Pension and Other Postretirement Benefits

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefits

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	2021		2020		2019
Service cost	$	20	$	18	$	15
Interest cost	25		38		50
Expected return on plan assets	(63)		(73)		(70)
Settlements	—		3		—
Curtailments and special termination benefits	9		—		—
Amortization of actuarial loss	58		56		55
Amortization of prior service cost	1		1		1
Net periodic cost	$	50	$	43	$	51

Non-U.S. Plans	2021		2020		2019
Service cost	$	13	$	10	$	13
Interest cost	32		52		70
Expected return on plan assets	(72)		(107)		(138)
Settlements	1,511		63		44
Curtailments	—		—		(14)
Amortization of actuarial loss	33		27		37
Amortization of prior service credit	—		—		(1)
Net periodic cost	$	1,517	$	45	$	11

The settlement charge in 2021 arose from the irrevocable transfer of the Company's U.K. pension plan to an insurer. In October 2021, the trustees of the Company's U.K. defined benefit pension plan (the "Plan") entered into a transaction to fully insure all of its U.K. pension liabilities. The Company made a cash contribution of $271 to enable the Plan to purchase a bulk annuity insurance contract for the benefit of the Plan participants. Subsequent to the purchase of the bulk annuity contract, each of the Plan participants was issued an individual annuity contract. The issuer of the individual annuity contract is solely responsible for paying each participant's benefits in full. The Company recorded a settlement charge of $1,511 ($1,040, net of tax) in November 2021, upon irrevocable transfer of the Plan's obligations. Of the $271, the Company was reimbursed $55 in the fourth quarter of 2021 and expects to receive an additional $110 of reimbursement in 2022 and 2023 as the plan sells its remaining illiquid assets.

The settlement charges in 2020 and 2019 arose from the payment of lump sum buy-outs to settle certain pension obligations using plan assets The curtailment gain in 2019 was to recognize prior service credits that were previously recorded in accumulated other comprehensive income in connection with the closure of a non-U.S. defined pension plan.

Additional pension expense of $5 in each of 2021, 2020 and 2019 was recognized 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 were as follows:

	U.S. Plans				Non-U.S. Plans
	2021		2020		2021		2020
Projected Benefit Obligations
Benefit obligations at January 1	$	1,505	$	1,440	$	3,172	$	3,155
Service cost	20		18		13		10
Interest cost	25		38		32		52
Plan participants’ contributions	—		—		2		2
Amendments	2		1		(3)		—
Settlements	—		(7)		(2,982)		(271)
Curtailments	(10)		—		(7)		—
Special termination benefits	6		—		—		—
Actuarial (gain) / loss	(43)		109		444		276
Benefits paid	(92)		(94)		(165)		(148)
Foreign currency translation	—		—		7		96
Benefit obligations at December 31	$	1,413	$	1,505	$	513	$	3,172
Plan Assets
Fair value of plan assets at January 1	$	1,152	$	1,131	$	3,518	$	3,480
Actual return on plan assets	115		113		(94)		334
Employer contributions	2		9		234		18
Plan participants’ contributions	—		—		2		2
Settlements	—		(7)		(2,982)		(271)
Benefits paid	(92)		(94)		(165)		(152)
Foreign currency translation	—		—		16		107
Fair value of plan assets at December 31	$	1,177	$	1,152	$	529	$	3,518
Funded status	$	(236)	$	(353)	$	16	$	346
Accumulated benefit obligations at December 31	$	1,361	$	1,445	$	474	$	3,111

For the year ended December 31, 2021, actuarial losses for the Company’s U.S. and non-U.S. pension plans totaled $638. Actuarial gains and losses arise each year primarily due to changes in discount rates, differences in actual plan asset returns compared to expected returns, and changes in actuarial assumptions such as mortality. The loss in 2021 is primarily due to the remeasurement of the U.K. pension plan in conjunction with the settlement, partially offset by a gain of $65 due to actual asset returns higher than expected returns and higher discount rates at the end of 2021.

U.S. pension plans with accumulated benefit obligations and projected benefit obligations in excess of plan assets were as follows: 

	2021		2020
Projected benefit obligations	$	1,413	$	1,505
Accumulated benefit obligations	1,361		1,445
Fair value of plan assets	1,177		1,152

Non-U.S. pension plans with accumulated benefit obligations in excess of plan assets were as follows: 

	2021		2020
Projected benefit obligations	$	284	$	354
Accumulated benefit obligations	253		320
Fair value of plan assets	147		191

Non-U.S. pension plans with projected benefit obligations in excess of plan assets were as follows: 

	2021		2020
Projected benefit obligations	$	288	$	432
Accumulated benefit obligations	257		389
Fair value of plan assets	151		194

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

U.S. equities	45	%	to	55	%
International equities	7	%	to	13	%
Fixed income	18	%	to	28	%
Balanced funds	7	%	to	13	%
Real estate	4	%	to	10	%

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.

Level 1 Investments

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.

Level 2 Investments

Fixed income securities, including government issued debt, corporate debt, asset-backed and structured debt securities are valued using the latest bid prices or valuations based on a matrix system (which considers such factors as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, 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.

Level 3 Investments

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.

Investments Measured Using NAV per Share Practical Expedient

Investments measured using NAV per share as a practical expedient include investment funds that invest in global equity, emerging markets and fixed income. The global equity funds invest in equity securities of various market sectors including industrial materials, consumer discretionary goods and services, financial infrastructure, technology, and health care. The emerging markets funds invest in equity markets within financial services, consumer goods and services, energy, and technology.

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, 2021 and 2020 are summarized in the tables below:

	2021
	U.S. plan assets		Non-U.S. plan assets		Total
Level 1
Cash and cash equivalents	$	68	$	21	$	89
Global large cap equity	—		8		8
U.S. large cap equity	238		6		244
U.S. mid/small cap equity	332		25		357
Mutual funds – global equity	93		—		93
Mutual funds – U.S. equity	85		—		85
Mutual funds – fixed income	71		—		71
	887		60		947
Level 2
Government issued debt securities	—		17		17
Corporate debt securities	61		3		64
Insurance contracts	—		110		110
Investment funds – fixed income	—		38		38
	61		168		229
Level 3
Investment funds – real estate	79		92		171
Private equity	5		2		7
Real estate – direct	25		15		40
	109		109		218
Total assets in fair value hierarchy	1,057		337		1,394
Investments measured at NAV Practical Expedient (a)
Investment funds – fixed income	112		25		137
Investment funds – global equity	—		167		167
Investment funds – emerging markets	7		—		7
	119		192		311
Total investments at fair value	$	1,176	$	529	$	1,705

	2020
	U.S. plan assets		Non-U.S. plan assets		Total
Level 1
Cash and cash equivalents	$	157	$	498	$	655
Global large cap equity	—		9		9
U.S. large cap equity	178		4		182
U.S. mid/small cap equity	301		22		323
Mutual funds – global equity	88		—		88
Mutual funds – U.S. equity	56		—		56
Mutual funds – fixed income	75		—		75
	855		533		1,388
Level 2
Government issued debt securities	—		298		298
Corporate debt securities	58		647		705
Asset backed securities	—		2		2
Structured debt	—		1,034		1,034
Insurance contracts	—		115		115
Derivatives	—		166		166
Investment funds – fixed income	—		128		128
Investment funds – global equity	—		69		69
	58		2,459		2,517
Level 3
Investment funds – real estate	91		181		272
Hedge funds	—		2		2
Private equity	5		46		51
Real estate – direct	23		12		35
	119		241		360
Total assets in fair value hierarchy	1,032		3,233		4,265
Investments measured at NAV Practical Expedient (a)
Investment funds – fixed income	112		25		137
Investment funds – global equity	—		141		141
Investment funds – emerging markets	7		—		7
Hedge funds	—		109		109
	119		275		394
Total investments at fair value	$	1,151	$	3,508	$	4,659

(a) Certain investments that are measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy.

Accrued income excluded from the tables above was as follows:

	2021		2020
U.S. plan assets	$	1	$	1
Non-U.S. plan assets	—		10

Plan assets include $357 and $323 of the Company’s common stock at December 31, 2021 and 2020.

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, 2020	$	43	$	75	$	346	$	464
Foreign currency translation	1		2		7		10
Asset returns – assets held at reporting date	3		6		(15)		(6)
Asset returns – assets sold during the period	(12)		(9)		3		(18)
Purchases, sales and settlements, net	(33)		(23)		(34)		(90)
Balance at December 31, 2020	2		51		307		360
Foreign currency translation	—		—		(1)		(1)
Asset returns – assets held at reporting date	(1)		(48)		30		(19)
Asset returns – assets sold during the period	1		39		3		43
Purchases, sales and settlements, net	(2)		(35)		(128)		(165)
Balance at December 31, 2021	$	—	$	7	$	211	$	218

The following table presents additional information about the pension plan assets valued using net asset value as a practical expedient:

	Fair Value		Redemption Frequency	Redemption Notice Period
Balance at December 31, 2021
Investment funds – fixed income	$	137	Semi-monthly	1- 5 days
Investment funds – global equity	167		Daily	10 days
Investment funds – emerging markets	7		Daily	30 days
Balance at December 31, 2020
Investment funds – fixed income	$	137	Semi-monthly	1- 5 days
Investment funds – global equity	141		Monthly	1- 5 days
Investment funds – emerging markets	7		Daily	30 days
Hedge funds	109		Monthly	1 - 30 days

The pension plan assets valued using net asset value as a practical expedient do not have any unfunded commitments.

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

	2021		2020
Non-current assets	$	158	$	532
Current liabilities	11		8
Non-current liabilities	367		537

The Company’s current liability at December 31, 2021, represents the expected required payments to be made for unfunded plans over the next twelve months. Total estimated 2022 employer contributions are $27 for the Company’s pension plans.

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

	2021				2020				2019
	Net loss		Prior service		Net loss		Prior service		Net loss		Prior service
Balance at January 1	$	1,802	$	8	$	1,808	$	8	$	1,962	$	(6)
Reclassification to net periodic benefit cost	(1,629)		(4)		(150)		(1)		(137)		14
Current year loss / (gain)	640		(2)		118		—		(53)		—
Amendments	(1)		—		—		1		—		—
Foreign currency translation	2		—		26		—		36		—
Balance at December 31	$	814	$	2	$	1,802	$	8	$	1,808	$	8

Expected future benefit payments as of December 31, 2021 are:

 

	U.S. plans		Non-U.S. plans
2022	$	104	$	31
2023	99		30
2024	99		30
2025	100		32
2026	85		32
2027 - 2031	419		360

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

U.S. Plans	2021		2020		2019
Discount rate	2.9	%	2.5	%	3.2	%
Compensation increase	4.7	%	4.7	%	4.7	%

Non-U.S. Plans	2021		2020		2019
Discount rate	2.5	%	1.4	%	2.1	%
Compensation increase	2.5	%	3.0	%	3.0	%

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

U.S. Plans	2021		2020		2019
Discount rate - service cost	3.1	%	3.6	%	4.7	%
Discount rate - interest cost	1.7	%	2.8	%	3.9	%
Compensation increase	4.7	%	4.7	%	4.5	%
Long-term rate of return	5.7	%	6.8	%	7.3	%

 

Non-U.S. Plans	2021		2020		2019
Discount rate - service cost	2.2	%	2.6	%	3.0	%
Discount rate - interest cost	1.8	%	1.9	%	2.7	%
Compensation increase	2.5	%	3.0	%	3.2	%
Long-term rate of return	3.3	%	3.3	%	4.3	%

The expected long-term rate of return on plan assets is determined by taking into consideration expected long-term returns associated with each major asset class based on long-term historical ranges, inflation assumptions and the expected net value from active management of the assets based on actual results.

Other Postretirement Benefit Plans. The Company sponsors unfunded plans to provide health care and life insurance benefits to certain retirees 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 were as follows:

Other Postretirement Benefits	2021		2020		2019
Service cost	$	1	$	1	$	1
Interest cost	4		5		6
Amortization of prior service credit	(26)		(26)		(34)
Amortization of actuarial loss	4		4		3
Net periodic benefit credit	$	(17)	$	(16)	$	(24)

Changes in the benefit obligations were:

	2021		2020
Benefit obligations at January 1	$	163	$	161
Service cost	1		1
Interest cost	4		5
Actuarial (gain) / loss	(20)		7
Benefits paid	(10)		(11)
Foreign currency translation	(1)		—
Benefit obligations at December 31	$	137	$	163

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

	2021				2020				2019
	Net loss		Prior service		Net loss		Prior service		Net loss		Prior service
Balance at January 1	$	45	$	(46)	$	42	$	(72)	$	31	$	(105)
Reclassification to net periodic benefit cost	(4)		26		(4)		26		(3)		34
Current year (gain) / loss	(20)		—		7		—		14		—
Amendments	—		—		—		—		—		(1)
Balance at December 31	$	21	$	(20)	$	45	$	(46)	$	42	$	(72)

Expected future benefit payments are as follows:

	Benefit Payments
2022	$	14
2023	12
2024	11
2025	10
2026	10
2027 - 2031	43

The assumed health care cost trend rates at December 31, 2021 were as follows: 

Health care cost trend rate assumed for 2021	4.5	%
Rate that the cost trend rate gradually declines to	3.8	%
Year that the rate reaches the rate it is assumed to remain	2040

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:

 

	2021		2020		2019
Benefit obligations	3.4	%	2.8	%	3.5	%
Service cost	5.9	%	4.1	%	4.8	%
Interest cost	3.6	%	3.3	%	4.2	%

Defined Contribution Benefit Plans. The Company also sponsors defined contribution benefit plans in certain jurisdictions including the U.S. and the U.K. The Company recognized expense of $12, $13, and $11 in 2021, 2020 and 2019 related to these plans.