EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT PLANS

We have both funded and unfunded noncontributory defined benefit pension plans (“Pension Benefits”) covering certain employees primarily in the U.S., the U.K., Germany and Canada. Under the provisions of the U.S. qualified pension plan (the “U.S. Pension Plan”), a hypothetical cash balance account is established for each participant. Such accounts receive quarterly credits based on a percentage according to the employee’s age on the last day of the quarter applied to quarterly eligible compensation and interest credits based on the balance in the account on the last day of the quarter. The U.K. and Canada plans are frozen for the majority of the participants; therefore, we do not accrue benefits for those participants. The Germany pension plan is an unfunded plan where benefits are based on creditable years of service, creditable pay and accrual rates. We also provide certain postretirement health care benefits (“Other Postretirement Benefits”), through an unfunded plan, to a closed group of U.S. employees who retire and have met certain age and service requirements. During 2015, as a result of the workforce reductions stemming from our restructuring activities, we remeasured certain pension and other postretirement benefit obligations, which resulted in reductions in our projected benefit obligations of $28 million, and curtailment gains of $18 million.

Funded Status

Below is the reconciliation of the beginning and ending balances of benefit obligations, fair value of plan assets and the funded status of our plans.



	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
	2015			2014			2015			2014			2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	728		$	649		$	872		$	799		$	122		$	128
Service cost	64			70			15			11			5			6
Interest cost	26			28			30			34			4			5
Actuarial loss (gain)	(4		)	21			(23		)	120			(10		)	1
Benefits paid	(59		)	(35		)	(35		)	(29		)	(11		)	(7		)
Plan amendments	—			—			—			—			—			(11		)
Curtailment	(24		)	—			(2		)	—			(2		)	—
Other	4			(5		)	(6		)	(3		)	(1		)	—
Foreign currency translation adjustments	—			—			(53		)	(60		)	—			—
Benefit obligation at end of year	735			728			798			872			107			122

Change in plan assets:
Fair value of plan assets at beginning of year	648			617			767			645			—			—
Actual return on plan assets	(5		)	39			4			122			—			—
Employer contributions	16			32			28			78			11			7
Benefits paid	(59		)	(35		)	(35		)	(29		)	(11		)	(7		)
Other	(5		)	(5		)	(6		)	—			—			—
Foreign currency translation adjustments	—			—			(45		)	(49		)	—			—
Fair value of plan assets at end of year	595			648			713			767			—			—

Funded status - underfunded at end of year	$	(140	)	$	(80	)	$	(85	)	$	(105	)	$	(107	)	$	(122	)

Accumulated benefit obligation	$	681		$	662		$	763		$	832		$	107		$	122

The amounts recognized in the consolidated balance sheets consist of the following at December 31:



	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
	2015			2014			2015			2014			2015			2014
Noncurrent assets	$	—		$	—		$	51		$	42		$	—		$	—
Current liabilities	(2		)	(2		)	(6		)	(7		)	(16		)	(13		)
Noncurrent liabilities	(138		)	(78		)	(130		)	(140		)	(91		)	(109		)
Net amount recognized	$	(140	)	$	(80	)	$	(85	)	$	(105	)	$	(107	)	$	(122	)

The funded status position represents the difference between the benefit obligation and the plan assets. The projected benefit obligation (“PBO”) for pension benefits represents the actuarial present value of benefits attributed to employee services and compensation and includes an assumption about future compensation levels. The accumulated benefit obligation (“ABO”) is the actuarial present value of pension benefits attributed to employee service to date and present compensation levels. The ABO differs from the PBO in that the ABO does not include any assumptions about future compensation levels.

Information for the plans with ABOs in excess of plan assets is as follows at December 31:



	U.S. Pension Benefits				Non-U.S. Pension Benefits				Other Postretirement Benefits
	2015		2014		2015		2014		2015		2014
Projected benefit obligation	$	735	$	19	$	149	$	164	n/a		n/a
Accumulated benefit obligation	$	681	$	18	$	114	$	125	$	107	$	122
Fair value of plan assets	$	595	$	—	$	12	$	17	n/a		n/a

Weighted average assumptions used to determine benefit obligations for these plans are as follows for the years ended December 31:



	U.S. Pension Benefits				Non-U.S. Pension Benefits				Other Postretirement Benefits
	2015		2014		2015		2014		2015		2014
Discount rate	4.2	%	3.8	%	3.7	%	3.5	%	3.7	%	3.4	%
Rate of compensation increase	5.9	%	5.8	%	4.1	%	4.1	%	n/a		n/a
Social security increase	2.8	%	2.8	%	2.2	%	2.1	%	n/a		n/a

The development of the discount rate for our U.S. plans and substantially all non-U.S. plans was based on a bond matching model, whereby a hypothetical bond portfolio of high-quality, fixed-income securities is selected that will match the cash flows underlying the projected benefit obligation.

Accumulated Other Comprehensive Loss

The amount recorded before-tax in accumulated other comprehensive loss related to employee benefit plans consists of the following at December 31:



	U.S. Pension Benefits				Non-U.S. Pension Benefits				Other Postretirement Benefits
	2015		2014		2015		2014		2015			2014
Net actuarial loss	$	191	$	174	$	229	$	231	$	10		$	25
Net prior service cost (credit)	—		1		—		—		(54		)	(83		)
Total	$	191	$	175	$	229	$	231	$	(44	)	$	(58	)

The estimated net actuarial loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss and included in net periodic benefit cost in 2016 are $17 million and $0.3 million, respectively. The estimated prior service credit for the other postretirement benefits that will be amortized from accumulated other comprehensive loss and included in net periodic benefit cost in 2016 is $9 million. No amortization of the net actuarial loss for the other postretirement benefits from accumulated other comprehensive loss is expected in 2016.

Net Periodic Cost

The components of net periodic cost are as follows for the years ended December 31:



	U.S. Pension Benefits									Non-U.S. Pension Benefits									Other Postretirement Benefits
	2015			2014			2013			2015			2014			2013			2015			2014			2013
Service cost	$	64		$	70		$	65		$	15		$	11		$	12		$	5		$	6		$	6
Interest cost	26			28			21			30			34			31			4			5			5
Expected return on plan assets	(49		)	(44		)	(39		)	(47		)	(41		)	(37		)	—			—			—
Amortization of prior service credit	1			—			—			—			—			—			(11		)	(11		)	(7		)
Amortization of net actuarial loss	9			8			13			6			5			8			1			1			2
Curtailment gain	—			—			—			(1		)	—			—			(17		)	—			—
Other	8			—			—			—			—			2			—			(3		)	—
Net periodic cost	$	59		$	62		$	60		$	3		$	9		$	16		$	(18	)	$	(2	)	$	6

Weighted average assumptions used to determine net periodic cost for these plans are as follows for the years ended December 31:



	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
	2015		2014		2013		2015		2014		2013		2015		2014		2013
Discount rate	3.7	%	4.5	%	3.6	%	3.5	%	4.4	%	4.4	%	3.3	%	4.0	%	3.2	%
Expected long-term return on plan assets	7.6	%	7.3	%	7.4	%	6.3	%	6.1	%	6.5	%	n/a		n/a		n/a
Rate of compensation increase	5.8	%	5.6	%	5.6	%	4.1	%	4.4	%	4.4	%	n/a		n/a		n/a
Social security increase	2.8	%	2.8	%	2.8	%	2.1	%	2.4	%	2.1	%	n/a		n/a		n/a

In selecting the expected rate of return on plan assets, we consider the average rate of earnings expected on the funds invested or to be invested to provide for the benefits of these plans. This includes considering the trusts’ asset allocation and the expected returns likely to be earned over the life of the plans.

Health Care Cost Trend Rates

Assumed health care cost trend rates can have a significant effect on the amounts reported for other postretirement benefits. As of December 31, 2015, the health care cost trend rate was 7.3% for employees under age 65, declining gradually each successive year until it reaches 4.5%. A one percentage point change in assumed health care cost trend rates would have had the following effects on 2015:



	One Percentage Point Increase		One Percentage Point Decrease
Effect on total of service and interest cost components	$	0.1	$	(0.1	)
Effect on postretirement welfare benefit obligation	$	0.9	$	(1.2	)

Plan Assets

We have investment committees that meet regularly to review the portfolio returns and to determine asset-mix targets based on asset/liability studies. Third-party investment consultants assist such committees in developing asset allocation strategies to determine our expected rates of return and expected risk for various investment portfolios. The investment committees considered these strategies in the formal establishment of the current asset-mix targets based on the projected risk and return levels for all major asset classes.

The majority of investments are held in the form of units of funds. The funds hold underlying securities and are redeemable as of the measurement date. Investments in equities and fixed-income funds are generally measured at fair value based on daily closing prices provided by active exchanges or on the basis of observable, market-based inputs. Investments in hedge funds are generally measured at fair value on the basis of their net asset values, which are provided by the investment sponsor or third party administrator. The fair values of private equity investments and real estate funds are based on appraised values developed using comparable market transactions or discounted cash flows.

U.S. Pension Plan

The investment policy of the U.S. Pension Plan was developed after examining the historical relationships of risk and return among asset classes and the relationship between the expected behavior of the U.S. Plan’s assets and liabilities. The investment policy of the U.S. Plan is designed to provide the greatest probability of meeting or exceeding the U.S. Plan’s objectives at the lowest possible risk. In evaluating risk, the investment committee for the U.S. Pension Plan (“U.S. Committee”) reviews the long-term characteristics of various asset classes, focusing on balancing risk with expected return. Accordingly, the U.S. Committee selected the following six asset classes as allowable investments for the assets of the U.S. Pension Plan: U.S. equities, non-U.S. equities, global fixed-income securities, real estate, hedge funds and private equity.

The table below presents the fair value of the assets in the U.S. Pension Plan by asset category and by valuation technique at December 31:



	2015								2014
Asset Category	Total Asset Value		Level One		Level Two		Level Three		Total Asset Value		Level One		Level Two		Level Three
Cash and Cash Equivalents	$	16	$	12	$	4	$	—	$	3	$	—	$	3	$	—
Fixed Income ⁽¹⁾	109		—		109		—		125		—		125		—
Non-U.S. Equity ⁽²⁾	129		31		98		—		148		30		118		—
U.S. Equity ⁽³⁾	129		—		129		—		169		—		169		—
Hedge Funds ⁽⁴⁾	152		—		—		152		164		—		—		164
Real Estate Funds ⁽⁵⁾	10		—		—		10		10		—		—		10
Real Estate Investment Trust Equity	9		—		9		—		8		—		8		—
Private Equity Fund ⁽⁶⁾	41		—		—		41		21		—		—		21
Total	$	595	$	43	$	349	$	203	$	648	$	30	$	423	$	195


⁽¹⁾	A multi-manager strategy investing in fixed income securities and funds. The current allocation includes: 29% in government bonds; 24% in government agencies; 20% in unconstrained bond funds; 11% in corporate bonds; 11% in government mortgage-backed securities; 3% in asset-backed securities; and 2% in cash and other securities.


⁽²⁾	Multi-manager strategy investing in common stocks of non-U.S. listed companies using both value and growth approaches.


⁽³⁾	Multi-manager strategy investing in common stocks of U.S. listed companies using value and growth approaches.


⁽⁴⁾	Strategies taking long and short positions in equities, fixed income securities, currencies and derivative contracts.


⁽⁵⁾	Strategy investing in the global private real estate secondary market using a value-based investment approach.


⁽⁶⁾	Partnership making opportunistic investments on a global basis across asset classes, capital structures and geographies.

Non-U.S. Pension Plans

The investment policies of our pension plans with plan assets, which are primarily in Canada and the U.K., (the “Non-U.S. Plans”), cover the asset allocations that the governing boards believe are the most appropriate for these Non-U.S. Plans in the long-term, taking into account the nature of the liabilities they expect to incur. The suitability of asset allocations and investment policies are reviewed periodically to ensure alignment with plan liabilities.

The table below presents the fair value of the assets in our Non-U.S. Plans by asset category and by valuation technique at December 31:



	2015								2014
Asset Category	Total Asset Value		Level One		Level Two		Level Three		Total Asset Value		Level One		Level Two		Level Three
Cash and Cash Equivalents	$	5	$	5	$	—	$	—	$	10	$	10	$	—	$	—
Asset Allocation ⁽¹⁾	152		—		152		—		124		—		124		—
Bonds - Canada - Corporate ⁽²⁾	6		—		6		—		—		—		—		—
Bonds - Canada - Government ⁽³⁾	19		—		19		—		25		—		25		—
Bonds - U.K. - Corporate ⁽⁴⁾	8		—		8		—		113		—		113		—
Bonds - U.K. - Government ⁽⁵⁾	211		—		211		—		196		—		196		—
Bonds - Global - Corporate ⁽⁶⁾	64		—		64		—		—		—		—		—
Equities ⁽⁷⁾	128		—		128		—		133		—		133		—
Real Estate Fund ⁽⁸⁾	23		—		—		23		22		—		—		22
Pooled Swap Funds ⁽⁹⁾	85		—		85		—		127		—		127		—
Insurance contracts	12		—		—		12		17		—		—		17
Total	$	713	$	5	$	673	$	35	$	767	$	10	$	718	$	39


⁽¹⁾	Invests in mixes of global common stocks and bonds to achieve broad diversification.


⁽²⁾	Invests in Canadian Dollar-denominated high quality corporate bonds.


⁽³⁾	Invests in Canadian Dollar-denominated government issued bonds intended to match the duration of plan liabilities.


⁽⁴⁾	Invests passively in British Pound Sterling-denominated investment grade corporate bonds.


⁽⁵⁾	Invests passively in British Pound Sterling-denominated government issued bonds.


⁽⁶⁾	Invests globally in high quality corporate bonds.


⁽⁷⁾	Invests in broad equity funds based on securities offered in various regions or countries. Equity funds are allocated by region as follows: 49% Global; 31% U.K.; 6% Emerging Markets; 5% North America; 5% Asia Pacific; and 4% Europe.


⁽⁸⁾	Invests in a diversified range of property throughout the U.K., principally in the retail, office and industrial/warehouse sectors.


⁽⁹⁾	Invests in a range of pooled funds which include positions in swap contracts and U.K. sovereign bonds; pooled funds are categorized by maturities of underlying positions. Pooled funds employ leverage in order to match the U.K. Plan's duration and inflation.

The following table presents the changes in the fair value of assets determined using level 3 unobservable inputs:



	U.S. Private Equity Fund			U.S. Real Estate Fund			U.S. Hedge Funds			Non-U.S. Real Estate Fund		Non-U.S. Insurance Contracts			Total
Balance at December 31, 2012	$	16		$	7		$	172		$	20	$	16		$	231
Unrealized gains	2			—			12			1		2			17
Realized gains	—			—			7			—		—			7
Sales	(10		)	—			(84		)	—		(2		)	(96		)
Purchases	8			2			83			—		2			95
Balance at December 31, 2013	16			9			190			21		18			254
Unrealized gains (losses)	—			1			6			1		(1		)	7
Realized gains	1			—			7			—		—			8
Sales	(4		)	—			(85		)	—		—			(89		)
Purchases	8			—			46			—		—			54
Balance at December 31, 2014	21			10			164			22		17			234
Unrealized losses	—			—			(6		)	—		(2		)	(8		)
Realized gains	—			1			1			—		—			2
Sales	(4		)	(2		)	(15		)	—		(5		)	(26		)
Purchases	24			1			8			1		2			36
Balance at December 31, 2015	$	41		$	10		$	152		$	23	$	12		$	238

Expected Cash Flows

For all pension plans, we make annual contributions to the plans in amounts equal to or greater than amounts necessary to meet minimum governmental funding requirements. In 2016, we expect to contribute between $65 million and $75 million to our funded and unfunded pension plans. In 2016, we also expect to make benefit payments related to other postretirement benefits of between $15 million and $20 million.

The following table presents the expected benefit payments over the next ten years. The U.S. and non-U.S. pension benefit payments are made by the respective pension trust funds.



Year	U.S. Pension Benefits			Non-U.S. Pension Benefits			Other Postretirement Benefits
2016		$	47		$	24		$	17
2017		$	41		$	25		$	13
2018		$	43		$	28		$	11
2019		$	46		$	33		$	10
2020		$	48		$	32		$	10
2021-2025		$	280		$	204		$	43

DEFINED CONTRIBUTION PLANS

During the periods reported, generally all of our U.S. employees were eligible to participate in our sponsored 401(k) plan (“Thrift Plan”). The Thrift Plan allows eligible employees to elect to contribute portions of their salaries to an investment trust. Employee contributions are matched by the Company in cash at the rate of $1.00 per $1.00 employee contribution for the first 5% of the employee’s salary, and such contributions vest immediately. In addition, we make cash contributions for all eligible employees between 2% and 5% of their salary depending on the employee’s age. Such contributions are fully vested to the employee after three years of employment. The Thrift Plan provides several investment options, for which the employee has sole investment discretion. The Thrift Plan does not offer the Company's common stock as an investment option. Our contributions to the Thrift Plan and several other non-U.S. defined contribution plans amounted to $202 million, $263 million and $240 million in 2015, 2014 and 2013, respectively.

For certain non-U.S. employees who are not eligible to participate in the Thrift Plan, we provide a non-qualified defined contribution international retirement plan that provides basically the same benefits as those provided in the Thrift Plan. In addition, we provide a non-qualified supplemental retirement plan (“SRP”) for certain officers and employees whose benefits under the Thrift Plans and/or the U.S. qualified pension plan are limited by federal tax law. The SRP also allows eligible employees to defer a portion of their eligible compensation and provides for employer matching and base contributions pursuant to limitations. Both non-qualified plans are invested through trusts, and the assets and corresponding liabilities are included in our consolidated balance sheets. Our contributions to these non-qualified plans amounted to $15 million, $17 million and $15 million in 2015, 2014 and 2013, respectively. In 2016, we estimate we will contribute between $165 million and $180 million to all of our defined contribution plans.

POSTEMPLOYMENT BENEFITS

We provide certain postemployment disability income, medical and other benefits to substantially all qualifying former or inactive U.S. employees. Income benefits for long-term disability are provided through a fully-insured plan. The continuation of medical and other benefits while on disability (“Continuation Benefits”) are provided through a qualified self-insured plan. The accrued postemployment liability for Continuation Benefits at December 31, 2015 and 2014 was $34 million and $30 million, respectively, and is included in other liabilities in our consolidated balance sheets.