Pension and Other Postretirement Benefits

Pensions. The Company sponsors various pension plans covering certain U.S. and non-U.S. employees, and participates in certain multi-employer pension plans. The benefits under the Company plans are based primarily on years of service and either the employees’ remuneration near retirement or a fixed dollar multiple.

A measurement date of December 31 was used for all plans presented below.

The components of pension expense were as follows:



U.S. Plans	2015			2014			2013
Service cost	$	14		$	13		$	15
Interest cost	63			66			62
Expected return on plan assets	(100		)	(104		)	(99		)
Amortization of actuarial loss	50			41			55
Amortization of prior service cost	—			—			1
Net periodic cost	$	27		$	16		$	34



Non-U.S. Plans	2015			2014			2013
Service cost	$	24		$	23		$	24
Interest cost	127			154			138
Expected return on plan assets	(172		)	(194		)	(176		)
Settlements	—			—			(2		)
Amortization of actuarial loss	55			73			71
Amortization of prior service credit	(13		)	(16		)	(14		)
Net periodic cost	$	21		$	40		$	41

Additional pension expense of $5 was recognized in each of 2015, 2014 and 2013 for multi-employer plans.

The projected benefit obligations, accumulated benefit obligations, plan assets and funded status of the Company's U.S. and non-U.S. plans is as follows:



	U.S. Plans						Non-U.S. Plans
	2015			2014			2015			2014
Projected Benefit Obligations
Benefit obligations at January 1	$	1,601		$	1,454		$	3,750		$	3,651
Service cost	14			13			24			23
Interest cost	63			66			127			154
Plan participants’ contributions	—			—			3			4
Amendments	—			3			—			(3		)
Settlements	(5		)	—			—			(17		)
Actuarial (gain) / loss	(69		)	170			(62		)	384
Acquisitions	—			—			102			—
Benefits paid	(103		)	(105		)	(190		)	(191		)
Foreign currency translation	—			—			(241		)	(255		)
Benefit obligations at December 31	$	1,501		$	1,601		$	3,513		$	3,750
Plan Assets
Fair value of plan assets at January 1	$	1,300		$	1,349		$	3,410		$	3,135
Actual return on plan assets	(9		)	54			48			623
Employer contributions	7			2			72			80
Plan participants’ contributions	—			—			3			4
Settlements	(5		)	—			—			(17		)
Acquisitions	—			—			40			—
Benefits paid	(103		)	(105		)	(190		)	(191		)
Foreign currency translation	—			—			(214		)	(224		)
Fair value of plan assets at December 31	$	1,190		$	1,300		$	3,169		$	3,410

Funded Status	$	(311	)	$	(301	)	$	(344	)	$	(340	)

Accumulated benefit obligations at December 31	$	1,463		$	1,557		$	3,407		$	3,630

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



U.S. Plans	2015		2014
Projected benefit obligations	$	1,501	$	1,601
Accumulated benefit obligations	1,463		1,557
Fair value of plan assets	1,190		1,300



Non-U.S. Plans	2015		2014
Projected benefit obligations	$	3,366	$	3,444
Accumulated benefit obligations	3,261		3,350
Fair value of plan assets	3,015		3,116

The Company’s investment strategy in its U.S. plan is designed to generate returns that are consistent with providing benefits to plan participants within the risk tolerance of the plan. Asset allocation is the primary determinant of return levels and investment risk exposure. The assets of the plan are broadly diversified in terms of securities and security types in order to limit the potential of large losses from any one security.

The strategic ranges for asset allocation in the U.S. plan are as follows:



U.S. equities	30	%	to	40	%
International equities	10	%	to	15	%
Fixed income	13	%	to	23	%
Balanced funds	15	%	to	25	%
Real estate	5	%	to	10	%
Private equity	5	%	to	10	%

The Company’s investment strategy in its U.K. plan, the largest non-U.S. plan, is designed to achieve a funding level of 100% within the next 11 years by targeting an expected return of 2.0% annually in excess of the expected growth in the liabilities. The Company seeks to achieve this return with a risk level commensurate with a 5% chance of the funding level falling between 4% and 8% in any one year. The strategic ranges for asset allocation in the U.K. plan are as follows:



Investment grade credit	40	%	to	80	%
Equities	0	%	to	30	%
Hedge funds	0	%	to	10	%
Real estate	0	%	to	5	%
Private equity	0	%	to	15	%
Emerging market wealth	0	%	to	15	%
Alternative credit	0	%	to	15	%
Other	0	%	to	5	%

Pension assets are classified into three levels. Level 1 asset values are derived from quoted prices which are available in active markets as of the report date. Level 2 asset values are derived from other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the report date. Level 3 asset values are derived from unobservable pricing inputs that are not corroborated by market data or other objective sources.

Equity securities are valued at the latest quoted prices taken from the primary exchange on which the security trades. Mutual funds are valued at the net asset value (NAV) of shares held at year-end. Fixed income securities, including government issued debt, corporate debt and asset-backed and structured debt securities are valued using market inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers and other reference data including market research publications. Derivatives, which consist mainly of interest rate swaps, are valued using a discounted cash flow pricing model based on observable market data. Investment funds, hedge funds and private equity funds are valued at the NAV at year-end. The values assigned to private equity funds are based upon assessments of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information,

including comparable transactions, and performance multiples among other factors. Real estate investments are based on third party appraisals.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair value. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in different fair value measurements at the reporting date.

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and their placement within the fair value hierarchy.

The levels assigned to the defined benefit plan assets as of December 31, 2015 and 2014 are summarized in the tables below:



	2015
	U.S. plan assets		Non-U.S. plan assets		Total
Level 1
Cash and cash equivalents	$	40	$	132	$	172
U.S. large cap equity	62		7		69
U.S. mid/small cap equity	231		18		249
Mutual funds – global equity	164		2		166
Mutual funds – U.S. equity	194		—		194
Mutual funds – fixed income	134		—		134
	825		159		984
Level 2
Government issued debt securities	43		381		424
Corporate debt securities	71		86		157
Asset backed securities	15		4		19
Structured debt	—		697		697
Insurance contracts	—		17		17
Derivatives	—		84		84
Investment funds – fixed income	71		585		656
Investment funds – global equity	25		336		361
Investment funds – emerging markets	21		46		67
	246		2,236		2,482
Level 3
Investment funds – real estate	74		97		171
Hedge funds	2		411		413
Private equity	26		255		281
Real estate – direct	16		4		20
	118		767		885
Total	$	1,189	$	3,162	$	4,351



	2014
	U.S. plan assets		Non-U.S. plan assets		Total
Level 1
Cash and cash equivalents	$	66	$	67	$	133
Global large cap equity	—		38		38
U.S. large cap equity	187		26		213
U.S. mid/small cap equity	251		19		270
Mutual funds – global equity	174		—		174
Mutual funds – U.S. equity	83		—		83
Mutual funds – fixed income	145		—		145
	906		150		1,056
Level 2
Government issued debt securities	35		553		588
Corporate debt securities	81		75		156
Asset backed securities	17		8		25
Structured debt	—		722		722
Insurance contracts	—		12		12
Derivatives	—		195		195
Investment funds – fixed income	60		527		587
Investment funds – global equity	24		377		401
Investment funds – emerging markets	29		112		141
	246		2,581		2,827
Level 3
Investment funds – real estate	57		108		165
Hedge funds	42		260		302
Private equity	30		303		333
Real estate – direct	17		4		21
	146		675		821
Total	$	1,298	$	3,406	$	4,704

Accrued income excluded from the tables above is as follows:



	2015		2014
U.S. plan assets	$	1	$	2
Non-U.S. plan assets	7		4

Plan assets include $171 of the Company’s common stock at December 31, 2015 and 2014.

The following tables reconcile the beginning and ending balances of plan assets measured using significant unobservable inputs (Level 3).



	Hedge funds			Private equity			Real estate			Total
Balance at January 1, 2014	$	225		$	335		$	157		$	717
Foreign currency translation	(9		)	(18		)	(6		)	(33		)
Asset returns – assets held at reporting date	25			62			25			112
Asset returns – assets sold during the period	—			(5		)	(4		)	(9		)
Purchases, sales and settlements, net	61			(41		)	14			34
Balance at December 31, 2014	302			333			186			821
Foreign currency translation	(14		)	(16		)	(8		)	(38		)
Asset returns – assets held at reporting date	(5		)	(17		)	5			(17		)
Asset returns – assets sold during the period	17			54			10			81
Purchases, sales and settlements, net	113			(73		)	(2		)	38
Balance at December 31, 2015	$	413		$	281		$	191		$	885

Pension assets and liabilities included in the Consolidated Balance Sheets are:



	2015		2014
Non-current assets	$	8	$	13
Current liabilities	39		12
Non-current liabilities	629		641

The Company’s current liability at December 31, 2015, represents the expected required payments to be made for unfunded plans over the next twelve months. Total estimated 2016 employer contributions are $112 for the Company’s pension plans.

Changes in the net loss and prior service credit for the Company’s pension plans were:



	2015						2014						2013
	Net loss			Prior service			Net loss			Prior service			Net loss			Prior service
Balance at January 1	$	2,423		$	(71	)	$	2,466		$	(94	)	$	2,619		$	(102	)
Reclassification to net periodic benefit cost	(105		)	13			(120		)	16			(130		)	13
Current year loss/(gain)	95			—			174			—			(47		)	(1		)
Amendments	—			—			—			3			—			—
Foreign currency translation	(93		)	4			(97		)	4			24			(4		)
Balance at December 31	$	2,320		$	(54	)	$	2,423		$	(71	)	$	2,466		$	(94	)

The estimated portions of the net losses and net prior service that are expected to be recognized as components of net periodic benefit cost / (credit) in 2016 are $102 and $(13).

Expected future benefit payments as of December 31, 2015 are:



	U.S. plans		Non-U.S. plans
2016	$	138	$	179
2017	105		178
2018	102		182
2019	114		185
2020	104		188
2021 - 2025	490		961

The weighted average actuarial assumptions used to calculate the benefit obligations at December 31 are:



U.S. Plans	2015		2014		2013
Discount rate	4.4	%	4.0	%	4.8	%
Compensation increase	4.6	%	4.6	%	3.0	%



Non-U.S. Plans	2015		2014		2013
Discount rate	3.7	%	3.4	%	4.4	%
Compensation increase	2.9	%	2.7	%	3.2	%

The weighted average actuarial assumptions used to calculate pension expense for each year were:



U.S. Plans	2015		2014		2013
Discount rate	4.0	%	4.8	%	4.0	%
Compensation increase	4.6	%	3.0	%	3.0	%
Long-term rate of return	8.0	%	8.0	%	8.0	%



Non-U.S. Plans	2015		2014		2013
Discount rate	3.4	%	4.4	%	4.1	%
Compensation increase	2.7	%	3.2	%	2.8	%
Long-term rate of return	5.2	%	6.4	%	6.0	%

The expected long-term rates of return are determined at each measurement date based on a review of the actual plan assets, the target allocation, and the historical returns of the capital markets.

The U.S. plan’s 2015 assumed asset rate of return was based on a calculation using underlying assumed rates of return of 9.6% for equity securities and alternative investments, 5.5% for debt securities and 4.0% for real estate. The rate of return used for equity securities and alternative investments was based on the total return of the S&P 500 for the 25 year period ended December 31, 2014. The Company believes that the equity securities included in the S&P 500 are representative of the equity securities and alternative investments held by its U.S. plan, and that this period provides a sufficient time horizon as a basis for estimating future returns. The rate of return used for debt securities is consistent with the U.S. plan discount rate and the return on AA corporate bonds with duration equal to the plan’s liabilities. The underlying debt securities in the plan are primarily invested in various corporate and government agency securities and are benchmarked against returns on AA corporate bonds.

The U.K. plan’s 2015 assumed asset rate of return was based on a calculation using underlying assumed rates of return of 8.5% for equity securities, 9.6% for alternative investments, 5.5% for debt securities and 3.4% for real estate. Equity securities in the U.K. plan were allocated approximately 39% to U.S. securities, 42% to securities in developed European countries, and 19% to securities in emerging markets. The assumed rate of return for equity securities and alternative investments represents the weighted average 25 year return of equity securities in these markets. The Company believes that the equity securities included in the related market indexes are representative of the equity securities and alternative investments held by its U.K. plan, and that this period provides a sufficient time horizon as a basis for estimating future returns.

Other Postretirement Benefit Plans. The Company sponsors unfunded plans to provide health care and life insurance benefits to pensioners and survivors. Generally, the medical plans pay a stated percentage of medical expenses reduced by deductibles and other coverages. Life insurance benefits are generally provided by insurance contracts. The Company reserves the right, subject to existing agreements, to change, modify or discontinue the plans. A measurement date of December 31 was used for the plans presented below.

The components of net postretirement benefits cost are as follows:



Other Postretirement Benefits	2015			2014			2013
Service cost	$	1		$	2		$	3
Interest cost	7			12			13
Amortization of prior service credit	(37		)	(34		)	(39		)
Amortization of actuarial loss	4			6			10
Net periodic benefit cost	$	(25	)	$	(14	)	$	(13	)

Changes in the benefit obligations were:



	2015			2014
Benefit obligations at January 1	$	241		$	274
Service cost	1			2
Interest cost	7			12
Amendments	(52		)	—
Actuarial gain	(19		)	(23		)
Curtailment	(3		)	—
Benefits paid	(17		)	(19		)
Foreign currency translation	(7		)	(5		)
Benefit obligations at December 31	$	151		$	241

Changes in the net loss and prior service credit for the Company’s postretirement benefit plans were:



	2015						2014						2013
	Net loss			Prior service			Net loss			Prior service			Net loss			Prior service
Balance at January 1	$	69		$	(211	)	$	97		$	(246	)	$	157		$	(269	)
Reclassification to net periodic benefit cost	(4		)	37			(6		)	34			(10		)	39
Current year loss	(18		)	—			(24		)	—			(49		)	—
Amendments	—			(51		)	—			—			—			(18		)
Foreign currency translation				—			2			1			(1		)	2
Balance at December 31	$	47		$	(225	)	$	69		$	(211	)	$	97		$	(246	)

The estimated portions of the net losses and prior service credits that are expected to be recognized as components of net periodic benefit cost/(credit) in 2016 are $4 and $(41).

In 2015, the U.S. plan was amended to eliminate or reduce certain health and life insurance coverage benefits.

Expected future benefit payments, as of December 31, 2015, net of expected Medicare Part D subsidies of $4 in the aggregate are:



	Benefit Payments
2016	$	14
2017	13
2018	13
2019	12
2020	12
2021 - 2024	53

The assumed health care cost trend rates at December 31, 2015 are as follows:



Health care cost trend rate assumed for 2016	5.5	%
Rate that the cost trend rate gradually declines to	4.4	%
Year that the rate reaches the rate it is assumed to remain	2027

A one-percentage-point change in assumed health care cost trend rates would have the following effects:



	One percentage point
	Increase		Decrease
Effect on total service and interest cost	$	1	$	1
Effect on postretirement benefit obligation	$	6	$	5

Weighted average discount rates used to calculate the benefit obligations at the end of each year and the cost for each year are presented below.



	2015		2014		2013
Benefit obligations	3.9	%	4.0	%	4.8	%
Cost	4.0	%	4.8	%	4.1	%

Employee Savings Plan. The Company sponsors a Savings Investment Plan which covers substantially all U.S. salaried employees who are at least 21 years of age. The Company matches up to 50% of 3% of a participant’s compensation and the total Company contributions were $2 in each of the last three years.

Employee Stock Purchase Plan. The Company sponsors an Employee Stock Purchase Plan which covers all U.S. employees with one or more years of service who are non-officers and non-highly compensated as defined by the Internal Revenue Code. Eligible participants contribute 85% of the quarter-ending market price towards the purchase of each common share. The Company’s contribution is equivalent to 15% of the quarter-ending market price. Total shares purchased under the plan in 2015 and 2014 were 25,917 and 25,351 and the Company’s contributions were less than $1 in both years.