Retirement Plans

12 Months Ended

Dec. 31, 2023

Retirement Benefits [Abstract]

Retirement Plans

18. Retirement Plans

DEFINED CONTRIBUTION PLANS

Many of the Company’s employees are covered by government sponsored pension and welfare programs. Under the terms of these programs, the Company makes periodic payments to various government agencies. In addition, in some countries the Company sponsors or participates in certain non-governmental defined contribution plans. Contributions to defined contribution plans for the years ended December 31, 2023, 2022 and 2021 were $26 million, $24 million, and $18 million, respectively.

MULTIEMPLOYER PLANS

The Company participates in a multiemployer plan in Sweden. This ITP-2 plan is funded through Alecta and covers employees born before 1979, for whom it provides a final pay pension benefit based on all service with participating employers. The Company must pay for wage increases in excess of inflation on service earned with previous employers. The plan also provides disability and family benefits and is more than 100% funded. The Company´s contributions to this multiemployer plan for the years ended December 31, 2023, 2022 and 2021 were $4 million, $6 million and $5 million, respectively.

DEFINED BENEFIT PLANS

The Company has a number of defined benefit pension plans, both contributory and non-contributory, in the U.S., France, Germany, India, Japan, Mexico, Philippines, Poland, Sweden, South Korea, Thailand, Turkey and the United Kingdom. There are funded as well as unfunded plan arrangements which provide retirement benefits to both U.S. and non-U.S. participants.

The main plan is the U.S. plan for which the benefits are based on an average of the employee’s earnings and on credited service earned through December 31, 2021. In a prior year, the Company closed participation in the Autoliv ASP, Inc. Pension Plan to exclude those employees hired after December 31, 2003. Within the U.S. there is also a non-qualified restoration plan that provides benefits to employees whose benefits in the primary U.S. plan are restricted by limitations on the compensation that can be considered in calculating their benefits. Effective December 31, 2021, the Autoliv ASP, Inc. Pension Plan is frozen to new accruals and, by extension, the non-qualified restoration plan is also frozen. Settlement accounting has been recognized each quarter in 2023 and 2022 for the U.S. plans because the lump-sum payments made to plan participants during 2023 and 2022 exceeded the sum of service cost and interest cost.

For the Company’s non-U.S. defined benefit plans the most significant individual plan is in the U.K. The Company has closed participation in the U.K. defined benefit plan to exclude all employees hired after April 30, 2003 with few members currently accruing benefits.

CHANGES IN BENEFIT OBLIGATIONS AND PLAN ASSETS FOR THE YEARS ENDED DECEMBER 31

	U.S.						Non-U.S.
(Dollars in millions)	2023			2022			2023			2022
Benefit obligation at beginning of year	$	227		$	381		$	192		$	260
Service cost		—			—			9			9
Interest cost		12			12			10			6
Actuarial (gain) loss due to:
Change in discount rate		5			(111	)		(22	)		(65	)
Experience		2			15			(1	)		4
Other assumption changes		2			—			24			18
Benefits paid		(4	)		(4	)		(10	)		(20	)
Plan settlements/curtailments		(17	)		(66	)		(2	)		(3	)
Plan amendments		—			—			1			2
Other		—			—			0			—
Translation difference		—			—			7			(19	)
Benefit obligation at end of year	$	226		$	227		$	208		$	192
Fair value of plan assets at beginning of year	$	201		$	343		$	63		$	101
Actual return on plan assets		24			(75	)		3			(27	)
Company contributions		0			3			11			19
Benefits paid		(4	)		(4	)		(10	)		(20	)
Plan settlements		(17	)		(66	)		(0	)		—
Translation difference		—			—			3			(10	)
Fair value of plan assets at end of year	$	204		$	201		$	70		$	63
Pension liability recognized in the balance sheet	$	21		$	26		$	138		$	129

The U.S. plan provides that benefits may be paid in the form of a lump sum, if so elected by the participant. In order to more accurately reflect a market-derived pension obligation, Autoliv adjusts the assumed lump sum interest rate to reflect market conditions as of each December 31. This methodology is consistent with the approach required under the Pension Protection Act of 2006, which provides the rules for determining minimum funding requirements in the U.S.

COMPONENTS OF NET PERIODIC BENEFIT COST ASSOCIATED WITH THE DEFINED BENEFIT RETIREMENT PLANS FOR THE YEARS ENDED DECEMBER 31

	U.S.
(Dollars in millions)	2023			2022			2021
Service cost	$	—		$	—		$	8
Interest cost		12			12			10
Expected return on plan assets		(10	)		(14	)		(18	)
Amortization of actuarial loss		0			0			2
Settlement loss		1			6			5
Net periodic benefit cost	$	3		$	4		$	7

	Non-U.S.
(Dollars in millions)	2023			2022			2021
Service cost	$	9		$	9		$	12
Interest cost		10			6			5
Expected return on plan assets		(3	)		(2	)		(2	)
Amortization of prior service costs		1			1			0
Amortization of actuarial loss		1			1			1
Settlement/curtailment (gain) loss		0			(8	)		0
Net periodic benefit cost	$	18		$	7		$	17

The service cost and amortization of prior service cost components are reported among other employee compensation costs in the Consolidated Statements of Income. The remaining components, interest cost, expected returns on plan assets and amortization of actuarial loss, are reported as Other non-operating items, net in the Consolidated Statements of Income.

Amortization of the net actuarial loss from accumulated other comprehensive income is made over the estimated average remaining lifetime of the plan participants (27 to 31 years) for the U.S. plans, and the estimated average remaining service lives or lifetimes of the plan participants for the non-U.S. plans, the periods varying over a wide range between the different countries depending on the age of the population concerned.

COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS BEFORE TAX AS OF DECEMBER 31

	U.S.				Non-U.S.
(Dollars in millions)	2023		2022		2023		2022
Net actuarial loss	$	15	$	22	$	19	$	18
Prior service cost		—		—		4		4
Total accumulated other comprehensive loss    recognized in the balance sheet	$	15	$	22	$	24	$	22

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS BEFORE TAX FOR THE YEARS ENDED DECEMBER 31

	U.S.						Non-U.S.
(Dollars in millions)	2023			2022			2023			2022
Total retirement benefit recognized in accumulated    other comprehensive loss at beginning of year	$	22		$	35		$	22		$	33
Net actuarial loss (gain)		(6	)		(7	)		2			(15	)
Amortization or curtailment recognition of prior service credit (cost)		—			—			(1	)		1
Amortization or settlement recognition of net gain (loss)		(1	)		(6	)		(1	)		5
Translation difference		—			—			2			(2	)
Total retirement benefit recognized in accumulated    other comprehensive loss at end of year	$	15		$	22		$	24		$	22

The accumulated benefit obligation for the U.S. non-contributory defined benefit pension plans was $226 million and $227 million at December 31, 2023 and 2022, respectively. The accumulated benefit obligation for the non-U.S. defined benefit pension plans was $173 million and $154 million at December 31, 2023 and 2022, respectively.

Pension plans for which the accumulated benefit obligation (ABO) is notably in excess of the plan assets reside in the following countries: U.S., Mexico, France, Germany, Japan, South Korea, Sweden, Thailand and Turkey.

PENSION PLANS FOR WHICH ABO EXCEEDS THE FAIR VALUE OF PLAN ASSETS AS OF DECEMBER 31

	U.S.				Non-U.S.
(Dollars in millions)	2023		2022		2023		2022
Projected Benefit Obligation (PBO)	$	226	$	227	$	145	$	134
Accumulated Benefit Obligation (ABO)		226		227		116		102
Fair value of plan assets		204		201		2		2

The Company, in consultation with its actuarial advisors, determines certain key assumptions to be used in calculating the projected benefit obligation and annual net periodic benefit cost.

ASSUMPTIONS USED TO DETERMINE THE BENEFIT OBLIGATIONS AS OF DECEMBER 31

	U.S.				Non-U.S.1)
(% Weighted average / % Weighted average range)	2023		2022		2023	2022
Discount rate		5.13		5.41	1.00-10.25	0.75-9.75
Rate of increases in compensation level	n/a		n/a		2.25-5.00	2.10-5.00

1) The % weighted average ranges in the tables above represent significant non-U.S. plans only.

ASSUMPTIONS USED TO DETERMINE THE NET PERIODIC BENEFIT COST FOR THE YEARS ENDED DECEMBER 31

	U.S.
(% Weighted average)	2023		2022		2021
Discount rate		5.41		2.77		2.37
Rate of increases in compensation level	n/a		n/a			2.65
Expected long-term rate of return on assets		5.05		5.05		5.05

	Non-U.S.1)
(% Weighted average range)	2023	2022	2021
Discount rate	0.75-9.75	0.25-8.00	0.25-7.25
Rate of increases in compensation level	2.10-5.00	1.80-5.00	1.80-5.00
Expected long-term rate of return on assets	4.20-4.80	1.70-2.20	1.40-2.25

1) The % weighted average ranges in the tables above represent significant non-U.S. plans only.

The discount rate for the U.S. plans has been set based on the rates of return on high-quality fixed-income investments currently available at the measurement date and expected to be available during the period the benefits will be paid. The expected timing of cash flows from the plan has also been considered in selecting the discount rate. In particular, the yields on bonds rated AA or better on the measurement date have been used to set the discount rate. The discount rate for the U.K. plan has been set based on the weighted average yields on long-term high-grade corporate bonds and is determined by reference to financial markets on the measurement date.

The expected rate of increase in compensation levels and long-term rate of return on plan assets are determined based on a number of factors and must take into account long-term expectations and reflect the financial environment in the respective local market. The expected return on assets for the U.S. and U.K. plans are based on the fair value of the assets as of December 31.

The level of equity exposure is currently targeted at approximately 32% for the primary U.S. plan. The investment objective is to provide an attractive risk-adjusted return that will ensure the payment of benefits while protecting against the risk of substantial investment losses. Correlations among the asset classes are used to identify an asset mix that Autoliv believes will provide the most attractive returns. Long-term return forecasts for each asset class using historical data and other qualitative considerations to adjust for projected economic forecasts are used to set the expected rate of return for the entire portfolio. The Company has assumed a long-term rate of return on the U.S. plan assets of 5.05% for calculating the 2023 expense.

The Company has assumed a long-term rate of return on the non-U.S. plan assets in a range of 4.20-4.80% for 2023. The closed U.K. plan, which has a targeted allocation of almost 100% debt instruments, accounts for approximately 73% of the total non-U.S. plan assets.

Autoliv made contributions to the U.S. plans during 2023 and 2022 amounting to $0 million and $3 million, respectively. Contributions to the U.K plan during 2023 and 2022 amounted to $2 million and $2 million, respectively. The Company expects to contribute $1 million to its U.S. pension plans in 2024 and is currently projecting a yearly funding at the same level in the years thereafter. For the U.K. pension plan, which is the most significant non-U.S. plan, the Company expects to contribute $2 million in 2024 and in the years thereafter.

FAIR VALUE OF TOTAL PLAN ASSETS FOR THE YEARS ENDED DECEMBER 31

	U.S.		U.S.				Non-U.S.
ASSETS CATEGORY (% Weighted average)	Target allocation		2023		2022		2023		2022
Equity securities %		32		31		23		0		0
Debt instruments %		68		68		76		64		60
Other assets %		—		1		1		36		40
Total %		100		100		100		100		100

The following table summarizes the fair value of the Company’s U.S. and non-U.S. defined benefit pension plan assets:

	Fair value measurement at December 31,
(Dollars in millions)	2023		2022
Assets
Non-U.S. Bonds
Government	$	24	$	15
Corporate		21		23
Insurance Contracts		17		14
Other Investments		10		11
Assets at fair value Level 2		71		63
Investments measured at net asset value    (NAV):
Common collective trusts		203		201
Total	$	274	$	264

The fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. Plan assets not measured using the NAV are classified as Level 2 in the table above. Plan assets measured using the NAV mainly relate to the U.S. defined benefit pension plans and are separately disclosed as Common collective trusts below the Level 2 assets in the table above.

The estimated future benefit payments for the pension benefits reflect expected future service, as appropriate. The amount of benefit payments in a given year may vary from the projected amount, especially for the U.S. plan since historically this plan pays the majority of benefits as a lump sum, where the lump sum amounts vary with market interest rates.

PENSION BENEFITS EXPECTED PAYMENTS (dollars in millions)	U.S.		Non-U.S.
2024	$	14	$	17
2025		17		12
2026		20		12
2027		19		14
2028		21		14
Years 2029-2033		91		84

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company currently provides postretirement health care and life insurance benefits to a limited group of U.S. retirees.

In general, the terms of the plans provide that U.S. employees who retire after attaining age 55, with 15 years of service (5 years before December 31, 2006), are reimbursed for qualified medical expenses up to a maximum annual amount. Spouses for certain retirees are also eligible for reimbursement under the plan. Life insurance coverage is available for those who elect coverage under the retiree health plan. During 2014, the plan was amended to move from a self-insured model where employees were charged an estimated premium based on anticipated plan expenses for continued coverage, to a plan where retirees are provided a fixed contribution to a Health Retirement Account (HRA). Retirees can use the HRA funds to purchase insurance through a private exchange. Employees hired on or after January 1, 2004 are not eligible to participate in the plan.

As of December 31, 2023 and 2022, the benefit obligation for postretirement benefit plans other than pensions were $13 million and $13 million, respectively. The liability for postretirement benefits other than pensions is classified as other non-current liabilities in the balance sheet. The components of the net periodic benefit costs associated with these plans were immaterial for the years 2023, 2022 and 2021.

The average discount rate used to determine the U.S. postretirement benefit obligation was 5.16% in 2023 and 5.39% in 2022. The average discount rate used in determining the postretirement benefit cost was 5.39% in 2023, 2.91% in 2022 and 2.60% in 2021.

The accumulated other comprehensive income before tax associated with the postretirement benefit plans other than pensions recognized in the balance sheet as of December 31, 2023 and 2022 were $6 million and $7 million, respectively. The components of the accumulated other comprehensive income were immaterial for the years 2023 and 2022.

The estimated future benefit payments for the postretirement benefits, which reflect expected future service as appropriate, are expected to be immaterial for all the future years.