Obligations and Funded Status The following table sets forth the changes in benefit obligations and the fair value of plan assets for our benefit plans (in millions): Year Ended December 31, Benefit obligation at beginning of year' Service cost Interest cost Participant contributions Foreign currency exchange rate changes. Amendments Net actuarial loss (gain) Benefits paid' Business combinations' Divestitures Settlements (11) (932) Curtailments' (63) Special termination benefits' Other -- 7 1 3 Benefit obligation at end of year' S 8,757 $ 8,015 Fair value of plan assets at beginning of year S 7,429 S 8,866 Actual return on plan assets 1,111 (269) Employer contributions 36 107 Participant contributions' 1 1 Foreign currency exchange rate changes (26) (131) Benefits paid (453) Business combinations' Divestitures Settlements (287) 30 (1) (892) Pension Benefits 2019 Other Benefits 2018 2019 2018 $ 8,015 $ 9,469 $ 719 $ 795 104 124 9 291 296 28 1 1 20 (28) (112) (2) (1) 1 931 (470) 71 (537) (358) (86) 60 =Cg - | | | |8ga 25 9 (2) (2) $ 757 $ 719 $ | | 289 $ 288 (5) 9 (3) Other Fair value of plan assets at end of year Net liability recognized (18) $ $ 8,080 $ (677) $ S 7,429 $ (586) $ 339 $ 289 (418) $ (430) For pension benefit plans, the benefit obligation is the projected benefit obligation. For other benefit plans, the benefit obligation is the accumulated postretirement benefit obligation. The accumulated benefit obligation for our pension plans was $8,607 million and $7,867 million as of December 31, 2019 and 2018, respectively. 2 In prior year disclosures, participant contributions were included in the Other line item. Benefits paid to pension plan participants during 2019 and 2018 included S84 million and $71 million, respectively, in payments related to unfunded pension plans that were paid from Company assets. Benefits paid to participants of other benefit plans during 2019 and 2018 included $83 million and $67 million, respectively, that were paid from Company assets. *Business combinations were primarily related to the acquisition of a controlling interest in the Philippine bottling operations in 2018. Refer to Note 2. Settlements, curtailments and special termination benefits were primarily related to our productivity and reinvestment program and the refranchising of certain of our North America bottling operations. Refer to Note 2 and Note 20. Pension and other benefit amounts recognized in our consolidated balance sheets are as follows (in millions): December 31, Other assets Accounts payable and accrued expenses Other liabilities Net liability recognized Pension Benefits 2019 2018 Other Benefits 2019 2018 $ 998 $ (72) (1,603) 813 $ - $ (70) (1,329) (21) (21) (397) (409) $ (677) $ (586) $ (418) $ (430) Certain of our pension plans have projected benefit obligations in excess of the fair value of plan assets. For these plans, the projected benefit obligations and the fair value of plan assets were as follows (in millions): December 31, Projected benefit obligations Fair value of plan assets 2019 2018 $ 7,194 $ 6,562 5,515 5,163 Certain of our pension plans have accumulated benefit obligations in excess of the fair value of plan assets. For these plans, the accumulated benefit obligations and the fair value of plan assets were as follows (in millions): December 31, Accumulated benefit obligations Fair value of plan assels Pension Plan Assets 2019 2018 7,052 $ 5,485 6,451 5,157 The following table presents total assets for our U.S. and non-U.S. pension plans (in millions): December 31, U.S. Plans 2019 Non-U.S. Plans 2018 2019 2018 Cash and cash equivalents Equity securities: 364 S 310 $ 377 $ 173 U.S.-based companies International-based companies Fixed-income securities: Government bonds Corporate bonds and debt securities 1,231 1,116 673 644 770 659 617 462 Mutual, pooled and commingled funds' Hedge funds/limited partnerships Real estate Other Total pension plan assets S 263 192 273 271 899 745 65 90 279 238 619 637 652 785 37 43 337 385 5 6 354 412 265 261 5,149 S 4,842 S 2,931 $ 2,587 Mutual, pooled and commingled funds include investments in equity securities, fixed-income securities and combinations of both. There are a significant number of mutual, pooled and commingled funds from which investors can choose. The selection of the type of fund is dictated by the specific investment objectives and needs of a given plan. These objectives and needs. vary greatly between plans. Fair value disclosures related to our pension plan assets are included in Note 18. Fair value disclosures include, but are not limited to, the levels within the fair value hierarchy in which the fair value measurements in their entirety fall; a reconciliation of the beginning and ending balances of Level 3 assets; and information about the valuation techniques and inputs used to measure the fair value of our pension plan assets. Investment Strategy for U.S. Pension Plans The Company utilizes the services of investment managers to actively manage the assets of our U.S. pension plans. We have established asset allocation targets and investment guidelines with each investment manager. Our asset allocation targets promote optimal expected return and volatility characteristics given the long-term time horizon for fulfilling the obligations of the plans. Selection of the targeted asset allocation for U.S. plan assets was based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes. Our target allocation is a mix of 42 percent equity investments, 30 percent fixed- income investments and 28 percent alternative investments. We believe this target allocation will enable us to achieve the following long-term investment objectives: (1) optimize the long-term return on plan assets at an acceptable level of risk; (2) maintain a broad diversification across asset classes and among investment managers; and (3) maintain careful control of the risk level within each asset class. The guidelines that have been established with each investment manager provide parameters within which the investment managers agree to operate, including criteria that determine eligible and ineligible securities, diversification requirements and credit quality standards, where applicable. Unless exceptions have been approved, investment managers are prohibited from buying or selling commodities, futures or option contracts, as well as from short selling of securities. Additionally, investment managers agree to obtain written approval for deviations from stated investment style or guidelines. As of December 31, 2019, no investment manager was responsible for more than 11 percent of total U.S. pension plan assets. Our target allocation of 42 percent equity investments is composed of 60 percent global equities, 16 percent emerging market equities and 24 percent domestic small- and mid- cap equities. Optimal returns through our investments in global equities are achieved through security selection as well as country and sector diversification. Investments in our common stock accounted for approximately 5 percent of our total global equities and approximately3 percent of total U.S. plan assets. Our investments in global equities are intended to provide diversified exposure to both U.S. and non-U.S. equity markets. Our investments in both emerging market equities and domestic small- and mid-cap equities may experience large swings in their market value. Our investments in these asset classes are selected based on capital appreciation potential. Our target allocation of 30 percent fixed-income investments is composed of 33 percent long-duration bonds and 67 percent with multi-strategy alternative credit managers. Long-duration bonds are intended to provide a stable rate of return through investments in high-quality publicly traded debt securities. Our investments in long-duration bonds are diversified in order to mitigate duration and credit exposure. Multi-strategy alternative credit managers invest in a combination of high-yield bonds, bank loans, structured credit and emerging market debt. These investments are in lower-rated and non-rated debt securities, which generally produce higher returns compared to long-duration bonds and also help to diversify our overall fixed-income portfolio. Our target allocation for alternative investments is 28 percent. These alternative investments include hedge funds, reinsurance, private equity limited partnerships, leveraged buyout funds, international venture capital partnerships and real estate. The objective of investing in alternative investments is to provide a higher rate of return than that which is typically available from publicly traded equity securities. Alternative investments are inherently illiquid and require a long-term perspective in evaluating investment performance. Investment Strategy for Non-U.S. Pension Plans As of December 31, 2019, the long-term target allocation for 68 percent of our international subsidiaries' pension plan assets, primarily certain of our European and Canadian plans, is 64 percent equity securities, 4 percent fixed-income securities and 32 percent other investments. The actual allocation for the remaining 32 percent of the Company's international subsidiaries' plan assets consisted of 57 percent mutual, pooled and commingled funds; 7 percent fixed-income securities; I percent equity securities and 35 percent other investments. The investment strategies for our international subsidiaries' plans differ greatly, and in some instances are influenced by local law. None of our pension plans outside the United States is individually significant for separate disclosure. Other Postretirement Benefit Plan Assets Plan assets associated with other postretirement benefits primarily represent funding of one of the U.S. postretirement benefit plans through a Voluntary Employee Beneficiary Association ("VEBA"), a tax-qualified trust. The VEBA assets are primarily invested in liquid assets due to the level and timing of expected future benefit payments. The following table presents total assets for our other postretirement benefit plans (in millions): December 31, Cash and cash equivalents Equity securities: U.S.-based companies International-based companies Fixed-income securities: Government bonds Corporate bonds and debt securities Mutual, pooled and commingled funds Hedge funds/limited partnerships Real estate Other Total other postretirement benefit plan assets 2019 2018 57 $ 73 124 93 7 3 2 47 16 84 82 7 8 4 4 4 4 339 $ 289 Fair value disclosures related to our other postretirement benefit plan assets are included in Note 18. Fair value disclosures include, but are not limited to, the levels within the fair value hierarchy in which the fair value measurements in their entirety fall and information about the valuation techniques and inputs used to measure the fair value of our other postretirement benefit plan assets. Components of Net Periodic Benefit Cost (Income) Net periodic benefit cost (income) for our pension and other postretirement benefit plans consisted of the following (in millions): Year Ended December 31, Service cost Interest cost Expected return on plan assets Amortization of prior service credit Amortization of net actuarial loss Net periodic benefit cost (income) Settlement charges Curtailment charges (credits) Special termination benefits Other Total cost (income) recognized in consolidated statements of income Pension Benefits 2019 2018 $ 104 $ 291 124 S 296 (552) (650) (4) (3) 151 128 (10) (105) 6 240 - 1 1 (2) $ S 7 - 147 $ (650) 8 | 2| - Other Benefits 2019 2018 $ 9 $ 28 (13) (13) (2) (14) 2 24 (2) g= | 2017 $ 17 9 : @8 - (12) (18) 1 367 $ 22 $ 7 $ (55) The Company has elected to use the actual fair value of plan assets as the market-related value of assets in the determination of the expected return on plan assets. Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to 10 percent of the greater of the benefit obligation and the market-related value of assets. Gains and losses in excess of the corridor are generally amortized over the average future working lifetime of the plan participants. Settlements, curtailments and special termination benefits were primarily related to our productivity and reinvestment program and the refranchising of certain of our North America bottling operations. Refer to Note 2 and Note 20. All of the amounts in the tables above, other than service cost, were recorded in the line item other income (loss)-net in our consolidated statements of income. Impact on Accumulated Other Comprehensive Income The following table sets forth the changes in AOCI for our benefit plans (in millions, pretax): Year Ended December 31, Balance in AOCI at beginning of year Recognized prior service cost (credit) Recognized net actuarial loss Prior service credit (cost) occurring during the year Net actuarial (loss) gain occurring during the year Impact of divestitures Foreign currency translation gain Balance in AOCI at end of year 'Includes $6 million of recognized net actuarial loss due to the impact of settlements. Pension Benefits Other Benefits 2019 2018 2019 2018 $ (2,482) S (2,493) $ (4) 13 (15) $ (4) 5 (26) (18) 6 157 3694 2 3 1 (1) - 8 (370) (386)' (44) 17 - 4 - 20 24 2 (2,678) S (2,482) $ (59) $ (15) Includes $2 million of net actuarial gain occurring during the year due to the impact of curtailments. >Includes $4 million of recognized prior service cost and $63 million of not actuarial gain occurring during the year due to the impact of curtailments. * Includes $240 million of recognized net actuarial loss due to the impact of settlements. * Includes $2 million of recognized prior service credit and $2 million of net actuarial gain occurring during the year due to the impact of curtailments. *Includes $4 million of recognized prior service credit due to the impact of curtailments. The following table sets forth amounts in AOCI for our benefit plans (in millions, pretax): December 31, Pension Benefits 2019 Other Benefits 2018 2019 2018 Prior service credit (cost) $ (12) $ (12) S 23 $ 28 Net actuarial loss (2,666) (2,470) (82) (43) Balance in AOCI at end of year $ (2,678) S (2,482) $ (59) $ (15) Amounts in AOCI expected to be recognized as components of net periodic benefit cost in 2020 are as follows (in millions, pretax): Pension Benefits Amortization of prior service credit $ Amortization of nel actuarial loss Total Other Benefits - $ (2) 171 * 171 $ 3 Assumptions Certain weighted-average assumptions used in computing the benefit obligations are as follows: Pension Benefits Other Benefits December 31, Discount rate 2019 3.25% 2018 2019 2018 4.00% 3.50% 4.25% Rate of increase in compensation levels 3.75% 3.75% N/A N/A Certain weighted-average assumptions used in computing net periodic benefit cost (income) are as follows: Pension Benefits Other Benefits Year Ended December 31, Discount rate 2019 2018 2017 2019 2018 2017 4.00% 3.50% 4.00% 4.25% 3.50% 4.00% Rate of increase in compensation levels 3.75% 3.50% 3.75% N/A N/A N/A Expected long-term rate of return on plan assets 7.75% 8.00% 8.00% 4.50% 4.50% 4.75% The discount rate assumptions used to account for pension and other postretirement benefit plans reflect the rates at which the benefit obligations could be effectively settled. Rates for U.S. and certain non-U.S. plans at December 31, 2019 were determined using a cash flow matching technique whereby the rates of a yield curve, developed from high-quality debt securities, were applied to the benefit obligations to determine the appropriate discount rate. For other non-U.S. plans, we base the discount rate on comparable indices within each of the countries. The Company measures the service cost and interest cost components of net periodic benefit cost for pension and other postretirement benefit plans by applying the specific spot rates along the yield curve to the plans' projected cash flows. The rate of compensation increase assumption is determined by the Company based upon annual reviews. The expected long-term rate of return assumption for U.S. pension plan assets is based upon the target asset allocation and is determined using forward-looking assumptions in the context of historical returns and volatilities for each asset class, as well as correlations among asset classes. We evaluate the rate of return assumption on an annual basis. The expected long-term rate of return assumption used in computing 2019 net periodic pension cost for the U.S. plans was 7.75 percent. As of December 31, 2019, the 5-year, 10-year and 15-year annualized return on plan assets for the primary U.S. plan was 7.4 percent, 8.9 percent and 6.7 percent, respectively. The annualized return since inception was 10.5 percent. The weighted-average assumptions for health care cost trend rates are as follows December 31, Health care cost trend rate assumed for next year Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) Year that the rate reaches the ultimate trend rate 2019 2018 6.75% 5.25% 2025 7.00% 5.00% 2023 We review external data and our own historical trends for health care costs to determine the health care cost trend rate assumptions. The Company's U.S. postretirement benefit plans are primarily defined dollar benefit plans that limit the effects of medical inflation because the plans have established dollar limits for determining our contributions. As a result, the effect of a 1 percentage point change in the assumed health care cost trend rate would not be significant to the Company.