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PENSION AND OTHER POSTRETIREMENT BENEFITS
 12 Months Ended
Dec. 31, 2019
Retirement Benefits, Description [Abstract]  
Pension and Other Postretirement Benefits Pension and Other Postretirement Benefits
The Company sponsors a number of both funded and unfunded U.S. and non-U.S. defined benefit pension plans. Pension benefits for many of our U.S. employees are provided through non-contributory, qualified and non-qualified defined benefit plans. All non-union hourly and salaried employees joining Honeywell for the first time after December 31, 2012, are not eligible to participate in Honeywell’s U.S. defined benefit pension plans. We also sponsor defined benefit pension plans which cover non-U.S. employees who are not U.S. citizens, in certain jurisdictions, principally the UK, Netherlands, Germany, and Canada. Other pension plans outside of the U.S. are not material to the Company either individually or in the aggregate.
The Company also sponsors postretirement benefit plans that provide health care benefits and life insurance coverage mainly to U.S. eligible retirees. None of Honeywell’s U.S. employees are eligible for a retiree medical subsidy from the Company. In addition, the vast majority of Honeywell’s U.S. retirees either have no Company subsidy or have a fixed-dollar subsidy amount. This significantly limits our exposure to the impact of future health care cost increases. The retiree medical and life insurance plans are not funded. Claims and expenses are paid from our operating cash flow.
The following tables summarize the balance sheet impact, including the benefit obligations, assets and funded status associated with the Company's significant pension and other postretirement benefit plans.
 
Pension Benefits
U.S. Plans
 
Non-U.S. Plans
2019
 
2018
 
2019
 
2018
Change in benefit obligation:
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
16,141

 
$
18,151

 
$
6,182

 
$
7,019

Service cost
82

 
140

 
22

 
26

Interest cost
613

 
573

 
142

 
143

Plan amendments
—

 
—

 
—

 
30

Actuarial (gains) losses
2,064

 
(1,111
)
 
708

 
(356
)
Benefits paid
(1,111
)
 
(1,137
)
 
(269
)
 
(264
)
Settlements and curtailments
(507
)
 
—

 
—

 
(9
)
Foreign currency translation
—

 
—

 
107

 
(342
)
Other
1

 
(475
)
 
5

 
(65
)
Benefit obligation at end of year
17,283

 
16,141

 
6,897

 
6,182

Change in plan assets:
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
17,109

 
18,985

 
6,481

 
7,151

Actual return on plan assets
3,458

 
(303
)
 
863

 
(173
)
Company contributions
45

 
34

 
62

 
137

Benefits paid
(1,111
)
 
(1,137
)
 
(269
)
 
(264
)
Settlements and curtailments
(507
)
 
—

 
—

 
—

Foreign currency translation
—

 
—

 
165

 
(378
)
Other
1

 
(470
)
 
5

 
8

Fair value of plan assets at end of year
18,995

 
17,109

 
7,307

 
6,481

Funded status of plans
$
1,712

 
$
968

 
$
410

 
$
299

Amounts recognized in Consolidated Balance Sheet consist of:
 
 
 
 
 
 
 
Prepaid pension benefit cost(1)
$
2,069

 
$
1,295

 
$
1,196

 
$
1,094

Accrued pension liabilities—current(2)
(32
)
 
(27
)
 
(13
)
 
(12
)
Accrued pension liabilities—noncurrent(3)
(325
)
 
(300
)
 
(773
)
 
(783
)
Net amount recognized
$
1,712

 
$
968

 
$
410

 
$
299

(1)
Included in Other assets on Consolidated Balance Sheet
(2)
Included in Accrued liabilities on Consolidated Balance Sheet
(3)
Included in Other liabilities on Consolidated Balance Sheet
 
Other
Postretirement
Benefits
2019
 
2018
Change in benefit obligation:
 
 
 
Benefit obligation at beginning of year
$
364

 
$
530

Service cost
—

 
—

Interest cost
14

 
15

Plan amendments
(2
)
 
(34
)
Actuarial (gains) losses
(16
)
 
(110
)
Benefits paid
(35
)
 
(37
)
Benefit obligation at end of year
325

 
364

Change in plan assets:
 
 
 
Fair value of plan assets at beginning of year
—

 
—

Actual return on plan assets
—

 
—

Company contributions
—

 
—

Benefits paid
—

 
—

Fair value of plan assets at end of year
—

 
—

Funded status of plans
$
(325
)
 
$
(364
)
Amounts recognized in Consolidated Balance Sheet consist of:
 
 
 
Accrued liabilities
$
(40
)
 
$
(62
)
Postretirement benefit obligations other than pensions(1)
(285
)
 
(302
)
Net amount recognized
$
(325
)
 
$
(364
)
(1)
Excludes non-U.S. plans of $41 million and $42 million in 2019 and 2018.
Amounts recognized in Accumulated other comprehensive (income) loss associated with the Company's significant pension and other postretirement benefit plans at December 31, 2019 and 2018 are as follows:
 
Pension Benefits
U.S. Plans
 
Non-U.S. Plans
2019
 
2018
 
2019
 
2018
Prior service (credit) cost
$
(176
)
 
$
(218
)
 
$
21

 
$
20

Net actuarial loss
544

 
860

 
701

 
600

Net amount recognized
$
368

 
$
642

 
$
722

 
$
620

 
Other
Postretirement
Benefits
2019
 
2018
Prior service (credit)
$
(166
)
 
$
(226
)
Net actuarial (gain) loss
(20
)
 
(4
)
Net amount recognized
$
(186
)
 
$
(230
)

The components of net periodic benefit (income) cost and other amounts recognized in Other comprehensive (income) loss for the Company's significant pension and other postretirement benefit plans include the following components:
Net Periodic Benefit Cost
Pension Benefits
U.S. Plans
 
Non-U.S. Plans
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Service cost
$
82

 
$
140

 
$
172

 
$
22

 
$
26

 
$
40

Interest cost
613

 
573

 
586

 
142

 
143

 
147

Expected return on plan assets
(1,117
)
 
(1,426
)
 
(1,262
)
 
(331
)
 
(443
)
 
(411
)
Amortization of prior service (credit) cost
(42
)
 
(43
)
 
(43
)
 
—

 
(1
)
 
(1
)
Recognition of actuarial losses
35

 
—

 
41

 
88

 
37

 
46

Settlements and curtailments
4

 
—

 
18

 
—

 
(3
)
 
—

Net periodic benefit (income) cost
$
(425
)
 
$
(756
)
 
$
(488
)
 
$
(79
)
 
$
(241
)
 
$
(179
)
Other Changes in Plan Assets and
Benefits Obligations Recognized in Other Comprehensive (Income) Loss
U.S. Plans
 
Non-U.S. Plans
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Actuarial (gains) losses
$
(277
)
 
$
619

 
$
(792
)
 
$
176

 
$
250

 
$
(153
)
Prior service cost (credit)
—

 
—

 
—

 
—

 
30

 
(1
)
Prior service credit recognized during year
42

 
43

 
43

 
—

 
4

 
1

Actuarial losses recognized during year
(39
)
 
—

 
(59
)
 
(88
)
 
(37
)
 
(46
)
Foreign currency translation
—

 
—

 
—

 
14

 
(34
)
 
43

Total recognized in other comprehensive (income) loss
$
(274
)
 
$
662

 
$
(808
)
 
$
102

 
$
213

 
$
(156
)
Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss
$
(699
)
 
$
(94
)
 
$
(1,296
)
 
$
23

 
$
(28
)
 
$
(335
)

The estimated prior service (credit) for pension benefits that will be amortized from Accumulated other comprehensive (income) loss into net periodic benefit (income) cost in 2020 are expected to be $(42) million and $0 million for U.S. and non-U.S. pension plans.
Net Periodic Benefit Cost
Other Postretirement Benefits
Years Ended December 31,
2019
 
2018
 
2017
Service cost
$
—

 
$
—

 
$
—

Interest cost
14

 
15

 
19

Amortization of prior service (credit)
(62
)
 
(52
)
 
(58
)
Recognition of actuarial losses
—

 
3

 
13

Net periodic benefit (income) cost
$
(48
)
 
$
(34
)
 
$
(26
)
Other Changes in Plan Assets and Benefits Obligations
Recognized in Other Comprehensive (Income) Loss
Years Ended December 31,
2019
 
2018
 
2017
Actuarial (gains) losses
$
(16
)
 
$
(110
)
 
$
(14
)
Prior service cost (credit)
(2
)
 
(34
)
 
91

Prior service credit recognized during year
62

 
52

 
58

Actuarial losses recognized during year
—

 
(3
)
 
(13
)
Total recognized in other comprehensive (income) loss
$
44

 
$
(95
)
 
$
122

Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss
$
(4
)
 
$
(129
)
 
$
96


The estimated net (gain) and prior service (credit) for other postretirement benefits that will be amortized from Accumulated other comprehensive (income) loss into net periodic benefit (income) cost in 2020 are expected to be $0 and $(63) million.
Major actuarial assumptions used in determining the benefit obligations and net periodic benefit (income) cost for our significant benefit plans are presented in the following table as weighted averages.
 
Pension Benefits
U.S. Plans
 
Non-U.S. Plans
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Actuarial assumptions used to determine benefit obligations as of December 31:
 
 
 
 
 
 
 
 
 
 
 
Discount rate
3.22
%
 
4.35
%
 
3.68
%
 
1.81
%
 
2.63
%
 
2.36
%
Expected annual rate of compensation increase
3.25
%
 
3.25
%
 
4.50
%
 
2.47
%
 
2.46
%
 
0.73
%
Actuarial assumptions used to determine net periodic benefit (income) cost for years ended December 31:
 
 
 
 
 
 
 
 
 
 
 
Discount rate—benefit obligation
4.35
%
 
3.68
%
 
4.20
%
 
2.63
%
 
2.36
%
 
2.51
%
Discount rate—service cost
4.47
%
 
3.77
%
 
4.42
%
 
2.26
%
 
2.20
%
 
2.14
%
Discount rate—interest cost
3.94
%
 
3.27
%
 
3.49
%
 
2.34
%
 
2.08
%
 
2.19
%
Expected rate of return on plan assets
6.75
%
 
7.75
%
 
7.75
%
 
5.14
%
 
6.23
%
 
6.43
%
Expected annual rate of compensation increase
3.25
%
 
4.50
%
 
4.50
%
 
2.46
%
 
2.49
%
 
2.17
%
 
Other
Postretirement
Benefits
2019
 
2018
 
2017
Actuarial assumptions used to determine benefit obligations as of December 31:
 
 
 
 
 
Discount rate
3.03
%
 
4.07
%
 
3.39
%
Actuarial assumptions used to determine net periodic benefit cost for years ended December 31:
 
 
 
 
 
Discount rate(1)
4.07
%
 
3.39
%
 
3.60
%
(1)
Discount rate was 3.65% for 1/1/2017 through 2/28/2017. Rate was changed to 3.60% for the remainder of 2017 due to a Plan remeasurement as of 3/1/2017.
The discount rate for the Company's U.S. pension and other postretirement benefits plans reflects the current rate at which the associated liabilities could be settled at the measurement date of December 31. To determine discount rates for our U.S. pension and other postretirement benefit plans, we use a modeling process that involves matching the expected cash outflows of our benefit plans to a yield curve constructed from a portfolio of high quality, fixed-income debt instruments. We use the single weighted-average yield of this hypothetical portfolio as a discount rate benchmark. We utilize a full yield curve approach in the estimation of the service and interest cost components of net periodic pension benefit (income) for our significant pension plans. This approach applies the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows and provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates. For our U.S. pension plans, the single weighted average spot rates used to determine service and interest costs for 2020 are 3.33% and 2.76%. The discount rate used to determine the other postretirement benefit obligation is lower principally due to a shorter expected duration of other postretirement plan obligations as compared to pension plan obligations.
The Company plans to use an expected rate of return on U.S. plan assets of 6.15% for 2020 down from 6.75% for 2019 reflecting a decline in interest rates and additional re-balancing of assets to more fixed income. Our asset return assumption is based on historical plan asset returns over varying long-term periods combined with current market conditions and broad asset mix considerations with a focus on long-term trends rather than short-term market conditions. We review the expected rate of return on an annual basis and revise it as appropriate.
For non-U.S. benefit plans actuarial assumptions reflect economic and market factors relevant to each country.
Pension Benefits
The following amounts relate to the Company's significant pension plans with accumulated benefit obligations exceeding the fair value of plan assets:
 
December 31,
U.S. Plans
 
Non-U.S. Plans
2019
 
2018
 
2019
 
2018
Projected benefit obligation
$
357

 
$
327

 
$
1,018

 
$
1,668

Accumulated benefit obligation
$
347

 
$
321

 
$
973

 
$
1,604

Fair value of plan assets
$
—

 
$
—

 
$
233

 
$
873


The accumulated benefit obligation for the Company's U.S. defined benefit pension plans was $17.2 billion and $16.1 billion and for our Non-U.S. defined benefit pension plans was $6.8 billion and $6.1 billion at December 31, 2019 and 2018.
The Company's asset investment strategy for our U.S. pension plans focuses on maintaining a diversified portfolio using various asset classes in order to achieve our long-term investment objectives on a risk adjusted basis. During 2019, we continued to employ a de-risking strategy which increases the matching characteristics of our assets relative to our obligation. Our long-term target allocations are as follows: 55%-70% fixed income securities and cash, 25%-40% equity securities, 5%-10% real estate investments, and 10%-20% other types of investments. Equity securities include publicly-traded stock of companies located both inside and outside the United States. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities, and U.S. Treasuries. Real estate investments include direct investments in commercial properties and investments in real estate funds. Other types of investments include investments in private equity and hedge funds that follow several different strategies. We review our assets on a regular basis to ensure that we are within the targeted asset allocation ranges and, if necessary, asset balances are adjusted back within target allocations.
The Company's non-U.S. pension assets are typically managed by decentralized fiduciary committees with the Honeywell Corporate Investments group providing funding and investment guidance. Our non-U.S. investment policies are different for each country as local regulations, funding requirements, and financial and tax considerations are part of the funding and investment allocation process in each country.
In accordance with ASU 2015-07, “Fair Value Measurement (Topic 820)”, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the following tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan assets.
The fair values of both the Company's U.S. and non-U.S. pension plans assets by asset category are as follows:
 
U.S. Plans
December 31, 2019
Total
 
Level 1
 
Level 2
 
Level 3
Equities:
 
 
 
 
 
 
 
Honeywell common stock
$
2,857

 
$
2,857

 
$
—

 
$
—

U.S. equities
1,227

 
1,227

 
—

 
—

Non-U.S. equities
—

 
—

 
—

 
—

Real estate investment trusts
—

 
—

 
—

 
—

Fixed income:
 
 
 
 
 
 
 
Short term investments
1,395

 
1,395

 
—

 
—

Government securities
1,146

 
—

 
1,146

 
—

Corporate bonds
8,603

 
—

 
8,603

 
—

Mortgage/Asset-backed securities
1,023

 
—

 
1,023

 
—

Insurance contracts
8

 
—

 
8

 
—

Direct investments:
 
 
 
 
 
 
 
Direct private investments
950

 
—

 
—

 
950

Real estate properties
619

 
—

 
—

 
619

Total
$
17,828

 
$
5,479

 
$
10,780

 
$
1,569

Investments measured at NAV:
 
 
 
 
 
 
 
Private funds
1,019

 
 
 
 
 
 
Real estate funds
42

 
 
 
 
 
 
Hedge funds
—

 
 
 
 
 
 
Commingled Funds
106

 
 
 
 
 
 
Total assets at fair value
$
18,995

 
 
 
 
 
 
 
U.S. Plans
December 31, 2018
Total
 
Level 1
 
Level 2
 
Level 3
Equities:
 
 
 
 
 
 
 
Honeywell common stock
$
2,438

 
$
2,438

 
$
—

 
$
—

U.S. equities
1,365

 
1,365

 
—

 
—

Non-U.S. equities
753

 
753

 
—

 
—

Real estate investment trusts
244

 
244

 
—

 
—

Fixed income:
 
 
 
 
 
 
 
Short term investments
877

 
877

 
—

 
—

Government securities
993

 
—

 
993

 
—

Corporate bonds
6,824

 
—

 
6,824

 
—

Mortgage/Asset-backed securities
1,032

 
—

 
1,032

 
—

Insurance contracts
8

 
—

 
8

 
—

Direct investments:
 
 
 
 
 
 
 
Direct private investments
829

 
—

 
—

 
829

Real estate properties
657

 
—

 
—

 
657

Total
$
16,020

 
$
5,677

 
$
8,857

 
$
1,486

Investments measured at NAV:
 
 
 
 
 
 
 
Private funds
931

 
 
 
 
 
 
Real estate funds
56

 
 
 
 
 
 
Hedge funds
1

 
 
 
 
 
 
Commingled funds
101

 
 
 
 
 
 
Total assets at fair value
$
17,109

 
 
 
 
 
 
 
Non-U.S. Plans
December 31, 2019
Total
 
Level 1
 
Level 2
 
Level 3
Equities:
 
 
 
 
 
 
 
U.S. equities
$
149

 
$
—

 
$
149

 
$
—

Non-U.S. equities
1,384

 
54

 
1,330

 
—

Fixed income:
 
 
 
 
 
 
 
Short-term investments
522

 
522

 
—

 
—

Government securities
3,006

 
—

 
3,006

 
—

Corporate bonds
1,746

 
—

 
1,746

 
—

Mortgage/Asset-backed securities
84

 
—

 
84

 
—

Insurance contracts
120

 
—

 
120

 
—

Investments in private funds:
 
 
 
 
 
 
 
Private funds
69

 
—

 
35

 
34

Real estate funds
150

 
—

 
—

 
150

Total
$
7,230

 
$
576

 
$
6,470

 
$
184

Investments measured at NAV:
 
 
 
 
 
 
 
Private funds
21

 
 
 
 
 
 
Real estate funds
56

 
 
 
 
 
 
Total assets at fair value
$
7,307

 
 
 
 
 
 
 
Non-U.S. Plans
December 31, 2018
Total
 
Level 1
 
Level 2
 
Level 3
Equities:
 
 
 
 
 
 
 
U.S. equities
$
429

 
$
297

 
$
132

 
$
—

Non-U.S. equities
1,356

 
44

 
1,312

 
—

Fixed income:
 
 
 
 
 
 
 
Short-term investments
189

 
189

 
—

 
—

Government securities
2,572

 
—

 
2,572

 
—

Corporate bonds
1,468

 
—

 
1,468

 
—

Mortgage/Asset-backed securities
60

 
—

 
60

 
—

Insurance contracts
137

 
—

 
137

 
—

Investments in private funds:
 
 
 
 
 
 
 
Private funds
46

 
—

 
12

 
34

Real estate funds
144

 
—

 
—

 
144

Total
$
6,401

 
$
530

 
$
5,693

 
$
178

Investments measured at NAV:
 
 
 
 
 
 
 
Private funds
26

 
 
 
 
 
 
Real estate funds
54

 
 
 
 
 
 
Total assets at fair value
$
6,481

 
 
 
 
 
 

The following table summarizes changes in the fair value of Level 3 assets for both U.S. and Non-U.S. plans:
 
U.S. Plans
 
Non-U.S. Plans
Direct
Private
Investments
 
Real Estate
Properties
 
Private
Funds
 
Real Estate
Funds
Balance at December 31, 2017
$
752

 
$
597

 
$
31

 
$
149

Actual return on plan assets:
 
 
 
 
 
 
 
Relating to assets still held at year-end
36

 
33

 
1

 
(4
)
Relating to assets sold during the year
65

 
2

 
—

 
—

Purchases
95

 
47

 
2

 
—

Sales and settlements
(119
)
 
(22
)
 
—

 
(1
)
Balance at December 31, 2018
$
829

 
$
657

 
$
34

 
$
144

Actual return on plan assets:
 
 
 
 
 
 
 
Relating to assets still held at year-end
15

 
40

 
—

 
7

Relating to assets sold during the year
89

 
(23
)
 
—

 
1

Purchases
216

 
48

 
—

 
—

Sales and settlements
(199
)
 
(103
)
 
—

 
(2
)
Balance at December 31, 2019
$
950

 
$
619

 
$
34

 
$
150


The Company enters into futures contracts to gain exposure to certain markets. Sufficient cash or cash equivalents are held by our pension plans to cover the notional value of the futures contracts. At December 31, 2019 and 2018, our U.S. plans had contracts with notional amounts of $4,463 million and $2,808 million. At December 31, 2019 and 2018, our non-U.S. plans had contracts with notional amounts of $479 million and $111 million. In both our U.S. and non-U.S. pension plans, the notional derivative exposure is related to outstanding equity and fixed income futures contracts.
Common stocks, preferred stocks, real estate investment trusts, and short-term investments are valued at the closing price reported in the active market in which the individual securities are traded. Corporate bonds, mortgages, asset-backed securities, and government securities are valued either by using pricing models, bids provided by brokers
or dealers, quoted prices of securities with similar characteristics or discounted cash flows and as such include adjustments for certain risks that may not be observable such as credit and liquidity risks. Certain securities are held in collective trust funds which are valued using net asset values provided by the administrators of the funds. Investments in private equity, debt, real estate and hedge funds and direct private investments are valued at estimated fair value based on quarterly financial information received from the investment advisor and/or general partner. Investments in real estate properties are valued on a quarterly basis using the income approach. Valuation estimates are periodically supplemented by third party appraisals.
The Company's funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. In 2019, 2018, and 2017, we were not required to make contributions to our U.S. pension plans and no contributions were made. We are not required to make any contributions to our U.S. pension plans in 2020. In 2019, contributions of $43 million were made to our non-U.S. pension plans to satisfy regulatory funding requirements. In 2020, we expect to make contributions of cash and/or marketable securities of approximately $112 million to our non-U.S. pension plans to satisfy regulatory funding standards. Contributions for both our U.S. and non-U.S. pension plans do not reflect benefits paid directly from Company assets.
Benefit payments, including amounts to be paid from Company assets, and reflecting expected future service, as appropriate, are expected to be paid as follows:
 
U.S. Plans
 
Non-U.S. Plans
2020
$
1,159

 
$
282

2021
1,151

 
288

2022
1,145

 
296

2023
1,138

 
303

2024
1,128

 
311

2025-2029
5,353

 
1,690


Other Postretirement Benefits
 
December 31,
2019
 
2018
Assumed health care cost trend rate:
 
 
 
Health care cost trend rate assumed for next year
7.00
%
 
7.00
%
Rate that the cost trend rate gradually declines to
5.00
%
 
5.00
%
Year that the rate reaches the rate it is assumed to remain at
2029

 
2029


The assumed health care cost trend rate has a significant effect on the amounts reported. A one-percentage-point change in the assumed health care cost trend rate would have the following effects:
 
1 percentage point
Increase
 
Decrease
Effect on total of service and interest cost components
$
1

 
$
(1
)
Effect on postretirement benefit obligation
$
14

 
$
(12
)

Benefit payments reflecting expected future service, as appropriate, are expected to be paid as follows:
 
Without Impact of
Medicare Subsidy
 
Net of
Medicare Subsidy
2020
$
46

 
$
41

2021
42

 
38

2022
39

 
35

2023
36

 
32

2024
22

 
20

2025-2029
95

 
84