10-K
UNION CARBIDE CORP /NEW/ filed this Form 10-K on 02/15/2018
Entire Document
 

Effective January 1, 2016, the Corporation adopted the spot rate approach to determine the discount rate utilized to measure the service cost and interest cost components of net periodic pension and other postretirement benefit costs. Under the spot rate approach, the Corporation calculates service cost and interest cost by applying individual spot rates from the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to the separate expected cash flow components of service cost and interest cost. Prior to 2016, the service and interest cost components were determined based on the single discount rate used to measure the benefit obligation. The Corporation changed to the new method to provide a more precise measure of service and interest costs by improving the correlation between projected benefit cash flows and the discrete spot yield curves. The Corporation accounted for this change as a change in accounting estimate and it was applied prospectively starting in 2016.

The discount rates utilized to measure the pension and other postretirement obligations of the U.S. qualified plans were based on the yield on high-quality corporate fixed income investments at the measurement date. Future expected actuarially determined cash flows for the plans are individually discounted at the spot rates under the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to arrive at the plan’s obligations as of the measurement date.

The Corporation utilizes the Society of Actuaries’ mortality tables released in 2014 and a modified version of the generational mortality improvement scale released in 2014 for purposes of measuring the U.S. pension and other postretirement obligations, based on an evaluation of the mortality experience of its pension plans.

Summarized information on the Corporation's pension and other postretirement benefit plans is as follows:

Change in Projected Benefit Obligations, Plan Assets and Funded Status for all Plans
Defined Benefit
Pension Plans
Other Postretirement Benefits
In millions
2017
2016
2017
2016
Change in projected benefit obligations:
 
 
 
 
Benefit obligation at beginning of year
$
4,025

$
3,993

$
264

$
276

Service cost
38

39

1

1

Interest cost
129

131

8

8

Actuarial changes in assumptions and experience
241

155

(23
)
4

Benefits paid
(281
)
(285
)
(26
)
(25
)
Other
(2
)
(8
)


Benefit obligation at end of year
$
4,150

$
4,025

$
224

$
264

 
 
 
 
 
Change in plan assets:
 
 
 
 
Fair value of plan assets at beginning of year
$
3,097

$
3,173

$

$

Actual return on plan assets
331

165



Employer contributions
162

52



Asset transfers
(2
)
(8
)


Benefits paid
(281
)
(285
)


Fair value of plan assets at end of year
$
3,307

$
3,097

$

$

 
 
 
 
 
Funded status at end of year
$
(843
)
$
(928
)
$
(224
)
$
(264
)

Net amounts recognized in the consolidated balance sheets at Dec 31:
 
 
 
 
Accrued and other current liabilities
$
(2
)
$
(2
)
$
(15
)
$
(24
)
Pension and other postretirement benefits - noncurrent

(841
)
(926
)
(209
)
(240
)
Net amount recognized
$
(843
)
$
(928
)
$
(224
)
$
(264
)
 
 
 
 
 
Pretax amounts recognized in accumulated other comprehensive (income) loss at Dec 31:

 
 
 
 
Net loss (gain)
$
2,083

$
2,035

$
(86
)
$
(69
)
Prior service credit
(12
)
(13
)


Pretax balance in accumulated other comprehensive (income) loss at end of year

$
2,071

$
2,022

$
(86
)
$
(69
)

42