NOTE 14 RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

We have various benefit plans for our salaried and union and nonunion hourly employees.

Defined Contribution Plans

All of our employees were eligible to participate in one or more of the defined contribution retirement or savings plans that provide for periodic contributions by us, our subsidiaries or, prior to the Spin-off, by Occidental, based on plan-specific criteria, such as base pay, age, level and employee contributions. Certain salaried employees participated in supplemental plans that restored benefits lost due to governmental limitations on qualified plan benefits. The accrued liabilities for the supplemental plans were $32 million and $27 million as of December 31, 2015 and 2014, respectively, and we expensed $39 million in 2015, $29 million in 2014 and $34 million in 2013 under the provisions of these defined contribution plans. In February 2016, we substantially reduced our contributions to these defined contribution plans.

Defined Benefit Plans

Participation in defined benefit pension plans sponsored by us is limited. During 2015, approximately 260 employees, including union and certain nonunion employees who joined us from acquired operations with grandfathered benefits, accrued benefits under these plans. Effective December 31, 2015, the plans were amended such that participants other than union employees no longer earn benefits for service after December 31, 2015.

Pension costs for the 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

We provided postretirement medical and dental benefits and life insurance coverage for our former employees and their eligible dependents through Occidental-sponsored plans prior to the Spin-off, and provide them through CRC-sponsored plans following the Spin-off. The benefits were generally funded as they were paid during the year.

Obligations and Funded Status

The following tables show the amounts recognized in our balance sheets related to pension and postretirement benefit plans, as well as plans that we or our subsidiaries sponsor, and their funding status, obligations and plan asset fair values (in millions):

	Pension Benefits				Postretirement Benefits
	As of December 31,
	2015		2014		2015		2014
Amounts recognized in the balance sheet:
Accrued liabilities	$	—	$	—	$	(1)	$	—
Other long-term liabilities	(27)		(21)		(70)		(68)

	$	(27)	$	(21)	$	(71)	$	(68)

AOCI included the following after-tax balances:
Net loss (gain)	$	19	$	22	$	(4)	$	2

	Pension Benefits				Postretirement Benefits
	2015		2014		2015		2014
Changes in the benefit obligation:
Benefit obligation—beginning of year	$	108	$	103	$	68	$	63
Service cost—benefits earned during the period	4		4		5		4
Interest cost on projected benefit obligation	4		4		3		2
Curtailment (gain) loss	(12)		—		5		—
Actuarial loss (gain)	24		6		(10)		(1)
Benefits paid	(45)		(9)		—		—

Benefit obligation—end of year	$	83	$	108	$	71	$	68


Changes in plan assets:
Fair value of plan assets—beginning of year	$	87	$	91	$	—	$	—
Actual return on plan assets	1		5		—		—
Employer contributions	13		—		—		—
Benefits paid	(45)		(9)		—		—

Fair value of plan assets—end of year	$	56	$	87	$	—	$	—

Unfunded status:	$	(27)	$	(21)	$	(71)	$	(68)

The following table sets forth the accumulated and projected benefit obligations and fair values of assets of the defined benefit pension plans:

	Accumulated Benefit Obligation in Excess of Plan Assets				Plan Assets in Excess of Accumulated Benefit Obligation
	As of December 31,
	2015		2014		2015		2014
	(in millions)
Projected Benefit Obligation	$	83	$	31	$	—	$	77
Accumulated Benefit Obligation	$	81	$	26	$	—	$	62
Fair Value of Plan Assets	$	56	$	19	$	—	$	68

We do not expect any plan assets to be returned during 2016.

COMPONENTS OF NET PERIODIC BENEFIT COST

The following table sets forth the components of net periodic benefit costs:

	Pension Benefits						Postretirement Benefits
	2015		2014		2013		2015		2014		2013
	(in millions)
Net periodic benefit costs:
Service cost—benefits earned during the period	$	4	$	4	$	5	$	5	$	4	$	5
Interest cost on projected benefit obligation	4		4		3		3		2		3
Expected return on plan assets	(5)		(6)		(4)		—		—		—
Recognized actuarial loss	3		2		4		—		1		2
Settlement cost	18		2		2		—		—		—
Curtailment loss	—		—		—		5		—		—

Net periodic benefit cost	$	24	$	6	$	10	$	13	$	7	$	10

The estimated net loss and prior service credit for the defined benefit pension plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year are $3 million and $1 million, respectively. We do not expect to have any estimated net loss or prior service cost for the defined benefit postretirement plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year.

The following table sets forth the weighted-average assumptions used to determine our benefit obligations and net periodic benefit cost:

	Pension Benefits		Postretirement Benefits
	For the years ended December 31,
	2015	2014	2015	2014
Benefit Obligation Assumptions:
Discount rate	3.99%	3.82%	4.81%	4.44%
Rate of compensation increase	4.00%	4.00%	—	—
Net Periodic Benefit Cost Assumptions:
Discount rate	3.82%	4.45%	4.44%	4.75%
Assumed long term rate of return on assets	6.50%	6.50%	—	—
Rate of compensation increase	4.00%	4.00%	—	—

For pension plans and postretirement benefit plans that we or our subsidiaries sponsor, we based the discount rate on the Aon/Hewitt AA Above Median yield curve in both 2015 and 2014. The weighted-average rate of increase in future compensation levels is consistent with our past and anticipated future compensation increases for employees participating in retirement plans that determine benefits using compensation. 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.

Effective in 2015, we adopted the Society of Actuaries MP-2015 Mortality Improvement Scale, which updated the Society of Actuaries Adjusted RP-2014 mortality assumptions that private defined benefit pension plans in the United States use in the actuarial valuations that determine a plan sponsor’s pension and postretirement obligations. In 2014, we utilized the Society of Actuaries Adjusted RP-2014 Mortality Table reflecting the MP-2014 Mortality Improvement Scale. The changes in the mortality assumptions resulted in a decrease of less than $1 million and $1 million in the pension and postretirement benefit obligations, respectively, at December 31, 2015.

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 healthcare cost trend rates projected at an assumed U.S. Consumer Price Index (CPI) increase of 1.60% and 1.79% as of December 31, 2015 and 2014, respectively. Under the terms of our postretirement plans, participants other than certain union employees pay for all medical cost increases in excess of increases in the CPI. For those union employees, we projected that healthcare cost trend rates would decrease 0.25 percent per year from 7.5% in 2015 until they reach 5.0% in 2025, and remain at 5.0% thereafter. A 1-percent increase or a 1-percent decrease in these assumed healthcare cost trend rates would result in an increase of $5 million or a reduction of $4 million, respectively, in the postretirement benefit obligation as of December 31, 2015. The annual service and interest costs would not be materially affected by these changes.

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

We employ a total return investment approach that uses a diversified blend of equity and fixed-income investments to optimize the long-term return of plan assets at a prudent level of risk. The investments were monitored by Occidental’s Investment Committee in its role as fiduciary through November 30, 2014, and by our Investment Committee thereafter. Equity investments were diversified across United States and non-United States stocks, as well as differing styles and market capitalizations. Other asset classes, such as private equity and real estate, may have been used with the goals of enhancing long-term returns and improving portfolio diversification. The target allocation of plan assets was 65% equity securities and 35% debt securities. Investment performance was 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 our pension plan assets by asset category are as follows (in millions):

	Fair Value Measurements at December 31, 2015 Using
	Level 1		Level 2		Level 3		Total
Asset Class:
Commingled funds:
Fixed income	$	—	$	15	$	—	$	15
U.S. equity	—		16		—		16
International equity	—		10		—		10
Mutual funds:
Bond funds	4		—		—		4
Blend funds	2		—		—		2
Value funds	1		—		—		1
Growth funds	2		—		—		2
Guaranteed deposit account	—		—		6		6

Total pension plan assets	$	9	$	41	$	6	$	56

	Fair Value Measurements at December 31, 2014 Using
	Level 1		Level 2		Level 3		Total
Asset Class:
Commingled funds:
Fixed income	$	—	$	20	$	—	$	20
U.S. equity	—		31		—		31
International equity	—		17		—		17
Mutual funds:
Bond funds	5		—		—		5
Blend funds	2		—		—		2
Value funds	2		—		—		2
Growth funds	3		—		—		3
Guaranteed deposit account	—		—		7		7

Total pension plan assets	$	12	$	68	$	7	$	87

The activity during the years ended December 31, 2015 and 2014, for the assets using Level 3 fair value measurements was insignificant. We expect to contribute $8 million to our defined benefit pension plans during 2016.

Estimated future benefit payments, which reflect expected future service, as appropriate, are as follows:

For the years ended December 31,	Pension Benefits		Postretirement Benefits
	(in millions)
2016	$	22	$	1
2017	$	8	$	3
2018	$	9	$	3
2019	$	6	$	3
2020	$	6	$	4
2021 - 2025	$	25	$	22