Financial Information
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PART II
Item 8. Financial Statements and Supplementary Data.
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. PENSION AND OTHER POSTRETIREMENT BENEFITS
We sponsor numerous funded and unfunded domestic and international defined benefit pension plans. All defined benefit plans covering U.S. employees are frozen, meaning that employees do not accrue additional benefits. Certain plans covering non-U.S. employees remain active. We also sponsor the Starwood Retiree Welfare Program, which provides health care and life insurance benefits for certain eligible retired employees.
Effective December 7, 2015, the trustees of certain of our international pension plans located in the U.K. entered into a “Buy-In” agreement with Legal & General Assurance Society Limited (“LGAS”) to transfer the benefit obligations under these plans to LGAS. We expect that certain of these plans will move from a “Buy-in” to a “Buy-out” status during 2018, at which point we will complete the transfer of the benefit obligations to LGAS.
The following tables show changes in plan assets and accumulated benefit obligations and the funded status of our defined benefit pension and other postretirement benefit plans at year-end 2017 and 2016:
(1) Beginning balances in 2016 represent assets acquired and liabilities assumed on the Merger Date.
The following table shows the classification of overfunded and (underfunded) amounts in our Balance Sheets at year-end 2017 and 2016:
The following table shows the benefit obligations for pension plans with accumulated benefit obligations that exceed the fair value of plan assets:
Domestic Pension Benefits Foreign Pension Benefits
The weighted average assumptions used to determine benefit obligations at year-end 2017 and 2016 were as follows:
(1) Rate of compensation increase is not applicable to domestic pension benefits as all domestic plans are frozen and do not accrue additional benefits, or to other postretirement benefits as it is not an input in the benefit obligation determination.
Our investment objectives for plan assets are to minimize asset value volatility and to ensure the assets are sufficient to pay plan benefits. The target asset allocation is 31% debt securities, 31% equity securities, and 38% other. We consider several factors in assessing the expected return on plan assets, including current and expected allocation of plan assets, investment strategy, historical rates of return and our expectations, as well as investment expert expectations, for investment performance over approximately a ten-year period.
The following tables present our fair value hierarchy of plan assets at year-end 2017 and 2016:
The collective trust assets include investments in insurance contracts, which we valued using significant unobservable inputs, including plan specific data and bond interest rates. We value all other assets using quoted market prices in active markets or other observable inputs.
The following table shows our expected future pension and other postretirement benefit plan payments for the next ten years:
