss was primarily due to a lower discount rate at the third quarter 2016 remeasurement date compared to December 31, 2015. The lower discount rate is reflective of changes in global market conditions and interest rates on high-grade corporate bonds.

In first quarter 2016, the Company changed the approach used to calculate service and interest cost components of net periodic benefit costs for its significant defined benefit pension and other postretirement benefit plans. The Company elected to calculate service and interest costs by applying the specific spot rates along the yield curve to the plans' projected cash flows. The change does not affect the measurement of the total benefit obligation or the annual net periodic benefit cost or credit of the plans because the change in the service and interest costs will be offset in the MTM actuarial gain or loss which typically is recognized in the fourth quarter of each year or in any other quarters in which an interim remeasurement is triggered.