Benefit Obligations

Pension obligations. Pension obligations are established for benefits payable in the form of retirement, disability and surviving dependent pensions. The commitments result from participation in defined contribution and defined benefit plans, primarily in the US. Benefits are dependent on years of service and the employee's compensation. Supplemental retirement benefits provided to certain employees are nonqualified for US tax purposes. Separate nonqualified trusts have been established for US nonqualified plans. Pension costs under the Company's retirement plans are actuarially determined.

The Company sponsors defined benefit pension plans in North America, Europe and Asia. Independent trusts or insurance companies administer the majority of these plans.

During the three months ended December 31, 2013, the Company settled certain of its defined benefit pension plan obligations in the United Kingdom and Canada, which resulted in the recognition of settlement losses of $9 million in the consolidated statement of operations. Additionally, effective December 31, 2013, benefits offered to all US non-union eligible employees in the Company's US qualified defined benefit pension plan have been frozen and the US qualified defined benefit pension plan was closed to new participants. Accumulated benefits earned and service rendered through December 31, 2013 under the US qualified defined benefit pension plan provisions will continue to be considered for purposes of determining retirement benefits and eligibility for early retirement. These actions resulted in the recognition of a curtailment gain of $61 million in the consolidated statements of operations for the three months ended December 31, 2013.

The Company sponsors various defined contribution plans in North America, Europe and Asia covering certain employees. Employees may contribute to these plans and the Company will match these contributions in varying amounts. The Company's matching contribution to the defined contribution plans are based on specified percentages of employee contributions.

The Company participates in a multiemployer defined benefit plan and a multiemployer defined contribution plan in Germany covering certain employees. The Company's contributions to the multiemployer defined benefit plan are based on specified percentages of employee contributions as outlined in a works council agreement, covering all German entity employees hired prior to January 1, 2012. As of January 1, 2012, the multiemployer defined benefit pension plan described above was closed to new employees. Qualifying employees hired in Germany after December 31, 2011 are covered by a multiemployer defined contribution plan. The Company's contributions to the multiemployer defined contribution plan are based on specified percentages of employee contributions, similar to the multiemployer defined benefit plan, but at a lower rate.

Statutory regulations and the works council agreement require the contributions to fully fund the multiemployer plans. The risks of participating in the multiemployer plans are different from single-employer plans in the following aspects:


•	Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.


•	If a participating employer stops contributing to the plan, any underfunding may be borne by the remaining participants, especially since regulations strictly enforce funding requirements.


•	If the Company chooses to stop participating in the multiemployer plan, the Company may be required to pay the plan an amount based on the underfunded status of the plan, referred to as the withdrawal liability.

Based on the 2013 unaudited and 2012 audited multiemployer defined benefit plan's financial statements, the plan is 100% funded in 2013, 2012 and 2011. The number of employees covered by the Company's multiemployer defined benefit plan remained relatively stable year over year from 2011 to 2013, resulting in minimal changes to employer contributions. The Company's participation in the German multiemployer defined benefit plan is not considered individually significant to that plan as the Company's contributions were less than 5% in both 2013 and 2012. No other factors would indicate the Company's participation in the German multiemployer defined benefit plan is individually significant.

Contributions to the Company's defined contribution plans and multiemployer plans are as follows:



	Year Ended December 31,
	2013	2012	2011
	(In $ millions)
Defined contribution plans	19	17	15
Multiemployer pension plan	8	6	6

Other postretirement obligations. Certain retired employees receive postretirement health care and life insurance benefits under plans sponsored by the Company, which has the right to modify or terminate these plans at any time. The cost for coverage is shared between the Company and the retiree. The cost of providing retiree health care and life insurance benefits is actuarially determined and accrued over the service period of the active employee group. The Company's policy is to fund benefits as claims and premiums are paid. The US plan was closed to new participants effective January 1, 2006.

On November 5, 2013, the Company announced it would amend its US postretirement health care plan to (a) eliminate eligibility for all US non-union individuals not eligible to participate prior to November 5, 2013; (b) terminate its US postretirement health care plan on December 31, 2014 for all US non-union participants eligible to participate prior to November 5, 2013; and (c) offer certain eligible US non-union individuals a lump-sum buyout payment if they irrevocably waive all future benefits under the US postretirement health care plan and end their participation before December 31, 2014. These actions generated a prior service credit of $92 million, which was recorded to Accumulated other comprehensive income, net in the consolidated balance sheets and will be amortized ratably into the consolidated statements of operations beginning November 1, 2013 through December 31, 2014. As of December 31, 2013, the Company had made $23 million in lump-sum buyout payments to US non-union individuals.

Summarized information on the Company's pension and postretirement benefit plans is as follows:



	Pension Benefits As of December 31,				Postretirement Benefits As of December 31,
	2013		2012		2013		2012
	(In $ millions)
Change in Projected Benefit Obligation
Projected benefit obligation as of beginning of period	4,199		3,761		292		281
Service cost	34		28		2		1
Interest cost	154		170		9		11
Participant contributions	—		—		23		22
Plan amendments	(1	)	—		(92	)	4
Net actuarial (gain) loss⁽¹⁾	(119	)	466		(37	)	12
Settlements	(172	)	—		(23	)	—
Benefits paid	(244	)	(242	)	(43	)	(46	)
Federal subsidy on Medicare Part D	—		—		6		6
Curtailments	(67	)	—		—		—
Exchange rate changes	6		16		(1	)	1
Other	9		—		—		—
Projected benefit obligation as of end of period	3,799		4,199		136		292
Change in Plan Assets
Fair value of plan assets as of beginning of period	2,896		2,562		—		—
Actual return on plan assets	171		294		—		—
Employer contributions	59		270		43		24
Participant contributions	—		—		23		22
Settlements	(173	)	—		(23	)	—
Benefits paid⁽⁴⁾	(244	)	(242	)	(43	)	(46	)
Exchange rate changes	—		12		—		—
Fair value of plan assets as of end of period	2,709		2,896		—		—
Funded status as of end of period	(1,090	)	(1,303	)	(136	)	(292	)
Amounts Recognized in the Consolidated Balance Sheets Consist of:
Noncurrent Other assets	11		26		—		—
Current Other liabilities	(23	)	(23	)	(55	)	(24	)
Benefit obligations	(1,078	)	(1,306	)	(81	)	(268	)
Net amount recognized	(1,090	)	(1,303	)	(136	)	(292	)
Amounts Recognized in Accumulated Other Comprehensive Income Consist of:
Net actuarial (gain) loss⁽²⁾	9		9		—		—
Prior service (benefit) cost⁽³⁾	(3	)	6		(75	)	4
Net amount recognized	6		15		(75	)	4

______________________________


⁽¹⁾	Primarily relates to change in discount rates.


⁽²⁾	Amount includes accumulated other comprehensive losses of $9 million and $9 million as of December 31, 2013 and 2012, respectively, related to the pension plans of the Company's equity method investments.


⁽³⁾	Amount shown net of an income tax expense of $26 million and income tax benefit of $4 million as of December 31, 2013 and 2012, respectively, in the consolidated statements of equity (Note 16).


⁽⁴⁾	Includes benefit payments to nonqualified pension plans of $22 million and $22 million as of December 31, 2013 and 2012, respectively.

The percentage of US and international projected benefit obligation at the end of the period is as follows:



	Pension Benefits As of December 31,		Postretirement Benefits As of December 31,
	2013	2012	2013	2012
	(In percentages)
US plans	86	84	75	88
International plans	14	16	25	12
Total	100	100	100	100

The percentage of US and international fair value of plan assets at the end of the period is as follows:



	Pension Benefits As of December 31,
	2013	2012
	(In percentages)
US plans	88	83
International plans	12	17
Total	100	100

Pension plans with projected benefit obligations in excess of plan assets are as follows:



	As of December 31,
	2013	2012
	(In $ millions)
Projected benefit obligation	3,749	3,986
Fair value of plan assets	2,648	2,657

Included in the above table are pension plans with accumulated benefit obligations in excess of plan assets as follows:



	As of December 31,
	2013	2012
	(In $ millions)
Accumulated benefit obligation	3,715	3,881
Fair value of plan assets	2,633	2,654

The accumulated benefit obligation for all defined benefit pension plans is as follows:



	As of December 31,
	2013	2012
	(In $ millions)
Accumulated benefit obligation	3,778	4,096

The components of net periodic benefit costs are as follows:



	Pension Benefits Year Ended December 31,						Postretirement Benefits Year Ended December 31,
	2013		2012		2011		2013		2012	2011
	(In $ millions)
Service cost	34		28		28		2		1	1
Interest cost	154		170		182		9		11	13
Expected return on plan assets	(223	)	(204	)	(195	)	—		—	—
Amortization of prior service cost	1		2		1		(12	)	1	—
Recognized actuarial (gain) loss	(67	)	377		293		(37	)	12	13
Curtailment (gain) loss	(61	)	—		—		—		—	—
Settlement (gain) loss	9		—		—		—		—	—
Special termination benefits	—		—		—		—		—	—
Total	(153	)	373		309		(38	)	25	27

Amortization of Accumulated other comprehensive income (loss), net into net periodic benefit cost in 2014 is expected to be as follows:



	Pension Benefits	Postretirement Benefits
	(In $ millions)
Prior service cost	—	(78	)

The Company maintains nonqualified pension plans funded with nonqualified trusts for certain US employees as follows:



	As of December 31,
	2013	2012
	(In $ millions)
Nonqualified Trust Assets
Marketable securities, at fair value	41	53
Noncurrent Other assets, consisting of insurance contracts	62	66
Nonqualified Pension Obligations
Current Other liabilities	22	22
Benefit obligations	247	264

Expense relating to the nonqualified pension plans included in net periodic benefit cost, excluding returns on the assets held by the nonqualified trusts, is as follows:



	Year Ended December 31,
	2013	2012	2011
	(In $ millions)
Total	6	17	18

Valuation

The Company applies the long-term expected rate of return to the fair value of plan assets and immediately recognizes the change in fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each fiscal year and whenever a plan is required to be remeasured. Events requiring a plan remeasurement will be recognized in the quarter in which such remeasurement event occurs. The remaining components of the Company's net periodic benefit cost are recorded on a quarterly basis. The policy changes have no impact on future pension and postretirement benefit plan funding or pension and postretirement benefits paid to participants.

The principal weighted average assumptions used to determine benefit obligation are as follows:



	Pension Benefits As of December 31,		Postretirement Benefits As of December 31,
	2013	2012	2013	2012
	(In percentages)
Discount Rate Obligations
US plans	4.7	3.8	4.3	3.4
International plans	3.7	3.6	4.5	3.8
Combined	4.6	3.8	4.4	3.5
Rate of Compensation Increase
US plans	3.0	4.0
International plans	2.8	2.9
Combined	3.0	3.8

The principal weighted average assumptions used to determine benefit cost are as follows:



	Pension Benefits Year Ended December 31,			Postretirement Benefits Year Ended December 31,
	2013	2012	2011	2013	2012	2011
	(In percentages)
Discount Rate Obligations
US plans	3.8	4.6	5.3	3.4	4.3	4.9
International plans	3.6	4.7	5.1	3.8	4.0	5.0
Combined	3.8	4.6	5.3	3.5	4.3	4.9
Expected Return on Plan Assets
US plans	8.5	8.5	8.5
International plans	5.8	6.0	6.0
Combined	8.0	8.1	8.1
Rate of Compensation Increase
US plans	4.0	4.0	4.0
International plans	2.9	2.9	2.7
Combined	3.8	3.8	3.6

The expected rate of return is assessed annually and is based on long-term relationships among major asset classes and the level of incremental returns that can be earned by the successful implementation of different active investment management strategies. Equity returns are based on estimates of long-term inflation rate, real rate of return, 10-year Treasury bond premium over cash and equity risk premium. Fixed income returns are based on maturity, long-term inflation, real rate of return and credit spreads. The US qualified defined benefit plans' actual return on assets for the year ended December 31, 2013 was 7.9% versus an expected long-term rate of asset return assumption of 8.5%.

In the US, the rate used to discount pension and other postretirement benefit plan liabilities was based on a yield curve developed from market data of over 300 Aa-grade non-callable bonds at December 31, 2013. This yield curve has discount rates that vary based on the duration of the obligations. The estimated future cash flows for the pension and other benefit obligations were matched to the corresponding rates on the yield curve to derive a weighted average discount rate.

The Company determines its discount rates in the Euro zone using the iBoxx Euro Corporate AA Bond indices with appropriate adjustments for the duration of the plan obligations. In other international locations, the Company determines its discount rates based on the yields of high quality government bonds with a duration appropriate to the duration of the plan obligations.

On January 1, 2013, the Company's health care cost trend assumption for US postretirement medical plan's net periodic benefit cost was 7.5% for the first year, declining 0.5% per year to an ultimate rate of 5%. On January 1, 2012, the Company's health care cost trend assumption for US postretirement medical plan's net periodic benefit cost was 7.5% for the first year, declining 0.5% per year to an ultimate rate of 5%. On January 1, 2011, the Company's health care cost trend assumption for US postretirement medical plan's net periodic benefit cost was 8% for the first four years declining 0.5% per year to an ultimate rate of 5%.

Assumed health care cost trend rates for US postretirement medical plans have a significant effect on the amounts reported for the health care plans.

The impact of a one percentage point change in the assumed health care cost trend is as follows:



	Trend Rate Change
	Decreases 1%	Increases 1%
	(In $ millions)
Postretirement obligations	7	8
Service and interest cost	—	1

Plan Assets

The investment objectives for the Company's pension plans are to earn, over a moving twenty-year period, a long-term expected rate of return, net of investment fees and transaction costs, sufficient to satisfy the benefit obligations of the plan, while at the same time maintaining adequate liquidity to pay benefit obligations and proper expenses, and meet any other cash needs, in the short- to medium-term.

The weighted average target asset allocations for the Company's pension plans in 2014 are as follows:



	US Plans	International Plans
	(In percentages)
Bonds - domestic to plans	53	71
Equities - domestic to plans	26	20
Equities - international to plans	20	3
Other	1	6
Total	100	100

The equity and debt securities objectives are to provide diversified exposure across the US and global equity markets and to manage the risks and returns of the plans through the use of multiple managers and strategies. The fixed income strategy is designed to reduce liability-related interest rate risk by investing in bonds that match the duration and credit quality of the plan liabilities. Derivatives based strategies may be used to improve the effectiveness of the hedges.

FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. Valuations for fund investments such as common/collective trusts and registered investment companies, which do not have readily determinable fair values, are typically estimated using a net asset value provided by a third party as a practical expedient.

The levels of inputs used to measure fair value are as follows:

Level 1 - unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company

Level 2 - inputs that are observable in the marketplace other than those inputs classified as Level 1

Level 3 - inputs that are unobservable in the marketplace and significant to the valuation

The Company's defined benefit plan assets are measured at fair value on a recurring basis and include the following items:

Cash and Cash Equivalents: Foreign and domestic currencies as well as short term securities are valued at cost plus accrued interest, which approximates fair value.

Equity securities, treasuries and corporate debt: Valued at the closing price reported on the active market in which the individual securities are traded. Automated quotes are provided by multiple pricing services and validated by the plan custodian. These securities are traded on exchanges as well as in the over the counter market.

Registered Investment Companies: Composed of various mutual funds and other investment companies whose diversified portfolio is comprised of foreign and domestic equities, fixed income securities, and short term investments. Investments are valued at the net asset value of units held by the plan at year-end.

Common/Collective Trusts: Composed of various funds whose diversified portfolio is comprised of foreign and domestic equities, fixed income securities, and short term investments. Investments are valued at the net asset value of units held by the plan at year-end.

Derivatives: Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs such as interest rates and foreign currency exchange rates. These market inputs are utilized in the discounted cash flow calculation considering the instrument's term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps, foreign currency forwards and swaps, and options are observable in the active markets and are classified as Level 2 in the hierarchy.

Collateralized mortgage obligations and mortgage backed securities: Fair value is estimated based on valuations obtained from third-party pricing services for identical or comparable assets. Mortgage Backed Securities are traded in the over the counter broker/dealer market.

Insurance contracts: Valued at contributions made, plus earnings, less participant withdrawals and administrative expenses, which approximates fair value.

Short-term investment funds: Foreign and domestic currencies as well as short-term securities are valued at cost plus accrued interest, which approximates fair value.

Other: Composed of real estate investment trust common stock valued at closing price as reported on the active market in which the individual securities are traded.

The fair values of pension plan assets are as follows:



	Fair Value Measurement
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total
	As of December 31,
	2013	2012	2013	2012	2013	2012
	(In $ millions)
Assets
Cash and cash equivalents	8	15	—	—	8	15
Common/collective trusts
Loans	—	—	51	55	51	55
Equities	—	—	179	176	179	176
Derivatives
Swaps	—	—	49	10	49	10
Other	—	—	—	1	—	1
Equity securities
US companies	462	359	—	—	462	359
International companies	426	450	—	—	426	450
Fixed income
Collateralized mortgage obligations	—	—	1	2	1	2
Corporate debt	—	—	855	822	855	822
Treasuries, other debt	4	102	390	349	394	451
Mortgage backed securities	—	—	26	31	26	31
Registered investment companies	—	—	124	278	124	278
Securities lending collateral	6	10	—	—	6	10
Short-term investments	—	—	131	229	131	229
Insurance contracts	—	—	34	31	34	31
Other	15	22	8	8	23	30
Total investments, at fair value	921	958	1,848	1,992	2,769	2,950
Liabilities
Derivatives
Swaps	—	—	48	10	48	10
Other	—	—	1	—	1	—
Obligations under securities lending	6	10	—	—	6	10
Total liabilities	6	10	49	10	55	20
Total net assets ⁽¹⁾	915	948	1,799	1,982	2,714	2,930

______________________________


⁽¹⁾	Total net assets excludes non-financial plan receivables and payables of $26 million and $31 million, respectively, as of December 31, 2013 and $29 million and $63 million, respectively, as of December 31, 2012. Non-financial items include due to/from broker, interest receivables and accrued expenses.

The financial objectives of the qualified pension plans are established in conjunction with a comprehensive review of each plan's liability structure. The Company's asset allocation policy is based on detailed asset/liability analysis. In developing investment policy and financial goals, consideration is given to each plan's demographics, the returns and risks associated with current and alternative investment strategies and the current and projected cash, expense and funding ratios of each plan. Investment policies must also comply with local statutory requirements as determined by each country. A formal asset/liability study of each plan is undertaken every three to five years or whenever there has been a material change in plan demographics, benefit structure or funding status and investment market. The Company has adopted a long-term investment horizon such that the risk and duration of investment losses are weighed against the long-term potential for appreciation of assets. Although there cannot be complete assurance that these objectives will be realized, it is believed that the likelihood for their realization is reasonably high, based upon the asset allocation chosen and the historical and expected performance of the asset classes utilized by the plans. The intent is for investments to be broadly diversified across asset classes, investment styles, market sectors, investment managers, developed and emerging markets and securities in order to moderate portfolio volatility and risk. Investments may be in separate accounts, commingled trusts, mutual funds and other pooled asset portfolios provided they all conform to fiduciary standards.

External investment managers are hired to manage pension assets. Investment consultants assist with the screening process for each new manager hired. Over the long-term, the investment portfolio is expected to earn returns that exceed a composite of market indices that are weighted to match each plan's target asset allocation. The portfolio return should also (over the long-term) meet or exceed the return used for actuarial calculations in order to meet the future needs of each plan.

Employer contributions for pension benefits and postretirement benefits are estimated to be $69 million and $54 million, respectively, in 2014. Employer contributions to and benefit payments from nonqualified trusts related to nonqualified pension plans are estimated to be $22 million in 2014.

Pension benefits and postretirement benefit cost expected to be paid are as follows:



		Postretirement Benefit
	Pension Benefit Payments⁽¹⁾	Company Portion of Benefit Cost⁽²⁾		Expected Federal Subsidy
	(In $ millions)
2014	231	68	⁽³⁾	2
2015	232	5		—
2016	232	5		—
2017	234	6		—
2018	236	6		—
2019-2023	1,212	27		—

______________________________


⁽¹⁾	Payments are expected to be made primarily from plan assets.


⁽²⁾	Payments are expected to be made primarily from Company assets.


⁽³⁾	Includes $49 million of expected lump-sum buyout payments to US non-union individuals in connection with the elimination of US postretirement health care benefits.

Other Obligations

Additional benefit obligations are as follows:



	As of December 31,
	2013	2012
	(In $ millions)
Long-term disability	10	22
Other	6	6