United states securities and exchange commission

Other Postretirement Benefit Plans

Dow

Dow provides certain health care and life insurance benefits to retired employees and survivors. Dow’s plans outside of the United States are not significant; therefore, this discussion relates to the U.S. plans only. The plans provide health care benefits, including hospital, physicians’ services, drug and major medical expense coverage, and life insurance benefits. In general, for employees hired before January 1, 1993, the plans provide benefits supplemental to Medicare when retirees are eligible for these benefits. Dow and the retiree share the cost of these benefits, with the Dow portion increasing as the retiree has increased years of credited service, although there is a cap on the Dow portion. Dow has the ability to change these benefits at any time. Employees hired after January 1, 2008, are not covered under the plans.

Dow funds most of the cost of these health care and life insurance benefits as incurred. In 2017, Dow did not make any contributions to its other postretirement benefit plan trusts. The trusts did not hold assets at December 31, 2017. Dow does not expect to contribute assets to its other postretirement benefit plan trusts in 2018.
DuPont

DuPont provides medical, dental and life insurance benefits to pensioners and survivors. The associated plans for retiree benefits are unfunded and the cost of the approved claims is paid from DuPont company funds. Essentially all of the cost and liabilities for these retiree benefit plans are attributable to the U.S. benefit plans. The non-Medicare eligible retiree medical plan is contributory with pensioners and survivors' contributions adjusted annually to achieve a 50/50 target for sharing of cost increases between DuPont and pensioners and survivors. In addition, limits are applied to DuPont's portion of the retiree medical cost coverage. For Medicare eligible pensioners and survivors, DuPont provides a DuPont-funded Health Reimbursement Arrangement ("HRA"). In November 2016, DuPont announced that OPEB eligible employees who will be under the age of 50 as of November 30, 2018, as defined above, will not receive postretirement medical, dental and life insurance benefits. Beginning January 1, 2015, eligible employees who retire on and after that date will receive the same life insurance benefit payment, regardless of the employee's age or pay. The majority of U.S. employees hired on or after January 1, 2007, are not eligible to participate in the postretirement medical, dental and life insurance plans.

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The weighted-average assumptions used to determine other postretirement benefit obligations and net periodic benefit costs for the U.S. plans are provided below:

Weighted-Average Assumptions for U.S. Other Postretirement Benefits Plans		Benefit Obligations  at Dec 31				Net Periodic Costs for the Year Ended
		2017		2016		2017 1		2016		2015
Discount rate		3.54	%	3.83	%	3.76	%	3.96	%	3.68	%
Health care cost trend rate assumed for next year		6.52	%	7.00	%	7.00	%	7.25	%	7.06	%
Rate to which the cost trend rate is assumed to decline (the ultimate health cost care trend rate)		5.00	%	5.00	%	5.00	%	5.00	%	5.00	%
Year that the rate reaches the ultimate health care cost trend rate:
Dow plans		2025		2025		2025		2025		2020
DuPont plans		2023				2023
1.	Includes DuPont plans subsequent to the Merger date.

Assumed health care cost trend rates have a modest effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have an immaterial impact on service and interest cost and the postretirement benefit obligation.

Assumptions

Dow and DuPont determine the expected long-term rate of return on plan assets by performing a detailed analysis of key economic and market factors driving historical returns for each asset class and formulating a projected return based on factors in the current environment. Factors considered include, but are not limited to, inflation, real economic growth, interest rate yield, interest rate spreads, and other valuation measures and market metrics. The expected long-term rate of return for each asset class is then weighted based on the strategic asset allocation approved by the governing body for each plan. Dow and DuPont historical experience with the pension fund asset performance is also considered.

Effective January 1, 2016, Dow 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 for the U.S. and other selected countries. DuPont also adopted the spot rate approach for its U.S. plans. Under the spot rate approach, Dow and DuPont calculate service costs and interest costs by applying individual spot rates from a yield curve (based on high-quality corporate bond yields) for each selected country to the separate expected cash flow components of service cost and interest cost. Service cost and interest cost for all other plans are determined on the basis of the single equivalent discount rates derived in determining those plan obligations. Dow and DuPont changed to the new method to provide a more precise measure of interest and service costs for certain plans by improving the correlation between projected benefit cash flows and the discrete spot yield curves. The change in accounting estimate was applied prospectively starting in 2016.
The discount rates utilized to measure the pension and other postretirement obligations of the U.S. plans are based on the yield on high-quality corporate fixed income investments at the measurement date. Future expected actuarially determined cash flows are individually discounted at spot rates under the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve for Dow's plans and under the Aon Hewitt AA_Above Median yield curve for DuPont's plans to arrive at the plan's obligations as of the measurement date.
Dow utilizes the Society of Actuaries’ ("SOA") 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. DuPont adopted the mortality tables released by SOA in 2014 and the most recent available SOA mortality improvement scale in measuring its U.S. pension and other postretirement obligations.

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

Change in Projected Benefit Obligations, Plan Assets and Funded Status of All Significant Plans			Defined Benefit Pension Plans						Other Postretirement Benefits
In millions			2017 1			2016			2017 1			2016
Change in projected benefit obligations:
Benefit obligations at beginning of year			$	30,280		$	25,652		$	1,835		$	1,597
Merger impact 2			26,036			—			2,772			—
Service cost			555			463			17			13
Interest cost			1,130			846			80			52
Plan participants' contributions			20			19			—			—
Actuarial changes in assumptions and experience			1,781			1,967			(130		)	13
Benefits paid 3			(2,170		)	(1,324		)	(210		)	(154		)
Plan amendments			14			—			—			—
Acquisitions/divestitures/other 4			72			3,201			—			313
Effect of foreign exchange rates			875			(506		)	13			1
Termination benefits/curtailment cost/settlements 5			(1,192		)	(38		)	—			—
Benefit obligations at end of year			$	57,401		$	30,280		$	4,377		$	1,835
Change in plan assets:
Fair value of plan assets at beginning of year			$	21,208		$	18,774		$	—		$	—
Merger impact 2			20,395			—			—			—
Actual return on plan assets			3,049			1,437			—			—
Employer contributions			1,744			629			—			—
Plan participants' contributions			20			19			—			—
Benefits paid 3			(2,170		)	(1,324		)	—			—
Acquisitions/divestitures/other 6			14			2,077			—			—
Effect of foreign exchange rates			613			(404		)	—			—
Settlements 7			(1,188		)	—			—			—
Fair value of plan assets at end of year			$	43,685		$	21,208		$	—		$	—
Funded status:
U.S. plans with plan assets 8			$	(8,991	)	$	(5,122	)	$	—		$	—
Non-U.S. plans with plan assets 8			(2,780		)	(2,474		)	—			—
All other plans 8, 9			(1,945		)	(1,476		)	(4,377		)	(1,835		)
Funded status at end of year			$	(13,716	)	$	(9,072	)	$	(4,377	)	$	(1,835	)
1.		Includes DuPont activity subsequent to the Merger Date.
2.	Plan assets and liabilities assumed in the Merger. Represents remeasurement of the projected benefit obligation and fair value of plan assets for DuPont's plans as of the Merger date.
3.	In the fourth quarter 2017, approximately $140 million of lump-sum payments were made from DuPont's U.S. qualified pension plan trust fund to a group of separated, vested plan participants who were extended a limited-time opportunity and voluntarily elected to receive their pension benefits in a single lump-sum payment.
4.	The 2017 impact includes the reclassification of a China pension liability of $69 million from "Other noncurrent obligations" to "Pension and other postretirement benefits - noncurrent" and the divestiture of a Korean company with pension benefit obligations of $25 million . The 2016 impact includes pension benefit obligations of $3,252 million and other postretirement benefit obligations of $313 million assumed with the ownership restructure of Dow Corning. The 2016 impact also includes the transfer of benefit obligations of $53 million in the U.S. through the purchase of annuity contracts from an insurance company. See Note 3 for additional information.
5.	The 2017 impact includes the settlement of certain plan obligations for a Dow U.S. non-qualified pension plan of $1,170 million required due to a change in control provision. The 2017 impact also includes the conversion of a Korean pension plan of $22 million to a defined contribution plan. The 2016 impact primarily relates to the curtailment of benefits for certain participants of a U.S. Dow Corning plan of $36 million .
6.	The 2017 impact relates to the divestiture of a Korean company. The 2016 impact includes plan assets assumed with the ownership restructure of Dow Corning of $2,327 million . The 2016 impact also includes the purchase of annuity contracts of $55 million in the U.S. associated with the transfer of benefit obligations to an insurance company and the transfer of plan assets associated with the Reverse Morris Trust transaction with Olin of $184 million . See Notes 3 and 6 for additional information.
7.	The 2017 impact includes payments made of $1,170 million to settle certain plan obligations of a Dow U.S. non-qualified pension plan required due to a change in control provision. The 2017 impact also includes payments made of $18 million to convert a Korean pension plan to a defined contribution plan.
8.		Updated to conform with the current year presentation.
9.	As of December 31, 2017, $389 million of the benefit obligations are supported by funding under the Trust agreement, defined in the "Trust Assets" section below.