Retirement Benefits

Pension and Postretirement Health Care Benefits Plans

U.S. Pension Benefit Plans

The Company’s noncontributory U.S. pension plan (the “Regular Pension Plan”) provides benefits to U.S. employees hired prior to January 1, 2005, who became eligible after one year of service. In December 2008, the Company amended the Regular Pension Plan 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.

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 purchased 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. On December 3, 2014, the Company transfered $3.2 billion of plan assets to PICA upon the close of the Agreement and then subsequently terminated the plan. During 2014, 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. Upon the establishment of the New Plan, the Company offered and paid out from plan assets the maximum of $1.0 billion of a lump-sum distribution 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. As a result of the actions taken to the Plan, the Company recorded a settlement loss of $1.9 billion in 2014 which is recorded in "Other charges" within the statement of operations.

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. 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. Similar to the Regular Pension Plan, the Company amended the MSPP (collectively, the “U.S. Pension Benefit Plans”) in December 2008 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. Effective January 1, 2009, the MSPP was closed to new participants unless such participation was required under a prior contractual entitlement.

Postretirement Health Care Benefits Plan

Certain health care benefits are available to eligible domestic employees hired prior to January 1, 2002 and meeting certain age and service requirements upon termination of employment (the “Postretirement Health Care Benefits Plan”). 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") such that, as of January 1, 2013, retirees over the age of 65 are provided an annual subsidy to use toward the purchase of their own health care coverage from private insurance companies or for reimbursement of eligible health care expenses. The Original Amendment 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 was recognized by the end of 2015.

In September 2014, the Postretirement Health Care Benefits Plan was then further amended (“the New Amendment”) to provide the annual subsidy discussed as part of the Original Amendment to all participants under the plan effective March 1, 2015. Additionally, the New Amendment eliminated dental benefits that were previously provided under the plan. The New Amendment required a remeasurement, 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, 2015, 2014, and 2013, $59 million, $50 million, and $43 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.

Non U.S. Pension Benefit Plans

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.

In June 2015, the Company amended its Non-US defined benefit plan within the United Kingdom by closing future benefit accruals to all participants effective December 31, 2015. As a result, the Company recorded a curtailment gain of $32 million to “Other Charges” within the consolidated statement of operations during 2015.

Net Periodic Cost (Benefit)

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



	U.S. Pension Benefit Plans									Non U.S. Pension Benefit Plans									Postretirement Health Care Benefits Plan
Years ended December 31	2015			2014			2013			2015			2014			2013			2015			2014			2013
Service cost	$	—		$	—		$	—		$	12		$	15		$	11		$	1		$	2		$	2
Interest cost	193			370			352			66			80			69			8			10			11
Expected return on plan assets	(212		)	(381		)	(364		)	(103		)	(90		)	(77		)	(9		)	(10		)	(10		)
Amortization of:
Unrecognized net loss	46			97			130			17			12			13			8			9			14
Unrecognized prior service benefit	—			—			—			(3		)	(7		)	(6		)	(59		)	(50		)	(43		)
Curtailment gain	—			—			—			(32		)	—			—			—			—			—
Settlement/loss	—			1,883			—			—			—			—			—			—			—
Net periodic pension cost (benefit)	$	27		$	1,969		$	118		$	(43	)	$	10		$	10		$	(51	)	$	(39	)	$	(26	)

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



	U.S. Pension Benefit Plans						Non U.S. Pension Benefit Plans						Postretirement Health Care Benefits Plan
	2015			2014			2015			2014			2015			2014
Change in benefit obligation:
Benefit obligation at January 1	$	4,536		$	7,317		$	2,075		$	1,904		$	212		$	278
Service cost	—			—			12			15			1			2
Interest cost	193			370			66			80			8			10
Plan amendments	—			—			1			—			—			(41		)
Settlements/curtailments	—			(4,227		)	(5		)	—			—			—
Actuarial loss (gain)	(319		)	1,357			(151		)	263			(12		)	(14		)
Foreign exchange valuation adjustment	—			—			(123		)	(146		)	—			—
Employee contributions	—			—			2			2			—			—
Benefit payments	(106		)	(281		)	(62		)	(43		)	(17		)	(23		)
Benefit obligation at December 31	4,304			4,536			1,815			2,075			192			212
Change in plan assets:
Fair value at January 1	3,317			6,071			1,806			1,513			163			161
Return on plan assets	(84		)	642			33			191			(6		)	21
Company contributions	3			1,112			10			237			—			—
Settlements	—			(3,196		)	—			—			—			—
Employee contributions	—			—			2			2			—			—
Foreign exchange valuation adjustment	—			—			(93		)	(96		)	—			—
Lump sum settlements	—			(1,031		)	—			—			—			—
Benefit payments	(106		)	(281		)	(62		)	(41		)	(14		)	(19		)
Fair value at December 31	3,130			3,317			1,696			1,806			143			163
Funded status of the plan	(1,174		)	(1,219		)	(119		)	(269		)	(49		)	(49		)
Unrecognized net loss	1,777			1,846			453			593			104			109
Unrecognized prior service benefit	—			—			—			(35		)	(24		)	(83		)
Prepaid (accrued) pension cost	$	603		$	627		$	334		$	289		$	31		$	(23	)
Components of prepaid (accrued) pension cost:
Non-current benefit liability	$	(1,174	)	$	(1,219	)	$	(119	)	$	(269	)	$	(49	)	$	(49	)
Deferred income taxes	657			701			46			51			31			10
Accumulated other comprehensive loss	1,120			1,145			407			507			49			16
Prepaid (accrued) pension cost	$	603		$	627		$	334		$	289		$	31		$	(23	)

The net funded status of the of the Non U.S. Pension Benefit Plans primarily reflects a net underfunded status of $224 million related to Germany and a net overfunded status of $105 million related to the United Kingdom as of December 31, 2015.

The benefit obligation and plan assets for the Company's plans are measured as of December 31, 2015. The Company utilizes a five-year, market-related asset value method of recognizing asset related gains and losses.

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 eleven to thirty-five years. Prior service costs are amortized over periods ranging from two to nine years. Benefits under all pension plans are valued based on the projected unit credit cost method.

The net periodic cost for 2016 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 $38 million and $11 million, respectively. It is estimated that the 2016 net periodic expense for the Postretirement Health Care Benefits Plan will include amortization of a net credit of $16 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 the 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
	2015		2014		2015		2014		2015		2014
Discount rate	4.30	%	5.15	%	3.19	%	4.24	%	3.90	%	4.65	%
Investment return assumption	7.00	%	7.00	%	5.90	%	5.92	%	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
	2015		2014		2015		2014		2015		2014
Discount rate	4.73	%	4.30	%	3.57	%	3.19	%	4.26	%	3.90	%
Future compensation increase rate	n/a		n/a		0.41	%	2.54	%	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	2015		2014		2015		2014
Accumulated benefit obligation	$	4,304	$	4,536	$	1,809	$	2,059

In 2014, the Society of Actuaries ("SOA") released the “RP-2014 White Collar” mortality table which was utilized in calculating the 2014 projected benefit obligation. During 2015, the SOA issued an update, Mortality Improvement Scale MP-2015, which includes two additional years of mortality data and was utilized to calculate the 2015 projected benefit obligation.

Effective on January 1, 2016, the Company changed the method used to estimate the interest and service cost components of net periodic cost for defined benefit pension and other post-retirement benefit plans. Historically, the interest and service cost components were estimated using a single weighted-average discount rate derived from the yield curve used to measure the projected benefit obligation at the beginning of the period. The Company has elected to use a full yield curve approach in the estimation of these components of net periodic cost by applying the specific spot rates along the yield curve used in the determination of the projected benefit obligation to the relevant projected cash flows. The Company made this change to improve the correlation between projected benefit cash flows and the corresponding yield curve spot rates and to provide a more precise measurement of interest and service costs. This change does not affect the measurement of total benefit obligations as the change in interest and service cost is completely offset in the actuarial loss reported in the period. The Company has concluded that this change is a change in estimate and, accordingly, will account for it prospectively beginning in 2016.

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 not limited to, equity and fixed income securities, cash, cash equivalents, commodities, hedge funds, infrastructure/utilities, insurance contracts, leveraged loan funds and real estate. 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, 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	2015		2014		2015		2014
Target Mix:
Equity securities	37	%	41	%	36	%	37	%
Fixed income securities	45	%	44	%	42	%	42	%
Cash and other investments	18	%	15	%	22	%	21	%
Actual Mix:
Equity securities	37	%	43	%	37	%	20	%
Fixed income securities	44	%	44	%	41	%	20	%
Cash and other investments	19	%	13	%	22	%	60	%

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 made $3 million of contributions to its U.S. Pension Benefit Plans during 2015, compared to $1.1 billion contributed in 2014. The Company contributed $10 million to its Non U.S. Pension Benefit Plans during 2015, compared to $237 million contributed in 2014. The Company made no contributions to its Postretirement Health Care Benefits Plan in 2015 or 2014.

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
2016	$	94	$	47	$	19
2017	108		46		18
2018	124		52		17
2019	141		55		16
2020	162		62		15
2021-2025	1,128		376		63

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, 2015, 2014 and 2013. The Company has recorded a liability representing the actuarial present value of the future death benefits as of the employees’ expected retirement date of $63 million and $66 million as of December 31, 2015 and December 31, 2014, 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, 2015, 2014 and 2013 were $28 million, $31 million and $32 million, respectively.

Under the 401(k) plan, the Company may make an additional discretionary 401(k) plan matching contribution to eligible employees. For the years ended December 31, 2015, 2014, and 2013 the Company made no discretionary matching contributions.