RETIREMENT AND OTHER BENEFIT PROGRAMS

12 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

RETIREMENT AND OTHER BENEFIT PROGRAMS

PENSION AND OTHER POSTRETIREMENT BENEFIT PROGRAMS

We sponsor a number of qualified and nonqualified pension plans for eligible employees. We also sponsor certain unfunded contributory healthcare and life insurance benefits for substantially all domestic retired employees. Newly hired employees in the United States and Puerto Rico are not eligible to participate in the pension plans but receive a higher level of company contributions in the defined contribution plans.

Reconciliation of Pension and Other Postretirement Benefit Plan Obligations, Assets and Funded Status

The benefit plan information in the table below pertains to all of our pension and OPEB plans, both in the United States and in other countries. 

	Pension benefits				OPEB
			As Restated
as of and for the years ended December 31 (in millions)	2019		2018		2019		2018
Benefit obligations
Beginning of period	$	5,635	$	6,182	$	211	$	235
Service cost	74		87		1		1
Interest cost	172		178		8		7
Participant contributions	4		5		—		—
Actuarial (gain) loss	924		(431)		26		(14)
Benefit payments	(267)		(259)		(18)		(18)
Settlements	(2,550)		(6)		—		—
Curtailment	(13)		(56)		—		—
Foreign exchange and other	(6)		(65)		—		—
End of period	3,973		5,635		228		211
Fair value of plan assets
Beginning of period	4,774		5,261		—		—
Actual return on plan assets	939		(237)		—		—
Employer contributions	69		51		18		18
Participant contributions	4		5		—		—
Benefit payments	(267)		(259)		(18)		(18)
Settlements	(2,550)		(6)		—		—
Foreign exchange and other	4		(41)		—		—
End of period	2,973		4,774		—		—
Funded status at December 31	$	(1,000)	$	(861)	$	(228)	$	(211)
Amounts recognized in the consolidated balance sheets
Noncurrent asset	$	77	$	60	$	—	$	—
Current liability	(25)		(25)		(20)		(20)
Noncurrent liability	(1,052)		(896)		(208)		(191)
Net liability recognized at December 31	$	(1,000)	$	(861)	$	(228)	$	(211)

The pension obligation information in the table above represents the projected benefit obligation (PBO). The PBO incorporates assumptions relating to future compensation levels. The accumulated benefit obligation (ABO) is the same as the PBO except that it includes no assumptions relating to future compensation levels. The ABO for all of our pension plans was $3.7 billion and $5.4 billion at the 2019 and 2018 measurement dates, respectively.

The information in the funded status table above represents the totals for all of our pension plans. The following table is information relating to the individual plans in the funded status table above that have an ABO in excess of plan assets.

			As Restated
as of December 31 (in millions)	2019		2018
ABO	$	3,240	$	4,981
Fair value of plan assets	$	2,339	$	4,246

The following table presents information relating to the individual plans in the funded status table above that have a PBO in excess of plan assets (many of which also have an ABO in excess of assets and are therefore also included in the table directly above).

			As Restated
as of December 31 (in millions)	2019		2018
PBO	$	3,688	$	5,386
Fair value of plan assets	$	2,611	$	4,465

Expected Net Pension and OPEB Plan Payments for the Next 10 Years

(in millions)	Pension benefits		OPEB
2020	$	86	$	20
2021	104		18
2022	118		17
2023	132		17
2024	149		16
2024 through 2028	917		71
Total expected net benefit payments for next 10 years	$	1,506	$	159

The expected net benefit payments above reflect the total net benefits expected to be paid from the plans’ assets (for funded plans) or from our assets (for unfunded plans). The federal subsidies relating to the Medicare Prescription Drug, Improvement and Modernization Act are not expected to be significant.

Amounts Recognized in AOCI

The pension and OPEB plans’ gains or losses, prior service costs or credits, and transition assets or obligations not yet recognized in net periodic benefit cost are recognized on a net-of-tax basis in AOCI and will be amortized from AOCI to net periodic benefit cost in the future. For active employees, we utilize the average future working lifetime as the amortization period for prior service. For inactive employees, we utilize the average remaining life expectancy as the amortization period for prior service.

The following table is a summary of the pre-tax losses included in AOCI at December 31, 2019 and December 31, 2018.

(in millions)	Pension benefits		OPEB
Actuarial loss (gain)	$	1,025	$	(41)
Prior service credit and transition obligation	(9)		(59)
Total pre-tax loss recognized in AOCI at December 31, 2019	$	1,016	$	(100)
Actuarial loss (gain)	$	1,607	$	(79)
Prior service credit and transition obligation	(10)		(74)
Total pre-tax loss (gain) recognized in AOCI at December 31, 2018 (As Restated)	$	1,597	$	(153)

Refer to Note 11 for the net-of-tax balances included in AOCI as of each of the year-end dates. The following table is a summary of the net-of-tax amounts recorded in OCI relating to pension and OPEB plans.

			As Restated
Year ended December 31 (in millions)	2019		2018		2017
Gain (loss) arising during the year, net of tax expense (benefit) of $(64) in 2019, $(4) in 2018 and $25 in 2017	$	(184)	$	(22)	$	32
Amortization of loss to earnings, net of tax benefit of $6 in 2019, $14 in 2018 and $35 in 2017	25		55		102
Settlement charge, net of tax benefit of $188 in 2019	$	567	$	—	$	—
Pension and other employee benefits gain	$	408	$	33	$	134

In 2019, OCI activity for pension and OPEB plans was primarily related to the U.S. pension settlement charge, further discussed below, and actuarial gains and losses. In 2018 and 2017, OCI activity for pension and OPEB plans was primarily related to actuarial gains and losses.

Amounts Expected to be Amortized from AOCI to Net Periodic Benefit Cost in 2020

With respect to the AOCI balance at December 31, 2019, the following table is a summary of the pre-tax amounts expected to be amortized to net periodic benefit cost in 2020.

(in millions)	Pension benefits		OPEB
Actuarial loss/(gain)	$	78	$	(4)
Prior service credit and transition obligation	(1)		(14)
Total pre-tax amount expected to be amortized from AOCI to net pension and OPEB cost in 2020	$	77	$	(18)

Net Periodic Benefit Cost – Continuing Operations

			As Restated
Year ended December 31 (in millions)	2019		2018		2017
Pension benefits
Service cost	$	74	$	87	$	91
Interest cost	172		178		180
Expected return on plan assets	(264)		(303)		(291)
Amortization of net losses and other deferred amounts	58		94		163
Settlement charges	755		1		2
Other	—		—		(2)
Net periodic pension benefit cost	$	795	$	57	$	143
OPEB
Service cost	$	1	$	1	$	1
Interest cost	8		7		7
Amortization of net losses and prior service credit	(27)		(25)		(26)
Net periodic OPEB cost	$	(18)	$	(17)	$	(18)

Weighted-Average Assumptions Used in Determining Benefit Obligations at the Measurement Date

	Pension benefits				OPEB
	2019		2018		2019		2018
Discount rate
U.S. and Puerto Rico plans	3.44	%	4.31	%	3.16	%	4.20	%
International plans	1.34	%	2.02	%	n/a		n/a
Rate of compensation increase
U.S. and Puerto Rico plans	3.68	%	3.66	%	n/a		n/a
International plans	3.03	%	3.08	%	n/a		n/a
Annual rate of increase in the per-capita cost	n/a		n/a		6.75	%	7.00	%
Rate decreased to	n/a		n/a		5.00	%	5.00	%
by the year ended	n/a		n/a		2027		2027

The assumptions above, which were used in calculating the December 31, 2019 measurement date benefit obligations, will be used in the calculation of net periodic benefit cost in 2020.

Weighted-Average Assumptions Used in Determining Net Periodic Benefit Cost

	Pension benefits						OPEB
	2019		2018		2017		2019		2018		2017
Discount rate
U.S. and Puerto Rico plans	4.18	%	3.60	%	4.09	%	4.20	%	3.51	%	3.89	%
International plans	2.02	%	2.02	%	2.03	%	n/a		n/a		n/a
Expected return on plan assets
U.S. and Puerto Rico plans	6.29	%	6.25	%	6.50	%	n/a		n/a		n/a
International plans	5.45	%	5.58	%	5.77	%	n/a		n/a		n/a
Rate of compensation increase
U.S. and Puerto Rico plans	3.66	%	3.42	%	3.75	%	n/a		n/a		n/a
International plans	3.08	%	3.05	%	3.11	%	n/a		n/a		n/a
Annual rate of increase in the per-capita cost	n/a		n/a		n/a		6.75	%	7.00	%	6.25	%
Rate decreased to	n/a		n/a		n/a		5.00	%	5.00	%	5.00	%
by the year ended	n/a		n/a		n/a		2027		2027		2023

We established the expected return on plan assets assumption primarily based on a review of historical compound average asset returns, both company-specific and relating to the broad market (based on our asset allocation), as well as an analysis of current market and economic information and future expectations. We plan to use a 6.50% assumption for our U.S. and Puerto Rico plans for 2020.

Actuarial gains and losses result from changes in actuarial assumptions (such as changes in the discount rate and revised mortality rates). Actuarial losses in 2019 and gains in 2018 related to plan benefit obligations were primarily the result of changes in discount rates.

Effect of a One-Percent Change in Assumed Healthcare Cost Trend Rate on the OPEB Plan

The effect of a one-percent change in the assumed healthcare cost trend rate on the service and interest cost components of OPEB cost as well as the OPEB obligation were not significant for 2019 or 2018, respectively.

Pension Plan Assets

An investment committee of members of senior management is responsible for supervising, monitoring and evaluating the invested assets of our funded pension plans. The investment committee, which meets at least quarterly, abides by documented policies and procedures relating to investment goals, targeted asset allocations, risk management practices, allowable and prohibited investment holdings, diversification, use of derivatives, the relationship between plan assets and benefit obligations, and other relevant factors and considerations.

The investment committee’s policies and procedures include the following:

•Ability to pay all benefits when due;

•Targeted long-term performance expectations relative to applicable market indices, such as Russell, MSCI EAFE, and other indices;

•Targeted asset allocation percentage ranges (summarized below), and periodic reviews of these allocations;

•Diversification of assets among third-party investment managers, and by geography, industry, stage of business cycle and other measures;

•Specified investment holding and transaction prohibitions (for example, private placements or other restricted securities, securities that are not traded in a sufficiently active market, short sales, certain derivatives, commodities and margin transactions);

•Specified portfolio percentage limits on holdings in a single corporate or other entity (generally 5% at time of purchase, except for holdings in U.S. government or agency securities);

•Specified average credit quality for the fixed-income securities portfolio (at least A- by Standard & Poor’s or A3 by Moody’s);

•Specified portfolio percentage limits on foreign holdings; and

•Periodic monitoring of investment manager performance and adherence to the investment committee’s policies.

Plan assets are invested using a total return investment approach whereby a mix of equity securities, debt securities and other investments are used to preserve asset values, diversify risk and exceed the planned benchmark investment return. Investment strategies and asset allocations are based on consideration of plan liabilities, the plans’ funded status and other factors, such as the plans’ demographics and liability durations. Investment performance is reviewed by the investment committee on a quarterly basis and asset allocations are reviewed at least annually.

Plan assets are managed in a balanced portfolio comprised of two major components: return-seeking investments and liability hedging investments. The target allocations for plan assets are 53% in return-seeking investments and 47% in liability hedging investments and other holdings. The documented policy includes an allocation range based on each individual investment type within the major components that allows for a variance from the target allocations depending on the investment type. Return-seeking investments primarily include common stock of U.S. and international companies, common/collective trust funds, mutual funds, hedge funds, and partnership investments. Liability hedging investments and other holdings primarily include cash, money market funds with an original maturity of three months or less, U.S. and foreign government and governmental agency issues, corporate bonds, municipal securities, derivative contracts and asset-backed securities.

While the investment committee provides oversight over plan assets for U.S. and international plans, the summary above is specific to the plans in the United States. The plan assets for international plans are managed and allocated by the entities in each country, with input and oversight provided by the investment committee. The plan assets for the U.S. and international plans are included in the table below.

The following tables summarize our pension plan financial instruments that are measured at fair value on a recurring basis.

			Basis of fair value measurement
(in millions)	Balance at December 31, 2019		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Measured at NAV
Assets
Fixed income securities
Cash and cash equivalents	$	224	$	72	$	152	$	—	$	—
U.S. government and government agency issues	452		—		452		—		—
Corporate bonds	352		—		352		—		—
Equity securities
Common stock:
Large cap	231		231		—		—		—
Mid cap	158		158		—		—		—
Small cap	37		37		—		—		—
Total common stock	426		426		—		—		—
Mutual funds	442		189		253		—		—
Common/collective trust funds	668		19		272		—		377
Partnership investments	333		—		—		—		333
Other holdings	76		8		58		10		—
Collateral held on loaned securities	9		—		9		—		—
Liabilities
Collateral to be paid on loaned securities	(9)		(9)		—		—		—
Fair value of pension plan assets	$	2,973	$	705	$	1,548	$	10	$	710

	As Restated
			Basis of fair value measurement
(in millions)	Balance at December 31, 2018		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Measured at NAV
Assets
Fixed income securities
Cash and cash equivalents	$	145	$	21	$	124	$	—	$	—
U.S. government and government agency issues	735		—		735		—		—
Corporate bonds	1,127		—		1,127		—		—
Equity securities
Common stock:
Large cap	541		541		—		—		—
Mid cap	298		298		—		—		—
Small cap	91		91		—		—		—
Total common stock	930		930		—		—		—
Mutual funds	356		135		221		—		—
Common/collective trust funds	919		—		210		—		709
Partnership investments	390		—		—		—		390
Other holdings	172		11		151		10		—
Collateral held on loaned securities	196		—		196		—		—
Liabilities
Collateral to be paid on loaned securities	(196)		(34)		(162)		—		—
Fair value of pension plan assets	$	4,774	$	1,063	$	2,602	$	10	$	1,099

The following table is a reconciliation of changes in fair value measurements that used significant unobservable inputs (Level 3).

(in millions)	Total		Common/collective trust funds		Other holdings
Balance at December 31, 2017	$	18	$	8	$	10
Transfers out	(8)		(8)		—
Balance at December 31, 2018	10		—		10
Purchases	—		—		—
Balance at December 31, 2019	$	10	$	—	$	10

The assets and liabilities of our pension plans are valued using the following valuation methods:

Investment category	Valuation methodology
Cash and cash equivalents	These largely consist of a short-term investment fund, U.S. dollars and foreign currency. The fair value of the short-term investment fund is based on the net asset value
U.S. government and government agency issues	Values are based on reputable pricing vendors, who typically use pricing matrices or models that use observable inputs
Corporate bonds	Values are based on reputable pricing vendors, who typically use pricing matrices or models that use observable inputs
Common stock	Values are based on the closing prices on the valuation date in an active market on national and international stock exchanges
Mutual funds	Values are based on the net asset value of the units held in the respective fund which are obtained from national and international exchanges or based on the net asset value of the underlying assets of the fund provided by the fund manager
Common/collective trust funds	Values are based on the net asset value of the units held at year end
Partnership investments	Values are based on the net asset value of the participation by us in the investment as determined by the general partner or investment manager of the respective partnership
Other holdings	The value of these assets vary by investment type, but primarily are determined by reputable pricing vendors, who use pricing matrices or models that use observable inputs
Collateral held on loaned securities	Values are based on the net asset value per unit of the fund in which the collateral is invested
Collateral to be paid on loaned securities	Values are based on the fair value of the underlying securities loaned on the valuation date

Expected Pension and OPEB Plan Funding

Our funding policy for our pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that we may determine to be appropriate considering the funded status of the plans, tax deductibility, the cash flows generated by us, and other factors. Volatility in the global financial markets could have an unfavorable impact on future funding requirements. We have no obligation to fund our principal plans in the United States in 2020. We continually reassess the amount and timing of any discretionary contributions. In 2020, we expect to make contributions of at least $5 million to our Puerto Rico pension plan and $41 million to our foreign pension plans. We expect to have net cash outflows relating to our OPEB plan of approximately $20 million in 2020.

The following table details the funded status percentage of our pension plans as of December 31, 2019, including certain plans that are unfunded in accordance with the guidelines of our funding policy outlined above.

	United States and Puerto Rico					International
as of December 31, 2019 (in millions)	Qualified plans			Nonqualified plan		Funded plans			Unfunded plans		Total
Fair value of plan assets	$	2,060		n/a		$	913		n/a		$	2,973
PBO	2,278			$	243	1,001			$	451	3,973
Funded status percentage	90		%	n/a		91		%	n/a		75		%

Pension Annuitization

As part of our continued effort to reduce pension plan obligations, we transferred approximately $2.4 billion of U.S. qualified pension plan liabilities to an insurance company through the purchase of a group annuity contract in October 2019. As a result of this transaction, we recognized a non-cash pretax pension settlement charge of $755 million in the fourth quarter of 2019.

Pension Plan Amendments and Other Events

In January 2018, we announced changes to our U.S. pension plans.  We spun off the assets and liabilities of the qualified plan attributable to current employees into a new plan and will freeze the pay and service amounts used to calculate pension benefits for active participants in the U.S. pension plans as of December 31, 2022. The assets and liabilities attributable to retired and former company employees remained with the original qualified plan. Years of additional service earned and eligible compensation received after December 31, 2022 will not be included in the determination of the benefits payable to participants. These changes resulted in a $57 million decline in the PBO upon the effective date of the changes. As a result of these changes, net periodic pension and OPEB expense decreased in 2019 and 2018.

U.S. Defined Contribution Plan

Most U.S. employees are eligible to participate in a qualified defined contribution plan. We recognized expense of $53 million in 2019, $50 million in 2018 and $45 million in 2017 related to contributions to this plan.