Retirement Benefits

Pension and Postretirement Health Care Benefits Plans

The Company’s noncontributory pension plan (the “Regular Pension Plan”) covered U.S. employees hired prior to January 1, 2005, who became eligible after one year of service. The benefit formula was dependent upon employee earnings and years of service. During 2014, the Company terminated this plan. The Company also provides defined benefit plans which cover non-U.S. employees in certain jurisdictions, principally the United Kingdom and Germany (the “Non U.S. Pension Benefit Plans”). Other pension plans outside of the U.S. are not material to the Company either individually or in the aggregate.

The Company had a noncontributory supplemental retirement benefit plan (the “Officers’ Plan”) for its officers elected prior to December 31, 1999. The Officers’ Plan contained provisions for vesting and funding the participants’ expected retirement benefits when the participants met the minimum age and years of service requirements. Elected officers who were not yet vested in the Officers’ Plan as of December 31, 1999 had the option to remain in the Officers’ Plan or elect to have their benefit bought out in restricted stock units. Effective December 31, 1999, newly elected officers were not eligible to participate in the Officers’ Plan. Effective June 30, 2005, salaries were frozen for this plan. During 2013, the Company settled and terminated the Officers' Plan.

The Company has an additional noncontributory supplemental retirement benefit plan, the Motorola Supplemental Pension Plan (“MSPP”), which provides supplemental benefits to individuals by replacing the Regular Pension Plan benefits that are lost by such individuals under the retirement formula due to application of the limitations imposed by the Internal Revenue Code. However, elected officers who were covered under the Officers’ Plan were not eligible to participate in the MSPP. Effective January 1, 2007, eligible compensation was capped at the IRS limit plus $175,000 (the “Cap”) or, for those already in excess of the Cap as of January 1, 2007, the eligible compensation used to compute such employee’s MSPP benefit for all future years is the greater of: (i) such employee’s eligible compensation as of January 1, 2007 (frozen at that amount) or (ii) the relevant Cap for the given year. Effective January 1, 2009, the MSPP was closed to new participants unless such participation was required under a prior contractual entitlement.

In February 2007, the Company amended the Regular Pension Plan and the MSPP, modifying the definition of average earnings. For the years ended prior to December 31, 2007, benefits were calculated using the rolling average of the highest annual earnings in any five years within the previous ten calendar year period. Beginning in January 2008, the benefit calculation was based on the set of the five highest years of earnings within the ten calendar years prior to December 31, 2007, averaged with earnings from each year after 2007. In addition, effective January 2008, the Company amended the Regular Pension Plan, modifying the vesting period from five years to three years.

In December 2008, the Company amended the Regular Pension Plan, the Officers’ Plan and the MSPP (collectively, the “U.S. Pension Benefit Plans”) such that, effective March 1, 2009: (i) no participant shall accrue any benefit or additional benefit on or after March 1, 2009, and (ii) no compensation increases earned by a participant on or after March 1, 2009 shall be used to compute any accrued benefit.

Certain health care benefits are available to eligible domestic employees meeting certain age and service requirements upon termination of employment (the “Postretirement Health Care Benefits Plan”). For eligible employees hired prior to January 1, 2002, the Company offsets a portion of the postretirement medical costs to the retired participant. As of January 1, 2005, the Postretirement Health Care Benefits Plan was closed to new participants. During 2012, the Postretirement Health Care Benefits Plan was amended ("the Original Amendment"). As of January 1, 2013, benefits under the Postretirement Health Care Benefits Plan, are paid to a retiree health reimbursement account instead of directly providing health insurance coverage to certain participants. Covered retirees are now able to use the annual subsidy they receive through this account toward the purchase of their own health care coverage from private insurance companies and for reimbursement of eligible health care expenses. The Original Amendment to the Postretirement Health Care Benefits Plan effective January 1, 2013 resulted in a remeasurement of the plan generating an $87 million decrease in accumulated other comprehensive loss, net of taxes. The majority of that $87 million decrease will be recognized by the end of 2015.

In September 2014, the Postretirement Health Care Benefits Plan was amended (“the New Amendment”). As a result of the New Amendment, beginning March 1, 2015, all eligible retirees under the age of 65, will be able to use the annual subsidy they receive through their retiree health reimbursement account toward the purchase of their own health care coverage from private insurance companies and for the reimbursement of eligible health care expenses. Additionally, the New Amendment eliminated dental benefits under the plan. The New Amendment required a remeasurement of the plan, resulting in a $45 million decrease in Accumulated other comprehensive loss, net of taxes. A substantial portion of the decrease is related to a prior service credit and will be recognized as a credit to the consolidated statements of operations over almost three years, or the period in which the remaining employees eligible for the plan will qualify for benefits under the plan.

During the years ended December 31, 2014, 2013, and 2012, $50 million, $43 million, and $16 million of prior service cost credit, respectively, was recognized into the Company’s consolidated statements of operations for amendments to the Postretirement Health Care Benefits Plan.

In September 2014, the Company entered into a Definitive Purchase Agreement (the “Agreement”) by and among the Company, The Prudential Insurance Company of America (“PICA”), Prudential Financial, Inc. and State Street Bank and Trust Company, as Independent Fiduciary of the Company’s Regular Pension Plan. Under the Agreement, the Regular Pension Plan planned to purchase from PICA a group annuity contract that requires PICA to pay and administer certain future annuity payments to approximately 30,000 of the Company’s retirees. In anticipation of the Agreement, the Company established a new pension plan with substantially the same terms as the Regular Pension Plan (the “New Plan”) to accommodate the Company's remaining active employees and non-retirees. The establishment of the New Plan resulted in a mid-year remeasurement. On December 3, 2014, the Regular Pension Plan closed its planned purchase of a group annuity from PICA. The total premium paid by the Regular Pension Plan to PICA was the transfer of approximately $3.2 billion in plan assets, and is subject to customary post-closing true-ups. The Regular Pension Plan was then terminated.

Also in September 2014, the Company announced that the New Plan was offering a maximum of $1.0 billion of lump-sum distributions to certain participants who had accrued a pension benefit, had left the Company prior to June 30, 2014, and had not yet started receiving pension benefit payments (the “Eligible Participants”). The aggregate amount of lump-sum elections accepted by Eligible Participants exceeded the maximum of $1.0 billion, and $1.0 billion was paid out from plan assets in December 2014.

As a result of the actions taken to the Plans, the Company recorded a settlement loss of $1.9 billion in 2014 which is recorded in "Other charges" within the statement of operations.

Net Periodic Cost (Benefit)

The net periodic costs (benefit) for pension and Postretirement Health Care Benefits plans were as follows:



	U.S. Pension Benefit Plans									Non U.S. Pension Benefit Plans									Postretirement Health Care Benefits Plan
Years ended December 31	2014			2013			2012			2014			2013			2012			2014			2013			2012
Service cost	$	—		$	—		$	—		$	15		$	11		$	10		$	2		$	2		$	3
Interest cost	370			352			349			80			69			73			10			11			16
Expected return on plan assets	(381		)	(364		)	(421		)	(90		)	(77		)	(77		)	(10		)	(10		)	(12		)
Amortization of:
Unrecognized net loss	97			130			260			12			13			22			9			14			12
Unrecognized prior service benefit	—			—			—			(7		)	(6		)	(3		)	(50		)	(43		)	(16		)
Settlement/loss	1,883			—			—			—			—			—			—			—			—
Net periodic pension cost (benefit)	$	1,969		$	118		$	188		$	10		$	10		$	25		$	(39	)	$	(26	)	$	3

The status of the Company’s plans are as follows:



	U.S. Pension Benefit Plans						Non U.S. Pension Benefit Plans						Postretirement Health Care Benefits Plan
	2014			2013			2014			2013			2014			2013
Change in benefit obligation:
Benefit obligation at January 1	$	7,317		$	8,288		$	1,904		$	1,771		$	278		$	322
Service cost	—			—			15			11			2			2
Interest cost	370			352			80			69			10			11
Plan amendments	—			—			—			—			(41		)	—
Settlements	(4,227		)	—			—			—			—			—
Actuarial loss (gain)	1,357			(1,012		)	263			91			(14		)	(37		)
Foreign exchange valuation adjustment	—			—			(146		)	(1		)	—			—
Employee contributions	—			—			2			2			—			—
Benefit payments	(281		)	(311		)	(43		)	(39		)	(23		)	(20		)
Benefit obligation at December 31	4,536			7,317			2,075			1,904			212			278
Change in plan assets:
Fair value at January 1	6,071			5,426			1,513			1,343			161			155
Return on plan assets	642			806			191			182			21			22
Company contributions	1,112			150			237			32			—			—
Settlements	(3,196		)	—			—			—			—			—
Employee contributions	—			—			2			2			—			—
Foreign exchange valuation adjustment	—			—			(96		)	(8		)	—			—
Lump sum settlements	(1,031		)	—			—			—			—			—
Benefit payments	(281		)	(311		)	(41		)	(38		)	(19		)	(16		)
Fair value at December 31	3,317			6,071			1,806			1,513			163			161
Funded status of the plan	(1,219		)	(1,246		)	(269		)	(391		)	(49		)	(117		)
Unrecognized net loss	1,846			2,732			593			483			109			143
Unrecognized prior service benefit	—			—			(35		)	(44		)	(83		)	(92		)
Prepaid (accrued) pension cost	$	627		$	1,486		$	289		$	48		$	(23	)	$	(66	)
Components of prepaid (accrued) pension cost:
Non-current benefit liability	$	(1,219	)	$	(1,246	)	$	(269	)	$	(391	)	$	(49	)	$	(117	)
Deferred income taxes	701			1,002			51			28			10			19
Accumulated other comprehensive loss	1,145			1,730			507			411			16			32
Prepaid (accrued) pension cost	$	627		$	1,486		$	289		$	48		$	(23	)	$	(66	)

The benefit obligation and plan assets for the Company's plans are measured as of December 31, 2014. The Company utilizes a five-year, market-related asset value method of recognizing asset related gains and losses.

Prior to 2013, unrecognized gains and losses were amortized over periods ranging from three to thirteen years. At the close of fiscal 2012, the Company determined that the majority of the Company's plan participants in its Regular Pension Plan and United Kingdom pension plan were no longer actively employed by the Company due to significant employee exits as a result of the Company's divestitures. Under relevant accounting rules, when almost all of the plan participants are considered inactive, the amortization period for certain unrecognized losses changes from the average remaining service period to the average remaining lifetime of the participants. As such, depending on the specific plan, the Company amortizes gains and losses over periods ranging from four to thirty-six years. Prior service costs are amortized over periods ranging from six to twelve years. Benefits under all pension plans are valued based on the projected unit credit cost method.

The net periodic cost for 2015 will include amortization of the unrecognized net loss and prior service costs for the U.S. Pension Benefit Plans and Non U.S. Pension Benefit Plans, currently included in Accumulated other comprehensive loss, of $47 million and $11 million, respectively. It is estimated that the 2015 net periodic expense for the Postretirement Health Care Benefits Plan will include amortization of a net credit of $49 million, comprised of the unrecognized prior service gain and unrecognized actuarial loss, currently included in Accumulated other comprehensive loss.

Actuarial Assumptions

Certain actuarial assumptions such as the discount rate and the long-term rate of return on plan assets have a significant effect on the amounts reported for net periodic cost and benefit obligation. The assumed discount rates reflect the prevailing market rates of a universe of high-quality, non-callable, corporate bonds currently available that, if the obligation were settled at the measurement date, would provide the necessary future cash flows to pay the benefit obligation when due. The long-term rates of return on plan assets represent an estimate of long-term returns on an investment portfolio consisting of a mixture of equities, fixed income, cash and other investments similar to the actual investment mix. In determining the long-term return on plan assets, the Company considers long-term rates of return on the asset classes (both historical and forecasted) in which the Company expects the plan funds to be invested.

Weighted average actuarial assumptions used to determine costs for the plans at the beginning of the fiscal year were as follows:



	U.S. Pension Benefit Plans				Non U.S. Pension Benefit Plans				Postretirement Health Care Benefits Plan
	2014		2013		2014		2013		2014		2013
Discount rate	5.15	%	4.35	%	4.24	%	4.20	%	4.65	%	3.80	%
Investment return assumption	7.00	%	7.00	%	5.92	%	6.13	%	7.00	%	7.00	%

Weighted average actuarial assumptions used to determine benefit obligations for the plans were as follows:



	U.S. Pension Benefit Plans				Non U.S. Pension Benefit Plans				Postretirement Health Care Benefits Plan
	2014		2013		2014		2013		2014		2013
Discount rate	4.30	%	5.15	%	3.19	%	4.24	%	3.90	%	4.65	%
Future compensation increase rate	n/a		n/a		2.54	%	2.58	%	n/a		n/a

The accumulated benefit obligations for the plans were as follows:



	U.S. Pension Benefit Plans				Non U.S. Pension Benefit Plans
December 31	2014		2013		2014		2013
Accumulated benefit obligation	$	4,536	$	7,317	$	2,059	$	1,900

In September 2014, as a result of establishing the New Plan, the Company remeasured the Regular Pension Plan using a weighted average discount rate and expected long-term rate of return on assets of 4.25%. The Regular Pension Plan was subsequently terminated. The New Plan, which is the surviving plan, was measured using a discount rate and expected long-term rate of return on assets of 4.70% and 7.00%, respectively.

In September 2014, as a result of retiree healthcare design plan changes, the company remeasured the retiree healthcare plan using a weighted average discount rate and expected long-term rates of return on assets of 4.15% and 7.00%, respectively.

During 2014, the Company adopted the "RP 2014 White Collar" mortality table for purposes of calculating the projected benefit obligation for the Company's New Plan.

The health care cost trend rate used to determine the December 31, 2014 accumulated postretirement benefit obligation and 2015 net periodic benefit for the Postretirement Health Care Benefits Plan was 7.75%, grading down to a rate of 5.00% in 2021. The health care cost trend rate used to determine the December 31, 2013 accumulated postretirement benefit obligation and 2014 net periodic benefit was 8.50%, remaining flat at 8.50% through 2015, then grading down to a rate of 5.00% in 2020.

The effect of changing the health care trend rate by one percentage point on the accumulated postretirement benefit obligation and the net periodic cost of the Postretirement Health Care Benefits Plan is de minimis. The Company maintains a lifetime cap on postretirement health care costs, which reduces the liability duration of the plan. A result of this lower duration, is a decreased sensitivity to a change in the discount rate trend and health care cost assumptions with respect to the liability and related expense.

Investment Policy

The individual plans have adopted an investment policy designed to meet or exceed the expected rate of return on plan assets assumption. To achieve this, the plans retain professional advisors and investment managers that invest plan assets into various classes including, but are not limited to, equity, fixed income securities, cash, cash equivalents, commodities, hedge funds, infrastructure/utilities, insurance contracts, leveraged loan funds and real estate. In addition, some plans invest in insurance contracts. The Company uses long-term historical actual return experience with consideration of the expected investment mix of the plans’ assets, as well as future estimates of long-term investment returns, to develop its expected rate of return assumption used in calculating the net periodic cost. The individual plans have target mixes for these asset classes for all plans, which are readjusted periodically when an asset class weighting deviates from the target mix, with the goal of achieving the required return at a reasonable risk level.

The weighted-average asset allocations by asset categories for all pension and the Postretirement Health Care Benefits plans were as follows:



	All Pension Benefit Plans				Postretirement Health Care Benefits Plan
December 31	2014		2013		2014		2013
Target Mix:
Equity securities	41	%	55	%	37	%	57	%
Fixed income securities	44	%	43	%	42	%	42	%
Cash and other investments	15	%	2	%	21	%	1	%
Actual Mix:
Equity securities	43	%	55	%	20	%	58	%
Fixed income securities	44	%	42	%	20	%	40	%
Cash and other investments	13	%	3	%	60	%	2	%

Within the equity securities asset class, the investment policy provides for investments in a broad range of publicly-traded securities including both domestic and foreign equities. Within the fixed income securities asset class, the investment policy provides for investments in a broad range of publicly-traded debt securities including U.S. Treasury issues, corporate debt securities, mortgage and asset-backed securities, as well as foreign debt securities. In the cash and other investments asset class, investments may include, but are not limited to, cash, cash equivalents, commodities, hedge funds, infrastructure/utilities, insurance contracts, leveraged loan funds and real estate.

Cash Funding

The Company contributed $1.1 billion to its U.S. Pension Benefit Plans during 2014, compared to $150 million contributed in 2013. The Company contributed $237 million to its Non U.S. Pension Benefit Plans during 2014, compared to $32 million contributed in 2013. The Company expects to make no cash contributions to its U.S. Pension Benefit Plans and approximately $12 million to its Non U.S. Pension Benefit Plans in 2015. The Company does not expect to make cash contributions to the Postretirement Health Care Benefits Plan in 2015.

Expected Future Benefit Payments

The following benefit payments are expected to be paid:



Year	U.S. Pension Benefit Plans		Non U.S. Pension Benefit Plans		Postretirement Health Care Benefits Plan
2015	$	95	$	42	$	20
2016	93		43		19
2017	108		44		18
2018	122		45		17
2019	143		46		16
2020-2024	1,030		245		67

Other Benefit Plans

Split-Dollar Life Insurance Arrangements

The Company maintains a number of endorsement split-dollar life insurance policies on now-retired officers under a plan that was frozen prior to December 31, 2004. The Company had purchased the life insurance policies to insure the lives of employees and then entered into a separate agreement with the employees that split the policy benefits between the Company and the employee. Motorola Solutions owns the policies, controls all rights of ownership, and may terminate the insurance policies. To effect the split-dollar arrangement, Motorola Solutions endorsed a portion of the death benefits to the employee and upon the death of the employee, the employee’s beneficiary typically receives the designated portion of the death benefits directly from the insurance company and the Company receives the remainder of the death benefits. It is currently expected that minimal cash payments will be required to fund these policies.

The net periodic pension cost for these split-dollar life insurance arrangements was $5 million for the years ended December 31, 2014, 2013 and 2012. The Company has recorded a liability representing the actuarial present value of the future death benefits as of the employees’ expected retirement date of $66 million and $51 million as of December 31, 2014 and December 31, 2013, respectively.

Deferred Compensation Plan

The Company amended and reinstated its deferred compensation plan (“the Plan”) effective June 1, 2013 to reopen the Plan to certain participants. Under the Plan, participants may elect to defer base salary and cash incentive compensation in excess of 401(k) plan limitations. Participants under the Plan may choose to invest their deferred amounts in the same investment alternatives available under the Company's 401(k) plan. The Plan also allows for Company matching contributions for the following: (i) the first 4% of compensation deferred under the Plan, subject to a maximum of $50,000 for board officers, (ii) lost matching amounts that would have been made under the 401(k) plan if participants had not participated in the Plan, and (iii) discretionary amounts as approved by the Compensation and Leadership Committee of the Board of Directors.

Defined Contribution Plan

The Company and certain subsidiaries have various defined contribution plans, in which all eligible employees may participate. In the U.S., the 401(k) plan is a contributory plan. Matching contributions are based upon the amount of the employees’ contributions. The Company’s expenses for material defined contribution plans for the years ended December 31, 2014, 2013 and 2012 were $31 million, $32 million and $30 million, respectively.

Beginning January 1, 2012, the Company may make an additional discretionary 401(k) plan matching contribution to eligible employees. For the years ended December 31, 2014, 2013, and 2012 the Company made no discretionary matching contributions.