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PENSION AND POSTRETIREMENT BENEFIT PLANS | 12 Months Ended
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Dec. 31, 2020
Retirement Benefits [Abstract] |
PENSION AND POSTRETIREMENT BENEFIT PLANS | PENSION AND POSTRETIREMENT BENEFIT PLANS We have various qualified and non-qualified benefit plans for our salaried and union and nonunion hourly employees. Defined Contribution Plans All of our employees are eligible to participate in our tax-qualified, defined contribution retirement plan that provides for periodic cash contributions by us based on annual cash compensation and employee deferrals. Certain salaried employees participate in supplemental plans that restore benefits lost due to government limitations on qualified plans. As of December 31, 2020 and 2019, we recognized $35 million and $37 million in other long-term liabilities for these supplemental plans, respectively. We expensed $4 million in the Successor period and $28 million in the Predecessor period during 2020, $36 million in 2019 and $35 million in 2018 under the provisions of these defined contribution and supplemental plans. Defined Benefit Plans Participation in defined benefit pension plans sponsored by us is limited. During 2020, approximately 70 employees accrued benefits under these plans, all of whom were union employees. 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 funded by us through payments to trust funds, which are administered by independent trustees. Postretirement Benefit Plans We provide postretirement medical and dental benefits for our eligible former employees and their dependents. Our former employees are required to make monthly contributions to the plan, but the benefits are primarily funded by us as claims are paid during the year. Obligations and Funded Status of our Defined Benefit Plans The following table shows the amounts recognized on our balance sheets related to pension and postretirement benefit plans, as well as plans that we or our subsidiaries sponsor, as of December 31, 2020 and 2019 (in millions):
| Successor |  |  | Predecessor
| 2020 |  |  | 2019
| Pension |  | Postretirement |  |  | Pension |  | Postretirement
Amounts recognized on the balance sheet |  |  |  |  |  |  |  |
Accrued liabilities | $ | — |  |  | $ | (4) |  |  |  | $ | — |  |  | $ | (3) |
Other long-term liabilities | (15) |  |  | (125) |  |  |  | (18) |  |  | (113) |
| $ | (15) |  |  | $ | (129) |  |  |  | $ | (18) |  |  | $ | (116) |
Amounts recognized in accumulated other comprehensive loss | $ | (1) |  |  | $ | (7) |  |  |  | $ | (6) |  |  | $ | (17) |
The following table shows the funding status of our pension and post-retirement benefit plans along with a reconciliation of our benefit obligations and fair value of plan asset as of December 31, 2020 and 2019 (in millions):
| Successor |  |  | Predecessor
| November 1, 2020 - December 31, 2020 |  |  | January 1, 2020 - October 31, 2020 |  | January 1, 2019 - December 31, 2019
Pension |  |  |  |  |  |
Changes in the benefit obligation |  |  |  |  |  |
Benefit obligation—beginning balance | $ | 46 |  |  |  | $ | 45 |  |  | $ | 56 |
Service cost—benefits earned during the period | — |  |  |  | 1 |  |  | 1 |
Interest cost on projected benefit obligation | — |  |  |  | 1 |  |  | 2 |
Actuarial loss (gain) | 3 |  |  |  | 1 |  |  | 11 |
Benefits paid | (2) |  |  |  | (2) |  |  | (25) |
Benefit obligation—ending balance | $ | 47 |  |  |  | $ | 46 |  |  | $ | 45 |
Changes in plan assets |  |  |  |  |  |
Fair value of plan assets—beginning balance | $ | 26 |  |  |  | $ | 27 |  |  | $ | 42 |
Actual gain (loss) return on plan assets | 2 |  |  |  | 1 |  |  | 7 |
Employer contributions | 6 |  |  |  | — |  |  | 3 |
Benefits paid | (2) |  |  |  | (2) |  |  | (25) |
Fair value of plan assets—ending balance | $ | 32 |  |  |  | $ | 26 |  |  | $ | 27 |
Net benefit liability (unfunded status) | $ | (15) |  |  |  | $ | (20) |  |  | $ | (18) |
Postretirement |  |  |  |  |  |
Changes in the benefit obligation (in millions) |  |  |  |  |  |
Benefit obligation—beginning balance | $ | 122 |  |  |  | $ | 116 |  |  | $ | 84 |
Service cost—benefits earned during the period | 1 |  |  |  | 4 |  |  | 4 |
Interest cost on projected benefit obligation | — |  |  |  | 3 |  |  | 4 |
Actuarial loss (gain) | 7 |  |  |  | 2 |  |  | 19 |
Cost of special termination benefits | — |  |  |  | — |  |  | 6 |
Curtailment | — |  |  |  | — |  |  | 2 |
Benefits paid | (1) |  |  |  | (3) |  |  | (3) |
Benefit obligation—ending balance | $ | 129 |  |  |  | $ | 122 |  |  | $ | 116 |
Changes in plan assets |  |  |  |  |  |
Fair value of plan assets—beginning balance | $ | — |  |  |  | $ | — |  |  | $ | — |
Employer contributions | 1 |  |  |  | 3 |  |  | 3 |
Benefits paid | (1) |  |  |  | (3) |  |  | (3) |
Fair value of plan assets—ending balance | $ | — |  |  |  | $ | — |  |  | $ | — |
Net benefit liability (unfunded status) | $ | (129) |  |  |  | $ | (122) |  |  | $ | (116) |
Our accumulated benefit obligation for our defined benefit pension plans exceeded the fair value of our plan assets as shown in the table below for the years ended December 31:
| Successor |  |  | Predecessor
| 2020 |  |  | 2019
(in millions) |  |  |  |
Projected benefit obligation | $ | 47 |  |  |  | $ | 45 |
Accumulated benefit obligation | $ | 43 |  |  |  | $ | 41 |
Fair value of plan assets | $ | 32 |  |  |  | $ | 27 |
Components of Net Periodic Benefit Cost We record the service cost component of net periodic pension cost with other employee compensation and all other components, including settlement costs, are reported as other non-operating expenses on our consolidated statements of operations. The following table set forth the components of our net periodic pension and postretirement benefit costs (in millions):
| Successor |  |  | Predecessor
| November 1, 2020 - December 31, 2020 |  |  | January 1, 2020 - October 31, 2020 |  | Years ended December 31,
|  |  |  | 2019 |  | 2018
Pension |  |  |  |  |  |  |  |
Net periodic benefit costs |  |  |  |  |  |  |  |
Service cost—benefits earned during the period | $ | — |  |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | 1 |
Interest cost on projected benefit obligation | — |  |  |  | 1 |  |  | 2 |  |  | 2 |
Expected return on plan assets | — |  |  |  | (1) |  |  | (2) |  |  | (3) |
Amortization of net actuarial loss | — |  |  |  | 1 |  |  | 1 |  |  | 2 |
Settlement costs | — |  |  |  | 1 |  |  | 9 |  |  | 4 |
Net periodic benefit costs | $ | — |  |  |  | $ | 3 |  |  | $ | 11 |  |  | $ | 6 |
Postretirement |  |  |  |  |  |  |  |
Net periodic benefit costs |  |  |  |  |  |  |  |
Service cost—benefits earned during the period | $ | 1 |  |  |  | $ | 4 |  |  | $ | 4 |  |  | $ | 4 |
Interest cost on projected benefit obligation | — |  |  |  | 3 |  |  | 4 |  |  | 4 |
Expected return on plan assets | — |  |  |  | — |  |  | — |  |  | — |
Cost of special termination benefits | — |  |  |  | — |  |  | 6 |  |  | — |
Amortization of net actuarial loss | — |  |  |  | — |  |  | — |  |  | — |
Settlement costs | — |  |  |  | 1 |  |  | — |  |  | — |
Net periodic benefit costs | $ | 1 |  |  |  | $ | 8 |  |  | $ | 14 |  |  | $ | 8 |
Components of accumulated other comprehensive income (loss) (AOCI) are presented net of tax. The following table presents the changes in plan assets and benefit obligations recognized in other comprehensive (loss) income before tax (in millions):
| Successor |  |  | Predecessor
| November 1, 2020 - December 31, 2020 |  |  | January 1, 2020 - October 31, 2020 |  | Years ended December 31,
|  |  |  | 2019 |  | 2018
Pension |  |  |  |  |  |  |  |
Net actuarial (loss) gain | $ | (1) |  |  |  | $ | (1) |  |  | $ | (6) |  |  | $ | (3) |
Settlement costs | — |  |  |  | 1 |  |  | 9 |  |  | 4 |
Amortization of net actuarial gain/loss | — |  |  |  | 1 |  |  | 1 |  |  | 2 |
Total recognized in other comprehensive (loss) income | $ | (1) |  |  |  | $ | 1 |  |  | $ | 4 |  |  | $ | 3 |
Postretirement |  |  |  |  |  |  |  |
Net actuarial (loss) gain | $ | (7) |  |  |  | $ | (2) |  |  | $ | (19) |  |  | $ | 14 |
Settlement costs | — |  |  |  | 1 |  |  | (2) |  |  | — |
Amortization of net actuarial gain/loss | — |  |  |  | — |  |  | — |  |  | — |
Total recognized in other comprehensive (loss) income | $ | (7) |  |  |  | $ | (1) |  |  | $ | (21) |  |  | $ | 14 |
Settlement costs related to our pension and postretirement plans were associated with early retirements. The following table sets forth the valuation assumptions, on a weighted-average basis, used to determine our benefit obligations and net periodic benefit cost:
| Successor |  |  | Predecessor
| November 1, 2020 - December 31, 2020 |  |  | January 1, 2020 - October 31, 2020 |  | January 1, 2019 - December 31, 2019
Pension |  |  |  |  |  |
Benefit Obligation Assumptions |  |  |  |  |  |
Discount rate | 2.42 | % |  |  | 2.70 | % |  | 3.16 | %
Rate of compensation increase | 4.00 | % |  |  | 4.00 | % |  | 4.00 | %
Net Periodic Benefit Cost Assumptions |  |  |  |  |  |
Discount rate | 2.70 | % |  |  | 3.16 | % |  | 4.22 | %
Assumed long-term rate of return on assets | 5.42 | % |  |  | 5.42 | % |  | 6.50 | %
Rate of compensation increase | 4.00 | % |  |  | 4.00 | % |  | 4.00 | %
Postretirement |  |  |  |  |  |
Benefit Obligation Assumptions |  |  |  |  |  |
Discount rate | 2.92 | % |  |  | 3.11 | % |  | 3.48 | %
Net Periodic Benefit Cost Assumptions |  |  |  |  |  |
Discount rate | 3.11 | % |  |  | 3.48 | % |  | 4.57 | %
For pension plans and postretirement benefit plans that we or our subsidiaries sponsor, we based the discount rate on the Aon AA Above Median yield curve in both 2020 and 2019. 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. In 2020, we used the Society of Actuaries Pri-20212 mortality assumptions reflecting the MP-2020 scale which plan sponsors in the U.S. use in the actuarial valuations that determine a plan sponsor’s pension and postretirement obligations. Changes in mortality assumptions were reflected in the valuations of our pension and postretirement benefit obligations as part of fresh start accounting upon emergence from bankruptcy. These assumptions did not significantly change our pension benefit obligations or postretirement benefit obligations in 2020 as compared to the prior year. The postretirement benefit obligation was determined by application of the terms of medical and dental benefits, 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 2.06% and 1.86% as of December 31, 2020 and 2019, 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, as of December 31, 2020, health care cost trend rates would decrease from 6.50%-7.00% in 2020 until they reach 4.50% in 2028 and remain at 4.50% thereafter. 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 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. Equity investments were diversified across U.S. and non-U.S. 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. In 2020 and 2019, 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:
| Fair Value Measurements at December 31, 2020 (Successor)
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Asset Class | (in millions)
Cash equivalents | $ | 6 |  |  | $ | — |  |  | $ | — |  |  | $ | 6 |
Commingled funds |  |  |  |  |  |  |
Fixed income | — |  |  | 2 |  |  | — |  |  | 2 |
U.S. equity | — |  |  | 3 |  |  | — |  |  | 3 |
International equity | — |  |  | 2 |  |  | — |  |  | 2 |
Mutual funds |  |  |  |  |  |  |
Bond funds | 5 |  |  | — |  |  | — |  |  | 5 |
Blend funds | — |  |  | — |  |  | — |  |  | — |
Value funds | 2 |  |  | — |  |  | — |  |  | 2 |
Growth funds | 6 |  |  | — |  |  | — |  |  | 6 |
Guaranteed deposit account | — |  |  | — |  |  | 6 |  |  | 6 |
Total pension plan assets | $ | 19 |  |  | $ | 7 |  |  | $ | 6 |  |  | $ | 32 |
| Fair Value Measurements at December 31, 2019 (Predecessor)
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Asset Class | (in millions)
Cash equivalents | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commingled funds |  |  |  |  |  |  |
Fixed income | — |  |  | 3 |  |  | — |  |  | 3 |
U.S. equity | — |  |  | 4 |  |  | — |  |  | 4 |
International equity | — |  |  | 2 |  |  | — |  |  | 2 |
Mutual funds |  |  |  |  |  |  |
Bond funds | 5 |  |  | — |  |  | — |  |  | 5 |
Blend funds | 2 |  |  | — |  |  | — |  |  | 2 |
Value funds | 2 |  |  | — |  |  | — |  |  | 2 |
Growth funds | 2 |  |  | — |  |  | — |  |  | 2 |
Guaranteed deposit account | — |  |  | — |  |  | 7 |  |  | 7 |
Total pension plan assets | $ | 11 |  |  | $ | 9 |  |  | $ | 7 |  |  | $ | 27 |
Expected Contributions and Benefit Payments In 2021, we expect to contribute $5 million to our pension and $5 million to our postretirement benefit plans. Estimated future undiscounted benefit payments by the plans, which reflect expected future service, as appropriate, are as follows:
| Pension Benefits |  | Postretirement Benefits
For the years ended December 31, | (in millions)
2021 | $ | 13 |  |  | $ | 5 |
2022 | $ | 2 |  |  | $ | 5 |
2023 | $ | 3 |  |  | $ | 5 |
2024 | $ | 2 |  |  | $ | 5 |
2025 | $ | 3 |  |  | $ | 5 |
2026 to 2030 Payouts | $ | 11 |  |  | $ | 27 |

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