RETIREMENT PLANS

Retirement plans expense includes the following components:



	U.S. Plans							Non-U.S. Plans
	2014			2015		2016		2014		2015		2016
Defined benefit plans:
Service cost (benefits earned during the period)	$	59		69		59		32		37		26
Interest cost	182			182		148		53		46		39
Expected return on plan assets	(286		)	(303	)	(296	)	(58	)	(58	)	(52	)
Net amortization and other	153			174		166		18		20		17
Net periodic pension expense	108			122		77		45		45		30
Defined contribution plans	119			111		104		59		61		56
Total retirement plans expense	$	227		233		181		104		106		86

Beginning in 2016, the Company refined the method used to determine the service and interest cost components of pension expense for its U.S. retirement plans. The specific spot rates along the yield curve, rather than the single weighted-average rate previously used, are now applied to the projected cash flows to provide more precise measurement of these costs. This is a change in estimate which has been accounted for prospectively in the 2016 financial statements. The change reduced the 2016 service and interest cost by a total of $38 compared with the cost measured using the weighted-average approach. The increase in net periodic pension expense in 2015 is attributable to higher service costs and amortization compared to the prior year. Net periodic pension expense includes $12, $14 and $11 and defined contribution expense includes $34, $33 and $33, for 2016, 2015 and 2014, respectively, related to discontinued operations. For defined contribution plans, the Company makes cash contributions based on plan requirements, which are expensed as incurred.

The Company transitioned from defined benefit to defined contribution retirement plans in 2016. The principal U.S. defined benefit pension plan closed to employees hired after January 1, 2016, and current employees not meeting combined age and years of service criteria ceased accruing benefits effective October 1, 2016. Affected employees were enrolled in an enhanced defined contribution plan. The impact of these actions had an inconsequential impact on the Company's financial statements at September 30, 2016. Over time, defined benefit plan expense will decline while defined contribution plan expense will increase, with an expectation of reduced earnings volatility.

All of the following tables include defined benefit plans related to continuing and discontinued operations.

Details of the changes in the actuarial present value of the projected benefit obligation and the fair value of plan assets for defined benefit pension plans follow:



	U.S. Plans					Non-U.S. Plans
	2015			2016		2015		2016
Projected benefit obligation, beginning	$	4,336		4,263		1,330		1,248
Service cost	69			59		37		26
Interest cost	182			148		46		39
Actuarial (gain) loss	137			565		44		275
Benefits paid	(181		)	(191	)	(36	)	(31	)
Settlements	(205		)	(151	)	(25	)	(82	)
Acquisitions (Divestitures), net	(70		)	—		(4	)	(6	)
Foreign currency translation and other	(5		)	3		(144	)	(149	)
Projected benefit obligation, ending	$	4,263		4,696		1,248		1,320

Fair value of plan assets, beginning	$	4,473		3,928		988		935
Actual return on plan assets	(137		)	491		49		155
Employer contributions	20			31		33		35
Benefits paid	(181		)	(191	)	(36	)	(31	)
Settlements	(205		)	(151	)	(25	)	(82	)
Acquisitions (Divestitures), net	(44		)	—		(2	)	—
Foreign currency translation and other	2			2		(72	)	(103	)
Fair value of plan assets, ending	$	3,928		4,110		935		909

Net amount recognized in the balance sheet	$	(335	)	(586	)	(313	)	(411	)

Location of net amount recognized in the balance sheet:
Noncurrent asset	$	—		—		30		1
Current liability	(11		)	(11	)	(6	)	(7	)
Noncurrent liability	(316		)	(565	)	(227	)	(279	)
Net liability held-for-sale	(8		)	(10	)	(110	)	(126	)
Net amount recognized in the balance sheet	(335		)	(586	)	(313	)	(411	)

Pretax accumulated other comprehensive loss	$	(1,322	)	(1,527	)	(306	)	(389	)

Approximately $234 of the $1,916 of pretax losses deferred in accumulated other comprehensive income (loss) at September 30, 2016 will be amortized to expense in 2017. As of September 30, 2016, U.S. pension plans were underfunded by $586 and non-U.S. plans were underfunded by $411. The U.S. funded status includes unfunded plans totaling $216 and the non-U.S. status includes unfunded plans totaling $237.

As of the September 30, 2016 and 2015 measurement dates, the plans' total accumulated benefit obligation was $5,729 and $5,254, respectively. Also as of the measurement dates, the total projected benefit obligation, accumulated benefit obligation and fair value of plan assets for individual plans with accumulated benefit obligations in excess of plan assets were $5,951, $5,678 and $4,958, respectively, for 2016, and $1,245, $1,139 and $648, respectively, for 2015.

Future benefit payments by U.S. plans are estimated to be $215 in 2017, $224 in 2018, $233 in 2019, $241 in 2020, $249 in 2021 and $1,326 in total over the five years 2022 through 2026. Based on foreign currency exchange rates as of September 30, 2016, future benefit payments by non-U.S. plans are estimated to be $41 in 2017, $42 in 2018, $45 in 2019, $47 in 2020, $51 in 2021 and $306 in total over the five years 2022 through 2026. The Company expects to contribute approximately $40 to its retirement plans in 2017.

The weighted-average assumptions used in the valuation of pension benefits follow:



	U.S. Plans						Non-U.S. Plans
	2014		2015		2016		2014		2015		2016
Net pension expense
Discount rate used to determine service cost	4.75	%	4.25	%	4.60	%	4.2	%	3.6	%	3.3	%
Discount rate used to determine interest cost	4.75	%	4.25	%	3.50	%	4.2	%	3.6	%	3.3	%
Expected return on plan assets	7.50	%	7.50	%	7.50	%	6.6	%	6.6	%	6.4	%
Rate of compensation increase	3.25	%	3.25	%	3.25	%	3.2	%	3.4	%	3.4	%

Benefit obligations
Discount rate	4.25	%	4.35	%	3.50	%	3.6	%	3.3	%	2.3	%
Rate of compensation increase	3.25	%	3.25	%	3.25	%	3.4	%	3.4	%	3.2	%

The discount rate for the U.S. retirement plans was 3.50 percent as of September 30, 2016. An actuarially developed, company-specific yield curve is used to determine the discount rate. The expected return on plan assets assumption is determined by reviewing the investment returns of the plans for the past 10 years plus longer-term historical returns of an asset mix approximating the Company's asset allocation targets, and periodically comparing these returns to expectations of investment advisors and actuaries to determine whether long-term future returns are expected to differ significantly from the past.

The Company's asset allocations at September 30, 2016 and 2015, and weighted-average target allocations follow:



	U.S. Plans					Non-U.S. Plans
	2015		2016		Target	2015		2016		Target
Equity securities	65	%	66	%	60-70%	55	%	51	%	50-60%
Debt securities	30		29		25-35	32		36		25-35
Other	5		5		3-10	13		13		10-20
Total	100	%	100	%	100%	100	%	100	%	100%

The primary objective for the investment of pension assets is to secure participant retirement benefits by earning a reasonable rate of return. Plan assets are invested consistent with the provisions of the prudence and diversification rules of ERISA and with a long-term investment horizon. The Company continuously monitors the value of assets by class and routinely rebalances to remain within target allocations. The strategy for equity assets is to minimize concentrations of risk by investing primarily in companies in a diversified mix of industries worldwide, while targeting neutrality in exposure to market capitalization levels, growth versus value profile, global versus regional markets, fund types and fund managers. The approach for bonds emphasizes investment-grade corporate and government debt with maturities matching a portion of the longer duration pension liabilities. The bonds strategy also includes a high-yield element which is generally shorter in duration. For diversification, a small portion of U.S. plan assets is allocated to private equity partnerships and real asset fund investments, providing opportunities for above market returns. Leveraging techniques are not used and the use of derivatives in any fund is limited and inconsequential.

The fair values of defined benefit pension assets as of September 30, organized by asset class and by the fair value hierarchy of ASC 820, Fair Value Measurement, follow:



	Level 1		Level 2	Level 3	Total	%
2016
U.S. equities	$	1,081	305	292	1,678	33	%
International equities	627		607	—	1,234	25	%
Emerging market equities	—		257	—	257	5	%
Corporate bonds	—		648	—	648	13	%
Government bonds	3		749	—	752	15	%
High-yield bonds	—		122	—	122	2	%
Other	144		71	113	328	7	%
Total	$	1,855	2,759	405	5,019	100	%

2015
U.S. equities	$	956	460	257	1,673	34	%
International equities	502		677	—	1,179	24	%
Emerging market equities	—		211	—	211	4	%
Corporate bonds	—		628	—	628	13	%
Government bonds	2		674	—	676	14	%
High-yield bonds	—		175	—	175	4	%
Other	140		67	114	321	7	%
Total	$	1,600	2,892	371	4,863	100	%

Asset Classes

U.S. equities reflect companies domiciled in the U.S., including multinational companies. International equities are comprised of companies domiciled in developed nations outside the U.S. Emerging market equities are comprised of companies domiciled in portions of Asia, Eastern Europe and Latin America. Corporate bonds represent investment-grade debt of issuers primarily from the U.S. Government bonds include investment-grade instruments issued by federal, state and local governments, primarily in the U.S. High-yield bonds include noninvestment-grade debt from a diverse group of developed market issuers. Other includes cash, interests in mixed asset funds investing in commodities, natural resources, agriculture, real estate and infrastructure funds, life insurance contracts (U.S.), and shares in certain general investment funds of financial institutions or insurance arrangements (non-U.S.) that typically ensure no market losses or provide for a small minimum return guarantee.

Fair Value Hierarchy Categories

Valuations of Level 1 assets for all classes are based on quoted closing market prices from the principal exchanges where the individual securities are traded. Cash is valued at cost, which approximates fair value. Equity securities categorized as Level 2 assets are primarily nonexchange-traded commingled or collective funds where the underlying securities have observable prices available from active markets. Valuation is based on the net asset value of fund units held as derived from the fair value of the underlying assets. Debt securities categorized as Level 2 assets are generally valued based on independent broker/dealer bids or by comparison to other debt securities having similar durations, yields and credit ratings. Other Level 2 assets are valued based on a net asset value of fund units held, which is derived from either market-observed pricing for the underlying assets or broker/dealer

quotation. U.S. equity securities classified as Level 3 are fund investments in private companies. Valuation techniques and inputs for these assets include discounted cash flow analysis, earnings multiple approaches, recent transactions, transfer restrictions, prevailing discount rates, volatilities, credit ratings and other factors. In the Other class, interests in mixed assets funds are Level 2, and U.S. life insurance contracts and non-U.S. general fund investments and insurance arrangements are Level 3.

Details of the changes in value for Level 3 assets follow:



	2015			2016
Level 3, beginning	$	308		371
Gains (Losses) on assets held	18			18
Gains (Losses) on assets sold	(20		)	(20	)
Purchases, sales and settlements, net	65			36
Level 3, ending	$	371		405