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Employee Benefit Plans | 12 Months Ended
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Sep. 30, 2019
Compensation And Retirement Disclosure [Abstract] |
Employee Benefit Plans | NOTE N – EMPLOYEE BENEFIT PLANS Pension plans Ashland and its subsidiaries have several contributory and noncontributory qualified defined benefit pension plans that generally cover international employees and a small portion of certain U.S. manufacturing union employees. Pension obligations for applicable employees of non-U.S. consolidated subsidiaries are provided for in accordance with local practices and regulations of the respective countries. The majority of these foreign pension plans are closed to new participants while those that remain open relate to areas where jurisdictions require plans to operate within the applicable country. Benefits for those eligible for Ashland’s U.S. pension plans generally are based on employees’ years of service and compensation during the years immediately preceding their retirement. The remaining U.S. plans are still open for enrollment for qualifying union employees within certain manufacturing sites. Other postretirement benefit plans Ashland and its subsidiaries maintain limited health care for certain eligible employees in the U.S. who are retired or disabled. Ashland shares the costs of providing health care coverage with certain eligible retired employees through premiums, deductibles and coinsurance provisions. Ashland funds its share of the costs of the postretirement benefit plans as the benefits are paid. This benefit obligation was significantly reduced due to the transfer of a substantial portion to Valvoline. Postretirement health care plans include a limit on Ashland’s share of costs for recent and future retirees. The assumed pre-65 health care cost increase trend rate as of September 30, 2019 was 6.6% and continues to be reduced to 4.5% in 2037 and thereafter. The assumptions used to project the liability anticipate future cost-sharing changes to the written plans that are consistent with the increase in health care costs. Plan Amendments and Remeasurements During 2019, Ashland settled a non-U.S. plan, which required the plan to be remeasured. This remeasurement resulted in a curtailment gain of $18 million recorded within the other net periodic benefit (costs) caption of the Statements of Consolidated Comprehensive Income. During 2017, Ashland discontinued certain post-employment health and life insurance benefits which resulted in a remeasurement gain of $2 million within the Statements of Consolidated Comprehensive Income. Plan Transfers During August 2019, Ashland transferred a substantial portion of its non-qualified non-U.S. pension plans to INEOS as part of the sale of its Composites business (excluding the Maleic business) and the Marl facility. As of September 30, 2019, the net pension and other postretirement plan liabilities that transferred to INEOS totaled $27 million. The disclosures within this footnote exclude these amounts that were transferred and only relate to plans Ashland currently records within continuing operations. Net periodic benefit costs (income) allocation Consistent with Ashland’s historical accounting policies, service cost for continuing operations is proportionately allocated to each reportable segment, excluding the Unallocated and other segment, while all other costs for continuing operations are recorded within the Unallocated and other segment. The following table summarizes the components of pension and other postretirement benefit costs for continuing operations and the assumptions used to determine net periodic benefit costs (income) for the plans.
|  | Pension benefits |  |  | Other postretirement benefits |
(In millions) |  | 2019 |  |  | 2018 |  |  | 2017 |  |  | 2019 |  |  | 2018 |  |  | 2017 |
Net periodic benefit costs (income) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost (a) |  | $ | 6 |  |  | $ | 9 |  |  | $ | 8 |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | 1 |
Interest cost (b) |  |  | 10 |  |  |  | 10 |  |  |  | 8 |  |  |  | 2 |  |  |  | 1 |  |  |  | 2 |
Curtailment, settlement and other (b) |  |  | (18 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Expected return on plan assets (b) |  |  | (10 | ) |  |  | (12 | ) |  |  | (12 | ) |  |  | — |  |  |  | — |  |  |  | — |
Amortization of prior service credit (b) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Actuarial (gain) loss (b) |  |  | 18 |  |  |  | (14 | ) |  |  | 2 |  |  |  | (7 | ) |  |  | — |  |  |  | 6 |
|  | $ | 6 |  |  | $ | (7 | ) |  | $ | 6 |  |  | $ | (4 | ) |  | $ | 2 |  |  | $ | 9 |
Weighted-average plan assumptions (c) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate for service cost |  |  | 2.40 | % |  |  | 2.54 | % |  |  | 1.93 | % |  |  | 4.37 | % |  |  | 3.93 | % |  |  | 3.93 | %
Discount rate for interest cost |  |  | 3.02 | % |  |  | 2.55 | % |  |  | 2.25 | % |  |  | 3.91 | % |  |  | 3.13 | % |  |  | 2.86 | %
Rate of compensation increase |  |  | 2.52 | % |  |  | 2.53 | % |  |  | 2.81 | % |  |  |  |  |  |  |  |  |  |  |  |
Expected long-term rate of return on plan assets |  |  | 3.44 | % |  |  | 3.36 | % |  |  | 3.44 | % |  |  |  |  |  |  |  |  |  |  |  |
(a) | Service cost was not impacted by new accounting guidance adopted in 2018 and is therefore still classified within the selling, general and administrative expense and cost of sales captions on the Statements of Consolidated Comprehensive Income (Loss). See Note A for additional information.
(b) | These components are now classified within the other net periodic benefit income (costs) caption on the Statements of Consolidated Comprehensive Income (Loss) due to the adoption of new accounting guidance in 2018. See Note A for additional information.
(c) | The plan assumptions discussed are a blended weighted-average rate for Ashland’s U.S. and non-U.S. plans.
There were no changes in prior service credit recognized in accumulated other comprehensive income during both 2019 and 2018. At September 30, 2019, Ashland expects to recognize less than $1 million of the prior service credit in accumulated other comprehensive income as net periodic benefit cost (income) during the next fiscal year. At September 30, 2019 and 2018, the amounts included in accumulated other comprehensive income are shown in the following table.
|  | Pension |  |  | Postretirement |
(In millions) |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Prior service credit |  | $ | 3 |  |  | $ | (4 | ) |  | $ | — |  |  | $ | — |
Obligations and funded status Actuarial valuations are performed for the pension and other postretirement benefit plans to determine Ashland’s obligation for each plan. In accordance with U.S. GAAP, Ashland recognizes the unfunded status of the plans as a liability in the Consolidated Balance Sheets. Summaries of the change in benefit obligations, plan assets, funded status of the plans, amounts recognized in the balance sheet, and assumptions used to determine the benefit obligations for 2019 and 2018 are as follows.
|  |  |  |  |  |  |  |  |  | Other postretirement |
|  | Pension plans |  |  | benefit plans |
(In millions) |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Change in benefit obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligations at October 1 |  | $ | 404 |  |  | $ | 428 |  |  | $ | 58 |  |  | $ | 62 |
Service cost |  |  | 5 |  |  |  | 8 |  |  |  | 1 |  |  |  | 1 |
Interest cost |  |  | 10 |  |  |  | 10 |  |  |  | 2 |  |  |  | 1 |
Participant contributions |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Benefits paid |  |  | (16 | ) |  |  | (14 | ) |  |  | (2 | ) |  |  | (6 | )
Actuarial (gain) loss |  |  | 65 |  |  |  | (14 | ) |  |  | (7 | ) |  |  | — |
Curtailments |  |  | (18 | ) |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency exchange rate changes |  |  | (18 | ) |  |  | (6 | ) |  |  | — |  |  |  | — |
Other |  |  | (1 | ) |  |  | (1 | ) |  |  | — |  |  |  | — |
Settlements |  |  | (27 | ) |  |  | (8 | ) |  |  | — |  |  |  | — |
Benefit obligations at September 30 |  | $ | 405 |  |  | $ | 404 |  |  | $ | 52 |  |  | $ | 58 |
Change in plan assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Value of plan assets at October 1 |  | $ | 341 |  |  | $ | 349 |  |  | $ | — |  |  | $ | — |
Actual return on plan assets |  |  | 50 |  |  |  | 10 |  |  |  | — |  |  |  | — |
Employer contributions |  |  | 5 |  |  |  | 9 |  |  |  | — |  |  |  | — |
Participant contributions |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Benefits paid |  |  | (16 | ) |  |  | (14 | ) |  |  | — |  |  |  | — |
Foreign currency exchange rate changes |  |  | (15 | ) |  |  | (6 | ) |  |  | — |  |  |  | — |
Settlements |  |  | (27 | ) |  |  | (8 | ) |  |  | — |  |  |  | — |
Other |  |  | (2 | ) |  |  | — |  |  |  | — |  |  |  | — |
Value of plan assets at September 30 |  | $ | 337 |  |  | $ | 341 |  |  | $ | — |  |  | $ | — |
Unfunded status of the plans |  | $ | (68 | ) |  | $ | (63 | ) |  | $ | (52 | ) |  | $ | (58 | )
Amounts recognized in the balance sheet |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noncurrent benefit assets |  | $ | 33 |  |  | $ | 35 |  |  | $ | — |  |  | $ | — |
Current benefit liabilities |  |  | (3 | ) |  |  | (3 | ) |  |  | (3 | ) |  |  | (4 | )
Noncurrent benefit liabilities |  |  | (98 | ) |  |  | (95 | ) |  |  | (49 | ) |  |  | (54 | )
Net amount recognized |  | $ | (68 | ) |  | $ | (63 | ) |  | $ | (52 | ) |  | $ | (58 | )
Weighted-average plan assumptions |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  |  | 1.96 | % |  |  | 2.97 | % |  |  | 3.11 | % |  |  | 4.24 | %
Rate of compensation increase |  |  | 2.52 | % |  |  | 2.53 | % |  |  |  |  |  |  |  |
The accumulated benefit obligation for all pension plans was $400 million at September 30, 2019 and $394 million at September 30, 2018. All Ashland pension plans are either qualified U.S. or non-US plans. Information for pension plans with an accumulated benefit obligation in excess of plan assets follows:
(In millions) |  | 2019 |  |  | 2018 |
Projected benefit obligation |  | $ | 207 |  |  | $ | 227 |
Accumulated benefit obligation |  |  | 202 |  |  |  | 217 |
Fair value of plan assets |  |  | 106 |  |  |  | 129 |
Plan assets The expected long-term rate of return on pension plan assets was 3.44% and 3.36% for 2019 and 2018, respectively. The basis for determining the expected long-term rate of return is a combination of future return assumptions for various asset classes in Ashland’s investment portfolio, historical analysis of previous returns, market indices and a projection of inflation. The following table summarizes the various investment categories that the pension plan assets are invested in and the applicable fair value hierarchy that the financial instruments are classified within these investment categories as of September 30, 2019. For additional information and a detailed description of each level within the fair value hierarchy, see Note G.
|  |  |  |  |  | Quoted prices |  |  |  |  |  |  |  |  |
|  |  |  |  |  | in active |  |  | Significant |  |  |  |  |
|  |  |  |  |  | markets for |  |  | other |  |  | Significant |
|  |  |  |  |  | identical |  |  | observable |  |  | unobservable |
|  | Total fair |  |  | assets |  |  | inputs |  |  | inputs |
(In millions) |  | value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash and cash equivalents |  | $ | 5 |  |  | $ | 5 |  |  | $ | — |  |  | $ | — |
U.S. Government securities |  |  | 29 |  |  |  | — |  |  |  | 29 |  |  |  | — |
Non-U.S. Government securities |  |  | 73 |  |  |  | — |  |  |  | 73 |  |  |  | — |
Corporate debt instruments |  |  | 145 |  |  |  | — |  |  |  | 145 |  |  |  | — |
Listed real assets |  |  | 11 |  |  |  | — |  |  |  | 11 |  |  |  | — |
Asset-backed securities |  |  | 22 |  |  |  | — |  |  |  | 22 |  |  |  | — |
Corporate stocks |  |  | 29 |  |  |  | — |  |  |  | 29 |  |  |  | — |
Insurance contracts |  |  | 23 |  |  |  | — |  |  |  | 23 |  |  |  | — |
Total assets at fair value |  | $ | 337 |  |  | $ | 5 |  |  | $ | 332 |  |  | $ | — |
The following table summarizes the various investment categories that the pension plan assets are invested in and the applicable fair value hierarchy that the financial instruments are classified within these investment categories as of September 30, 2018.
|  |  |  |  |  | Quoted prices |  |  |  |  |  |  |  |  |
|  |  |  |  |  | in active |  |  | Significant |  |  |  |  |
|  |  |  |  |  | markets for |  |  | other |  |  | Significant |
|  |  |  |  |  | identical |  |  | observable |  |  | unobservable |
|  | Total fair |  |  | assets |  |  | inputs |  |  | inputs |
(In millions) |  | value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash and cash equivalents |  | $ | 6 |  |  | $ | 6 |  |  | $ | — |  |  | $ | — |
U.S. Government securities |  |  | 19 |  |  |  | — |  |  |  | 19 |  |  | $ | — |
Non-U.S. Government securities |  |  | 56 |  |  |  | — |  |  |  | 56 |  |  |  | — |
Corporate debt instruments |  |  | 147 |  |  |  | — |  |  |  | 147 |  |  |  | — |
Listed real assets |  |  | 10 |  |  |  | — |  |  |  | 10 |  |  |  | — |
Asset-backed securities |  |  | 22 |  |  |  | — |  |  |  | 22 |  |  |  | — |
Corporate stocks |  |  | 31 |  |  |  | — |  |  |  | 31 |  |  |  | — |
Insurance contracts |  |  | 50 |  |  |  | — |  |  |  | 50 |  |  |  | — |
Total assets at fair value |  | $ | 341 |  |  | $ | 6 |  |  | $ | 335 |  |  | $ | — |
Ashland’s pension plan holds a variety of investments designed to diversify risk. Investments classified as a Level 1 fair value measure principally represent marketable securities priced in active markets. Cash and cash equivalents and public equity and debt securities are well diversified and invested in U.S. and international small-to-large companies across various asset managers and styles. Investments classified as a Level 2 fair value measure principally represents fixed-income securities and other investment grade corporate bonds and debt obligations. Investments and Strategy In developing an investment strategy for its defined benefit plans, Ashland has considered the following factors: the nature of the plans’ liabilities, the allocation of liabilities between active, deferred and retired members, the funded status of the plans, the applicable investment horizon, the respective size of the plans and historical and expected capital market returns. Ashland’s U.S. pension plan assets are managed by outside investment managers, which are monitored against investment return benchmarks and Ashland’s established investment strategy. Investment managers are selected based on an analysis of, among other things, their investment process, historical investment results, frequency of management turnover, cost structure and assets under management. Assets are periodically reallocated between investment managers to maintain an appropriate asset mix and diversification of investments and to optimize returns. The current target asset allocation for the U.S. plans is 49% fixed income securities, 38% equity securities and 13% other securities. Fixed income securities primarily includes cash and cash equivalents, long duration corporate debt obligations and U.S. government debt obligations. In addition, Ashland’s non-U.S. plan fixed income securities include insurance contracts. Equity securities are comprised solely of traditional public equity investments. Investment managers may employ a limited use of derivatives to gain efficient exposure to markets. Ashland’s investment strategy and management practices relative to plan assets of non-U.S. plans generally are consistent with those for U.S. plans, except in those countries where investment of plan assets is dictated by applicable regulations. Although the investment allocation may vary based on funding percentages and whether plans are still accruing additional liabilities, the weighted-average asset allocations for Ashland’s U.S. and non-U.S. plans at September 30, 2019 and 2018 by asset category follow.
|  |  |  | Actual at September 30 |
(In millions) |  | Target |  | 2019 |  |  | 2018 |
Plan assets allocation |  |  |  |  |  |  |  |  |  |
Equity securities |  | 5 - 45% |  |  | 9 | % |  |  | 9 | %
Fixed income securities |  | 55 - 95% |  |  | 88 | % |  |  | 88 | %
Other |  | 0 - 5% |  |  | 3 | % |  |  | 3 | %
|  |  |  |  | 100 | % |  |  | 100 | %
Cash flows During 2019 and 2018, Ashland contributed $1 million to its U.S. pension plans each year and $4 million and $8 million, respectively, to its non-U.S. pension plans. Ashland expects to contribute approximately $1 million to its U.S. pension plans and $5 million to its non-U.S. pension plans during 2020. The following benefit payments, which reflect future service expectations, are projected to be paid from plan assets in each of the next five years and in aggregate for five years thereafter.
|  |  |  |  |  | Other |
|  | Pension |  |  | postretirement |
(In millions) |  | benefits |  |  | benefits |
2020 |  | $ | 18 |  |  | $ | 3 |
2021 |  |  | 18 |  |  |  | 3 |
2022 |  |  | 18 |  |  |  | 3 |
2023 |  |  | 19 |  |  |  | 4 |
2024 |  |  | 19 |  |  |  | 4 |
2025 - 2029 |  |  | 99 |  |  |  | 18 |
Other plans Ashland sponsors savings plans to assist eligible employees in providing for retirement or other future needs. Under such plans, company contributions amounted to $26 million in 2019, $25 million in 2018 and $26 million in 2017. Ashland also sponsors various other employee benefit plans, some of which are required by different countries. The total noncurrent liabilities associated with these plans were $3 million and $7 million as of September 30, 2019 and 2018, respectively.

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