| RETIREMENT AND EMPLOYEE BENEFIT PLANS 401(k) Defined Contribution Plan The Company has a 401(k) defined contribution plan covering eligible employees. The Company expensed $2 million, $3 million and $3 million of contribution expense in 2019, 2018 and 2017, respectively. Additionally, the Company capitalized $1 million of contributions in 2019 and $2 million in both 2018 and 2017, directly related to the acquisition, exploration and development activities of the Company’s natural gas and oil properties or directly related to the construction of the Company’s gathering systems. Defined Benefit Pension and Other Postretirement Plans Prior to January 1, 1998, the Company maintained a traditional defined benefit plan with benefits payable based upon average final compensation and years of service. Effective January 1, 1998, the Company amended its pension plan to become a “cash balance” plan on a prospective basis for its non-bargaining employees. A cash balance plan provides benefits based upon a fixed percentage of an employee’s annual compensation. The Company’s funding policy is to contribute amounts which are actuarially determined to provide the plans with sufficient assets to meet future benefit payment requirements and which are tax deductible. The postretirement benefit plan provides contributory health care and life insurance benefits. Employees become eligible for these benefits if they meet age and service requirements. Generally, the benefits paid are a stated percentage of medical expenses reduced by deductibles and other coverages. Substantially all of the Company’s employees are covered by the defined benefit pension and postretirement benefit plans. The Company accounts for its defined benefit pension and other postretirement plans by recognizing the funded status of each defined pension benefit plan and other postretirement benefit plan on the Company’s balance sheet. In the event a plan is overfunded, the Company recognizes an asset. Conversely, if a plan is underfunded, the Company recognizes a liability. In June 2018, the Company notified affected employees of a workforce reduction plan, which resulted primarily from a previously announced study of structural, process and organizational changes to enhance shareholder value. In December 2018, the Company closed the sale of the equity in certain of its subsidiaries that owned and operated its Fayetteville Shale E&P and related midstream gathering assets in Arkansas. As part of this transaction, many employees associated with those assets were either transferred to the buyer or their employment was terminated. As a result of the restructurings, the Company recognized a curtailment on its pension and other postretirement benefit plans and recognized a non-cash gain of $4 million on its consolidated statements of operations for the year ended December 31, 2018. In 2019, the Company recognized a $6 million non-cash settlement loss related to $21 million of lump sum payments as a result of these restructuring events. The following provides a reconciliation of the changes in the plans’ benefit obligations, fair value of assets and funded status as of December 31, 2019 and 2018: | | | | | | | | | | | | | | | | | | | | | | | | | | Pension Benefits | | | | Other Postretirement Benefits | | | | (in millions) | 2019 | | 2018 | | 2019 | | 2018 | | Change in benefit obligations: | | | | | | | | | Benefit obligation at January 1 | $ | 125 | | | $ | 143 | | | $ | 13 | | | $ | 17 | | | Service cost | 7 | | | 10 | | | 1 | | | 2 | | | Interest cost | 5 | | | 5 | | | — | | | 1 | | | Participant contributions | — | | | — | | | — | | | — | | | Actuarial (gain) loss | 15 | | | (14) | | | 1 | | | — | | | Benefits paid | (2) | | | (14) | | | (2) | | | (1) | | | Plan amendments | — | | | — | | | — | | | — | | | Curtailments | — | | | (5) | | | — | | | (6) | | | Settlements | (24) | | | — | | | — | | | — | | | Benefit obligation at December 31 | $ | 126 | | | $ | 125 | | | $ | 13 | | | $ | 13 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Pension Benefits | | | | Other Postretirement Benefits | | | | (in millions) | 2019 | | 2018 | | 2019 | | 2018 | | Change in plan assets: | | | | | | | | | Fair value of plan assets at January 1 | $ | 91 | | | $ | 101 | | | $ | — | | | $ | — | | | Actual return on plan assets | 16 | | | (8) | | | — | | | — | | | Employer contributions | 12 | | | 12 | | | 2 | | | 1 | | | Participant contributions | — | | | — | | | — | | | — | | | Benefits paid | (2) | | | (14) | | | (2) | | | (1) | | | Settlements | (21) | | | — | | | — | | | — | | | Fair value of plan assets at December 31 | $ | 96 | | | $ | 91 | | | $ | — | | | $ | — | | | | | | | | | | | | Funded status of plans at December 31 | $ | (30) | | | $ | (34) | | | $ | (13) | | | $ | (13) | |
The Company uses a December 31 measurement date for all of its plans and had liabilities recorded for the underfunded status for each period as presented above. The pension plans’ projected benefit obligation, accumulated benefit obligation and fair value of plan assets as of December 31, 2019 and 2018 are as follows: | | | | | | | | | | | | | (in millions) | 2019 | | 2018 | | Projected benefit obligation | $ | 126 | | | $ | 125 | | | Accumulated benefit obligation | 124 | | | 122 | | | Fair value of plan assets | 96 | | | 91 | |
Pension and other postretirement benefit costs include the following components for 2019, 2018 and 2017: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pension Benefits | | | | | | Other Postretirement Benefits | | | | | | (in millions) | 2019 | | 2018 | | 2017 | | 2019 | | 2018 | | 2017 | | Service cost | $ | 7 | | | $ | 10 | | | $ | 9 | | | $ | 1 | | | $ | 2 | | | $ | 2 | | | Interest cost | 5 | | | 5 | | | 5 | | | — | | | 1 | | | — | | | Expected return on plan assets | (6) | | | (7) | | | (6) | | | — | | | — | | | — | | | Amortization of transition obligation | — | | | — | | | — | | | — | | | — | | | — | | | Amortization of prior service cost | — | | | — | | | — | | | — | | | — | | | — | | | Amortization of net loss | 2 | | | 2 | | | 2 | | | — | | | — | | | — | | | Net periodic benefit cost | 8 | | | 10 | | | 10 | | | 1 | | | 3 | | | 2 | | | Curtailment gain | — | | | — | | | — | | | — | | | (4) | | | — | | | Settlement loss | 6 | | | — | | | — | | | — | | | — | | | — | | | Total benefit cost (benefit) | $ | 14 | | | $ | 10 | | | $ | 10 | | | $ | 1 | | | $ | (1) | | | $ | 2 | |
Service cost is classified as general and administrative expenses on the consolidated statements of operations. All other components of total benefit cost (benefit) are classified as other income (loss), net on the consolidated statements of operations. Amounts recognized in other comprehensive income for the years ended December 31, 2019 and 2018 were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | Pension Benefits | | | | Other Postretirement Benefits | | | | (in millions) | 2019 | | 2018 | | 2019 | | 2018 | | Net actuarial loss arising during the year | $ | (5) | | | $ | (2) | | | $ | (1) | | | $ | — | | | Amortization of prior service cost | — | | | — | | | — | | | — | | | Amortization of net loss | 2 | | | 2 | | | — | | | — | | | Settlements | 8 | | | — | | | — | | | — | | | Curtailments | — | | | 5 | | | — | | | 3 | | Tax effect (1) | (1) | | | (1) | | | — | | | (1) | | | | $ | 4 | | | $ | 4 | | | $ | (1) | | | $ | 2 | |
(1)For the year ended December 31, 2018, deferred tax activity related to pension and other postretirement benefits was offset by a valuation allowance, resulting in no tax expense presented on the consolidated statements of operations. Included in accumulated other comprehensive income as of December 31, 2019 and 2018 was a $30 million loss ($22 million net of tax) and a $34 million loss ($20 million net of tax), respectively, related to the Company’s pension and other postretirement benefit plans. For the year ended December 31, 2019, $3 million was classified from accumulated other comprehensive income, primarily driven by settlement losses. Amortization of prior period service cost reclassified from accumulated other comprehensive income to general and administrative expenses for the year was immaterial. The amount in accumulated other comprehensive income that is expected to be recognized as a component of net periodic benefit cost during 2020 is a $1 million expense. | | | | | | | | | | | | | | | | | | | | | | | | | | Pension Benefits | | | | Other Postretirement Benefits | | | | | 2019 | | 2018 | | 2019 | | 2018 | | Discount rate | 3.70 | % | | 4.35 | % | | 3.50 | % | | 4.35 | % | | Rate of compensation increase | 3.50 | % | | 3.50 | % | | n/a | | n/a |
The assumptions used in the measurement of the Company’s net periodic benefit cost for 2019, 2018 and 2017 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pension Benefits | | | | | | Other Postretirement Benefits | | | | | | | 2019 | | 2018 | | 2017 | | 2019 | | 2018 | | 2017 | | Discount rate | 3.70 | % | | 4.35 | % | | 4.20 | % | | 4.35 | % | | 4.35 | % | | 4.20 | % | | Expected return on plan assets | 7.00 | % | | 7.00 | % | | 7.00 | % | | n/a | | n/a | | n/a | | Rate of compensation increase | 3.50 | % | | 3.50 | % | | 3.50 | % | | n/a | | n/a | | n/a |
The expected return on plan assets for the various benefit plans is based upon a review of the historical returns experienced, combined with the future expected returns based upon the asset allocation strategy employed. The plans seek to achieve an adequate return to fund the obligations in a manner consistent with the federal standards of the Employee Retirement Income Security Act and with a prudent level of diversification. For measurement purposes, the following trend rates were assumed for 2019 and 2018: | | | | | | | | | | | | | | 2019 | | 2018 | | Health care cost trend assumed for next year | 7 | % | | 7 | % | | Rate to which the cost trend is assumed to decline | 5 | % | | 5 | % | | Year that the rate reaches the ultimate trend rate | 2037 | | 2036 |
Assumed health care cost trend rates have a significant effect on the amounts for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects: | | | | | | | | | | | | | (in millions) | 1% Increase | | 1% Decrease | | Effect on the total service and interest cost components | $ | 2 | | | $ | (1) | | | Effect on postretirement benefit obligations | $ | 2 | | | $ | (2) | |
Pension Payments and Asset Management In 2019, the Company contributed $12 million to its pension plans and $2 million to its other postretirement benefit plan. The Company expects to contribute $13 million to its pension and other postretirement benefit plans in 2020. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: | | | | | | | | | | | | | | | | | | | Pension Benefits | | | Other Postretirement Benefits | | | | (in millions) | | | | | | | 2020 | $ | 5 | | | 2020 | | $ | 1 | | | 2021 | 5 | | | 2021 | | 1 | | | 2022 | 6 | | | 2022 | | 1 | | | 2023 | 6 | | | 2023 | | 1 | | | 2024 | 7 | | | 2024 | | 1 | | | Years 2025-2029 | 34 | | | Years 2025-2029 | | 5 | |
The Company’s overall investment strategy is to provide an adequate pool of assets to support both the long-term growth of plan assets and to ensure adequate liquidity exists for the near-term payment of benefit obligations to participants, retirees and beneficiaries. The Benefits Administration Committee of the Company, appointed by the Compensation Committee of the Board of Directors, administers the Company’s pension plan assets. The Benefits Administration Committee believes long-term investment performance is a function of asset-class mix and restricts the composition of pension plan assets to a combination of cash and cash equivalents, domestic equity markets, international equity markets or investment grade fixed income assets. The table below presents the allocations targeted by the Benefits Administration Committee and the actual weighted-average asset allocation of the Company’s pension plan as of December 31, 2019, by asset category. The asset allocation targets are subject to change and the Benefits Administration Committee allows for its actual allocations to deviate from target as a result of current and anticipated market conditions. Plan assets are periodically balanced whenever the allocation to any asset class falls outside of the specified range. | | | | | | | | | | | | | | Pension Plan Asset Allocations | | | | Asset category: | Target | | Actual | | Equity securities: | | | | U.S. equity (1) | 35 | % | | 34 | % | Non-U.S. equity (2) | 35 | % | | 33 | % | | | | | Fixed income (3) | 28 | % | | 31 | % | Cash (4) | 2 | % | | 2 | % | | Total | 100 | % | | 100 | % |
(1)Includes the following equity securities in the table below: U.S. large cap growth equity, U.S. large cap value equity, U.S. large cap core equity, and U.S. small cap equity. (2)Includes Non-U.S. equity securities in the table below. (3)Includes fixed income pension plan assets in the table below. (4)Includes Cash and cash equivalent pension plan assets in the table below. | | | | | | | | | | | | | | | | | | | | | | | | | (in millions) | Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Measured within fair value hierarchy | | | | | | | | | Equity securities: | | | | | | | | U.S. large cap growth equity (1) | $ | 3 | | | $ | 3 | | | $ | — | | | $ | — | | U.S. large cap value equity (2) | 6 | | | 6 | | | — | | | — | | U.S. small cap equity (3) | 2 | | | 2 | | | — | | | — | | Non-U.S. equity (4) | 32 | | | 32 | | | — | | | — | | | | | | | | | | Fixed income (6) | 22 | | | 22 | | | — | | | — | | | Cash and cash equivalents | 2 | | | 2 | | | — | | | — | | | Total measured within fair value hierarchy | $ | 67 | | | $ | 67 | | | $ | — | | | $ | — | | Measured at net asset value (8) | | | | | | | | | Equity securities: | | | | | | | | U.S. large cap growth equity (9) | 3 | | | | | | | | U.S. large cap core equity (10) | 18 | | | | | | | | Fixed income (6) | 8 | | | | | | | | | Total measured at net asset value | $ | 29 | | | | | | | | | | | | | | | | | | Total plan assets at fair value | $ | 96 | | | | | | | |
Note: Footnotes are located after the prior year comparative table below. | | | | | | | | | | | | | | | | | | | | | | | | | (in millions) | Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Measured within fair value hierarchy | | | | | | | | | Equity securities: | | | | | | | | U.S. large cap growth equity (1) | $ | 5 | | | $ | 5 | | | $ | — | | | $ | — | | U.S. large cap value equity (2) | 5 | | | 5 | | | — | | | — | | U.S. small cap equity (3) | 2 | | | 2 | | | — | | | — | | Non-U.S. equity (4) | 20 | | | 20 | | | — | | | — | | Emerging markets equity (5) | 3 | | | 3 | | | — | | | — | | Fixed income (6) | 14 | | | 14 | | | — | | | — | | Cash and cash equivalents (7) | 23 | | | 23 | | | — | | | — | | | Total measured within fair value hierarchy | $ | 72 | | | $ | 72 | | | $ | — | | | $ | — | | Measured at net asset value (8) | | | | | | | | | Equity securities: | | | | | | | | U.S. large cap core equity (10) | 12 | | | | | | | | Fixed income (6) | 7 | | | | | | | | | Total measured at net asset value | $ | 19 | | | | | | | | | | | | | | | | | | Total plan assets at fair value | $ | 91 | | | | | | | |
(1)Mutual fund that seeks to invest in a diversified portfolio of stocks with price appreciation growth opportunities. (2)Mutual fund that seeks to invest in a diversified portfolio of stocks that will increase in value over the long-term as well as provide current income. (3)Mutual fund that seeks to invest in a diversified portfolio of stocks with small market capitalizations. (4)Mutual funds that invest primarily in equity securities of companies domiciled outside of the United States, primarily in developed markets. (5)An institutional fund that invests primarily in the equity securities of companies domiciled in emerging markets. (6)Institutional funds that seek an investment return that approximates, as closely as practicable, before expenses, the performance of the Barclays U.S. Intermediate Credit Bond Index over the long term and the Barclays Long U.S. Corporate Bond Index over the long-term. (7)Included approximately $21 million for anticipated lump sum distributions resulting from the Fayetteville Shale sale in December 2018. (8)Plan assets for which fair value was measured using net asset value as a practical expedient. (9)An institutional fund that seeks to invest in companies with sustainable competitive advantages, as identified through proprietary research. (10)An institutional fund that seeks to replicate the performance of the S&P 500 Index before fees. The Company’s pension plan assets that are classified as Level 1 are the investments comprised of either cash or investments in open-ended mutual funds which produce a daily net asset value that is validated with a sufficient level of observable activity to support classification of the fair value measurement as Level 1. Due to the Company’s implementation of Accounting Standards Update No. 2015-07, assets measured using net asset value as a practical expedient have not been classified in the fair value hierarchy. No concentration of risk arising within or across categories of plan assets exists due to any significant investments in a single entity, industry, country or investment fund.
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