Defined Benefit Postretirement Plans and Defined Contribution Plan (Notes)

12 Months Ended

Dec. 31, 2019

Defined Benefit Plan [Abstract]

Defined Benefit Postretirement Plans and Defined Contribution Plan

Defined Benefit Postretirement Plans and Defined Contribution Plan

We have noncontributory defined benefit pension plans covering substantially all domestic employees. Benefits under these plans are based on plan provisions specific to each plan.

We also had a noncontributory defined benefit pension plan covering eligible U.K. employees that was transferred to the buyer in connection with the sale of our U.K. business during 2019. See Note 5 for further information on this disposition. During the year ended December 31, 2019, we reclassified $20 million from accumulated other comprehensive income to pension assets upon remeasurement of the plan.

We also have plans for other postretirement benefits covering our U.S. employees. Health care benefits are provided up to age 65 through comprehensive hospital, surgical and major medical benefit provisions subject to various cost-sharing features. Post-age 65 health care benefits are provided to certain U.S. employees on a defined contribution basis. Life insurance benefits are provided to certain retiree beneficiaries. These other postretirement benefits are not funded in advance. Employees hired after 2016 are not eligible for any postretirement health care or life insurance benefits.

Obligations and funded status – The following summarizes the obligations and funded status for our defined benefit pension and other postretirement plans.    

	Pension Benefits												Other Benefits
	2019						2018						2019			2018
(In millions)	U.S.			Int’l			U.S.			Int’l			U.S.			U.S.
Accumulated benefit obligation	$	343		$	—		$	320		$	511		$	89		$	96
Change in pension benefit obligations:
Beginning balance	$	326		$	511		$	384		$	599		$	96		$	221
Service cost	19			—			18			—			1			2
Interest cost	12			8			12			14			3			7
Plan amendment	—			—			—			3			—			(99		)
Divestiture(a)	—			(549		)	—			—			—			—
Actuarial loss (gain)	48			36			(20		)	(38		)	9			(15		)
Foreign currency exchange rate changes	—			6			—			(29		)	—			—
Settlements paid	(45		)	—			(62		)	(23		)	—			—
Benefits paid	(6		)	(12		)	(6		)	(15		)	(20		)	(20		)
Ending balance	$	354		$	—		$	326		$	511		$	89		$	96
Change in fair value of plan assets:
Beginning balance	$	203		$	594		$	216		$	670		$	—		$	—
Actual return on plan assets	44			68			(6		)	(21		)	—			—
Employer contributions	40			8			61			17			20			20
Foreign currency exchange rate changes	—			8			—			(34		)	—			—
Divestiture(a)	—			(666		)	—			—			—			—
Settlements paid	(45		)	—			(62		)	(23		)	—			—
Benefits paid	(6		)	(12		)	(6		)	(15		)	(20		)	(20		)
Ending balance	$	236		$	—		$	203		$	594		$	—		$	—
Funded status of plans at December 31	$	(118	)	$	—		$	(123	)	$	83		$	(89	)	$	(96	)
Amounts recognized in the consolidated balance sheets:
Noncurrent assets	$	—		$	—		$	—		$	83		$	—		$	—
Current liabilities	(6		)	—			(5		)	—			(18		)	(19		)
Noncurrent liabilities	(112		)	—			(118		)	—			(71		)	(77		)
Accrued benefit cost	$	(118	)	$	—		$	(123	)	$	83		$	(89	)	$	(96	)
Pretax amounts in accumulated other comprehensive loss:
Net loss	$	85		$	—		$	90		$	59		$	23		$	14
Prior service cost	(29		)	—			(36		)	5			(129		)	(147		)

^(a)  Refer to Note 5 for further information on the sale of our U.K. business.

Components of net periodic benefit cost from continuing operations and other comprehensive (income) loss – The following summarizes the net periodic benefit costs and the amounts recognized as other comprehensive (income) loss for our defined benefit pension and other postretirement plans.

	Pension Benefits																		Other Benefits
	Year Ended December 31,																		Year Ended December 31,
	2019						2018						2017						2019			2018			2017
(In millions)	U.S.			Int’l			U.S.			Int’l			U.S.			Int’l			U.S.			U.S.			U.S.
Components of net periodic benefit cost:
Service cost	$	19		$	—		$	18		$	—		$	22		$	—		$	1		$	2		$	2
Interest cost	12			8			12			14			13			17			3			7			8
Expected return on plan assets	(10		)	(11		)	(11		)	(24		)	(13		)	(30		)	—			—			—
Amortization:
- prior service credit	(7		)	—			(10		)	—			(10		)	—			(19		)	(8		)	(7		)
- actuarial loss	7			—			11			—			8			1			1			1			—
Net settlement loss(a)	12			—			18			3			28			4			—			—			—
Net periodic benefit cost(b)	$	33		$	(3	)	$	38		$	(7	)	$	48		$	(8	)	$	(14	)	$	2		$	3
Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss (pretax):
Actuarial loss (gain)	$	14		$	(21	)	$	(4	)	$	8		$	28		$	(26	)	$	9		$	(15	)	$	5
Amortization of actuarial gain (loss)	(19		)	(41		)	(29		)	(3		)	(36		)	(4		)	(1		)	(1		)	—
Prior service cost (credit)	—			—			—			3			—			—			—			(99		)	—
Amortization of prior service credit (cost)	7			(6		)	10			—			10			—			19			8			7
Total recognized in other comprehensive (income) loss	$	2		$	(68	)	$	(23	)	$	8		$	2		$	(30	)	$	27		$	(107	)	$	12
Total recognized in net periodic benefit cost and other comprehensive (income) loss	$	35		$	(71	)	$	15		$	1		$	50		$	(38	)	$	13		$	(105	)	$	15

^(a)  Settlements are recognized as they occur, once it is probable that lump sum payments from a plan for a given year will exceed the plan’s total service and interest costs for that year.

^(b)  Net periodic benefit cost reflects a calculated market-related value of plan assets which recognizes changes in fair value over three years.

The estimated net loss and prior service credit for our defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2020 are $9 million and $7 million. The estimated net loss and prior service credit for our other defined benefit postretirement plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2020 are $2 million and $18 million.

Plan assumptions – The following summarizes the assumptions used to determine the benefit obligations at December 31, and net periodic benefit cost for the defined benefit pension and other postretirement plans for 2019, 2018 and 2017.

	Pension Benefits										Other Benefits
	2019		2018				2017				2019		2018		2017
(In millions)	U.S.		U.S.		Int’l		U.S.		Int’l		U.S.		U.S.		U.S.
Weighted average assumptions used to determine benefit obligation:
Discount rate	3.13	%	4.26	%	2.90	%	3.55	%	2.50	%	2.91	%	4.09	%	3.54	%
Rate of compensation increase	4.50	%	4.00	%	—	%	4.00	%	—	%	4.50	%	4.00	%	4.00	%
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate	3.70	%	3.88	%	2.50	%	3.86	%	2.70	%	4.09	%	3.54	%	3.98	%
Expected long-term return on plan assets	6.25	%	6.50	%	3.70	%	6.50	%	4.50	%	—	%	—	%	—	%
Rate of compensation increase	4.00	%	4.00	%	—	%	4.00	%	—	%	4.00	%	4.00	%	4.00	%

Expected long-term return on plan assets – The expected long-term return on plan assets assumption for our U.S. funded plan is determined based on an asset rate-of-return modeling tool developed by a third-party investment group which utilizes underlying assumptions based on actual returns by asset category and inflation and takes into account our U.S. pension plan’s asset allocation. To determine the expected long-term return on plan assets assumption for our international plans, we consider the current level of expected returns on risk-free investments (primarily government bonds), the historical levels of the risk premiums associated with the other applicable asset categories and the expectations for future returns of each asset class. The expected return for each asset category is then weighted based on the actual asset allocation to develop the overall expected long-term return on plan assets assumption.

Assumed weighted average health care cost trend rates

Employer provided subsidies for post-65 retiree health care coverage were frozen effective January 1, 2017 at January 1, 2016 established amount levels. Company contributions are funded to a Health Reimbursement Account on the retiree’s behalf to subsidize the retiree’s cost of obtaining health care benefits through a private exchange (the “post-65 retiree health benefits”). Therefore, a 1% change in health care cost trend rates would not have a material impact on either the service and interest cost components and the postretirement benefit obligations.

In the fourth quarter of 2018, we terminated the post-65 retiree health benefits effective as of December 31, 2020. The post-65 retiree health benefits will no longer be provided after that date. In addition, the pre-65 retiree medical coverage subsidy has been frozen as of January 1, 2019, and the ability for retirees to opt in and out of this coverage, as well as pre-65 retiree dental and vision coverage, has also been eliminated. Retirees must enroll in connection with retirement for such coverage, or they lose eligibility. These plan changes reduced our retiree medical benefit obligation by approximately $99 million at December 31, 2018.

Plan investment policies and strategies – The investment policies for our U.S. and international pension plan assets reflect the funded status of the plans and expectations regarding our future ability to make further contributions. Long-term investment goals are to: (1) manage the assets in accordance with applicable legal requirements; (2) produce investment returns which meet or exceed the rates of return achievable in the capital markets while maintaining the risk parameters set by the plan’s investment committees and protecting the assets from any erosion of purchasing power; and (3) position the portfolios with a long-term risk/return orientation. Investment performance and risk is measured and monitored on an ongoing basis through quarterly investment meetings and periodic asset and liability studies.

U.S. plan – The plan’s current targeted asset allocation is comprised of 55% equity securities and 45% other fixed income securities. Over time, as the plan’s funded ratio (as defined by the investment policy) improves, in order to reduce volatility in returns and to better match the plan’s liabilities, the allocation to equity securities will decrease while the amount allocated to fixed income securities will increase. The plan’s assets are managed by a third-party investment manager.

International plan – As mentioned above, the plan covering eligible U.K. employees that was transferred to the buyer in connection with the sale of our U.K. business during 2019.

Fair value measurements – Plan assets are measured at fair value. The following provides a description of the valuation techniques employed for each major plan asset class at December 31, 2019 and 2018.

Cash and cash equivalents – Cash and cash equivalents are valued using a market approach and are considered Level 1.

Equity securities – Investments in common stock are valued using a market approach at the closing price reported in an active market and are therefore considered Level 1. Private equity investments include interests in limited partnerships which are valued based on the sum of the estimated fair values of the investments held by each partnership, determined using a combination of market, income and cost approaches, plus working capital, adjusted for liabilities, currency translation and estimated performance incentives. These private equity investments are considered Level 3. Investments in pooled funds are valued using a market approach, these various funds consist of equity with underlying investments held in U.S. and non-U.S. securities. The pooled funds are benchmarked against a relative public index and are considered Level 2.

Fixed income securities – Fixed income securities are valued using a market approach. U.S. treasury notes and exchange traded funds (“ETFs”) are valued at the closing price reported in an active market and are considered Level 1. Corporate bonds, private placements, and GNMA/FNMA/FHLMC pools are valued using calculated yield curves created by models that incorporate various market factors. Primarily investments are held in U.S. and non-U.S. corporate bonds in diverse industries and are considered Level 2. Forward contracts included under government securities are traded in the over-the-counter market and occur between two parties only with no intermediary. The details of each contract such as trade size, price and maturity are tailored to each security and negotiated between the two parties, as such, these investments are considered Level 3. Other fixed income investments include zero coupon and interest rate swaps. Investments in pooled funds are valued using a market

approach, and primarily have investments held in U.S. and non-U.S. publicly traded investment grade government and corporate bonds and are considered Level 2.

Other – Other investments are comprised of an unallocated annuity contract, two limited liability companies, and real estate. All are considered Level 3, as significant inputs to determine fair value are unobservable.

Commingled funds – The investment in the commingled funds are valued using the net asset value of units held as a practical expedient. The commingled funds consist of equity and fixed income portfolios with underlying investments held in U.S. and non-U.S. securities.

The following tables present the fair values of our defined benefit pension plan’s assets, by level within the fair value hierarchy, as of December 31, 2019 and 2018.

	December 31, 2019
(In millions)	Level 1			Level 2		Level 3		Total
Cash and cash equivalents(a)	$	(7	)	$	—	$	—	$	(7	)
Equity securities:
Common stock	75			—		—		75
Private equity	—			—		10		10
Pooled funds	—			—		—		—
Fixed income securities:
Corporate	—			2		—		2
Exchange traded funds	3			—		—		3
Government	31			11		5		47
Pooled funds	—			—		—		—
Other	—			—		18		18
Total investments, at fair value	102			13		33		148
Commingled funds(b)	—			—		—		88
Total investments	$	102		$	13	$	33	$	236

	December 31, 2018
(In millions)	Level 1					Level 2				Level 3				Total
	U.S.			Int’l		U.S.		Int’l		U.S.		Int’l		U.S.			Int’l
Cash and cash equivalents(a)	$	(1	)	$	5	$	—	$	—	$	—	$	—	$	(1	)	$	5
Equity securities:
Common stock	75			—		—		—		—		—		75			—
Private equity	—			—		—		—		14		—		14			—
Pooled funds	—			—		—		191		—		—		—			191
Fixed income securities:
Corporate	—			—		4		—		—		—		4			—
Government	22			—		9		—		3		—		34			—
Pooled funds	—			—		—		398		—		—		—			398
Other	—			—		—		—		17		—		17			—
Total investments, at fair value	96			5		13		589		34		—		143			594
Commingled funds(b)	—			—		—		—		—		—		60			—
Total investments	$	96		$	5	$	13	$	589	$	34	$	—	$	203		$	594

^(a)   The negative cash balance was due to the timing of when investment trades occur and when they settle.

^(b)   After the adoption of the FASB update for the fair value hierarchy, we separately report the investments for which fair value was measured using the net asset value per share as a practical expedient. Amounts presented in this table are intended to reconcile the fair value hierarchy to the pension plan assets.

The activity during the year ended December 31, 2019 and 2018, for the assets using Level 3 fair value measurements was immaterial.

Cash flows

Estimated future benefit payments – The following gross benefit payments, which were estimated based on actuarial assumptions applied at December 31, 2019 and reflect expected future services, as appropriate, are to be paid in the years indicated.

(In millions)	Pension Benefits		Other Benefits
2020	$	39	$	18
2021	35		10
2022	31		9
2023	29		8
2024	27		7
2025 through 2029	116		25

Contributions to defined benefit plans – We expect to make contributions to the funded pension plan of up to $28 million in 2020. Cash contributions to be paid from our general assets for the unfunded pension and postretirement plans are expected to be approximately $6 million and $18 million in 2020.

Contributions to defined contribution plans – We contribute to several defined contribution plans for eligible employees. Contributions to these plans totaled $18 million, $22 million and $20 million in 2019, 2018 and 2017.