STI 2018 Annual Report

Notes to Consolidated Financial Statements, continued 135 Net Periodic Benefit Components of net periodic benefit related to the Company's pension and other postretirement benefits plans for the years ended December 31 are presented in the following table and are recognized in Employee benefits in the Consolidated Statements of Income: Pension Benefits 1 Other Postretirement Benefits (Dollars in millions) 2018 2017 2016 2018 2017 2016 Service cost $6 $5 $5 $— $— $— Interest cost 91 95 97 1 1 2 Expected return on plan assets (187) (195) (186) (5) (5) (5) Amortization of prior service credit — — — (6) (6) (6) Amortization of actuarial loss 22 25 25 — — — Deferred losses related to NCF Retirement Plan settlement 60 — — — — — Other — — — — 9 — Net periodic benefit ($8) ($70) ($59) ($10) ($1) ($9) Weighted average assumptions used to determine net periodic benefit: Discount rate 3.62% 4.18% 4.44% 3.29% 3.70% 3.95% Expected return on plan assets 5.90 6.66 6.68 3.10 3.12 3.13 Interest crediting rate 3.00 3.11 3.00 N/A 2 N/A 2 N/A 2 1 Administrative fees are recognized in service cost for each of the periods presented. 2 Other postretirement benefits plans do not include any plans with promised interest crediting rates; thus the weighted-average interest crediting rate assumption is not applicable ("N/A") for other postretirement benefit plans for all periods presented. Amounts Recognized in AOCI Components of the benefit obligations AOCI balance at December 31 were as follows: Pension Benefits Other Postretirement Benefits (Dollars in millions) 2018 2017 2018 2017 Prior service credit $— $— ($52) ($58) Net actuarial loss/(gain) 978 1,001 (17) (22) Total AOCI, pre-tax $978 $1,001 ($69) ($80) Other changes in plan assets and benefit obligations recognized in AOCI during 2018 were as follows: (Dollars in millions) Pension Benefits Other Postretirement Benefits Current year actuarial loss $59 $5 Amortization of prior service credit — 6 Amortization of actuarial loss (22) — Deferred losses related to NCF Retirement Plan settlement (60) — Total recognized in AOCI, pre-tax ($23) $11 Total recognized in net periodic (benefit)/loss and AOCI, pre-tax ($31) $1 The amortization for net gains and losses reflects a corridor based on 10% of the greater of the projected benefit obligation or the market-related value of assets. The amount of net gains and losses that exceeds the corridor is amortized over a fixed period based on the average remaining lifetime. Plan Assumptions Each year, the SBFC, which includes several members of senior management, reviews and approves the assumptions used in the year-end measurement calculations for each plan. The discount rate for each plan, used to determine the present value of future benefit obligations, is determined by matching the expected cash flows of each plan to a yield curve based on long-term, high quality fixed income debt instruments available as of the measurement date. A series of benefit payments projected to be paid by the plan is developed based on the most recent census data, plan provisions, and assumptions. The benefit payments at each future maturity date are discounted by the year-appropriate spot interest rates. The model then solves for the discount rate that produces the same present value of the projected benefit payments as generated by discounting each year’s payments by the spot interest rate. TheCompany utilizes a full yield curve approach to estimate the service and interest cost components of net periodic benefit expense for pension and other postretirement benefit plans by applying specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. Actuarial gains and losses are created when actual experience deviates from assumptions. The actuarial losses/ (gains) during 2018 and 2017 for the pension plans resulted primarily from asset experience, partially offset by losses due to the decrease in discount rates. The SBFCestablishes investment policies and strategies and formally monitors the performance of the investments throughout the year. The Company’s investment strategy with respect to pension assets is to invest the assets in accordance with ERISA and related fiduciary standards. The long-term primary investment objectives for the pension plans are to provide a commensurate amount of long-term growth of principal and income in order to satisfy the pension plan obligations without