PENSION AND OTHER POSTRETIREMENT BENEFITS

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefits Disclosure

NOTE 10. PENSIONS AND OTHER POSTRETIREMENT BENEFITS

Pension Plans

We sponsor several pension plans covering substantially all employees. Generally, pension benefits for salaried employees are determined as a function of employee’s compensation. Pension benefits for most hourly employees are determined similarly and as a function of employee’s compensation, with the exception of a small group of hourly employees whose pension benefits were grandfathered in accordance with agreements with their union representation and are based on their years of service and compensation during active employment. The level of benefits and terms of vesting may vary among plans and are offered in accordance with applicable laws. Pension plans assets are administered by trustees and are principally invested in fixed income securities and equity securities. It is our policy to make contributions to our various qualified plans in accordance with statutory and contractual funding requirements, and any additional contributions we determine are appropriate.

Obligations, Assets and Funded Status

Benefit obligation balances presented below reflect the projected benefit obligation (PBO) for our pension plans. The changes in the benefit obligations, the various plan assets, the funded status of the plans and the amounts recognized in our Consolidated Balance Sheets for our significant pension plans at December 31 were as follows:

	Qualified and Non-Qualified Pension Plans
	U.S. Plans				U.K. Plans
In millions	2021		2020		2021		2020
Change in benefit obligation
Benefit obligation at the beginning of the year	$	3,122	$	2,916	$	2,050	$	1,851
Service cost	139		133		33		29
Interest cost	79		95		30		36
Actuarial (gain) loss	(132)		224		(136)		136
Benefits paid from fund	(178)		(224)		(63)		(72)
Benefits paid directly by employer	(18)		(22)		—		—
Foreign currency translation adjustments	—		—		(27)		70
Benefit obligation at end of year	$	3,012	$	3,122	$	1,887	$	2,050
Change in plan assets
Fair value of plan assets at beginning of year	$	3,429	$	3,357	$	2,337	$	2,010
Actual return on plan assets	267		274		118		268
Employer contributions	30		22		30		48
Benefits paid from fund	(178)		(224)		(63)		(72)
Foreign currency translation adjustments	—		—		(32)		83
Fair value of plan assets at end of year	$	3,548	$	3,429	$	2,390	$	2,337
Funded status (including unfunded plans) at end of year	$	536	$	307	$	503	$	287
Amounts recognized in consolidated balance sheets
Pension assets	$	985	$	755	$	503	$	287
Accrued compensation, benefits and retirement costs	(18)		(17)		—		—
Pension and OPEB	(431)		(431)		—		—
Net amount recognized	$	536	$	307	$	503	$	287
Amounts recognized in accumulated other comprehensive loss
Net actuarial loss	$	467	$	714	$	61	$	250
Prior service cost	6		6		11		19
Net amount recognized	$	473	$	720	$	72	$	269

In addition to the pension plans in the above table, we also maintain less significant defined benefit pension plans in 14 other countries outside of the U.S. and the U.K. that comprise approximately 4 percent and 5 percent of our pension plan assets and obligations, respectively, at December 31, 2021. These plans are reflected in "Other liabilities" on our Consolidated Balance Sheets. In 2021 and 2020, we made $13 million and $16 million of contributions to these plans, respectively.

The following table summarizes the total accumulated benefit obligation (ABO), the ABO for defined benefit pension plans with ABO in excess of plan assets and the PBO for defined benefit pension plans with PBO in excess of plan assets:

	Qualified and Non-Qualified Pension Plans
	U.S. Plans				U.K. Plans
In millions	2021		2020		2021		2020
Total ABO	$	2,986	$	3,091	$	1,844	$	1,954
Plans with ABO in excess of plan assets
ABO	424		417		—		—
Plans with PBO in excess of plan assets
PBO	449		448		—		—

Components of Net Periodic Pension Cost

The following table presents the net periodic pension cost under our plans for the years ended December 31:

	Qualified and Non-Qualified Pension Plans
	U.S. Plans						U.K. Plans
In millions	2021		2020		2019		2021		2020		2019
Service cost	$	139	$	133	$	116	$	33	$	29	$	26
Interest cost	79		95		108		30		36		43
Expected return on plan assets	(199)		(195)		(189)		(85)		(74)		(70)
Amortization of prior service cost	1		1		1		2		2		2
Recognized net actuarial loss	47		41		17		31		34		11
Net periodic pension cost	$	67	$	75	$	53	$	11	$	27	$	12

Other changes in benefit obligations and plan assets recognized in other comprehensive (income) loss for the years ended December 31 were as follows:

In millions	2021		2020		2019
Amortization of prior service cost	$	(3)	$	(3)	$	(3)
Recognized net actuarial loss	(78)		(75)		(28)
Incurred actuarial (gain) loss	(368)		85		101
Foreign currency translation adjustments	5		19		4
Total recognized in other comprehensive (income) loss	$	(444)	$	26	$	74
Total recognized in net periodic pension cost and other comprehensive (income) loss	$	(366)	$	128	$	139

Assumptions

The table below presents various assumptions used in determining the PBO for each year and reflects weighted-average percentages for the various plans as follows:

	Qualified and Non-Qualified Pension Plans
	U.S. Plans				U.K. Plans
	2021		2020		2021		2020
Discount rate	3.01	%	2.62	%	1.95	%	1.50	%
Cash balance crediting rate	3.79	%	3.74	%	—		—
Compensation increase rate	2.71	%	2.73	%	3.75	%	3.75	%

The table below presents various assumptions used in determining the net periodic pension cost and reflects weighted-average percentages for the various plans as follows:

	Qualified and Non-Qualified Pension Plans
	U.S. Plans						U.K. Plans
	2021		2020		2019		2021		2020		2019
Discount rate	2.62	%	3.36	%	4.36	%	1.50	%	2.00	%	2.80	%
Expected return on plan assets	6.25	%	6.25	%	6.25	%	4.00	%	4.00	%	4.00	%
Compensation increase rate	2.72	%	2.73	%	2.73	%	3.75	%	3.75	%	3.75	%

Plan Assets

Our investment policies in the U.S. and U.K. provide for the rebalancing of assets to maintain our long-term strategic asset allocation. We are committed to this long-term strategy and do not attempt to time the market. Given empirical evidence that asset allocation is critical, rebalancing of the assets has and continues to occur, maintaining the proper weighting of assets to achieve the expected total portfolio returns. We believe that our portfolio is highly diversified and does not have any significant exposure to concentration risk. The plan assets for our defined benefit pension plans do not include any of our common stock.

U.S. Plan Assets

For the U.S. qualified pension plans, our assumption for the expected return on assets was 6.25 percent in 2021. Projected returns are based primarily on broad, publicly traded equity and fixed income indices and forward-looking estimates of active portfolio and investment management. We expect additional positive returns from this active investment management. Based on the historical returns and forward-looking return expectations, we elected to maintain our assumption of 6.25 percent in 2022.

The primary investment objective is to exceed, on a net-of-fee basis, the rate of return of a policy portfolio comprised of the following:

			Range
Asset Class	Target		Minimum		Maximum
U.S. equities	5.0	%	—	%	10	%
Non-U.S. equities	1.0	%	—	%	4	%
Global equities	6.0	%	3	%	9	%
Total equities	12.0	%
Real assets	6.0	%	—	%	10	%
Private equity/venture capital	6.0	%	—	%	10	%
Opportunistic credit	4.0	%	—	%	10	%
Fixed income	72.0	%	67	%	77	%
Total	100.0	%

The fixed income component is structured to represent a custom bond benchmark that will closely hedge the change in the value of our liabilities. This component is structured in such a way that its benchmark covers approximately 100 percent of the plan's exposure to changes in its discount rate (AA corporate bond yields). In order to achieve a hedge on more than the targeted 72 percent of plan assets invested in fixed income securities, our Benefits Policy Committee (BPC) permits the fixed income managers, other managers or the custodian/trustee to utilize derivative securities, as part of a liability driven investment strategy to further reduce the plan's risk of declining interest rates. However, all managers hired to manage assets for the trust are prohibited from using leverage unless approved by the BPC.

U.K. Plan Assets

For the U.K. qualified pension plans, our assumption for the expected return on assets was 4.0 percent in 2021. The methodology used to determine the rate of return on pension plan assets in the U.K. was based on establishing an equity-risk premium over current long-term bond yields adjusted based on target asset allocations. Our strategy with respect to our investments in these assets is to be invested in a suitable mixture of return-seeking assets such as equities, real estate and liability matching assets such as group annuity insurance contracts and duration matched bonds. Therefore, the risk and return balance of our U.K. asset portfolio should reflect a long-term horizon. To achieve these objectives we established the following targets:

Asset Class	Target
Equities	10.0	%
Private markets/secure income assets	12.0	%
Credit	16.0	%
Diversifying strategies	5.0	%
Fixed income/insurance annuity	56.0	%
Cash	1.0	%
Total	100.0	%

As part of our strategy in the U.K. we have not prohibited the use of any financial instrument, including derivatives. As in the U.S. plan, derivatives may be used to better match liability duration and are not used in a speculative way. The 56 percent fixed income component is structured in a way that covers approximately 90 percent of the plan's exposure to changes in its discount rate. Based on the above discussion, we elected an assumption of 3.75 percent in 2022.

Fair Value of U.S. Plan Assets

The fair values of U.S. pension plan assets by asset category were as follows:

	Fair Value Measurements at December 31, 2021
In millions	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Equities
U.S.	$	115	$	—	$	—	$	115
Non-U.S.	38		—		—		38
Fixed income
Government debt	37		30		—		67
Corporate debt
U.S.	—		489		—		489
Non-U.S.	—		19		—		19
Net cash equivalents (1)	270		57		—		327
Private markets and real assets (2)	—		—		551		551
Net plan assets subject to leveling	$	460	$	595	$	551	$	1,606
Pending trade/purchases/sales							2
Accruals (3)							6
Investments measured at net asset value							1,934
Net plan assets							$	3,548

	Fair Value Measurements at December 31, 2020
In millions	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Equities
U.S.	$	194	$	—	$	—	$	194
Non-U.S.	58		—		—		58
Fixed income
Government debt	78		5		—		83
Corporate debt
U.S.	—		512		—		512
Non-U.S.	—		26		—		26
Asset/mortgaged backed securities	—		3		—		3
Net cash equivalents (1)	319		37		—		356
Private markets and real assets (2)	—		—		431		431
Net plan assets subject to leveling	$	649	$	583	$	431	$	1,663
Accruals (3)							5
Investments measured at net asset value							1,761
Net plan assets							$	3,429
(1) Cash equivalents include commercial paper, short-term government/agency, mortgage and credit instruments.
(2) The instruments in private markets and real assets, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by audited financial statements of the funds. Private markets include equity, venture capital and private credit instruments and funds. Real assets include real estate and infrastructure.
(3) Accruals include interest or dividends that were not settled at December 31.

Certain of our assets are valued based on their respective net asset value (NAV) (or its equivalent), as an alternative to estimated fair value due to the absence of readily available market prices. The fair value of each such investment category was as follows:

•U.S. and Non-U.S. Corporate Debt ($995 million and $1,068 million at December 31, 2021 and 2020, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

•U.S. and Non-U.S. Equities ($145 million and $245 million at December 31, 2021 and 2020, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

•Government Debt ($361 million and $199 million at December 31, 2021 and 2020, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

•Real Estate ($171 million and $153 million at December 31, 2021 and 2020, respectively) - This asset type represents different types of real estate including development property, industrial property, individual mortgages, office property, property investment companies and retail property. These funds are valued using NAVs and allow quarterly or more frequent redemptions.

•Asset/Mortgage Backed Securities ($262 million and $96 million at December 31, 2021 and 2020, respectively) - This asset type represents investments in fixed- and floating-rate loans. These funds are valued using NAVs and allow quarterly or more frequent redemptions.

The reconciliation of Level 3 assets was as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
In millions	Private Markets		Real Assets		Total
Balance at December 31, 2019	$	299	$	72	$	371
Actual return on plan assets
Unrealized gains on assets still held at the reporting date	21		2		23
Purchases, sales and settlements, net	39		(2)		37
Balance at December 31, 2020	359		72		431
Actual return on plan assets
Unrealized gains on assets still held at the reporting date	144		11		155
Purchases, sales and settlements, net	(32)		(3)		(35)
Balance at December 31, 2021	$	471	$	80	$	551

Fair Value of U.K. Plan Assets

The fair values of U.K. pension plan assets by asset category were as follows:

	Fair Value Measurements at December 31, 2021
In millions	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Equities
U.S.	$	—	$	79	$	—	$	79
Non-U.S.	—		74		—		74
Fixed income
Net cash equivalents (1)	35		—		—		35
Insurance annuity (2)	—		—		514		514
Private markets and real assets (3)	—		—		389		389
Net plan assets subject to leveling	$	35	$	153	$	903	$	1,091
Investments measured at net asset value							1,299
Net plan assets							$	2,390

	Fair Value Measurements at December 31, 2020
In millions	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Equities
U.S.	$	—	$	56	$	—	$	56
Non-U.S.	—		69		—		69
Fixed income
Net cash equivalents (1)	26		—		—		26
Insurance annuity (2)	—		—		556		556
Private markets and real assets (3)	—		—		282		282
Net plan assets subject to leveling	$	26	$	125	$	838	$	989
Investments measured at net asset value							1,348
Net plan assets							$	2,337
(1) Cash equivalents include commercial paper, short-term government/agency, mortgage and credit instruments.
(2) In July 2012, the U.K. pension plan purchased an insurance contract that will guarantee payment of specified pension liabilities. The contract defers payment for 10 years.
(3) The instruments in private markets and real assets, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by audited financial statements of the funds. Private markets include equity, venture capital and private credit instruments and funds. Real assets include real estate and infrastructure.

Certain of our assets are valued based on their respective NAV (or its equivalent), as an alternative to estimated fair value due to the absence of readily available market prices. The fair value of each such investment category was as follows:

•U.S. and Non-U.S. Corporate Debt ($894 million and $970 million at December 31, 2021 and 2020, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

•U.S. and Non-U.S. Equities ($194 million and $168 million at December 31, 2021 and 2020, respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

•Asset/Mortgage Backed Securities ($99 million and $100 million at December 31, 2021 and 2020, respectively) - This asset type represents investments in fixed- and floating-rate loans. These funds are valued using NAVs and allow quarterly or more frequent redemptions.

•Re-insurance ($61 million and $60 million at December 31, 2021 and 2020, respectively) - This commingled fund has a NAV that is determined on a monthly basis and the investment may be sold at that value.

•Diversified Strategies ($51 million and $50 million at December 31, 2021 and 2020, respectively) - These commingled funds invest in commodities, fixed income and equity securities. They have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days.

The reconciliation of Level 3 assets was as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
In millions	Insurance Annuity		Real Assets		Private Markets		Total
Balance at December 31, 2019	$	476	$	35	$	224	$	735
Actual return on plan assets
Unrealized gains (losses) on assets still held at the reporting date	80		(2)		22		100
Purchases, sales and settlements, net	—		(2)		5		3
Balance at December 31, 2020	556		31		251		838
Actual return on plan assets
Unrealized (losses) gains on assets still held at the reporting date	(42)		2		114		74
Purchases, sales and settlements, net	—		—		(9)		(9)
Balance at December 31, 2021	$	514	$	33	$	356	$	903

Level 3 Assets

The investments in an insurance annuity contract, venture capital, private equity and real estate, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by quarterly financial statements of the funds. These financial statements are audited at least annually. In conjunction with our investment consultant and actuary, we monitor the fair value of the insurance contract as periodically reported by our insurer and their counterparty risk. The fair value of all real estate properties, held in the partnerships, are valued at least once per year by an independent professional real estate valuation firm. Fair value generally represents the fund's proportionate share of the net assets of the investment partnerships as reported by the general partners of the underlying partnerships. Some securities with no readily available market are initially valued at cost, utilizing independent professional valuation firms as well as market comparisons with subsequent adjustments to values which reflect either the basis of meaningful third-party transactions in the private market or the fair value deemed appropriate by the general partners of the underlying investment partnerships. In such instances, consideration is also given to the financial condition and operating results of the issuer, the amount that the investment partnerships can reasonably expect to realize upon the sale of the securities and any other factors deemed relevant. The estimated fair values are subject to uncertainty and therefore may differ from the values that would have been used had a ready market for such investments existed and such differences could be material.

Estimated Future Contributions and Benefit Payments

We plan to contribute approximately $47 million to our defined benefit pension plans in 2022. The table below presents expected future benefit payments under our pension plans:

	Qualified and Non-Qualified Pension Plans
In millions	2022		2023		2024		2025		2026		2027 - 2031
Expected benefit payments	$	274	$	261	$	268	$	271	$	277	$	1,411

Other Pension Plans

We also sponsor defined contribution plans for certain hourly and salaried employees. Our contributions to these plans were $92 million, $85 million and $102 million for the years ended December 31, 2021, 2020 and 2019.

Other Postretirement Benefits

Our other postretirement benefit (OPEB) plans provide various health care and life insurance benefits to eligible employees, who retire and satisfy certain age and service requirements, and their dependents. The plans are contributory and contain cost-sharing features such as caps, deductibles, coinsurance and spousal contributions. Employer contributions are limited by formulas in each plan. Retiree contributions for health care benefits are adjusted annually, and we reserve the right to change benefits covered under these plans. There were no plan assets for OPEB plans as our policy is to fund benefits and expenses for these plans as claims and premiums are incurred.

Obligations and Funded Status

Benefit obligation balances presented below reflect the accumulated postretirement benefit obligations for our OPEB plans. The changes in the benefit obligations, the funded status of the plans and the amounts recognized in our Consolidated Balance Sheets for our significant OPEB plans were as follows:

	December 31,
In millions	2021		2020
Change in benefit obligation
Benefit obligation at the beginning of the year	$	219	$	227
Interest cost	5		7
Plan participants' contributions	14		9
Actuarial (gain) loss	(8)		14
Benefits paid directly by employer	(38)		(38)
Benefit obligation at end of year	$	192	$	219
Funded status at end of year	$	(192)	$	(219)
Amounts recognized in consolidated balance sheets
Accrued compensation, benefits and retirement costs	$	(19)	$	(20)
Pension and OPEB	(173)		(199)
Net amount recognized	$	(192)	$	(219)
Amounts recognized in accumulated other comprehensive loss
Net actuarial gain	$	(18)	$	(10)
Prior service credit	(4)		(4)
Net amount recognized	$	(22)	$	(14)

In addition to the OPEB plans in the above table, we also maintain less significant OPEB plans in four other countries outside the U.S. that comprise approximately 8 percent and 9 percent of our OPEB obligations at December 31, 2021 and 2020, respectively. These plans are reflected in "Other liabilities" in our Consolidated Balance Sheets.

Components of Net Periodic OPEB Cost

The following table presents the net periodic OPEB cost under our plans:

	Years ended December 31,
In millions	2021		2020		2019
Interest cost	$	5	$	7	$	10
Recognized net actuarial gain	—		(1)		—
Net periodic OPEB cost	$	5	$	6	$	10

Other changes in benefit obligations recognized in other comprehensive (income) loss for the years ended December 31 were as follows:

	Years ended December 31,
In millions	2021		2020		2019
Recognized net actuarial gain	$	—	$	1	$	—
Incurred actuarial (gain) loss	(8)		14		(1)
Total recognized in other comprehensive (income) loss	$	(8)	$	15	$	(1)
Total recognized in net periodic OPEB cost and other comprehensive (income) loss	$	(3)	$	21	$	9

Assumptions

The table below presents assumptions used in determining the OPEB obligation for each year and reflects weighted-average percentages for our other OPEB plans as follows:

	2021		2020
Discount rate	2.75	%	2.30	%

The table below presents assumptions used in determining the net periodic OPEB cost and reflects weighted-average percentages for the various plans as follows:

	2021		2020		2019
Discount rate	2.30	%	3.15	%	4.25	%

Our consolidated OPEB obligation is determined by application of the terms of health care and life insurance plans, together with relevant actuarial assumptions and health care cost trend rates. For measurement purposes, a 6.75 percent annual rate of increase in the per capita cost of covered health care benefits was assumed in 2021. The rate is assumed to decrease on a linear basis to 5.0 percent through 2029 and remain at that level thereafter.

Estimated Benefit Payments

The table below presents expected benefit payments under our OPEB plans:

In millions	2022		2023		2024		2025		2026		2027 - 2031
Expected benefit payments	$	19	$	18	$	18	$	17	$	16	$	65