Defined Benefit Postretirement Plans and Defined Contribution Plan

We have noncontributory defined benefit pension plans covering substantially all domestic employees, as well as U.K. employees who were hired before April 2010. Certain employees located in E.G., who are U.S. or U.K. based, also participate in these plans. Benefits under these plans are based on plan provisions specific to each plan. For the U.K. pension plan, the principal employer and plan trustees reached a decision to close the plan to future benefit accruals effective December 31, 2015.

We also have defined benefit plans for other postretirement benefits covering our U.S. employees. Health care benefits are provided up to age 65 through comprehensive hospital, surgical and major medical benefit provisions subject to various cost-sharing features. Post-age 65 health care benefits are provided to certain U.S. employees on a defined contribution basis. Life insurance benefits are provided to certain retiree beneficiaries. These other postretirement benefits are not funded in advance. Employees hired after 2016 are not eligible for any postretirement health care or life insurance benefits.

Obligations and funded status – The following summarizes the obligations and funded status for our defined benefit pension and other postretirement plans.



	Pension Benefits												Other Benefits
	2016						2015						2016			2015
(In millions)	U.S.			Int’l			U.S.			Int’l			U.S.			U.S.
Accumulated benefit obligation	386			583			518			579			227			260
Change in benefit obligations:
Beginning balance	$	525		$	579		$	894		$	651		$	260		$	279
Service cost	25			—			29			14			2			3
Interest cost	16			23			25			25			11			11
Plan amendment^(a)	—			1			(88		)	1			(38		)	—
Actuarial loss (gain)	78			139			26			(29		)	11			(20		)
Foreign currency exchange rate changes	—			(108		)	—			(35		)	—			—
Divestiture	—			—			—			—			—			—
Liability (gain)/loss due to curtailment^(b)	—			—			(18		)	(23		)	—			2
Settlements paid	(240		)	(36		)	(335		)	—			—			—
Benefits paid	(7		)	(15		)	(8		)	(25		)	(19		)	(15		)
Ending balance	$	397		$	583		$	525		$	579		$	227		$	260
Change in fair value of plan assets:
Beginning balance	$	354		$	608		$	574		$	622		$	—		$	—
Actual return on plan assets	25			129			8			8			—			—
Employer contributions	95			18			115			36			20			15
Foreign currency exchange rate changes	—			(109		)	—			(33		)	—			—
Divestiture	—			—			—			—			—			—
Settlements paid	(240		)	(36		)	(335		)	—			—			—
Benefits paid	(7		)	(15		)	(8		)	(25		)	(20		)	(15		)
Ending balance	$	227		$	595		$	354		$	608		$	—		$	—
Funded status of plans at December 31	$	(170	)	$	12		$	(171	)	$	29		$	(227	)	$	(260	)
Amounts recognized in the consolidated balance sheets:
Noncurrent assets	—			12			—			29			—			—
Current liabilities	(4		)	—			(8		)	—			(21		)	(20		)
Noncurrent liabilities	(166		)	—			(163		)	—			(206		)	(240		)
Accrued benefit cost	$	(170	)	$	12		$	(171	)	$	29		$	(227	)	$	(260	)
Pretax amounts in accumulated other comprehensive loss:
Net loss (gain)	$	130		$	81		$	171		$	61		$	25		$	14
Prior service cost (credit)	(55		)	4			(65		)	4			(63		)	(28		)


^(a)	The plan amendment in 2015 was a freeze of the final average pay used in the legacy formula of the defined benefit pension plan.


^(b)	Related to workforce reductions, which reduced the future expected years of service for employees participating in the plans and the impact of discontinuing accruals for future benefits under the U.K. pension plan effective December 31, 2015.

Components of net periodic benefit cost from continuing operations and other comprehensive (income) loss – The following summarizes the net periodic benefit costs and the amounts recognized as other comprehensive (income) loss for our defined benefit pension and other postretirement plans.



	Pension Benefits																		Other Benefits
	Year Ended December 31,																		Year Ended December 31,
	2016						2015						2014						2016			2015			2014
(In millions)	U.S.			Int’l			U.S.			Int’l			U.S.			Int’l			U.S.			U.S.			U.S.
Components of net periodic benefit cost:
Service cost	$	25		$	—		$	29		$	14		$	31		$	16		$	2		$	3		$	3
Interest cost	16			23			25			25			35			27			11			11			13
Expected return on plan assets	(18		)	(35		)	(30		)	(37		)	(34		)	(32		)	—			—			—
Amortization:
- prior service cost (credit)	(10		)	1			(7		)	1			5			1			(3		)	(4		)	(6		)
- actuarial loss	14			—			22			2			29			1			—			1			—
Net curtailment loss (gain)^(a)	—			—			(5		)	4			—			—			—			(7		)	—
Net settlement loss^(b)	97			6			119			—			99			—			—			—			—
Net periodic benefit cost^(c)	$	124		$	(5	)	$	153		$	9		$	165		$	13		$	10		$	4		$	10
Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss (pretax):
Actuarial loss (gain)^(d)	$	70		$	41		$	30		$	(25	)	$	149		$	33		$	11		$	(21	)	$	42
Amortization of actuarial gain (loss)	(111		)	(6		)	(134		)	(2		)	(128		)	(1		)	—			(1		)	—
Prior service cost (credit)	—			1			(89		)	1			—			—			(38		)	—			(42		)
Amortization of prior service credit (cost)	10			(1		)	7			(5		)	(5		)	(1		)	3			13			6
Total recognized in other comprehensive (income) loss	$	(31	)	$	35		$	(186	)	$	(31	)	$	16		$	31		$	(24	)	$	(9	)	$	6
Total recognized in net periodic benefit cost and other comprehensive (income) loss	$	93		$	30		$	(33	)	$	(22	)	$	181		$	44		$	(14	)	$	(5	)	$	16


^(a)	Related to workforce reductions, which reduced the future expected years of service for employees participating in the plans and the impact of discontinuing accruals for future benefits under the U.K. pension plan effective December 31, 2015.


^(b)	Settlement losses are recorded when lump sum payments from a plan in a period exceed the plan’s total service and interest costs for the period.


^(c)	Net periodic benefit cost reflects a calculated market-related value of plan assets which recognizes changes in fair value over three years.


^(d)	Activity in 2014 includes the impact of the sale of our Norway business in the fourth quarter of 2014.

The estimated net loss and prior service credit for our defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2017 are $10 million and $10 million. The estimated prior service credit for our other defined benefit postretirement plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2017 is $7 million.

Plan assumptions – The following summarizes the assumptions used to determine the benefit obligations at December 31, and net periodic benefit cost for the defined benefit pension and other postretirement plans for 2016, 2015 and 2014.



	Pension Benefits												Other Benefits
	2016				2015				2014				2016		2015		2014
(In millions)	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l		U.S.		U.S.		U.S.
Weighted average assumptions used to determine benefit obligation:
Discount rate	4.02	%	2.70	%	4.04	%	3.90	%	3.71	%	3.70	%	3.98	%	4.36	%	4.01	%
Rate of compensation increase ^(a)	4.00	%	—		4.00	%	—		4.00	%	3.60	%	4.00	%	4.00	%	4.00	%
Weighted average assumptions used to determine net periodic benefit cost:
Discount rate	3.66	%	3.90	%	3.79	%	3.70	%	3.98	%	4.60	%	4.36	%	3.93	%	4.69	%
Expected long-term return on plan assets	6.75	%	5.50	%	6.75	%	5.70	%	6.75	%	5.70	%	—		—		—
Rate of compensation increase ^(a)	4.00	%	—		4.00	%	3.60	%	5.00	%	4.90	%	4.00	%	4.00	%	5.00	%


^(a)	No future benefits will be incurred for the U.K. plan after December 31, 2015. Therefore, rate of compensation increase is no longer applicable to this plan.

Expected long-term return on plan assets – The expected long-term return on plan assets assumption for our U.S. funded plan is determined based on an asset rate-of-return modeling tool developed by a third-party investment group which utilizes underlying assumptions based on actual returns by asset category and inflation and takes into account our U.S. pension plan’s asset allocation. To determine the expected long-term return on plan assets assumption for our international plans, we consider the current level of expected returns on risk-free investments (primarily government bonds), the historical levels of the risk premiums associated with the other applicable asset categories and the expectations for future returns of each asset class. The expected return for each asset category is then weighted based on the actual asset allocation to develop the overall expected long-term return on plan assets assumption.

Assumed weighted average health care cost trend rates



	2016		2015		2014
Initial health care trend rate	8.25	%	8.00	%	6.88	%
Ultimate trend rate	4.50	%	4.50	%	5.00	%
Year ultimate trend rate is reached	2025		2024		2024

Employer provided subsidies for post-65 retiree health care coverage were frozen effective January 1, 2017 at January 1, 2016 established amount levels. Company contributions are funded to a Health Reimbursement Account on the retiree’s behalf to subsidize the retiree’s cost of obtaining health care benefits through a private exchange. Therefore, a 1% change in health care cost trend rates would not have a material impact on either the service and interest cost components and the postretirement benefit obligations.

Plan investment policies and strategies – The investment policies for our U.S. and international pension plan assets reflect the funded status of the plans and expectations regarding our future ability to make further contributions. Long-term investment goals are to: (1) manage the assets in accordance with applicable legal requirements; (2) produce investment returns which meet or exceed the rates of return achievable in the capital markets while maintaining the risk parameters set by the plan's investment committees and protecting the assets from any erosion of purchasing power; and (3) position the portfolios with a long-term risk/return orientation. Investment performance and risk is measured and monitored on an ongoing basis through quarterly investment meetings and periodic asset and liability studies.

U.S. plan – The plan’s current targeted asset allocation is comprised of 55% equity securities and 45% other fixed income securities. Over time, as the plan’s funded ratio (as defined by the investment policy) improves, in order to reduce volatility in returns and to better match the plan’s liabilities, the allocation to equity securities will decrease while the amount allocated to fixed income securities will increase. The plan's assets are managed by a third-party investment manager.

International plan – Our international plan's target asset allocation is comprised of 60% equity securities and 40% fixed income securities. The plan assets are invested in eight separate portfolios, mainly pooled fund vehicles, managed by several professional investment managers whose performance is measured independently by a third-party asset servicing consulting firm.

Fair value measurements – Plan assets are measured at fair value. The following provides a description of the valuation techniques employed for each major plan asset class at December 31, 2016 and 2015.

Cash and cash equivalents – Cash and cash equivalents are valued using a market approach and are considered Level 1. This investment also includes a cash reserve account (a collective short-term investment fund) that is valued using an income approach and is considered Level 2.

Equity securities – Investments in common stock, preferred stock, and real estate investment trusts ("REIT") are valued using a market approach at the closing price reported in an active market and are therefore considered Level 1. Private equity investments include interests in limited partnerships which are valued based on the sum of the estimated fair values of the investments held by each partnership. These private equity investments are considered Level 3. Investments in mutual funds are valued using a market approach. The shares or units held are traded on the public exchanges and are therefore considered Level 1. Investments in pooled funds are valued using a market approach at the net asset value ("NAV") of units held. The various funds consist of either an equity or fixed income investment portfolio with underlying investments held in U.S. and non-U.S. securities. Nearly all of the underlying investments are publicly-traded. The majority of the pooled funds are benchmarked against a relative public index. These are considered Level 2.

Fixed income securities – Fixed income securities are valued using a market approach. U.S. treasury notes and exchange traded funds ("ETFs") are valued at the closing price reported in an active market and are considered Level 1. Corporate bonds and other bonds are valued using calculated yield curves created by models that incorporate various market factors. Primarily investments are held in U.S. and non-U.S. corporate bonds in diverse industries and are considered Level 2. Other bonds primarily consist of securities issued by governmental agencies and municipalities. The investment in the commingled fund is valued using the NAV of units held and is considered Level 2. The commingled fund consists of an equity and fixed income portfolio with underlying investments held in U.S. and non-U.S. securities. Pooled funds primarily have investments held in U.S. and non-U.S. publicly traded investment grade government and corporate bonds.

Other – Other investments are comprised of an international insurance carrier contract and the majority of the underlying investments consist of a mix of non-U.S. publicly traded equity securities valued at the closing price reported in an active market and fixed income securities valued using calculated yield curves. This asset is considered Level 2. The other investments, an unallocated annuity contract, two limited liability companies and real estate are considered Level 3, as significant inputs to determine fair value are unobservable.

The following tables present the fair values of our defined benefit pension plan's assets, by level within the fair value hierarchy, as of December 31, 2016 and 2015.



	December 31, 2016
(In millions)	Level 1				Level 2				Level 3				Total
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
Cash and cash equivalents	$	8	$	5	$	—	$	—	$	—	$	—	$	8	$	5
Equity securities:
Common and preferred stock	82		—		—		—		—		—		82		—
REIT and private equity	—		—		—		—		20		—		20		—
Mutual and pooled funds	—		201		—		159		—		—		—		360
Fixed income securities:
U.S. treasury notes and ETFs	11		—		—		—		—		—		11		—
Corporate and other bonds	—		—		60		—		—		—		60		—
Pooled funds	—		—		11		230		—		—		11		230
REIT and swaps	—		—		—		—		—		—		—		—
Other	—		—		—		—		21		—		21		—
Total investments, at fair value	101		206		71		389		41		—		213		595
Commingled funds ^(a)													14		—
Total investments	$	101	$	206	$	71	$	389	$	41	$	—	$	227	$	595



	December 31, 2015
(In millions)	Level 1				Level 2				Level 3				Total
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
Cash and cash equivalents	$	47	$	6	$	1	$	—	$	—	$	—	$	48	$	6
Equity securities:
Common and preferred stock	115		—		—		—		—		—		115		—
REIT and private equity	1		—		—		—		23		—		24		—
Mutual and pooled funds	—		218		—		152		—		—		—		370
Fixed income securities:
U.S. treasury notes and ETFs	12		—		—		—		—		—		12		—
Corporate and other bonds	—		—		105		—		—		—		105		—
Pooled funds	—		—		—		232		—		—		—		232
REIT and Swaps	—		—		2		—		—		—		2		—
Other	—		—		—		—		25		—		25		—
Total investments, at fair value	175		224		108		384		48		—		331		608
Commingled funds ^(a)													23		—
Total investments	$	175	$	224	$	108	$	384	$	48	$	—	$	354	$	608


^(a)	After the adoption of the FASB update for the fair value hierarchy, we separately report the investments for which fair value was measured using the net asset value per share as a practical expedient. Amounts presented in this table are intended to reconcile the fair value hierarchy to the pension plan assets. See Note 2 for further information on the FASB update.

The activity during the year ended December 31, 2016 and 2015, for the assets using Level 3 fair value measurements was immaterial.

Cash flows

Estimated future benefit payments – The following gross benefit payments, which were estimated based on actuarial assumptions applied at December 31, 2016 and reflect expected future services, as appropriate, are to be paid in the years indicated.



	Pension Benefits				Other Benefits
(In millions)	U.S.		Int’l		U.S.
2017	$	34	$	17	$	21
2018	35		17		21
2019	34		18		20
2020	35		18		19
2021	34		20		19
2022 through 2025	163		116		78

Contributions to defined benefit plans – We expect to make contributions to the funded pension plans of up to $60 million in 2017. Cash contributions to be paid from our general assets for the unfunded pension and postretirement plans are expected to be approximately $5 million and $21 million in 2017.

Contributions to defined contribution plans – We contribute to several defined contribution plans for eligible employees. Contributions to these plans totaled $20 million, $20 million and $25 million in 2016, 2015 and 2014.