Retirement Benefits

We sponsor funded and unfunded pension plans and other postretirement benefit plans for our employees. The pension plans cover most of our employees and provide for monthly pension payments to eligible employees after retirement. Pension benefits for salaried employees generally are based on years of credited service and average earnings. Pension benefits for hourly employees are primarily based on specified benefit amounts and years of service. Effective July 1, 2010 we closed participation in our U.S. and Canada pension plans to employees hired after June 30, 2010. Employees hired after June 30, 2010 are instead eligible to participate in employee savings plans. The Company contributions are based on age and years of service and range from 3% to 7% of eligible compensation. Effective October 1, 2010, we also closed participation in our U.K. pension plan to employees hired after September 30, 2010 and these employees are now eligible for a defined contribution plan. Benefits to be provided to plan participants hired before July 1, 2010 or October 1, 2010, respectively, are not affected by these changes. Our policy with respect to funding our pension obligations is to fund the minimum amount required by applicable laws and governmental regulations. We were not required to make contributions to satisfy minimum funding requirements in our U.S. pension plans. We did not make voluntary contributions to our U.S. qualified pension plan in 2016, 2015 or 2014. Other postretirement benefits are primarily in the form of retirement medical plans that cover most of our employees in the U.S. and Canada and provide for the payment of certain medical costs of eligible employees and dependents after retirement.

The components of net periodic benefit cost (income) are (in millions):



										Other Postretirement
	Pension Benefits									Benefits
	2016			2015			2014			2016			2015			2014
Service cost	$	88.0		$	85.7		$	78.5		$	1.3		$	1.5		$	2.0
Interest cost	169.5			167.2			174.2			3.3			4.1			6.5
Expected return on plan assets	(218.3		)	(223.2		)	(217.9		)	—			—			—
Amortization:
Prior service credit	(2.9		)	(2.7		)	(2.7		)	(11.1		)	(14.5		)	(10.2		)
Net actuarial loss	124.5			118.7			99.7			2.3			4.5			2.9
Special termination benefit	0.5			—			—			—			—			—
Settlements	—			—			(0.1		)	—			—			—
Net periodic benefit cost (income)	$	161.3		$	145.7		$	131.7		$	(4.2	)	$	(4.4	)	$	1.2

Benefit obligation, plan assets, funded status and net liability information is summarized as follows (in millions):



	Pension Benefits						Other Postretirement Benefits
	2016			2015			2016			2015
Benefit obligation at beginning of year	$	4,282.2		$	4,236.6		$	93.3		$	122.2
Service cost	88.0			85.7			1.3			1.5
Interest cost	169.5			167.2			3.3			4.1
Actuarial losses (gains)	515.4			230.2			(0.2		)	(20.1		)
Plan amendments	(10.0		)	(3.5		)	—			—
Plan participant contributions	4.3			4.9			4.0			5.4
Benefits paid	(232.0		)	(329.1		)	(14.9		)	(17.7		)
Special termination benefit	0.5			—			—			—
Currency translation and other	(32.0		)	(109.8		)	0.1			(2.1		)
Benefit obligation at end of year	4,785.9			4,282.2			86.9			93.3
Plan assets at beginning of year	3,262.5			3,591.0			—			—
Actual return on plan assets	394.3			29.5			—			—
Company contributions	44.3			41.0			10.9			12.3
Plan participant contributions	4.3			4.9			4.0			5.4
Benefits paid	(232.0		)	(329.1		)	(14.9		)	(17.7		)
Currency translation and other	(25.5		)	(74.8		)	—			—
Plan assets at end of year	3,447.9			3,262.5			—			—
Funded status of plans	$	(1,338.0	)	$	(1,019.7	)	$	(86.9	)	$	(93.3	)



Net amount on balance sheet consists of:
Other assets	$	0.1		$	0.1		$	—		$	—
Compensation and benefits	(11.6		)	(11.3		)	(10.5		)	(11.4		)
Retirement benefits	(1,326.5		)	(1,008.5		)	(76.4		)	(81.9		)
Net amount on balance sheet	$	(1,338.0	)	$	(1,019.7	)	$	(86.9	)	$	(93.3	)

Amounts included in accumulated other comprehensive loss, net of tax, at September 30, 2016 and 2015 which have not yet been recognized in net periodic benefit cost are as follows (in millions):



	Pension Benefits				Other Postretirement Benefits
	2016		2015		2016			2015
Prior service cost (credit)	$	4.9	$	3.0	$	(15.9	)	$	(22.9	)
Net actuarial loss	1,235.1		1,099.9		15.7			17.1
Total	$	1,240.0	$	1,102.9	$	(0.2	)	$	(5.8	)

During 2016, we recognized prior service credits of $14.0 million ($8.9 million net of tax) and net actuarial losses of $126.8 million ($82.7 million net of tax) in pension and other postretirement net periodic benefit cost, which were included in accumulated other comprehensive loss at September 30, 2015. In 2017, we expect to recognize prior service credits of $9.8 million ($6.5 million net of tax), and net actuarial losses of $155.5 million ($102.1 million net of tax) in pension and other postretirement net periodic benefit cost, which are included in accumulated other comprehensive loss at September 30, 2016.

During 2015, we offered lump-sum distributions to certain deferred vested participants in the U.S. defined benefit plans. Related payments totaled $108.8 million. No settlement charge was required to be recorded.

The accumulated benefit obligation for our pension plans was $4,429.1 million and $3,979.3 million at September 30, 2016 and 2015, respectively.

Net Periodic Benefit Cost Assumptions

Significant assumptions used in determining net periodic benefit cost included in the Consolidated Statement of Operations for the period ended September 30 are (in weighted averages):



	Pension Benefits September 30,						Other Postretirement Benefits September 30,
	2016		2015		2014		2016		2015		2014
U.S. Plans
Discount rate	4.55	%	4.50	%	5.05	%	3.85	%	3.65	%	4.60	%
Expected return on plan assets	7.50	%	7.50	%	7.50	%	—		—		—
Compensation increase rate	3.75	%	3.75	%	3.75	%	—		—		—
Non-U.S. Plans
Discount rate	2.67	%	3.01	%	3.69	%	3.60	%	3.50	%	4.20	%
Expected return on plan assets	5.21	%	5.31	%	5.33	%	—		—		—
Compensation increase rate	3.11	%	3.16	%	3.11	%	—		—		—

Net Benefit Obligation Assumptions

Significant assumptions used in determining the benefit obligations included in the Consolidated Balance Sheet are (in weighted averages):



	Pension Benefits September 30,				Other Postretirement Benefits September 30,
	2016		2015		2016		2015
U.S. Plans
Discount rate	3.75	%	4.55	%	3.10	%	3.85	%
Compensation increase rate	3.50	%	3.75	%	—		—
Health care cost trend rate⁽¹⁾	—		—		6.50	%	7.00	%
Non-U.S. Plans
Discount rate	1.77	%	2.67	%	2.80	%	3.60	%
Compensation increase rate	2.86	%	3.11	%	—		—
Health care cost trend rate⁽¹⁾	—		—		4.95	%	5.39	%

(1)

The health care cost trend rate reflects the estimated increase in gross medical claims costs. As a result of the plan amendment adopted effective October 1, 2002, our effective per person retiree medical cost increase is zero percent beginning in 2005 for the majority of our postretirement benefit plans. For our other plans, we assume the gross health care cost trend rate will decrease to 5.50% in 2018 for U.S. Plans and 4.50% in 2017 for Non-U.S. Plans.

In October 2014, the U.S. Society of Actuaries released a new mortality table (RP-2014) and new mortality improvement scale (MP-2014). We used these mortality tables to measure our U.S. pension obligation as of September 30, 2015. This change in mortality assumptions resulted in a $222.1 million increase to our projected benefit obligation. In October 2015, the U.S. Society of Actuaries released a new mortality improvement scale (MP-2015), which was used to measure our U.S. pension obligation as of September 30, 2016. This change in mortality assumptions resulted in a $28.0 million decrease to our projected benefit obligation.

In determining the expected long-term rate of return on assets assumption, we consider actual returns on plan assets over the long term, adjusted for forward-looking considerations, such as inflation, interest rates, equity performance and the active management of the plan’s invested assets. We also considered our current and expected mix of plan assets in setting this assumption. This resulted in the selection of the weighted average long-term rate of return on assets assumption. Our global weighted-average targeted and actual asset allocations at September 30, by asset category, are:



	Allocation			Target	September 30,
Asset Category	Range			Allocations	2016	2015
Equity securities	40%	–	65%	52%	50%	48%
Debt securities	30%	–	50%	39%	41%	43%
Other	0%	–	15%	9%	9%	9%

The investment objective for pension funds related to our defined benefit plans is to meet the plan’s benefit obligations, while maximizing the long-term growth of assets without undue risk. We strive to achieve this objective by investing plan assets within target allocation ranges and diversification within asset categories. Target allocation ranges are guidelines that are adjusted periodically based on ongoing monitoring by plan fiduciaries. Investment risk is controlled by rebalancing to target allocations on a periodic basis and ongoing monitoring of investment manager performance relative to the investment guidelines established for each manager.

As of September 30, 2016 and 2015, our pension plans do not directly own our common stock.

In certain countries where we operate, there are no legal requirements or financial incentives provided to companies to pre-fund pension obligations. In these instances, we typically make benefit payments directly from cash as they become due, rather than by creating a separate pension fund.

The valuation methodologies used for our pension plans’ investments measured at fair value are described as follows. There have been no changes in the methodologies used at September 30, 2016 and 2015.

Common stock — Valued at the closing price reported on the active market on which the individual securities are traded.

Mutual funds — Valued at the net asset value (NAV) reported by the fund.

Corporate debt — Valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks.

Government securities — Valued at the most recent closing price on the active market on which the individual securities are traded or, absent an active market, utilizing observable inputs such as closing prices in less frequently traded markets.

Common collective trusts — Valued at the NAV as determined by the custodian of the fund. The NAV is based on the fair value of the underlying assets owned by the fund, minus its liabilities then divided by the number of units outstanding.

Private equity and alternative equity — Valued at the estimated fair value, as determined by the respective fund manager, based on the NAV of the investment units held at year end, which is subject to judgment.

Real estate funds — Consists of the real estate funds, which provide an indirect investment into a diversified and multi-sector portfolio of property assets. Publicly-traded real estate funds are valued at the most recent closing price reported on the SIX Swiss Exchange. The remainder is valued at the estimated fair value, as determined by the respective fund manager, based on the NAV of the investment units held at year end, which is subject to judgment.

Insurance contracts — Valued at the aggregate amount of accumulated contribution and investment income less amounts used to make benefit payments and administrative expenses which approximates fair value.

Other — Consists of other fixed income investments and common collective trusts with a mix of equity and fixed income underlying assets. Other fixed income investments are valued at the most recent closing price reported in the markets in which the individual securities are traded, which may be infrequently.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Refer to Note 8 for further information regarding levels in the fair value hierarchy. The following table presents our pension plans’ investments measured at fair value as of September 30, 2016:



	Level 1		Level 2		Level 3		Total
U.S. Plans
Cash and cash equivalents	$	2.9	$	—	$	—	$	2.9
Equity securities:
Common stock	705.9		—		—		705.9
Mutual funds	203.6		—		—		203.6
Common collective trusts	—		483.6		—		483.6
Fixed income securities:
Corporate debt	—		591.8		—		591.8
Government securities	252.6		99.5		—		352.1
Common collective trusts	—		161.4		—		161.4
Other types of investments:
Private equity	—		—		57.1		57.1
Alternative equity	—		—		56.9		56.9
Insurance contracts	—		—		0.9		0.9
Non-U.S. Plans
Cash and cash equivalents	1.9		—		—		1.9
Equity securities:
Common stock	48.6		—		—		48.6
Common collective trusts	—		279.3		—		279.3
Fixed income securities:
Corporate debt	—		34.1		—		34.1
Government securities	10.0		7.6		—		17.6
Common collective trusts	—		271.1		—		271.1
Other types of investments:
Real estate funds	—		85.4		9.2		94.6
Insurance contracts	—		—		79.7		79.7
Other	—		1.4		3.4		4.8
Total plan investments	$	1,225.5	$	2,015.2	$	207.2	$	3,447.9

The following table presents our pension plans’ investments measured at fair value as of September 30, 2015:



	Level 1		Level 2		Level 3		Total
U.S. Plans
Cash and cash equivalents	$	5.1	$	—	$	—	$	5.1
Equity securities:
Common stock	628.5		—		—		628.5
Mutual funds	174.6		—		—		174.6
Common collective trusts	—		467.5		—		467.5
Fixed income securities:
Corporate debt	—		643.8		—		643.8
Government securities	212.0		121.3		—		333.3
Common collective trusts	—		124.8		—		124.8
Other types of investments:
Private equity	—		—		70.2		70.2
Alternative equity	—		—		50.7		50.7
Insurance contracts	—		—		0.9		0.9
Non-U.S. Plans
Cash and cash equivalents	2.3		—		—		2.3
Equity securities:
Common stock	37.0		—		—		37.0
Common collective trusts	—		259.5		—		259.5
Fixed income securities:
Corporate debt	—		40.0		—		40.0
Government securities	2.8		6.6		—		9.4
Common collective trusts	—		258.6		—		258.6
Other types of investments:
Real estate funds	—		79.4		8.7		88.1
Insurance contracts	—		—		63.8		63.8
Other	—		1.3		3.1		4.4
Total plan investments	$	1,062.3	$	2,002.8	$	197.4	$	3,262.5

The table below sets forth a summary of changes in fair market value of our pension plans’ Level 3 assets for the year ended September 30, 2016:



	Balance October 1, 2015		Realized Gains (Losses)		Unrealized Gains (Losses)			Purchases, Sales, Issuances, and Settlements, Net			Balance September 30, 2016
U.S. Plans
Private equity	$	70.2	$	5.3	$	(13.3	)	$	(5.1	)	$	57.1
Alternative equity	50.7		2.2		(5.6		)	9.6			56.9
Insurance contracts	0.9		—		—			—			0.9
Non-U.S. Plans
Real estate	8.7		—		0.5			—			9.2
Insurance contracts	63.8		—		14.5			1.4			79.7
Other	3.1		—		—			0.3			3.4
	$	197.4	$	7.5	$	(3.9	)	$	6.2		$	207.2

The table below sets forth a summary of changes in fair market value of our pension plans’ Level 3 assets for the year ended September 30, 2015:



	Balance October 1, 2014		Realized Gains (Losses)		Unrealized Gains (Losses)			Purchases, Sales, Issuances, and Settlements, Net			Balance September 30, 2015
U.S. Plans
Private equity	$	78.8	$	7.2	$	(11.0	)	$	(4.8	)	$	70.2
Alternative equity	49.9		4.0		1.7			(4.9		)	50.7
Insurance contracts	0.9		—		—			—			0.9
Non-U.S. Plans
Real estate	8.6		—		0.1			—			8.7
Insurance contracts	57.8		—		11.3			(5.3		)	63.8
Other	3.3		—		0.1			(0.3		)	3.1
	$	199.3	$	11.2	$	2.2		$	(15.3	)	$	197.4

Estimated Future Payments

We expect to contribute $49.2 million related to our worldwide pension plans and $10.6 million to our postretirement benefit plans in 2017.

The following benefit payments, which include employees’ expected future service, as applicable, are expected to be paid (in millions):



	Pension Benefits		Other Postretirement Benefits
2017	$	256.8	$	10.6
2018	246.2		11.2
2019	259.5		10.9
2020	268.5		7.0
2021	279.2		5.7
2022 – 2026	1,478.6		24.9