Pension Plans, Postretirement and Other Employee Benefits

12 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

Pension Plans, Postretirement and Other Employee Benefits

Pension Plans, Postretirement and Other Employee Benefits

Defined Contribution Plans

The Company sponsors defined contribution plans that provide Company matching contributions for eligible U.S. salaried and hourly employees. Contributions are also made to certain non-U.S. defined contribution plans. The Company recorded expense for these defined contribution plans of approximately $76 million, $43 million, and $29 million for the years ended December 31, 2019, 2018 and 2017.

Defined Benefit Plans

The Company sponsors defined benefit pension plans and health care and life insurance benefits for certain employees and retirees around the world. There are also unfunded nonqualified pension plans primarily covering U.S. executives, which are frozen with respect to future benefit accruals. The funding policy for defined benefit pension plans is to contribute the minimum required by applicable laws and regulations or to directly pay benefit payments where appropriate. At December 31, 2019, all

legal funding requirements had been met. The Company expects to contribute $49 million to its U.S. pension plans, $43 million to its non-U.S. pension plans, and $25 million to its other postretirement plans in 2020.

Other Benefits

The Company also provides benefits to former or inactive employees paid after employment but before retirement. The liabilities for these postemployment benefits were $73 million and $75 million at December 31, 2019 and 2018.

Significant Events

In December 2019, the Company approved an amendment for one of its U.S. postretirement benefit plans that eliminated health care and life insurance benefits in retirement for active salaried and nonunion hourly employees if benefits are not commenced by the earlier of (i) one-year from the date of separation, or (ii) July 1, 2021. In addition, the Company approved an amendment for another of its U.S. postretirement benefit plans to eliminate health care benefits for certain retirees. These actions reduced the Company's obligations by $17 million with a corresponding increase of $13 million to AOCI (net of taxes of $4 million) at December 31, 2019 and a non-cash curtailment gain of $7 million for the year ended December 31, 2019. The $17 million is being amortized on a straight-line basis as a reduction to net periodic postretirement benefit cost over participants' average remaining service periods or remaining life expectancy.

During 2019, the Company also offered a voluntary lump sum window for one of its U.S. defined benefit pension plans to terminated vested participants that met certain eligibility criteria. These benefits were paid in December 2019 out of the pension plan assets and resulted in a non-cash settlement charge of $5 million for the year ended December 31, 2019.

In December 2018, the Company approved an amendment for one of its U.S. postretirement health care benefit plans. Beginning June 1, 2019, eligible retirees that opt to receive benefits will receive a fixed subsidiary payment to purchase health care benefits on a marketplace exchange in lieu of the original plan’s medical benefits. The amendments to the plan resulted in a plan remeasurement and recognition of a negative plan amendment, which reduced the Company's obligation by $66 million with a corresponding increase of $50 million in AOCI (net of taxes of $16 million) as of December 31, 2018. The $66 million is being amortized on a straight-line basis as a reduction to net periodic postretirement benefit cost over participants' average remaining service periods or remaining life expectancy.

As a result of the Federal-Mogul Acquisition, the Company assumed $848 million in underfunded defined benefit pension and other postretirement benefit obligations.

In February 2016, the Company launched a voluntary program to buy out active employees and retirees who had earned benefits in the U.S. pension plans. As of December 31, 2016, this program had been substantially completed with cash payments to those who elected to take the buyout made from pension plan assets in the fourth quarter of 2016. In connection with this program the Company contributed $18 million into the pension trust and recognized a non-cash charge of $72 million. The program was completed in the first quarter of 2017, at which time the Company contributed another $10 million and recognize a non-cash charge of $6 million during the year ended December 31, 2017.

The measurement date for all defined benefit plans is December 31. The following provides a reconciliation of the plans’ benefit obligations, plan assets, and funded status as of December 31, 2019 and 2018:

	Pension Plans												Other Postretirement Benefits Plans
	U.S.						Non-U.S.
	2019			2018			2019			2018			2019			2018
Change in benefit obligation:
Benefit obligation, beginning of year	$	1,302		$	263		$	946		$	471		$	322		$	151
Federal-Mogul acquisition	—			1,064			—			545			—			263
Service cost	2			1			24			13			1			—
Interest cost	53			21			24			15			13			8
Settlement	(67		)	(1		)	(5		)	(13		)	—			—
Curtailment	—			—			—			—			—			(1		)
Administrative expenses/taxes paid	—			—			(4		)	(3		)	—			—
Plan amendments	—			—			—			2			(17		)	(66		)
Actuarial (gain)/loss	105			(12		)	105			(16		)	6			(24		)
Benefits paid	(75		)	(34		)	(44		)	(22		)	(26		)	(15		)
Medicare subsidies received	—			—			—			—			—			1
Participants’ contributions	—			—			1			1			1			1
Held for sale	—			—			—			(16		)	—			—
Currency rate conversion and other	—			—			1			(31		)	—			4
Benefit obligation, end of year	1,320			1,302			1,048			946			300			322
Change in plan assets:
Fair value of plan assets, beginning of year	995			202			466			438			—			—
Federal-Mogul acquisition	—			943			—			81			—			—
Settlement	(67		)	(1		)	(5		)	(14		)	—			—
Actual return on plan assets	183			(122		)	55			(1		)	—			—
Administrative expenses/taxes paid	—			—			(4		)	—			—			—
Employer contributions	26			6			42			21			25			13
Medicare subsidies received	—			—			—			—			—			1
Participants’ contributions	—			—			1			1			1			1
Benefits paid	(75		)	(33		)	(44		)	(25		)	(26		)	(15		)
Held for sale	—			—			—			(10		)	—			—
Currency rate conversion and other	—			—			12			(25		)	—			—
Fair value of plan assets, end of year	1,062			995			523			466			—			—
Funded status of the plans	$	(258	)	$	(307	)	$	(525	)	$	(480	)	$	(300	)	$	(322	)

Amounts recognized on the consolidated balance sheets consist of the following at December 31, 2019 and 2018:

	Pension Plans												Other Postretirement Benefits Plans
	U.S.						Non-U.S.
	2019			2018			2019			2018			2019			2018
Noncurrent assets	$	—		$	—		$	35		$	33		$	—		$	—
Current liabilities	(4		)	(5		)	(17		)	(17		)	(25		)	(28		)
Noncurrent liabilities (a)	(254		)	(302		)	(543		)	(496		)	(275		)	(294		)
	$	(258	)	$	(307	)	$	(525	)	$	(480	)	$	(300	)	$	(322	)

^(a) Included in "Pension and postretirement benefits" within in the consolidated balance sheets is postemployment benefits of $73 million and $75 million at December 31, 2019 and 2018 which are not included in the tables above.

Amounts recognized in accumulated other comprehensive loss for pension and postretirement benefits, inclusive of tax effects, consist of the following components at December 31, 2019 and 2018:

	Pension Plans								Other Postretirement Benefits Plans
	U.S.				Non-U.S.
	2019		2018		2019		2018		2019			2018
Actuarial loss	$	230	$	255	$	145	$	80	$	34		$	31
Prior service cost/(credit)	—		—		3		4		(70		)	(73		)
Total	$	230	$	255	$	148	$	84	$	(36	)	$	(42	)

Information for defined benefit plans with projected benefit obligations in excess of plan assets:

	Pension Plans								Other Postretirement Benefits Plans
	2019				2018
	U.S.		Non-U.S.		U.S.		Non-U.S.		2019		2018
Projected benefit obligation	$	1,320	$	712	$	1,302	$	652	$	300	$	322
Fair value of plan assets	$	1,062	$	151	$	995	$	138	$	—	$	—

Information for pension plans with accumulated benefit obligations in excess of plan assets:

	December 31, 2019				December 31, 2018
	U.S.		Non-U.S.		U.S.		Non-U.S.
Projected benefit obligation	$	1,320	$	682	$	1,302	$	620
Accumulated benefit obligation	$	1,320	$	637	$	1,302	$	606
Fair value of plan assets	$	1,062	$	126	$	995	$	111

The accumulated benefit obligation for all pension plans is $2,315 million and $2,225 million at December 31, 2019 and 2018.

Net periodic pension and postretirement benefits costs for the years 2019, 2018 and 2017, consist of the following components:

	Pension Plans																		Other Postretirement Benefits Plans
	U.S.									Non-U.S.
	2019			2018			2017			2019			2018			2017			2019			2018		2017
Service cost	$	2		$	1		$	1		$	24		$	14		$	9		$	1		$	—	$	—
Interest cost	53			21			10			24			15			13			13			8		5
Expected return on plan assets	(67		)	(28		)	(14		)	(19		)	(18		)	(25		)	—			—		—
Curtailment loss (gain)	—			—			—			—			—			—			(7		)	1		—
Settlement loss	6			1			8			1			3			1			—			—		—
Net amortization:
Actuarial loss	5			5			5			5			6			9			4			5		4
Prior service cost (credit)	—			—			—			1			1			1			(8		)	—		(1		)
Net periodic costs	$	(1	)	$	—		$	10		$	36		$	21		$	8		$	3		$	14	$	8

The following assumptions were used in the accounting for the pension and other postretirement benefits plans for the years of 2019, 2018, and 2017:

	Pension Plans												Other Postretirement Benefits Plans
	U.S.						Non-U.S.
	2019		2018		2017		2019		2018		2017		2019		2018		2017
Weighted-average assumptions used to determine benefit obligations:
Discount rate	3.2	%	4.2	%	3.8	%	1.7	%	2.6	%	2.6	%	3.2	%	4.3	%	3.8	%
Rate of compensation increase	n/a		n/a		n/a		2.0	%	3.0	%	2.5	%	n/a		n/a		n/a
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate	4.2	%	4.1	%	4.2	%	2.6	%	2.4	%	2.8	%	4.3	%	4.2	%	4.2	%
Expected long-term return on plan assets	6.3	%	6.0	%	7.8	%	4.0	%	4.2	%	5.2	%	n/a		n/a		n/a
Rate of compensation increase	n/a		n/a		n/a		2.0	%	2.9	%	2.5	%	n/a		n/a		n/a

Estimated amounts to be amortized from accumulated other comprehensive loss into net periodic benefit cost in the year ending December 31, 2020 based on December 31, 2019 plan measurements:

	2020
	Pension Plans				Other Postretirement Benefits Plans
	U.S.		Non-U.S
Net actuarial loss	$	6	$	9	$	2
Prior service (credit)	—		—		(9		)
	$	6	$	9	$	(7	)

Estimated future benefit payments are as follows:

	Pension Plans				Other Postretirement Benefits Plans
Year	U.S.		Non-U.S.
2020	$	97	$	44	$	25
2021	$	95	$	44	$	25
2022	$	98	$	46	$	24
2023	$	97	$	50	$	24
2024	$	96	$	48	$	23
2025-2029	$	410	$	251	$	99

Health Care Trend

The weighted-average assumed health care cost trend rate used in determining next year's postretirement health care benefits are as follows:

	Other Postretirement Benefits Plans
	2019		2018		2017
Initial health care cost trend rate	6.6	%	6.9	%	6.8	%
Ultimate health care cost trend rate	4.9	%	4.9	%	4.5	%
Year ultimate health care cost trend rate reached	2027		2027		2027

The assumed health care cost trend rate has a significant effect on the amounts reported for other postretirement benefits plans. The following table illustrates the sensitivity to a change in the assumed health care cost trend rate:

	Total Service and Interest Cost			Postretirement Benefits Obligation
100 basis point ("bp") increase in health care cost trend rate	$	—		$	21
100 bp decrease in health care cost trend rate	$	(1	)	$	(18	)

Long-term Rate of Return

The Company's expected return on assets is established annually through analysis of anticipated future long-term investment performance for the plan based upon the asset allocation strategy and is primarily a long-term prospective rate.

An analysis was performed in December 2019 resulting in changes to the expected long-term rate of return on assets. The weighted-average long-term rate of return on assets for the U.S. pension plans was 6.3% at both December 31, 2019 and 2018. The expected long-term rate of return on plan assets used in determining pension expense for non-U.S. plans is determined in a similar manner to the U.S. plans and decreased from 4.0% at December 31, 2018 to 3.5% at December 31, 2019.

Plan Assets

Certain pension plans sponsored by the Company invest in a diversified portfolio consisting of an array of asset classes that attempts to maximize returns while minimizing volatility. These asset classes include developed market equities, emerging market equities, private equity, global high quality and high yield fixed income, real estate, and absolute return strategies.

U.S. Plans: The U.S. investment strategy mitigates risk by incorporating diversification across appropriate asset classes to meet the plans' objectives. It is intended to reduce risk, provide long-term financial stability for the plan, and maintain funded levels that meet long-term plan obligations while preserving sufficient liquidity for near-term benefit payments. Risk assumed is considered appropriate for the return anticipated and consistent with the diversification of plan assets. Approximately 51% of the U.S. plan assets were invested in actively managed investment funds. The Company’s investment strategy includes a target asset allocation of 55% equity investments, 20% fixed income investments, 5% debt securities, and 20% in other investment types including hedge funds.

Non-U.S. Plans: The Company's non-U.S. plans are individually managed to different target levels depending on the investing environment in each country and the funded status of each plan, with a reduction in the allocation of assets to equity and fixed income securities at higher funded ratios. The insurance contracts guarantee a minimum rate of return. The Company has no input into the investment strategy of the assets underlying the contracts, but they are typically heavily invested in active bond markets and are highly regulated by local law.

Pension plan assets were invested in the following classes of securities:

	Percentage of Fair Market Value
	December 31, 2019
	U.S.		Non-U.S.
Equity securities	66	%	32	%
Fixed income securities	15	%	5	%
Debt securities	10	%	43	%
Insurance contracts	—	%	15	%
Other	9	%	5	%

The assets of some of the Company's pension plans are invested in trusts that permit commingling of the assets of more than one employee benefit plan for investment and administrative purposes. Each of the plans participating in the trust has interests in the net assets of the underlying investment pools.

The following table presents the Company’s defined benefit plan assets measured at fair value by asset class: 

	Fair Value Level as of December 31, 2019
	U.S.								Non-U.S.
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Investments with registered investment companies:
Equity securities	$	337	$	—	$	—	$	337	$	1	$	—	$	—	$	1
Fixed income securities	158		—		—		158		23		—		—		23
Real estate and other	38		—		—		38		—		—		—		—
Equity securities	238		—		—		238		18		58		—		76
Debt securities:
Corporate and other	—		21		—		21		6		—		—		6
Government	12		21		—		33		5		166		—		171
Real Estate and other	—		—		—		—		3		10		—		13
Insurance contracts	—		—		—		—		—		—		80		80
Hedge funds	—		—		21		21		—		—		—		—
Cash and equivalents	34		—		—		34		14		—		—		14
Total	$	817	$	42	$	21	$	880	$	70	$	234	$	80	$	384
Plan assets measured at net asset value
Equity securities							$	128							$	92
Government debt securities							—								33
Corporate and other debt securities							54								14
Total plan assets measured at net asset value							182								139
Net plan assets							$	1,062							$	523

	Fair Value Level as of December 31, 2018
	U.S.								Non-U.S.
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Investments with registered investment companies:
Equity securities	$	323	$	—	$	—	$	323	$	1	$	—	$	—	$	1
Fixed income securities	167		—		—		167		21		—		—		21
Real estate and other	41		—		—		41		—		—		—		—
Equity securities	194		—		—		194		14		55		—		69
Debt securities:
Corporate and other	—		18		—		18		8		—		—		8
Government	12		21		—		33		2		147		—		149
Real Estate and other	—		—		—		—		1		4		—		5
Insurance contracts	—		—		—		—		—		—		71		71
Hedge funds	—		—		28		28		—		—		—		—
Cash and equivalents	33		—		—		33		17		—		—		17
Total	$	770	$	39	$	28	$	837	$	64	$	206	$	71	$	341
Plan assets measured at net asset value
Equity securities							$	104							$	81
Government debt securities							—								30
Corporate and other debt securities							54								14
Total plan assets measured at net asset value							158								125
Net plan assets							$	995							$	466

The Company's level 1 assets were valued using market prices based on daily net asset value ("NAV") or prices available daily through a public stock exchange. Its level 2 assets were valued primarily using market prices, sometimes net of estimated realization expenses, and based on broker/dealer markets or in commingled funds where NAV is not available daily or publicly. For insurance contracts, the estimated surrender value of the policy was used to estimate fair market value.

The table below summarizes the changes in the fair value of the Level 3 assets:

	December 31, 2019						December 31, 2018
	Level 3 Assets						Level 3 Assets
	U.S.			Non-U.S.			U.S.			Non-U.S.
Balance at beginning of period	$	28		$	71		$	—		$	9
Net realized/unrealized gains (loss)	2			7			(2		)	1
Purchases and settlements, net	8			24			—			—
Sales, net	(17		)	(20		)	—			—
Transfers into (out) of Level 3	—			—			—			15
Acquisitions	—			—			30			56
Held for sale	—			—			—			(10		)
Foreign exchange	—			(2		)	—			—
Balance at end of period	$	21		$	80		$	28		$	71

The following table contains information about significant concentrations of risk, including all individual assets that make up more than 5% of the total assets and any direct investments in Tenneco stock:

Asset Category	Fair Value  Level	Fair Value		Percentage of Total Assets
2019:
Tenneco stock	1	$	5	0.3	%
2018:
Tenneco stock	1	$	10	0.7	%