Retirement Plans

12 Months Ended

Sep. 30, 2011

Retirement Plans [Abstract]

RETIREMENT PLANS

14. RETIREMENT PLANS

Pension Benefits

The Company has non-contributory defined benefit pension plans covering certain U.S. and non-U.S. employees. The benefits provided are primarily based on years of service and average compensation or a monthly retirement benefit amount. Effective January 1, 2006, certain of the Company’s U.S. pension plans were amended to prohibit new participants from entering the plans. Effective September 30, 2009, active participants will continue to accrue benefits under the amended plans until December 31, 2014. Funding for U.S. pension plans equals or exceeds the minimum requirements of the Employee Retirement Income Security Act of 1974. Funding for non-U.S. plans observes the local legal and regulatory limits. Also, the Company makes contributions to union-trusteed pension funds for construction and service personnel.

For pension plans with accumulated benefit obligations (ABO) that exceed plan assets, the projected benefit obligation (PBO), ABO and fair value of plan assets of those plans were $4,339 million, $4,185 million and $3,346 million, respectively, as of September 30, 2011 and $3,942 million, $3,804 million and $3,169 million, respectively, as of September 30, 2010.

In fiscal 2011, total employer and employee contributions to the defined benefit pension plans were $280 million, of which $183 million were voluntary contributions made by the Company. The Company expects to contribute approximately $350 million in cash to its defined benefit pension plans in fiscal year 2012. Projected benefit payments from the plans as of September 30, 2011 are estimated as follows (in millions):

2012	$	276
2013		250
2014		262
2015		266
2016		275
2017-2021		1,465

Postretirement Health and Other Benefits

The Company provides certain health care and life insurance benefits for eligible retirees and their dependents primarily in the U.S. Most non-U.S. employees are covered by government sponsored programs, and the cost to the Company is not significant.

Eligibility for coverage is based on meeting certain years of service and retirement age qualifications. These benefits may be subject to deductibles, co-payment provisions and other limitations, and the Company has reserved the right to modify these benefits. Effective January 31, 1994, the Company modified certain salaried plans to place a limit on the Company’s cost of future annual retiree medical benefits at no more than 150% of the 1993 cost.

The September 30, 2011 projected postretirement benefit obligation (PBO) for both pre-65 and post-65 years of age employees was determined using assumed medical care cost trend rates of 7.5% for U.S. plans and non-U.S. plans, decreasing one half percent each year to an ultimate rate of 5% and prescription drug trend rates of 7.5% for U.S. plans and non-U.S. plans, decreasing one half percent each year to an ultimate rate of 5%. The September 30, 2010 PBO for both pre-65 and post-65 years of age employees was determined using medical care cost trend rates of 7% and 8% for U.S. plans and non-U.S. plans, respectively, decreasing one half percent each year to an ultimate rate of 5% and prescription drug trend rates of 9% and 8% for U.S. plans and non-U.S. plans, respectively, decreasing one half percent each year to an ultimate rate of 6% and 5% for U.S. plans and non-U.S. plans, respectively. The health care cost trend assumption does not have a significant effect on the amounts reported.

In fiscal 2011, total employer and employee contributions to the postretirement health and other benefit plans were $183 million, of which $156 million were voluntary contributions made by the Company. The Company expects to contribute approximately $60 million in cash to its postretirement health and other benefit plans in fiscal year 2012. Projected benefit payments from the plans as of September 30, 2011 are estimated as follows (in millions):

2012	$	23
2013		24
2014		24
2015		25
2016		25
2017-2021		98

In December 2003, the U.S. Congress enacted the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Act) for employers sponsoring postretirement health care plans that provide prescription drug benefits. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans providing a benefit that is at least actuarially equivalent to Medicare Part D.1. Under the Act, the Medicare subsidy amount is received directly by the plan sponsor and not the related plan. Further, the plan sponsor is not required to use the subsidy amount to fund postretirement benefits and may use the subsidy for any valid business purpose. Projected subsidy receipts are estimated to be approximately $3 million per year over the next ten years.

Savings and Investment Plans

The Company sponsors various defined contribution savings plans primarily in the U.S. that allow employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan specified guidelines. Under specified conditions, the Company will contribute to certain savings plans based on the employees’ eligible pay and/or will match a percentage of the employee contributions up to certain limits. Matching contributions charged to expense amounted to $67 million, $42 million and $35 million for the fiscal years ended 2011, 2010 and 2009, respectively.

Multiemployer Pension Plans

The Company participates in multiemployer pension plans for certain of its hourly employees in the U.S. The Company contributed $51 million, $46 million and $47 million to multiemployer pension plans in fiscal 2011, 2010 and 2009, respectively.

Plan Assets

The Company’s investment policies employ an approach whereby a mix of equities, fixed income and alternative investments are used to maximize the long-term return of plan assets for a prudent level of risk. The investment portfolio primarily contains a diversified blend of equity and fixed income investments. Equity investments are diversified across domestic and non-domestic stocks, as well as growth, value and small to large capitalizations. Fixed income investments include corporate and government issues, with short-, mid- and long-term maturities, with a focus on investment grade when purchased. Investment and market risks are measured and monitored on an ongoing basis through regular investment portfolio reviews, annual liability measurements and periodic asset/liability studies. The majority of the real estate component of the portfolio is invested in a diversified portfolio of high-quality, operating properties with cash yields greater than the targeted appreciation. Investments in other alternative asset classes, including hedge funds and commodities, are made via mutual funds to diversify the expected investment returns relative to the equity and fixed income investments. As a result of our diversification strategies, there are no significant concentrations of risk within the portfolio of investments.

The Company’s actual asset allocations are in line with target allocations. The Company rebalances asset allocations as appropriate, in order to stay within a range of allocation for each asset category.

The expected return on plan assets is based on the Company’s expectation of the long-term average rate of return of the capital markets in which the plans invest. The average market returns are adjusted, where appropriate, for active asset management returns. The expected return reflects the investment policy target asset mix and considers the historical returns earned for each asset category.

The Company’s plan assets at September 30, 2011 and 2010, by asset category, are as follows (in millions):

	Fair Value Measurements Using:
					Significant
			Quoted Prices		Other		Significant
			in Active		Observable		Unobservable
	Total as of		Markets		Inputs		Inputs
Asset Category	September 30, 2011		(Level 1)		(Level 2)		(Level 3)
U.S. Pension
Cash	$	25	$	25	$	—	$	—
Equity Securities
Large-Cap		734		734		—		—
Small-Cap		230		230		—		—
International — Developed		429		429		—		—
Fixed Income Securities
Government		162		162		—		—
Corporate/Other		494		494		—		—
Hedge Funds		94		—		—		94
Real Estate		204		—		—		204
Total	$	2,372	$	2,074	$	—	$	298
Non-U.S. Pension
Cash	$	57	$	57	$	—	$	—
Equity Securities
Large-Cap		141		141		—		—
International — Developed		347		347		—		—
International — Emerging		47		47		—		—
Fixed Income Securities
Government		276		276		—		—
Corporate/Other		499		499		—		—
Commodities		11		11		—		—
Real Estate		93		—		—		93
Total	$	1,471	$	1,378	$	—	$	93
Postretirement Health and Other Benefits
Equity Securities
Large-Cap	$	25	$	25	$	—	$	—
Small-Cap		8		8		—		—
International — Developed		19		19		—		—
International — Emerging		9		9		—		—
Fixed Income Securities
Government		19		19		—		—
Corporate/Other		53		53		—		—
Commodities		14		14		—		—
Real Estate		9		9		—		—
Total	$	156	$	156	$	—	$	—

	Fair Value Measurements Using:
					Significant
			Quoted Prices		Other		Significant
			in Active		Observable		Unobservable
	Total as of		Markets		Inputs		Inputs
Asset Category	September 30, 2010		(Level 1)		(Level 2)		(Level 3)
U.S. Pension
Cash	$	52	$	52	$	—	$	—
Equity Securities
Large-Cap		779		779		—		—
Small-Cap		287		287		—		—
International — Developed		505		505		—		—
Fixed Income Securities
Government		147		147		—		—
Corporate/Other		469		469		—		—
Hedge Funds		91		—		—		91
Real Estate		141		—		—		141
Total	$	2,471	$	2,239	$	—	$	232
Non-U.S. Pension
Cash	$	28	$	28	$	—	$	—
Equity Securities
Large-Cap		97		97		—		—
International — Developed		452		452		—		—
International — Emerging		13		13		—		—
Fixed Income Securities
Government		132		132		—		—
Corporate/Other		412		412		—		—
Commodities		11		11		—		—
Real Estate		71		—		—		71
Total	$	1,216	$	1,145	$	—	$	71

There were no postretirement health and other benefit plan assets held at September 30, 2010.

Following is a description of the valuation methodologies used for assets measured at fair value.

Cash: The fair value of cash is valued at cost.

Equity Securities: The fair value of equity securities is determined by indirect quoted market prices. The value of assets held in separate accounts is not published, but the investment managers report daily the underlying holdings. The underlying holdings are direct quoted market prices on regulated financial exchanges.

Fixed Income Securities: The fair value of fixed income securities is determined by indirect quoted market prices. The value of assets held in separate accounts is not published, but the investment managers report daily the underlying holdings. The underlying holdings are direct quoted market prices on regulated financial exchanges.

Commodities: The fair value of the commodities is determined by quoted market prices of the underlying holdings on regulated financial exchanges.

Hedge Funds: The fair value of hedge funds is accounted for by a custodian. The custodian obtains valuations from underlying managers based on market quotes for the most liquid assets and alternative methods for assets that do not have sufficient trading activity to derive prices. The Company and custodian review the methods used by the underlying managers to value the assets. The Company believes this is an appropriate methodology to obtain the fair value of these assets.

Real Estate: The fair value of Real Estate Investment Trusts (REITs) is recorded as Level 1 as these securities are traded on an open exchange. The fair value measurement of other investments in real estate is deemed Level 3 since the value of these investments is provided by fund managers. The fund managers value the real estate investments via independent third party appraisals on a periodic basis. Assumptions used to revalue the properties are updated every quarter. The Company believes this is an appropriate methodology to obtain the fair value of these assets. For the component of the real estate portfolio under development, the investments are carried at cost until they are completed and valued by a third party appraiser.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following sets forth a summary of changes in the fair value of assets measured using significant unobservable inputs (Level 3) (in millions):

	Total			Hedge Funds		Real Estate
U.S. Pension
Asset value as of September 30, 2009	$	174		$	86	$	88
Additions net of redemptions		50			—		50
Realized loss		(5	)		—		(5	)
Unrealized gain		13			5		8
Asset value as of September 30, 2010	$	232		$	91	$	141
Additions net of redemptions		41			—		41
Realized gain		10			—		10
Unrealized gain		15			3		12
Asset value as of September 30, 2011	$	298		$	94	$	204
Non-U.S. Pension
Asset value as of September 30, 2009	$	64		$	—	$	64
Unrealized gain		7			—		7
Asset value as of September 30, 2010	$	71		$	—	$	71
Additions net of redemptions		12			—		12
Unrealized gain		10			—		10
Asset value as of September 30, 2011	$	93		$	—	$	93

Funded Status

The table that follows contains the ABO and reconciliations of the changes in the PBO, the changes in plan assets and the funded status (in millions):

	Pension Benefits												Postretirement Health
	U.S. Plans						Non-U.S. Plans						and Other Benefits
September 30,	2011			2010			2011			2010			2011			2010
Accumulated Benefit Obligation	$	2,850		$	2,655		$	1,774		$	1,622		$	—		$	—
Change in Projected Benefit Obligation
Projected benefit obligation at beginning of year		2,717			2,512			1,725			1,521			256			275
Service cost		66			67			34			38			5			4
Interest cost		145			152			70			68			13			14
Plan participant contributions		—			—			6			5			6			7
Acquisitions		—			—			76			1			—			—
Actuarial loss		177			106			9			146			5			23
Amendments made during the year		—			—			(32	)		(3	)		—			(44	)
Benefits paid		(150	)		(120	)		(67	)		(68	)		(27	)		(26	)
Estimated subsidy received		—			—			—			—			1			2
Curtailment gain		—			—			(30	)		(5	)		—			—
Settlement		(2	)		—			(12	)		—			—			—
Other		—			—			40			6			—			—
Currency translation adjustment		—			—			33			16			—			1
Projected benefit obligation at end of year	$	2,953		$	2,717		$	1,852		$	1,725		$	259		$	256
Change in Plan Assets
Fair value of plan assets at beginning of year	$	2,471		$	1,867		$	1,216		$	1,080		$	—		$	—
Actual return on plan assets		44			151			29			64			—			—
Acquisitions		—			—			12			—			—			—
Employer and employee contributions		9			573			271			108			183			26
Benefits paid		(150	)		(120	)		(67	)		(68	)		(27	)		(26	)
Settlement payments		(2	)		—			(12	)		—			—			—
Other		—			—			1			4			—			—
Currency translation adjustment		—			—			21			28			—			—
Fair value of plan assets at end of year	$	2,372		$	2,471		$	1,471		$	1,216		$	156		$	—
Funded status	$	(581	)	$	(246	)	$	(381	)	$	(509	)	$	(103	)	$	(256	)
Amounts recognized in the statement of financial position consist of:
Prepaid benefit cost	$	—		$	7		$	40		$	17		$	15		$	—
Accrued benefit liability		(581	)		(253	)		(421	)		(526	)		(118	)		(256	)
Net amount recognized	$	(581	)	$	(246	)	$	(381	)	$	(509	)	$	(103	)	$	(256	)
Weighted Average Assumptions (1)
Discount rate (2)		5.25	%		5.50	%		4.00	%		4.00	%		5.25	%		5.50	%
Rate of compensation increase		3.30	%		3.20	%		2.50	%		3.00	%	NA			NA

(1)

Plan assets and obligations are determined based on a September 30 measurement date at September 30, 2011 and 2010.

(2)

The Company considers the expected benefit payments on a plan-by-plan basis when setting assumed discount rates. As a result, the Company uses different discount rates for each plan depending on the plan jurisdiction, the demographics of participants and the expected timing of benefit payments. For the U.S. pension and postretirement health and other benefit plans, the Company uses a discount rate provided by an independent third party calculated based on an appropriate mix of high quality bonds. For the non-U.S. pension and postretirement health and other benefit plans, the Company consistently uses the relevant country specific benchmark indices for determining the various discount rates.

Accumulated Other Comprehensive Income

The amounts in accumulated other comprehensive income on the consolidated statement of financial position, exclusive of tax impacts, that have not yet been recognized as components of net periodic benefit cost at September 30, 2011 are as follows (in millions):

				Postretirement
	Pension			Health and Other
	Benefits			Benefits
Accumulated other comprehensive loss (income)
Net transition obligation	$	2		$	—
Net actuarial loss		1,663			16
Net prior service credit		(11	)		(35	)
Total	$	1,654		$	(19	)

The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year are shown below (in millions):

			Postretirement
	Pension		Health and Other
	Benefits		Benefits
Amortization of:
Net actuarial loss	$	102	$	1
Net prior service credit		—		(17	)
Total	$	102	$	(16	)

Net Periodic Benefit Cost

The table that follows contains the components of net periodic benefit cost (in millions):

	Pension Benefits																		Postretirement Health
	U.S. Plans									Non-U.S. Plans									and Other Benefits
Year ended September 30	2011			2010			2009			2011			2010			2009			2011			2010			2009
Components of Net
Periodic Benefit Cost:
Service cost	$	66		$	67		$	66		$	34		$	38		$	32		$	5		$	4		$	4
Interest cost		145			152			159			70			68			65			13			14			18
Expected return on plan assets		(209	)		(179	)		(174	)		(76	)		(64	)		(55	)		—			—			—
Amortization of net actuarial loss (gain)		55			28			4			12			11			3			2			—			(3	)
Amortization of prior service cost (credit)		1			1			1			2			—			—			(17	)		(17	)		(7	)
Special termination benefits		—			—			—			—			—			1			—			—			—
Curtailment loss (gain)		—			—			4			(19	)		(1	)		(2	)		—			—			—
Settlement loss		—			—			—			4			2			—			—			—			—
Divestures gain		—			—			—			—			—			(1	)		—			—			—
Currency translation adjustment		—			—			—			(2	)		2			—			—			—			—
Net periodic benefit cost	$	58		$	69		$	60		$	25		$	56		$	43		$	3		$	1		$	12
Expense Assumptions:
Discount rate		5.50	%		6.25	%		7.50	%		4.00	%		4.75	%		5.50	%		5.50	%		6.25	%		7.50	%
Expected return on plan assets		8.50	%		8.50	%		8.50	%		5.50	%		6.00	%		6.00	%	NA			NA			NA
Rate of compensation increase		3.20	%		4.20	%		4.20	%		3.00	%		3.20	%		3.00	%	NA			NA			NA