PENSION AND OTHER POSTRETIREMENT BENEFITS

12 Months Ended

Dec. 31, 2015

Pension and Other Post Retirements Disclosure Paragraph Details [Abstract]

Pension and Other Postretirement Benefits

Note 20. Pension and Other Postretirement Benefits

We sponsor both funded and unfunded U.S. and non-U.S. defined benefit pension plans covering the majority of our employees and retirees. Pension benefits for substantially all 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.

We also sponsor postretirement benefit plans that provide health care benefits and life insurance coverage mainly to U.S. eligible retirees. Less than 1% of Honeywell’s U.S. employees are eligible for a retiree medical subsidy from the Company; and this subsidy is limited to a fixed-dollar amount. In addition, more than 80% of Honeywell’s current 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 our significant pension and other postretirement benefit plans.

		Pension Benefits
		U.S. Plans				Non-U.S. Plans
		2015		2014		2015		2014
Change in benefit obligation:
	Benefit obligation at beginning of year	$	18,035	$	16,290	$	5,761	$	5,523
	Service cost		223		241		51		56
	Interest cost		696		771		177		231
	Plan amendments		(429)		-		-		(17)
	Actuarial (gains) losses		(269)		1,718		(178)		601
	Acquisitions		61		-		1,137		-
	Divestitures		-		-		-		(61)
	Benefits paid		(1,027)		(996)		(199)		(210)
	Settlements and curtailments		-		-		(11)		-
	Foreign currency and other		8		11		(400)		(362)
	Benefit obligation at end of year		17,298		18,035		6,338		5,761
Change in plan assets:
	Fair value of plan assets at beginning of year		17,066		16,727		5,333		5,037
	Actual return on plan assets		233		1,290		154		622
	Company contributions		34		36		147		187
	Acquisitions		43		-		1,036		-
	Benefits paid		(1,027)		(996)		(199)		(210)
	Foreign currency and other		-		9		(354)		(303)
	Fair value of plan assets at end of year		16,349		17,066		6,117		5,333
Funded status of plans		$	(949)	$	(969)	$	(221)	$	(428)
Amounts recognized in Consolidated Balance
Sheet consist of:
	Prepaid pension benefit cost⁽¹⁾	$	-	$	-	$	427	$	270
	Accrued pension liabilities - current⁽²⁾		(51)		(74)		(7)		(8)
	Accrued pension liabilities - noncurrent⁽³⁾		(898)		(895)		(641)		(690)
Net amount recognized		$	(949)	$	(969)	$	(221)	$	(428)

(1) Included in other assets on Consolidated Balance Sheet
(2) Included in accrued liabilities on Consolidated Balance Sheet
(3) Included in other liabilities - noncurrent on Consolidated Balance Sheet

		Other Postretirement Benefits
		2015		2014
Change in benefit obligation:
	Benefit obligation at beginning of year	$	973	$	1,096
	Service cost		-		-
	Interest cost		33		42
	Plan amendments⁽¹⁾		(290)		(87)
	Actuarial (gains) losses		(55)		46
	Benefits paid		(92)		(124)
	Benefit obligation at end of year		569		973
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		$	(569)	$	(973)

Amounts recognized in Consolidated Balance Sheet consist of:
	Accrued liabilities	$	(85)	$	(111)
	Postretirement benefit obligations other than pensions⁽²⁾		(484)		(862)
Net amount recognized		$	(569)	$	(973)

(1) Elimination of retiree medical insurance coverage for certain retirees. Amount will be recognized as part of net postretirement benefit cost over the expected future lifetime of the remaining participants in the plan.
(2) Excludes non-U.S. plans of $42 million and $49 million in 2015 and 2014.

Amounts recognized in accumulated other comprehensive (income) loss associated with our significant pension and other postretirement benefit plans at December 31, 2015 and 2014 are as follows:

	Pension Benefits
	U.S. Plans				Non-U.S. Plans
	2015		2014		2015		2014
Transition obligation	$	-	$	-	$	-	$	1
Prior service (credit) cost		(355)		88		(22)		(27)
Net actuarial loss		1,005		281		464		493
Net amount recognized	$	650	$	369	$	442	$	467

	Other Postretirement Benefits
	2015		2014
Prior service (credit)	$	(496)	$	(235)
Net actuarial loss		189		278
Net amount recognized	$	(307)	$	43

The components of net periodic benefit (income) cost and other amounts recognized in other comprehensive (income) loss for our significant pension and other postretirement benefit plans include the following components:

			Pension Benefits
			U.S. Plans						Non-U.S. Plans
Net Periodic Benefit Cost				2015		2014		2013		2015		2014		2013
Service cost			$	223	$	241	$	272	$	51	$	56	$	58
Interest cost				696		771		677		177		231		215
Expected return on plan assets				(1,278)		(1,257)		(1,076)		(358)		(354)		(308)
Amortization of transition
	obligation			-		-		-		1		2		2
Amortization of prior service
	cost (credit)			13		23		23		(3)		(2)		(2)
Recognition of actuarial losses				52		26		-		15		223		51
Settlements and curtailments				8		-		-		2		-		-
Net periodic benefit (income) cost			$	(286)	$	(196)	$	(104)	$	(115)	$	156	$	16

Other Changes in Plan Assets and
Benefits Obligations Recognized in			U.S. Plans						Non-U.S. Plans
Other Comprehensive (Income) Loss				2015		2014		2013		2015		2014		2013
Actuarial losses (gains)			$	775	$	1,686	$	(3,090)	$	27	$	333	$	(48)
Prior service (credit) cost				(429)		-		14		-		(17)		-
Transition obligation
	recognized during year			-		-		-		(1)		(2)		(2)
Prior service (cost) credit
	recognized during year			(13)		(23)		(23)		3		2		2
Actuarial losses recognized
	during year			(52)		(26)		-		(17)		(223)		(51)
Foreign exchange translation
	adjustments			-		-		-		(37)		(50)		3
	Total recognized in other
		comprehensive (income) loss	$	281	$	1,637	$	(3,099)	$	(25)	$	43	$	(96)
	Total recognized in net periodic
		benefit (income) cost and other comprehensive
		(income) loss	$	(5)	$	1,441	$	(3,203)	$	(140)	$	199	$	(80)

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 2016 are expected to be ($44) million and ($3) million for U.S. and non-U.S. pension plans.

		Other Postretirement Benefits
		Years Ended December 31,
Net Periodic Benefit Cost			2015		2014		2013
Service cost		$	-	$	-	$	-
Interest cost			33		42		44
Amortization of prior service (credit)			(30)		(20)		(13)
Recognition of actuarial losses			34		24		27
Settlements and curtailments⁽¹⁾			-		-		(42)
Net periodic benefit cost		$	37	$	46	$	16

	(1) Curtailment gain in 2013 related to elimination of retiree medical coverage for a union group
	in connection with a new collective bargaining agreement.

		Years Ended December 31,
Other Changes in Plan Assets and Benefits Obligations			2015		2014		2013
Recognized in Other Comprehensive (Income) Loss
Actuarial (gains) losses		$	(55)	$	46	$	(108)
Prior service (credit)			(290)		(87)		(175)
Prior service credit recognized during year			30		20		13
Actuarial losses recognized during year			(34)		(24)		(27)
Settlements and curtailments			-		-		42
Total recognized in other comprehensive (income)		$	(349)	$	(45)	$	(255)
Total recognized in net periodic benefit cost and
	other comprehensive (income) loss	$	(312)	$	1	$	(239)

The estimated net loss and prior service (credit) for other postretirement benefits that will be amortized from accumulated other comprehensive (income) loss into net periodic benefit (income) in 2016 are expected to be $22 million and ($76) 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
	2015		2014		2013		2015		2014		2013
Actuarial assumptions used to determine
benefit obligations as of December 31:
Discount rate	4.46	%	4.08	%	4.89	%	3.49	%	3.26	%	4.29	%
Expected annual rate of
compensation increase	4.48	%	4.50	%	4.50	%	2.11	%	2.53	%	2.81	%

Actuarial assumptions used to determine
net periodic benefit (income) cost for
years ended December 31:
Discount rate	4.08	%	4.89	%	4.06	%	3.26	%	4.29	%	4.29	%
Expected rate of return
on plan assets	7.75	%	7.75	%	7.75	%	6.94	%	6.96	%	6.99	%
Expected annual rate of
compensation increase	4.50	%	4.50	%	4.50	%	2.53	%	2.81	%	3.55	%

			Other Postretirement Benefits
			2015		2014		2013
Actuarial assumptions used to determine benefit
	obligations as of December 31:
		Discount rate	3.80	%	3.45	%	4.05	%

Actuarial assumptions used to determine net periodic
	benefit cost for years ended December 31:
		Discount rate	3.45	%	4.05	%	3.40	%

The discount rate for our 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. 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.

During the fourth quarter of 2015 we changed the methodology used to estimate the service and interest cost components of net periodic benefit (income) cost for our significant pension plans. Previously, we estimated such cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the pension benefit obligation. The new methodology utilizes a full yield curve approach in the estimation of these cost components by applying 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. The change does not affect the measurement of our pension obligation and is applied prospectively as a change in estimate.

For our U.S. pension plans, the single weighted-average spot rates used to determine service and interest costs for 2016 are 4.69% and 3.59%. We estimate the service and interest costs for our U.S. pension plans will be reduced by approximately $150 million in 2016.

Our expected rate of return on U.S. plan assets of 7.75% is a long-term rate based on historical plan asset returns over varying long-term periods combined with current market conditions and broad asset mix considerations. 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. The impact of the discount rate methodology change on service and interest costs for our non-U.S. pension plans was not material.

Pension Benefits

Included in the aggregate data in the tables above are the amounts applicable to our pension plans with accumulated benefit obligations exceeding the fair value of plan assets. Amounts related to such plans were as follows:

	December 31,
	U.S. Plans		Non-U.S. Plans
	2015	2014	2015	2014
Projected benefit obligation	$17,298	$626	$1,624	$1,686
Accumulated benefit obligation	$16,899	$618	$1,574	$1,584
Fair value of plan assets	$16,349	$194	$976	$994

Accumulated benefit obligation for our U.S. defined benefit pension plans were $16.9 billion and $17.2 billion and for our Non-U.S. defined benefit plans were $6.2 billion and $5.5 billion at December 31, 2015 and 2014.

Our 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. Our actual invested positions in various securities change over time based on short and longer-term investment opportunities. To achieve our objectives, we have established long-term target allocations as follows: 60%-70% equity securities, 10%-20% fixed income securities and cash, 5%-15% 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.

Our non-U.S. pension assets are typically managed by decentralized fiduciary committees with the Honeywell Corporate Investments group providing standard funding and investment guidance. Our non-U.S. investment policies are different for each country as local regulations, funding rules, and financial and tax considerations are part of the funding and investment allocation process in each country.

The fair values of both our U.S. and non-U.S. pension plans assets by asset category are as follows:

		U.S. Plans
		December 31, 2015
			Total		Level 1		Level 2		Level 3
Common stock/preferred stock:
	Honeywell common stock	$	1,916	$	1,916		-		-
	U.S. large cap stocks		3,761		3,761		-		-
	U.S. mid cap stocks		722		722		-		-
	U.S. small cap stocks		89		89		-		-
	International stocks		2,099		1,943		156		-
	Real estate investment trusts		209		209		-		-
Fixed income investments:
	Short term investments		1,332		1,332		-		-
	Government securities		425		-		425		-
	Corporate bonds		3,003		-		3,003		-
	Mortgage/Asset-backed securities		561		-		561		-
	Insurance contracts		7		-		7		-
Investments in private funds:
	Private funds		889		-		-		889
	Hedge funds		19		-		-		19
	Real estate funds		156		-		-		156
Direct investments:
	Direct private investments		535		-		-		535
	Real estate properties		626		-		-		626
		$	16,349	$	9,972	$	4,152	$	2,225

		U.S. Plans
		December 31, 2014
			Total		Level 1		Level 2		Level 3
Common stock/preferred stock:
	Honeywell common stock	$	1,851	$	1,851	$	-	$	-
	U.S. large cap stocks		3,913		3,867		46		-
	U.S. mid cap stocks		1,028		1,018		10		-
	U.S. small cap stocks		219		219		-		-
	International stocks		2,576		2,400		176		-
	Real estate investment trusts		204		204		-		-
Fixed income investments:
	Short term investments		1,078		1,078		-		-
	Government securities		438		-		438		-
	Corporate bonds		2,988		-		2,988		-
	Mortgage/Asset-backed securities		635		-		635		-
	Insurance contracts		7		-		7		-
Investments in private funds:
	Private funds		999		-		-		999
	Hedge funds		3		-		-		3
	Real estate funds		226		-		-		226
Direct investments:
	Direct private investments		301		-		-		301
	Real estate properties		600		-		-		600
		$	17,066	$	10,637	$	4,300	$	2,129

		Non-U.S. Plans
		December 31, 2015
			Total		Level 1		Level 2		Level 3
Common stock/preferred stock:
	U.S. companies	$	569	$	479		90		-
	Non-U.S. companies		2,200		228		1,972		-
Fixed income investments:
	Short-term investments		108		105		3		-
	Government securities		1,621		-		1,621		-
	Corporate bonds		1,073		-		1,073		-
	Mortgage/Asset-backed securities		94		-		94		-
	Insurance contracts		170		-		170		-
Investments in private funds:
	Private funds		61		-		-		61
	Hedge funds		-		-		-		-
	Real estate funds		221		-		-		221
		$	6,117	$	812	$	5,023	$	282

		Non-U.S. Plans
		December 31, 2014
			Total		Level 1		Level 2		Level 3
Common stock/preferred stock:
	U.S. companies	$	534	$	464	$	70	$	-
	Non-U.S. companies		1,876		225		1,651		-
Fixed income investments:
	Short-term investments		117		113		4		-
	Government securities		1,495		-		1,495		-
	Corporate bonds		857		-		857		-
	Mortgage/Asset-backed securities		19		-		19		-
	Insurance contracts		186		-		186		-
Investments in private funds:
	Private funds		62		-		-		62
	Hedge funds		2		-		-		2
	Real estate funds		185		-		-		185
		$	5,333	$	802	$	4,282	$	249

The following tables summarize changes in the fair value of Level 3 assets:

			U.S. Plans
						Direct
				Private		Private		Hedge		Real Estate		Real Estate
				Funds		Investments		Funds		Funds		Properties
Balance at December 31, 2013				$	1,058		278		6		237		627
Actual return on plan assets:
	Relating to assets still held
		at year-end			(50)		(10)		(2)		21		10
	Relating to assets sold
		during the year			94		59		2		-		53
Purchases					168		92		3		8		38
Sales and settlements					(271)		(118)		(6)		(40)		(128)

Balance at December 31, 2014					999		301		3		226		600
Actual return on plan assets:
	Relating to assets still held
		at year-end			(87)		47		(2)		(20)		16
	Relating to assets sold
		during the year			85		21		-		4		14
Purchases					142		242		19		5		16
Sales and settlements					(250)		(76)		(1)		(59)		(20)
Balance at December 31, 2015				$	889	$	535	$	19	$	156	$	626

						Non-U.S. Plans
						Private		Hedge		Real Estate
						Funds		Funds		Funds
Balance at December 31, 2013						$	67		62		181
Actual return on plan assets:
	Relating to assets still held at year-end						(4)		(11)		17
	Relating to assets sold during the year						6		12		1
Purchases							-		-		4
Sales and settlements							(7)		(61)		(18)

Balance at December 31, 2014							62		2		185
Actual return on plan assets:
	Relating to assets still held at year-end						(7)		-		24
	Relating to assets sold during the year						7		-		(3)
Purchases							11		-		41
Sales and settlements							(12)		(2)		(26)
Balance at December 31, 2015						$	61	$	-	$	221

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, 2015 and 2014, our U.S. plans had contracts with notional amounts of $2,613 million and $2,354 million. At December 31, 2015 and 2014, our non-U.S. plans had contracts with notional amounts of $54 million and $65 million. In both our U.S. and non-U.S. pension plans, the notional derivative exposure is primarily related to outstanding equity 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 commingled 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.

Our general funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. In 2015, 2014 and 2013, 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 2016. In 2015, contributions of $139 million were made to our non-U.S. pension plans to satisfy regulatory funding requirements. In 2016, we expect to make contributions of cash and/or marketable securities of approximately $160 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
2016	$	1,151	$	243
2017		1,125		252
2018		1,138		258
2019		1,153		265
2020		1,166		272
2021-2025		5,922		1,474