Pension Plans, Postretirement and Other Employee Benefits

12 Months Ended

Dec. 31, 2021

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 $78 million, $77 million and $76 million for the years ended December 31, 2021, 2020 and 2019.

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, 2021, all legal funding requirements had been met. The Company expects to contribute $4 million to its U.S. pension plans, $46 million to its non-U.S. pension plans, and $18 million to its other postretirement plans in 2022.

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 $82 million and $81 million at December 31, 2021 and 2020.

Significant Events

In December 2021 and 2020, the Company recognized amendments to one of its U.S. postretirement health care benefit plans for certain retirees who will receive a fixed subsidy 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 negative plan amendments for the year ended December 31, 2021 and 2020. The Company reduced its obligation by $20 million with a corresponding decrease of $20 million in accumulated other comprehensive loss (net of taxes of $0 million) at December 31, 2021 and by $57 million with a corresponding decrease of $57 million in accumulated other comprehensive loss (net of taxes of $0 million) at December 31, 2020. The prior service credits generated by these negative plan amendments are being amortized on a straight-line basis as a reduction to net periodic postretirement benefit cost over participants’ average remaining life expectancy.

During the year ended December 31, 2020, the Company paid lump sums out of certain pension plans in connection with a previously announced plant closure. These lump sums were paid out of the pension plan assets and resulted in a non-cash settlement charge of $6 million for the year ended December 31, 2020.

In September 2020, the Company renegotiated one of its collective bargaining agreements in the U.S. which eliminated health care benefits in retirement if benefits were not commenced by September 24, 2021 for participants covered by the union agreement. This amendment resulted in a non-cash curtailment gain of $21 million for the year ended December 31, 2020.

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 decrease of $13 million to accumulated other comprehensive loss (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.

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 at December 31, 2021 and 2020:

	Pension Plans								Other Postretirement Benefits Plans
	U.S.				Non-U.S.
	2021		2020		2021		2020		2021		2020
Change in benefit obligation:
Benefit obligation, beginning of year	$	1,383	$	1,320	$	1,122	$	1,048	$	237	$	300
Service cost	2		1		26		25		—		—
Interest cost	31		41		17		18		6		9
Settlement	—		—		(5)		(17)		—		—
Administrative expenses/taxes paid	—		—		(5)		(5)		—		—
Plan amendments	—		1		—		—		(20)		(59)
Actuarial (gain)/loss	(45)		114		(39)		28		(16)		5
Other	—		—		—		2		—		—
Benefits paid	(93)		(94)		(43)		(44)		(18)		(18)
Participants’ contributions	—		—		1		1		1		—
Currency rate conversion and other	—		—		(50)		66		—		—
Benefit obligation, end of year	1,278		1,383		1,024		1,122		190		237
Change in plan assets:
Fair value of plan assets, beginning of year	1,145		1,062		571		523		—		—
Settlement	—		—		(5)		(17)		—		—
Actual return on plan assets	154		126		24		47		—		—
Administrative expenses/taxes paid	—		—		(5)		(5)		—		—
Employer contributions	4		51		41		42		17		18
Participants’ contributions	—		—		1		1		1		—
Benefits paid	(93)		(94)		(43)		(44)		(18)		(18)
Other	—		—		—		2		—		—
Currency rate conversion and other	—		—		(13)		22		—		—
Fair value of plan assets, end of year	1,210		1,145		571		571		—		—
Funded status of the plans	$	(68)	$	(238)	$	(453)	$	(551)	$	(190)	$	(237)

The actuarial gain arising during the year ended December 31, 2021 is primarily attributable to the increase in discount rates and asset returns exceeding the Company’s expected return on assets. The actuarial loss arising during the year ended December 31, 2020 is primarily due to a decrease in discount rates during the period, partially offset by asset returns exceeding the Company’s expected return on assets.

Amounts recognized on the consolidated balance sheets consist of the following at December 31, 2021 and 2020:

	Pension Plans								Other Postretirement Benefits Plans
	U.S.				Non-U.S.
	2021		2020		2021		2020		2021		2020
Noncurrent assets	$	—	$	—	$	75	$	37	$	—	$	—
Current liabilities	(3)		(2)		(17)		(18)		(18)		(23)
Noncurrent liabilities (a)	(65)		(236)		(511)		(570)		(172)		(214)
	$	(68)	$	(238)	$	(453)	$	(551)	$	(190)	$	(237)

(a) Included in “Pension and postretirement benefits” within the consolidated balance sheets are postemployment benefits of $82 million and $81 million at December 31, 2021 and 2020 which are not included in the tables above.

Amounts recognized in accumulated other comprehensive loss for pension and postretirement benefits, pre-tax, consist of the following components at December 31, 2021 and 2020:

	Pension Plans								Other Postretirement Benefits Plans
	U.S.				Non-U.S.
	2021		2020		2021		2020		2021		2020
Actuarial (gain) loss	$	144	$	290	$	108	$	168	$	14	$	32
Prior service cost/(credit)	1		1		3		4		(109)		(99)
Total	$	145	$	291	$	111	$	172	$	(95)	$	(67)

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

	Pension Plans								Other Postretirement Benefits Plans
	2021				2020
	U.S.		Non-U.S.		U.S.		Non-U.S.		2021		2020
Projected benefit obligation	$	1,278	$	645	$	1,383	$	743	$	190	$	237
Fair value of plan assets	$	1,210	$	117	$	1,145	$	155	$	—	$	—

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

	December 31, 2021				December 31, 2020
	U.S.		Non-U.S.		U.S.		Non-U.S.
Projected benefit obligation	$	1,278	$	602	$	1,383	$	696
Accumulated benefit obligation	$	1,278	$	561	$	1,383	$	654
Fair value of plan assets	$	1,210	$	81	$	1,145	$	118

The accumulated benefit obligation for all pension plans is $2,247 million and $2,446 million at December 31, 2021 and 2020.

Net periodic pension and postretirement benefits costs for the years ended December 31, 2021, 2020 and 2019, consist of the following components:

	Pension Plans												Other Postretirement Benefits Plans
	U.S.						Non-U.S.
	2021		2020		2019		2021		2020		2019		2021		2020		2019
Service cost	$	2	$	1	$	2	$	26	$	25	$	24	$	—	$	—	$	1
Interest cost	31		41		53		17		18		24		6		9		13
Expected return on plan assets	(65)		(64)		(67)		(16)		(17)		(19)		—		—		—
Curtailment loss (gain)	—		—		—		—		—		—		—		(21)		(7)
Settlement loss	—		1		6		1		6		1		—		—		—
Net amortization:
Actuarial loss	12		6		5		8		8		5		2		2		4
Prior service cost (credit)	—		—		—		1		—		1		(10)		(7)		(8)
Net periodic costs	$	(20)	$	(15)	$	(1)	$	37	$	40	$	36	$	(2)	$	(17)	$	3

The following assumptions were used in the accounting for the pension and other postretirement benefits plans for the years ended December 31, 2021, 2020, and 2019:

	Pension Plans												Other Postretirement Benefits Plans
	U.S.						Non-U.S.
	2021		2020		2019		2021		2020		2019		2021		2020		2019
Weighted average assumptions used to determine benefit obligations:
Discount rate	2.8	%	2.3	%	3.2	%	1.9	%	1.5	%	1.7	%	2.9	%	2.5	%	3.2	%
Rate of compensation increase	n/a		n/a		n/a		1.9	%	1.8	%	2.0	%	n/a		n/a		n/a
Interest crediting rate	4.2	%	4.2	%	4.2	%	1.8	%	1.8	%	1.8	%	n/a		n/a		n/a
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate	2.3	%	3.2	%	4.2	%	1.5	%	1.7	%	2.6	%	2.5	%	3.2	%	4.3	%
Expected long-term return on plan assets	6.2	%	6.3	%	6.3	%	2.9	%	3.5	%	4.0	%	n/a		n/a		n/a
Rate of compensation increase	n/a		n/a		n/a		1.8	%	2.0	%	2.0	%	n/a		n/a		n/a
Interest crediting rate	4.2	%	4.2	%	4.2	%	1.8	%	1.8	%	1.8	%	n/a		n/a		n/a

Estimated future benefit payments are as follows:

	Pension Plans				Other Postretirement Benefits Plans
Year	U.S.		Non-U.S.
2022	$	92	$	51	$	18
2023	$	93	$	48	$	17
2024	$	89	$	46	$	16
2025	$	87	$	48	$	15
2026	$	85	$	50	$	14
2027-2031	$	380	$	272	$	61

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
	2021		2020		2019
Initial health care cost trend rate	6.1	%	6.3	%	6.6	%
Ultimate health care cost trend rate	4.9	%	4.9	%	4.9	%
Year ultimate health care cost trend rate reached	2027		2027		2027

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 2021 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 decreased from 6.2% at December 31, 2020 to 5.6% at December 31, 2021, primarily attributable to a change in target asset allocation strategy. 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 2.9% at December 31, 2020 to 2.7% at December 31, 2021.

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. As the funded status of the plans improved in 2021, the Company further mitigated risk by reducing plan assets allocated to equity investments and increasing plan assets allocated to fixed income investments. The Company’s investment strategy for the U.S. plans currently includes a target asset allocation of 54% equity investments and 46% fixed income investments.

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 an increase in the allocation of assets to 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, 2021
	U.S.		Non-U.S.
Equity securities	53	%	14	%
Fixed income securities	41	%	59	%
Insurance contracts	—	%	20	%
Other	6	%	7	%

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 at December 31, 2021
	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	$	488	$	—	$	—	$	488	$	1	$	—	$	—	$	1
Fixed income securities	106		—		—		106		11		—		—		11
Real estate and other	—		—		—		—		—		—		—		—
Equity securities	4		—		—		4		4		38		—		42
Debt securities:
Corporate and other	—		163		—		163		—		—		—		—
Government	115		46		—		161		4		176		—		180
Real Estate and other	—		—		—		—		1		29		—		30
Insurance contracts	—		—		—		—		—		—		113		113
Hedge funds	—		—		11		11		—		—		—		—
Cash and equivalents	62		—		—		62		12		—		—		12
Total	$	775	$	209	$	11	$	995	$	33	$	243	$	113	$	389
Plan assets measured at net asset value
Equity securities							$	149							$	31
Government debt securities							—								103
Corporate and other debt securities							66								48
Total plan assets measured at net asset value							215								182
Net plan assets							$	1,210							$	571

	Fair Value Level at December 31, 2020
	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	$	374	$	—	$	—	$	374	$	1	$	—	$	—	$	1
Fixed income securities	140		—		—		140		12		—		—		12
Real estate and other	21		—		—		21		—		—		—		—
Equity securities	242		—		—		242		21		42		—		63
Debt securities:
Corporate and other	—		13		—		13		10		—		—		10
Government	25		39		—		64		14		189		—		203
Real Estate and other	—		—		—		—		1		30		—		31
Insurance contracts	—		—		—		—		—		—		113		113
Hedge funds	—		—		17		17		—		—		—		—
Cash and equivalents	80		—		—		80		5		—		—		5
Total	$	882	$	52	$	17	$	951	$	64	$	261	$	113	$	438
Plan assets measured at net asset value
Equity securities							$	137							$	84
Government debt securities							—								36
Corporate and other debt securities							57								13
Total plan assets measured at net asset value							194								133
Net plan assets							$	1,145							$	571

The Company’s level 1 assets were valued using market prices based on daily 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 activity attributable to U.S. and non-U.S. Level 3 defined benefit pension plan investments was not significant in the years ended December 31, 2021, 2020, and 2019.

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
2021:
Tenneco stock	1	$	4	0.2	%
2020:
Tenneco stock	1	$	4	0.2	%