Retirement Plans

Our company and subsidiaries have various plans that cover a significant number of our employees. These plans include defined contribution plans, defined benefit plans and other postretirement plans:

our defined contribution plans provide retirement benefits in return for services rendered. These plans provide an individual account for each participant and have terms that specify how contributions to the participant’s account are to be determined rather than the amount of pension benefits the participant is to receive. Contributions to these plans are based on pretax income and/or discretionary amounts determined on an annual basis. Our expense for the defined contribution plans for continuing operations totaled $111 million in 2016, $288 million in 2015 and $347 million in 2014. The decreases resulted from suspension of discretionary contributions in 2016 and company-wide reductions in workforce during 2016 and 2015;


-	our defined benefit plans, which include both funded and unfunded pension plans, define an amount of pension benefit to be provided, usually as a function of age, years of service and/or compensation. The unfunded obligations and net periodic benefit cost of our United States defined benefit plans were not material for the periods presented; and


-	our postretirement plans other than pensions are offered to specific eligible employees. The accumulated benefit obligations and net periodic benefit cost for these plans were not material for the periods presented.

Funded status

For our international pension plans, at December 31, 2016, the projected benefit obligation was $1.1 billion and the fair value of plan assets was $865 million, which resulted in an unfunded obligation of $241 million. At December 31, 2015, the projected benefit obligation was $1.0 billion and the fair value of plan assets was $872 million, which resulted in an unfunded obligation of $174 million. The accumulated benefit obligation for our international plans was $1.1 billion at December 31, 2016 and $990 million at December 31, 2015.

The following table presents additional information about our international pension plans.



	December 31
Millions of dollars	2016		2015
Amounts recognized on the Consolidated Balance Sheets
Accrued employee compensation and benefits	$	16	$	20
Employee compensation and benefits	227		155
Pension plans in which projected benefit obligation exceeded plan assets
Projected benefit obligation	$	1,083	$	1,042
Fair value of plan assets	840		867
Pension plans in which accumulated benefit obligation exceeded plan assets
Accumulated benefit obligation	$	1,037	$	964
Fair value of plan assets	840		846

Fair value measurements of plan assets

The fair value of our plan assets categorized within level 1 on the fair value hierarchy is based on quoted prices in active markets for identical assets. The fair value of our plan assets categorized within level 2 on the fair value hierarchy is based on significant observable inputs for similar assets. The fair value of our plan assets categorized within level 3 on the fair value hierarchy is based on significant unobservable inputs.

The following table sets forth the fair values of assets held by our international pension plans by level within the fair value hierarchy.



Millions of dollars	Level 1		Level 2		Level 3		Total
Cash and equivalents	$	—	$	49	$	—	$	49
Common/collective trust funds (a)
Equity funds (b)	—		197		—		197
Bond funds (c)	—		232		44		276
Alternatives funds (d)	—		221		—		221
Real estate funds (e)	—		36		35		71
Other assets	5		20		26		51
Fair value of plan assets at December 31, 2016	$	5	$	755	$	105	$	865

Cash and equivalents	$	—	$	46	$	—	$	46
Common/collective trust funds (a)
Equity funds (b)	—		209		—		209
Bond funds (c)	—		212		38		250
Alternatives fund (d)	—		231		—		231
Real estate funds (e)	—		42		46		88
Other assets	2		19		27		48
Fair value of plan assets at December 31, 2015	$	2	$	759	$	111	$	872

(a) Common/collective trust funds are valued at the net asset value of units held by the plans at year-end.

(b) Strategy is to invest in diversified funds of global common stocks.

(c) Strategy is to invest in diversified funds of fixed income securities of varying geographies and credit quality and whose cash flows approximate the maturities of the benefit obligation.

(d) Strategy is to invest in a fund of diversifying investments, including but not limited to reinsurance, commodities and currencies.

(e) Strategy is to invest in diversified funds of real estate investment trusts and private real estate.

Our investment strategy varies by country depending on the circumstances of the underlying plan. Risk management practices include diversification by issuer, industry and geography, as well as the use of multiple asset classes and investment managers within each asset class. Our investment strategy for our United Kingdom pension plan, which constituted 84% of our international pension plans’ projected benefit obligation at December 31, 2016 and is no longer accruing service benefits, aims to achieve full funding of the benefit obligation, with the plan's assets increasingly composed of investments whose cash flows match the maturities of the obligation.

Net periodic benefit cost

Net periodic benefit cost for our international pension plans was $30 million in 2016, $42 million in 2015 and $36 million in 2014. Included in net periodic benefit cost were $8 million in 2016 and $9 million in 2015 of net curtailment and settlement cost arising from reductions in workforce during these years.

Actuarial assumptions

Certain weighted-average actuarial assumptions used to determine benefit obligations of our international pension plans at December 31 were as follows:



	2016	2015
Discount rate	2.9%	4.2%
Rate of compensation increase	4.8%	5.4%

Certain weighted-average actuarial assumptions used to determine net periodic benefit cost of our international pension plans for the years ended December 31 were as follows:



	2016	2015	2014
Discount rate	4.2%	4.1%	4.8%
Expected long-term return on plan assets	5.3%	5.9%	6.4%
Rate of compensation increase	5.4%	5.3%	5.4%

Assumed long-term rates of return on plan assets, discount rates for estimating benefit obligations and rates of compensation increases vary by plan according to local economic conditions. Where possible, discount rates were determined based on the prevailing market rates of a portfolio of high-quality debt instruments with maturities matching the expected timing of the payment of the benefit obligations. Expected long-term rates of return on plan assets were determined based upon an evaluation of our plan assets and historical trends and experience, taking into account current and expected market conditions.

Other information

Contributions. Funding requirements for each plan are determined based on the local laws of the country where such plan resides. In certain countries the funding requirements are mandatory, while in other countries they are discretionary. We currently expect to contribute $15 million to our international pension plans in 2017.

Benefit payments. The following table presents expected benefit payments over the next 10 years for our international pension plans.



Millions of dollars
2017	$	55
2018	46
2019	49
2020	50
2021	54
Years 2022 - 2026	317