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POST-EMPLOYMENT BENEFITS
 12 Months Ended
Dec. 31, 2021
Employee Benefits [Abstract]  
POST-EMPLOYMENT BENEFITS POST-EMPLOYMENT BENEFITS
The company maintains several defined benefit pension plans within its subsidiaries. These plans are administered in various countries, the most significant of which is in the U.S. These benefits are provided through various insurance companies and the estimated net post-employment benefit costs are accrued during the employees’ credited service periods.
The following table shows the changes in the present value of the defined benefit pension plan and post-employment plan obligations and the fair values of plan assets as at December 31, 2021 and 2020.
Defined benefit pension planPost-employment plan
(US$ MILLIONS)2021202020212020
Changes in defined benefit obligation
Defined benefit obligation at beginning of year$2,377 $2,151 $52 $53 
Service cost20 14 1 2 
Interest cost54 62 2 2 
Participant contributions2 2 3 3 
Foreign currency exchange differences(28)32 — — 
Actuarial (gain) loss due to financial assumption changes(89)212 (3)2 
Actuarial (gain) loss due to demographic assumption changes16 (19)(9)— 
Actuarial experience adjustments(6)4 (3)(3)
Benefits paid from plan assets(113)(69)— — 
Benefits paid from employer(12)(12)(6)(6)
Defined benefit obligation at end of year$2,221 $2,377 $37 $52 
Changes in fair value of plan assets
Fair value of plan assets at beginning of year$(1,755)$(1,618)$— $— 
Interest income(41)(48)— — 
Return on plan assets (excluding interest income)(170)(109)— — 
Foreign currency exchange differences7 (15)— — 
Employer contributions(58)(51)(3)(4)
Participant contributions(2)(2)(3)(3)
Benefits paid from plan assets113 69 — — 
Benefits paid from employer12 12 6 6 
Administrative expenses paid from plan assets7 7 — — 
Fair value of plan assets at end of year$(1,887)$(1,755)$— $— 
Net asset at end of year $(75)$— $— $— 
Net liability at end of year$409 $622 $37 $52 
The net liabilities for the defined benefit pension plan and post-employment plan are recorded within accounts payable and other in the consolidated statements of financial position.
The following table summarizes the defined benefit pension plan and post-employment plan obligations and the fair values of plan assets by geography as at December 31, 2021:
(US$ MILLIONS)United States of AmericaOtherTotal
Defined benefit pension plan
Defined benefit obligation$1,647 $574 $2,221 
Fair value of plan assets(1,424)(463)(1,887)
Net liability$223 $111 $334 
Post-employment benefits
Defined benefit obligation $32 $5 $37 
Fair value of plan assets— — — 
Net liability$32 $5 $37 
The following table summarizes the defined benefit pension plan and post-employment plan obligations and the fair values of plan assets by geography as at December 31, 2020:
(US$ MILLIONS)United States of AmericaOtherTotal
Defined benefit pension plan
Defined benefit obligation$1,851 $526 $2,377 
Fair value of plan assets(1,364)(391)(1,755)
Net liability$487 $135 $622 
Post-employment benefits
Defined benefit obligation $46 $6 $52 
Fair value of plan assets— — — 
Net liability$46 $6 $52 
Amounts recognized in respect of these defined benefit and post-employment plans during the year are as follows:
Defined benefit pension planPost-employment
plan
(US$ MILLIONS)2021202020212020
Amounts recognized in profit and loss
Current service cost$20 $14 $1 $2 
Net interest expense13 15 2 2 
Administrative expense7 7 — — 
Total expense recognized in profit and loss$40 $36 $3 $4 
Amounts recognized in other comprehensive income
Return on plan assets (excluding amounts included in net interest expense)$(170)$(108)$— $— 
Actuarial (gains) and losses arising from changes in demographic assumptions16 (19)(9)— 
Actuarial (gains) and losses arising from changes in financial assumptions(89)213 (3)3 
Actuarial (gains) and losses arising from experience adjustments(6)4 (3)(3)
Total expense (gain) recognized in other comprehensive income$(249)$90 $(15)$— 
Total expense (gain) recognized in comprehensive income$(209)$126 $(12)$4 
The expense recorded in profit and loss is recognized within general and administrative expenses in the consolidated statements of operating results.
The defined benefit pension plans and post-employment plans expose the company to certain actuarial risks such as investment risk, interest rate risk, and compensation risk. The present value of the defined benefit pension plan and post-employment plan obligation is calculated using a discount rate. If the return on plan assets is below this rate, a plan deficit occurs. The company mitigates this investment risk by establishing a sound investment policy to be followed by the investment manager. The investment policy requires plan assets to be invested in a diversified portfolio and is set based on both asset return and local statutory requirements. A change in interest and compensation rates will also affect the defined benefit obligation. A sensitivity analysis of the discount rate and compensation rate is provided below.
The following table summarizes the fair value of plan assets by category and level in the fair value hierarchy as at December 31, 2021:
(US$ MILLIONS)Level 1
Level 2 (1)
Level 3 (2)
Total
Cash and cash equivalents$41 $— $— $41 
Equity instruments16 636 — 652 
Debt instruments249 803 105 1,157 
Real Estate— 37 — 37 
Total plan assets$306 $1,476 $105 $1,887 
____________________________________
(1)Level 2 assets represent the net asset value of the underlying assets held within an investment fund. The assets are valued by the fund administrator.
(2)Level 3 assets consist of insurance rights and equity and debt instruments held within an investment fund. The assets are valued using non-observable inputs by the plan administrator.
The following table summarizes the fair value of plan assets by category and level in the fair value hierarchy as at December 31, 2020:
(US$ MILLIONS)Level 1
Level 2 (1)
Level 3 (2)
Total
Cash and cash equivalents$13 $— $— $13 
Equity instruments1,218 112 — 1,330 
Debt instruments15 243 154 412 
Total plan assets$1,246 $355 $154 $1,755 
____________________________________
(1)Level 2 assets represent the net asset value of the underlying assets held within an investment fund. The assets are valued by the fund administrator.
(2)Level 3 assets consist of debt instruments held within an investment fund. The assets are valued using non-observable inputs by the plan administrator.
Significant Assumptions
The company annually reevaluates assumptions and estimates used in projecting the defined benefit and post-employment plan liabilities. These assumptions and estimates may affect the carrying value of the defined benefit and post-employment plan liabilities in the company’s consolidated statements of financial position. The significant actuarial assumptions adopted are as follows:
Defined benefit plan
20212020
Discount rate
1.0% to 3.0%
0.4% to 2.7%
Rate of compensation increase
0.0% to 2.7%
0.0% to 2.7%
Post-employment plan
20212020
Discount rate
2.9% to 5.3%
2.5% to 3.6%
Health care cost trend on covered charges:
Immediate trend rate
3.5% to 4.0%
3.5% to 4.0%
Ultimate trend rate
3.5% to 4.0%
3.5% to 4.0%
These assumptions have a significant impact on the defined benefit and post-employment plan liabilities reported in the consolidated statements of financial position. The following table presents a sensitivity analysis of each assumption with the related impact on these liabilities as at December 31, 2021:
(US$ MILLIONS, except as noted)Percentage increaseImpact on liabilityPercentage decreaseImpact on liability
Defined benefit pension plan
Discount rate1%$(320)1%$393
Rate of compensation increase1%211%(19)
Post-employment plan
Discount rate1%$(4)1%$5
Health care cost trend rates1%11%(1)
The following table presents a sensitivity analysis of each assumption with the related impact on these liabilities as at December 31, 2020:
(US$ MILLIONS, except as noted)Percentage increaseImpact on liabilityPercentage decreaseImpact on liability
Defined benefit pension plan
Discount rate
1%
$(386)
1%
$424
Rate of compensation increase
1%
$34
1%
$(21)
Post-employment plan
Discount rate
1%
$(6)
1%
$8
Health care cost trend rates
1%
$2
1%
$(1)
The sensitivity analysis above has been determined based on reasonably possible changes of the respective assumptions occurring as at December 31, 2021 and December 31, 2020, while holding all other assumptions constant. These analyses may not be representative of the actual change in the defined benefit and post-employment plan obligations as it is unlikely that the change in assumptions would occur in isolation of one another.
The following table summarizes future planned benefit payments under defined benefit and post-employment plans as at December 31, 2021:
(US$ MILLIONS)Defined benefit pension planPost-employment planTotal
2022$78 $3 $81 
202382 2 84 
202486 2 88 
202588 2 90 
202690 2 92 
Thereafter3,032 45 3,077 
Total$3,456 $56 $3,512