Pension and other postretirement benefits

12 Months Ended

Dec. 31, 2023

Retirement Benefits [Abstract]

Pension and other postretirement benefits

21. Pension and other postretirement benefits

The Company operates either defined benefit or defined contribution pension schemes in all of its principal operating areas. The disclosures included below relate to all pension schemes in the Company. The Company operates defined benefit pension schemes in Belgium, Canada, France, Germany, Italy, the Netherlands, the Philippines, the Republic of Ireland, Romania, Serbia, Slovakia, Switzerland, the United Kingdom and the United States. The Company also operated a defined benefit pension scheme in Brazil which was divested in April 2021. The Company has a mixture of funded and unfunded defined benefit pension schemes. The net surplus of the funded schemes was $218 million and $298 million at December 31, 2023 and December 31, 2022, respectively. Unfunded obligations (including jubilee, postretirement healthcare obligations and long-term service commitments) comprise of a number of schemes in Canada, France, Germany, Italy, the Netherlands, the Philippines, Romania, Serbia, Slovakia, Switzerland and the United States, totaling a net liability of $260 million and $238 million at December 31, 2023 and December 31, 2022 respectively.

Funded defined benefit schemes in the Republic of Ireland, Switzerland and the United Kingdom are administered by separate funds that are legally distinct from the Company under the jurisdiction of Trustees. The Trustees are required by law to act in the best interests of the scheme participants and are responsible for the definition of investment strategy and for scheme administration. Other schemes are also administered in line with the local regulatory environment. The level of benefits available to most members depends on length of service and either their average salary over their period of employment or their salary in the final years leading up to retirement. For Switzerland, the level of benefits depends on salary, level of savings contributions, the interest rate on old age accounts (which cannot be negative) and the annuity conversion factor on retirement. The Company’s pension schemes in Switzerland are contribution-based schemes with guarantees. This means the Company pays an age-dependent fixed contribution percentage but should the invested assets be insufficient to meet the guaranteed benefit obligations, additional contributions might be required.

The change in benefit obligation, change in plan assets, funded status of pension and other postretirement (OPEB) plans, and amounts recognized in the Consolidated Balance Sheets were:

	Pension Plans				OPEB Plans (i)
	2023		2022		2023	2022
in $ millions	U.S.	Non-U.S.	U.S.	Non-U.S.
Change in benefit obligation:
Benefit obligation at beginning of year	497	2,105	677	3,136	100	129
Service cost	1	31	2	55	2	3
Interest cost	24	86	18	43	5	3
Amendments	–	(1)	2	(2)	–	–
Actuarial losses and (gains)	9	178	(153)	(831)	3	(32)
Benefits paid	(35)	(89)	(35)	(101)	(5)	(5)
Plan participant contributions	–	9	–	9	–	–
Settlements	–	(4)	–	(6)	–	–
Net transfer out (including the effect of any business combinations/divestitures)	–	–	(14)	(11)	–	–
Foreign currency rate changes	–	99	–	(187)	–	2
Benefit obligation at end of year	496	2,414	497	2,105	105	100
Change in plan assets
Fair value of plan assets at beginning of year	446	2,316	601	3,015	–	–
Actual gain (loss) on plan assets	37	143	(122)	(467)	–	–
Employer contributions	1	38	2	36	5	5
Plan participant contributions	–	9	–	9	–	–
Benefits paid	(35)	(89)	(35)	(101)	(5)	(5)
Settlements	–	(4)	–	(6)	–	–
Foreign currency rate changes	–	111	–	(170)	–	–
Fair value of plan assets at end of year	449	2,524	446	2,316	–	–
Reconciliation of funded status:
Fair value of plan assets	449	2,524	446	2,316	–	–
Benefit obligation	496	2,414	497	2,105	105	100
Funded status	(47)	110	(51)	211	(105)	(100)
Accumulated Benefit Obligation	496	2,349	497	2,074
Amounts recognized in the Consolidated Balance Sheets:
Noncurrent assets	–	271	–	347	–	–
Current liabilities	(2)	(4)	(2)	(7)	(6)	(6)
Noncurrent liabilities	(45)	(111)	(49)	(129)	(98)	(94)
Liabilities held for sale	–	(46)	–	–	(1)	–
Funded status at end of year	(47)	110	(51)	211	(105)	(100)
Net actuarial (loss) gain	(68)	(225)	(79)	(97)	35	40
Prior service (cost) credit	(1)	92	(1)	95	3	3
Total accumulated other comprehensive (loss) income	(69)	(133)	(80)	(2)	38	43

(i) Includes a benefit obligation of $11 million and $11 million related to non-U.S. OPEB plans at December 31, 2023 and 2022, respectively.

The pension and other postretirement plans for which their accumulated benefit obligation, projected benefit obligation or accumulated postretirement benefit obligation exceeds the fair value of their respective plan assets at December 31 were:

	U.S. Plans		Non-U.S. Plans
in $ millions	2023	2022	2023	2022
Pension plans with projected benefit obligations in excess of plan assets:
Projected benefit obligation	496	497	580	512
Fair value of plan assets	449	446	421	378
Pension plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation	496	497	527	503
Fair value of plan assets	449	446	394	374
Other postretirement plans with accumulated postretirement benefit obligations in excess of plan assets:
Accumulated postretirement benefit obligation	–	–	9	8
Fair value of plan assets	–	–	–	–

Impact on Consolidated Statements of Income

The total retirement benefit expense recognized in the Consolidated Statements of Income for the years ended December 31 were:

in $ millions	2023	2022	2021
Total defined contribution expense	320	307	288
Total defined benefit expense	31	30	61
Total expense within the Consolidated Statements of Income	351	337	349

Components of Net Periodic Benefit Cost (Income)

The components of net periodic benefit cost (income) recognized in the Consolidated Statements of Income for the years ended December 31 were:

	Pension Plans						OPEB Plans (ii)
	U.S.			Non-U.S.
in $ millions	2023	2022	2021	2023	2022	2021	2023	2022	2021
Service cost	1	2	3	31	55	63	2	3	4
Interest cost	24	18	19	86	43	40	5	3	4
Expected return on assets	(20)	(30)	(37)	(91)	(72)	(71)	–	-	–
Amortization of:
Prior service cost (credit)	–	1	–	(11)	(11)	(11)	–	–	(1)
Actuarial loss (gain)	3	2	4	4	15	26	(3)	–	–
Curtailment loss (gain)	–	3	–	–	–	–	(1)	–	–
Settlement loss (gain)	–	–	17	1	(2)	1	–	–	–
Net periodic benefit cost (income) (i)	8	(4)	6	20	28	48	3	6	7

(i) Service cost is included within Cost of revenues and Selling, general and administrative expenses while all other cost components are recorded within Other nonoperating (expense) income, net.

(ii) Includes the net periodic benefit cost of $nil million, $1 million and $1 million related to non-U.S. OPEB plans for the years ended December 31, 2023, 2022, and 2021 respectively.

The changes in plan assets and benefit obligations that were recognized in Other comprehensive (income) loss for the years ended December 31 were:

	Pension Plans						OPEB Plans
	U.S.			Non-U.S.			(i)
in $ millions	2023	2022	2021	2023	2022	2021	2023	2022	2021
Net actuarial (gain) loss	(8)	(1)	(7)	126	(292)	(181)	3	(32)	(19)
Prior service cost (credit)	–	2	1	(1)	(2)	(1)	–	–	(1)
Amortization or curtailment recognition of prior service (cost) credit	–	(4)	–	11	11	11	–	–	1
Amortization or settlement recognition of net (loss) gain	(3)	(2)	(21)	(4)	(13)	(27)	3	–	–
Foreign currency exchange effects	–	–	–	(2)	(27)	(29)	–	–	–
Amount recognized in other comprehensive (income) loss (i)	(11)	(5)	(27)	130	(323)	(227)	6	(32)	(19)
Amount recognized in net periodic pension benefit cost (income) and other comprehensive (income) loss	(3)	(9)	(21)	150	(295)	(179)	9	(26)	(12)

(i) Includes an amount recognized in other comprehensive (income) loss of $1 million, $(2) million and $(2) million related to non-U.S. OPEB plans for the years ended December 31, 2023, 2022 and 2021, respectively.

The weighted average assumptions used to determine net periodic benefit cost (income) for the years ended December 31 were:

	Pension Plans												OPEB Plans
	U.S.						Non-U.S.
	2023		2022		2021		2023		2022		2021		2023		2022		2021
Discount rate	5.20	%	2.70	%	2.25	%	4.13	%	1.54	%	1.23	%	5.08	%	2.59	%	2.18	%
Rate of compensation increase	N/A		3.50	%	3.50	%	3.22	%	2.74	%	2.39	%	2.80	%	2.22	%	2.37	%
Expected long‐term rate of return on plan assets	5.50	%	5.50	%	5.50	%	4.04	%	2.54	%	2.51	%	N/A		N/A		N/A
Interest crediting rates	N/A		N/A		N/A		1.50	%	2.25	%	1.25	%	N/A		N/A		N/A

The weighted average assumptions used to determine the benefit obligation at December 31 were:

	Pension Plans								OPEB Plans
	U.S.				Non-U.S.
	2023		2022		2023		2022		2023		2022
Discount rate	4.95	%	5.20	%	3.49	%	4.13	%	4.86	%	5.08	%
Rate of compensation increase	N/A		N/A		3.22	%	3.22	%	2.75	%	2.80	%

The long-term return expectation is developed based on a diversified investment strategy that takes into account historical experience, as well as the impact of portfolio diversification, active portfolio management, and the Company’s view of current and future economic and financial market conditions. In determining the expected rate of return for the plan assets, the Company analyzes investment community forecasts and current market conditions to develop expected returns for each of the asset classes used by the plans, which are weighted to reflect the asset allocation of each plan. As market conditions and other factors change, the Company may adjust targets accordingly, and asset allocations may vary from the target allocations.

The assets of the Company’s pension and other postretirement plans are managed externally for the benefit of the plan members. Consideration is given to the long-term nature of the benefit obligations and the investment strategy is set at plan level, typically to maintain a diversified portfolio of assets with the objective of meeting future obligations and long-term cash requirements as they fall due. Assets are primarily invested in diversified funds that hold equity and debt securities to maintain security while maximizing returns within each plan’s investment policy. The investment policy for each plan specifies the type of investment vehicle, asset allocation guidelines as well as investment monitoring/performance requirements. For the main funded plans, the target allocations to equity/debt are as follows:

(i) Ireland: Equities 10-20% / Debt 45-55%.

(ii) U.S.: Equities 10-30% / Debt 65-85%.

(iii) Switzerland: Equities 25-35% / Debt 25-55%.

(iv) Other asset classes have a range of smaller % targets.

The target allocation ranges and fair values by asset class at December 31 were:

	Pension Plans
	Target allocation ranges
	U.S. Plans	Non-U.S. Plans
	2023 (%)
Cash and cash equivalents	–	0-5
Equity instruments (i)	10-30	15-25
Debt instruments (ii)	65-85	20-35
Real estate	–	5-10
Derivatives	–	0-5
Investment funds	0-15	0-5
Assets held by insurance company	–	0-5
Other	–	0-10

(i) For U.S. pension plans, equity instruments with a total allocation range of 10-30% are made up of 10-30% in developed markets’ diversified equity instruments and 10-30% in emerging markets’ diversified equity instruments. For non-U.S. pension plans, equity instruments with a total allocation range of 15-25% are made up of 15-22% in developed markets’ diversified equity instruments and 1-2% in emerging markets’ diversified equity instruments.

(ii) For U.S. pension plans, debt instruments with a total allocation range of 65-85% are made up of 65-85% in non-government debt instruments and 65-85% in government fixed interest instruments. For non-U.S. pension plans, debt instruments with a total allocation range of 20-35% are made up of 11-18% in non-government debt instruments, 17-32% in government fixed interest instruments, 31-40% in government inflation-protected bonds, 4-10% in asset-backed instruments, 4-10% in inflation-protected bonds and 4-10% in structured debt.

The Company’s asset allocations by asset category at December 31 were:

	Pension Plans
	Fair Values
	2023
	U.S. Plans				Non-U.S. Plans
in $ millions	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Cash and cash equivalents	3	–	–	3	50	15	–	65
Equity instruments (i)	–	90	–	90	462	56	–	518
Debt instruments (ii)	–	341	–	341	1,310	179	–	1,489
Real estate	–	–	–	–	97	82	14	193
Derivatives	–	–	–	–	12	2	–	14
Investment funds	11	–	–	11	85	13	–	98
Assets held by insurance company	–	–	–	–	–	2	117	119
Other	–	–	4	4	1	19	8	28
Total	14	431	4	449	2,017	368	139	2,524

(i) For U.S. pension plans, equity instruments of $90 million are made up of $79 million in developed markets’ diversified equity instruments and $11 million in emerging markets’ diversified equity instruments. For non-U.S. pension plans, equity instruments of $518 million are made up of $486 million in developed markets’ diversified equity instruments and $32 million in emerging markets’ diversified equity instruments.

(ii) For U.S. pension plans, debt instruments of $341 million are made up of $233 million in non-government debt instruments and $108 million in government fixed interest instruments. For non-U.S. pension plans, debt instruments of $1,489 million are made up of $251 million in non-government debt instruments, $400 million in government fixed interest instruments, $763 million in government inflation-protected bonds, $34 million in asset-backed instruments and $41 million in inflation-protected bonds.

There were no other postretirement plan assets at December 31, 2023.

	Pension Plans
	Fair Values
	2022
	U.S. Plans				Non-U.S. Plans
in $ millions	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Cash and cash equivalents	4	–	–	4	53	–	–	53
Equity instruments (i)	–	83	–	83	435	66	–	501
Debt instruments (ii)	3	314	–	317	1,288	36	–	1,324
Real estate	–	–	–	–	181	–	13	194
Derivatives	–	–	–	–	12	(5)	–	7
Investment funds	23	–	11	34	77	11	–	88
Assets held by insurance company	–	–	–	–	–	2	113	115
Other	–	–	8	8	28	–	6	34
Total	30	397	19	446	2,074	110	132	2,316

(i) For U.S. pension plans, equity instruments of $83 million are made up of $73 million in developed markets’ diversified equity instruments and $10 million in emerging markets’ diversified equity instruments. For non-U.S. pension plans, equity instruments of $501 million are made up of $470 million in developed markets’ diversified equity instruments and $31 million in emerging markets’ diversified equity instruments.

(ii) For U.S. pension plans, debt instruments of $317 million are made up of $189 million in non-government debt instruments and $128 million in government fixed interest instruments. For non-U.S. pension plans, debt instruments of $1,324 million are made up of $197 million in non-government debt instruments, $437 million in government fixed interest instruments, $663 million in government inflation-protected bonds and $27 million in asset-backed instruments.

There were no other postretirement plan assets at December 31, 2022.

The Level 3 reconciliation for pension plans by asset class for the years ended December 31, 2023 and 2022 were:

	U.S. Plans
in $ millions	Beginning balance on 1/1/2023	Actual return on plan assets, relating to assets still held at reporting date	Purchases, sales and settlements	Transfer (out of) Level 3	Change due to exchange rate changes	Ending balance on 12/31/2023
Asset Class
Investment funds	11	–	–	(11)	–	–
Other	8	1	(1)	(4)	–	4
Total	19	1	(1)	(15)	–	4

	Non-U.S. Plans
in $ millions	Beginning balance on 1/1/2023	Actual return on plan assets, relating to assets still held at reporting date	Purchases, sales and settlements	Transfer into/(out of) Level 3	Change due to exchange rate changes	Ending balance on 12/31/2023
Asset Class
Real estate	13	–	-	–	1	14
Assets held by insurance company	113	11	(10)	–	3	117
Other	6	2	–	–	–	8
Total	132	13	(10)	–	4	139

	U.S. Plans
in $ millions	Beginning balance on 1/1/2022	Actual return on plan assets, relating to assets still held at reporting date	Purchases, sales and settlements	Change due to exchange rate changes	Ending balance on 12/31/2022
Asset Class
Investment funds	11	–	–	–	11
Other	9	–	(1)	–	8
Total	20	–	(1)	–	19

	Non-U.S. Plans
in $ millions	Beginning balance on 1/1/2022	Actual return on plan assets, relating to assets still held at reporting date	Purchases, sales and settlements	Change due to exchange rate changes	Ending balance on 12/31/2022
Asset Class
Real estate	17	(2)	–	(2)	13
Assets held by insurance company	152	(31)	–	(8)	113
Other	5	2	–	(1)	6
Total	174	(31)	–	(11)	132

The following is a description of the methods and assumptions used to estimate the fair value of the pension and other postretirement plans’ assets:

Cash and cash equivalents: Cash and all highly liquid securities with original maturities of three months or less are classified as Cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds. These assets are classified as Level 1.

Equity instruments: Individual securities that are valued at the closing price or last trade reported on the major market on which they are traded are classed as Level 1. Commingled funds that are publicly traded are based upon market quotes and are classed as Level 1. The fair-value of non-publicly traded funds are determined using the Net Asset Value (NAV) provided by the administrator and are classified as Level 2.

Debt instruments: The fair value is determined using market prices (Level 1) or prices derived from observable inputs (Level 2). Level 2 investments may also include commingled funds that have a readily determinable fair value based on observable prices of the underlying securities.

Real estate: Investments in real estate funds that are publicly traded are based upon market quotes and are classed as Level 1. Direct investments in real estate are classed as Level 2 and determined using the NAV provided by the administrator.

Assets held by insurance company: The fair value is based on negotiated value and the underlying investments held in separate account portfolios, as well as the consideration of the creditworthiness of the issuer. The underlying investments are primarily government, asset-backed and fixed income securities. Assets held by insurance company are generally classified as Level 2 or Level 3 depending on the structure of the contract/market pricing information.

The assumed healthcare cost trend rates at December 31 were:

	2023		2022		2021
Healthcare cost trend rate assumed for next year	6.85	%	1.76	%	5.91	%
Rate to which the cost trend rate gradually declines	3.70	%	3.70	%	3.60	%
Year the rate reaches the ultimate rate	2090		2090		2074

The following table presents the expected future benefit payments to be made over the next 10 years:

	Pension plans		OPEB
in $ millions	U.S.	Non-U.S.
2024	36	100	6
2025	37	104	6
2026	37	107	6
2027	37	111	6
2028	36	114	6
2029-2033	176	598	34

The Company expects that it will contribute $2 million to the U.S. pension plans, $37 million to the non-U.S. pension plans and $6 million to the OPEB plans, including minimum funding payments, in 2024.