Employee Benefit Plans

We sponsor numerous defined benefit and defined contribution pension and other post-retirement benefit plans, primarily retiree health care, in our domestic and international operations. December 31 is the measurement date for all of our post-retirement benefit plans.



	Pension Benefits
	U.S. Plans						Non-U.S. Plans						Retiree Health
	2015			2014			2015			2014			2015			2014
Change in Benefit Obligation:
Benefit obligation, January 1	$	4,716		$	3,893		$	7,139		$	6,664		$	937		$	856
Service cost	4			9			32			34			7			9
Interest cost	83			281			212			272			34			36
Plan participants' contributions	—			—			4			5			14			16
Actuarial (gain) loss	(225		)	813			(107		)	1,069			(4		)	119
Currency exchange rate changes	—			—			(538		)	(594		)	(25		)	(13		)
Plan Amendments/Curtailments	—			(7		)	(17		)	—			(31		)	—
Divestitures⁽²⁾	—			—			—			(27		)	—			—
Benefits paid/settlements	(378		)	(273		)	(260		)	(279		)	(77		)	(86		)
Other	—			—			—			(5		)	—			—
Benefit Obligation, December 31	$	4,200		$	4,716		$	6,465		$	7,139		$	855		$	937

Change in Plan Assets:
Fair value of plan assets, January 1	$	3,126		$	2,876		$	6,088		$	5,789		$	—		$	—
Actual return on plan assets	(72		)	398			(17		)	899			—			—
Employer contribution	177			124			132			160			63			70
Plan participants' contributions	—			—			4			5			14			16
Currency exchange rate changes	—			—			(440		)	(484		)	—			—
Benefits paid/settlements	(378		)	(273		)	(260		)	(279		)	(77		)	(86		)
Other	—			1			(4		)	(2		)	—			—
Fair Value of Plan Assets, December 31	$	2,853		$	3,126		$	5,503		$	6,088		$	—		$	—

Net Funded Status at December 31⁽¹⁾	$	(1,347	)	$	(1,590	)	$	(962	)	$	(1,051	)	$	(855	)	$	(937	)

Amounts Recognized in the Consolidated Balance Sheets:
Other long-term assets	$	—		$	—		$	31		$	17		$	—		$	—
Accrued compensation and benefit costs	(23		)	(24		)	(27		)	(28		)	(68		)	(72		)
Pension and other benefit liabilities	(1,324		)	(1,566		)	(966		)	(1,040		)	—			—
Post-retirement medical benefits	—			—			—			—			(787		)	(865		)
Net Amounts Recognized	$	(1,347	)	$	(1,590	)	$	(962	)	$	(1,051	)	$	(855	)	$	(937	)

_______________


(1)	Includes under-funded and un-funded plans.


(2)	Represents the net un-funded pension obligations related to our ITO business, which was reported as a discontinued operation through its date of sale on June 30, 2015. These obligations were assumed by the purchaser of the ITO business. The net pension cost associated with these plans is immaterial. Refer to Note 4 - Divestitures for additional information regarding this sale.

Benefit plans pre-tax amounts recognized in AOCL at December 31:



	Pension Benefits
	U.S. Plans						Non-U.S. Plans						Retiree Health
	2015			2014			2015			2014			2015			2014
Net actuarial loss	$	1,119		$	1,301		$	1,995		$	2,036		$	112		$	122
Prior service credit	(11		)	(13		)	(33		)	(20		)	(34		)	(42		)
Total Pre-tax Loss	$	1,108		$	1,288		$	1,962		$	2,016		$	78		$	80

Accumulated Benefit Obligation	$	4,200		$	4,716		$	6,222		$	6,883

Aggregate information for pension plans with an Accumulated benefit obligation in excess of plan assets is presented below:



	December 31, 2015						December 31, 2014
	Projected benefit obligation		Accumulated benefit obligation		Fair value of plan assets		Projected benefit obligation		Accumulated benefit obligation		Fair value of plan assets
Underfunded Plans:
U.S.	$	3,855	$	3,855	$	2,853	$	4,351	$	4,351	$	3,126
Non U.S.	4,853		4,692		4,336		6,376		6,125		5,848

Unfunded Plans:
U.S.	$	345	$	345	$	—	$	365	$	365	$	—
Non U.S.	423		414		—		567		551		—

Total Underfunded and Unfunded Plans:
U.S.	$	4,200	$	4,200	$	2,853	$	4,716	$	4,716	$	3,126
Non U.S.	5,276		5,106		4,336		6,943		6,676		5,848
Total	$	9,476	$	9,306	$	7,189	$	11,659	$	11,392	$	8,974

Our pension plan assets and benefit obligations at December 31, 2015 were as follows:



(in billions)	Fair Value of Pension Plan Assets		Pension Benefit Obligations		Net Funded Status
U.S. funded	$	2.9	$	3.9	$	(1.0	)
U.S. unfunded	—		0.3		(0.3		)
Total U.S.	$	2.9	$	4.2	$	(1.3	)
U.K.	3.6		4.0		(0.4		)
Canada	0.7		0.7		—
Other unfunded	1.2		1.8		(0.6		)
Total	$	8.4	$	10.7	$	(2.3	)

Prior to the freeze of current benefits (see below), most of our defined benefit pension plans generally provided employees a benefit, depending on eligibility, calculated under a highest average pay and years of service formula. Our primary domestic defined benefit pension plans provided a benefit at the greater of (i) the highest average pay and years of service formula, (ii) the benefit calculated under a formula that provides for the accumulation of salary and interest credits during an employee's work life or (iii) the individual account balance from the Company's prior defined contribution plan (Transitional Retirement Account or TRA).

The components of Net periodic benefit cost and other changes in plan assets and benefit obligations were as follows:



	Year Ended December 31,
	Pension Benefits
	U.S. Plans									Non-U.S. Plans									Retiree Health
	2015			2014			2013			2015			2014			2013			2015			2014			2013
Components of Net Periodic Benefit Costs:
Service cost	$	4		$	9		$	10		$	32		$	34		$	91		$	7		$	9		$	9
Interest cost⁽¹⁾	83			281			154			212			272			260			34			36			33
Expected return on plan assets⁽²⁾	(83		)	(290		)	(179		)	(293		)	(342		)	(317		)	—			—			—
Recognized net actuarial loss	24			17			19			72			54			77			1			1			2
Amortization of prior service credit	(2		)	(2		)	(2		)	4			(1		)	—			(18		)	(43		)	(43		)
Recognized settlement loss	88			51			162			1			—			—			—			—			—
Recognized curtailment gain	—			—			—			—			(1		)	(8		)	(22		)	—			—
Defined Benefit Plans	114			66			164			28			16			103			2			3			1
Defined contribution plans	61			58			64			39			44			25			n/a			n/a			n/a
Net Periodic Benefit Cost	175			124			228			67			60			128			2			3			1

Other changes in plan assets and benefit obligations recognized in Other Comprehensive Income:
Net actuarial (gain) loss	(70		)	697			(403		)	195			481			(224		)	(4		)	119			(88		)
Prior service credit	—			—			—			(16		)	(6		)	(14		)	(32		)	—			—
Amortization of net actuarial loss	(112		)	(68		)	(181		)	(73		)	(54		)	(77		)	(1		)	(1		)	(2		)
Amortization of net prior service credit	2			2			2			(4		)	1			—			18			43			43
Curtailment gain	—			—			—			—			2			—			22			n/a			n/a
Total Recognized in Other Comprehensive Income	(180		)	631			(582		)	102			424			(315		)	3			161			(47		)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income	$	(5	)	$	755		$	(354	)	$	169		$	484		$	(187	)	$	5		$	164		$	(46	)

_______________


(1)	Interest cost includes interest expense on non-TRA obligations of $320, $371 and $349 and interest expense directly allocated to TRA participant accounts of $(25), $182 and $65 for the years ended December 31, 2015, 2014 and 2013, respectively.


(2)	Expected return on plan assets includes expected investment income on non-TRA assets of $401, $450 and $431 and actual investment income on TRA assets of $(25), $182 and $65 for the years ended December 31, 2015, 2014 and 2013, respectively.

The net actuarial loss and prior service credit for the defined benefit pension plans that will be amortized from Accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year are $(89) and $5, respectively, excluding amounts that may be recognized through settlement losses. The net actuarial loss and prior service credit for the retiree health benefit plans that will be amortized from Accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year are $(3) and $5, respectively.

Pension plan assets consist of both defined benefit plan assets and assets legally restricted to the TRA accounts. The combined investment results for these plans, along with the results for our other defined benefit plans, are shown above in the “actual return on plan assets” caption. To the extent that investment results relate to TRA, such results are charged directly to these accounts as a component of interest cost.

Plan Amendments

Pension Plan Freezes

Over the past several years, we have amended several of our major defined benefit pension plans to freeze current benefits and eliminate benefits accruals for future service including our primary U.S. defined benefit plan for salaried employees, the Canadian Salary Pension Plan and the U.K. Final Salary Pension Plan. The freeze of current benefits is the primary driver of the reduction in pension service costs since 2012. In certain Non-U.S. plans we are required to continue to consider salary increases and inflation in determining the benefit obligation related to prior service.

Retiree-Health Plan

In June 2015, we amended our U.S. Retiree Health Plan to eliminate future benefit accruals for active salaried employees effective December 31, 2015. There was no change in benefits for union employees or existing retirees or employees that retire before December 31, 2015. As a result of this plan amendment, we recognized a pre-tax curtailment gain of $22 in the second quarter 2015. The gain represents the recognition of deferred gains from other prior-year amendments (“prior service credits”) as a result of the discontinuation of the future benefit or service accrual period for active salaried employees. The amendment is not expected to materially impact future Retiree Health expense.

Plan Assets

Current Allocation

As of the 2015 and 2014 measurement dates, the global pension plan assets were $8.4 billion and $9.2 billion, respectively. These assets were invested among several asset classes.

The following tables presents the defined benefit plans assets measured at fair value and the basis for that measurement:



	December 31, 2015
	U.S. Plans													Non-U.S. Plans
Asset Class	Level 1			Level 2			Level 3		Total			%		Level 1		Level 2			Level 3		Total			%
Cash and cash equivalents	$	174		$	—		$	—	$	174		6	%	$	578	$	—		$	—	$	578		10	%
Equity Securities:
U.S. large cap	289			—			—		289			10	%	170		44			—		214			4	%
U.S. mid cap	61			—			—		61			2	%	5		—			—		5			—	%
U.S. small cap	45			20			—		65			2	%	25		—			—		25			—	%
International developed	170			75			—		245			9	%	800		139			—		939			17	%
Emerging markets	119			91			—		210			7	%	217		58			—		275			5	%
Global Equity	—			—			—		—			—	%	4		—			—		4			—	%
Total Equity Securities	684			186			—		870			30	%	1,221		241			—		1,462			26	%
Fixed Income Securities:
U.S. treasury securities	—			222			—		222			8	%	—		48			—		48			1	%
Debt security issued by government agency	—			156			—		156			5	%	3		1,623			—		1,626			30	%
Corporate bonds	—			926			—		926			32	%	3		741			—		744			14	%
Asset backed securities	—			2			—		2			—	%	—		1			—		1			—	%
Total Fixed Income Securities	—			1,306			—		1,306			45	%	6		2,413			—		2,419			45	%
Derivatives:
Interest rate contracts	—			(8		)	—		(8		)	—	%	—		90			—		90			2	%
Foreign exchange contracts	—			—			—		—			—	%	—		(34		)	—		(34		)	(1	)%
Equity contracts	—			—			—		—			—	%	—		(51		)	—		(51		)	(1	)%
Other contracts	—			—			—		—			—	%	—		4			—		4			—	%
Total Derivatives	—			(8		)	—		(8		)	—	%	—		9			—		9			—	%
Real estate	42			37			19		98			3	%	—		26			280		306			6	%
Private equity/venture capital	—			—			499		499			18	%	—		—			550		550			10	%
Guaranteed insurance contracts	—			—			—		—			—	%	—		—			124		124			2	%
Other⁽¹⁾	(103		)	17			—		(86		)	(2	)%	5		50			—		55			1	%
Total Fair Value of Plan Assets	$	797		$	1,538		$	518	$	2,853		100	%	$	1,810	$	2,739		$	954	$	5,503		100	%

_____________________________


(1)	Other Level 1 assets include net non-financial assets of $(103) U.S. and $5 Non-U.S., such as due to/from broker, interest receivables and accrued expenses. In 2015, the US Plans' Other included plan liabilities of $116 related to unsettled transactions such as purchases or sales of US Treasury securities with settlement dates beyond fiscal year-end.



	December 31, 2014
	U.S. Plans													Non-U.S. Plans
Asset Class	Level 1			Level 2			Level 3		Total			%		Level 1		Level 2			Level 3		Total			%
Cash and cash equivalents	$	52		$	—		$	—	$	52		2	%	$	608	$	—		$	—	$	608		10	%
Equity Securities:
U.S. large cap	332			15			—		347			11	%	253		52			—		305			5	%
U.S. mid cap	73			—			—		73			2	%	10		—			—		10			—	%
U.S. small cap	52			39			—		91			3	%	28		—			—		28			—	%
International developed	195			92			—		287			9	%	1,065		162			—		1,227			20	%
Emerging markets	140			113			—		253			8	%	276		69			—		345			6	%
Global Equity	2			7			—		9			—	%	4		6			—		10			—	%
Total Equity Securities	794			266			—		1,060			33	%	1,636		289			—		1,925			31	%
Fixed Income Securities:
U.S. treasury securities	—			145			—		145			5	%	7		26			—		33			1	%
Debt security issued by government agency	—			225			—		225			7	%	25		1,536			—		1,561			26	%
Corporate bonds	—			988			—		988			32	%	23		850			—		873			15	%
Asset backed securities	—			10			—		10			—	%	—		1			—		1			—	%
Total Fixed Income Securities	—			1,368			—		1,368			44	%	55		2,413			—		2,468			42	%
Derivatives:
Interest rate contracts	—			(1		)	—		(1		)	—	%	—		128			—		128			2	%
Foreign exchange contracts	—			1			—		1			—	%	—		(5		)	—		(5		)	—	%
Equity contracts	—			—			—		—			—	%	—		—			—		—			—	%
Other contracts	—			—			—		—			—	%	—		14			—		14			—	%
Total Derivatives	—			—			—		—			—	%	—		137			—		137			2	%
Real estate	46			39			25		110			4	%	—		29			279		308			5	%
Private equity/venture capital	—			—			497		497			16	%	—		—			499		499			8	%
Guaranteed insurance contracts	—			—			—		—			—	%	—		—			129		129			2	%
Other⁽¹⁾	(1		)	40			—		39			1	%	6		8			—		14			—	%
Total Fair Value of Plan Assets	$	891		$	1,713		$	522	$	3,126		100	%	$	2,305	$	2,876		$	907	$	6,088		100	%

_____________________________


(1)	Other Level 1 assets include net non-financial liabilities of $(1) U.S. and $6 Non-U.S., such as due to/from broker, interest receivables and accrued expenses.

The following tables represents a roll-forward of the defined benefit plans assets measured using significant unobservable inputs (Level 3 assets):



	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	U.S. Defined Benefit Plans Assets									Non-U.S. Defined Benefit Plans Assets
	Real Estate			Private Equity/Venture Capital			Total			Real Estate			Private Equity/Venture Capital			Guaranteed Insurance Contracts			Total
Balance at December 31, 2013	$	29		$	451		$	480		$	269		$	212		$	135		$	616
Purchases	1			44			45			74			279			22			375
Sales	(6		)	(59		)	(65		)	(64		)	—			(25		)	(89		)
Realized (losses) gains	(7		)	41			34			20			—			15			35
Unrealized gains (losses)	8			20			28			(1		)	38			—			37
Currency translation	—			—			—			(19		)	(30		)	(18		)	(67		)
Balance at December 31, 2014	25			497			522			279			499			129			907
Purchases	—			48			48			10			56			22			88
Sales	(16		)	(67		)	(83		)	(7		)	—			(21		)	(28		)
Realized gains (losses)	1			52			53			(1		)	—			6			5
Unrealized gains (losses)	9			(31		)	(22		)	14			21			1			36
Currency translation	—			—			—			(15		)	(26		)	(13		)	(54		)
Balance at December 31, 2015	$	19		$	499		$	518		$	280		$	550		$	124		$	954

Valuation Method

Our primary Level 3 assets are Real Estate and Private Equity/Venture Capital investments. The fair value of our real estate investment funds are based on the Net Asset Value (NAV) of our ownership interest in the funds. NAV information is received from the investment advisers and is primarily derived from third-party real estate appraisals for the properties owned. The fair value for our private equity/venture capital partnership investments are based on our share of the estimated fair values of the underlying investments held by these partnerships as reported (or expected to be reported) in their audited financial statements. The valuation techniques and inputs for our Level 3 assets have been consistently applied for all periods presented.

Investment Strategy

The target asset allocations for our worldwide defined benefit pension plans were:



	2015		2014
	U.S.	Non-U.S.	U.S.	Non-U.S.
Equity investments	34%	29%	33%	34%
Fixed income investments	43%	47%	43%	47%
Real estate	6%	6%	8%	9%
Private equity	9%	10%	9%	6%
Other	8%	8%	7%	4%
Total Investment Strategy	100%	100%	100%	100%

We employ a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize plan expenses by exceeding the interest growth in long-term plan liabilities. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. This consideration involves the use of long-term measures that address both return and risk. The investment portfolio contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, as well as growth, value and small and large capitalizations, and may include Company stock. Other assets such as real estate, private equity, and hedge funds are used to improve portfolio diversification. Derivatives may be used to hedge market exposure in an efficient and timely manner; however, derivatives may not be used to leverage the portfolio beyond the market value of the underlying investments. Investment risks and returns are measured and monitored on an ongoing basis through annual liability measurements and quarterly investment portfolio reviews.

Expected Long-term Rate of Return

We employ a “building block” approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-term relationships between equities and fixed income are assessed. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return is established giving consideration to investment diversification and rebalancing. Peer data and historical returns are reviewed periodically to assess reasonableness and appropriateness.

Contributions

In 2015, we made cash contributions of $309 ($177 U.S. and $132 Non-U.S.) and $63 to our defined benefit pension plans and retiree health benefit plans, respectively.

In 2016, based on current actuarial calculations, we expect to make contributions of approximately $140 ($25 U.S. and $115 non-U.S.) to our defined benefit pension plans and approximately $70 to our retiree health benefit plans. The 2016 expected pension plan contributions do not include any planned contribution for our domestic tax-qualified defined benefit plans because none are required to meet the minimum funding requirements. However, once the January 1, 2016 actuarial valuations and projected results as of the end of the 2016 measurement year are available, the desirability of making additional contributions will be reassessed. Based on these results, we may voluntarily decide to contribute to these plans.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid during the following years:



	Pension Benefits
	U.S.		Non-U.S.		Total		Retiree Health
2016	$	436	$	230	$	666	$	70
2017	392		239		631		68
2018	340		247		587		67
2019	319		254		573		66
2020	311		270		581		64
Years 2021-2024	1,469		1,411		2,880		296

Assumptions

Weighted-average assumptions used to determine benefit obligations at the plan measurement dates:



	Pension Benefits
	2015				2014				2013
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
Discount rate	4.3	%	3.3	%	3.9	%	3.1	%	4.8	%	4.2	%
Rate of compensation increase	0.2	%	2.6	%	0.2	%	2.6	%	0.2	%	2.7	%



	Retiree Health
	2015		2014		2013
Discount rate	4.09	%	3.8	%	4.5	%

Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31:



	Pension Benefits
	2016				2015				2014				2013
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
Discount rate	4.3	%	3.3	%	3.9	%	3.1	%	4.8	%	4.2	%	3.7	%	4.0	%
Expected return on plan assets	7.5	%	4.9	%	7.5	%	5.2	%	7.8	%	6.1	%	7.8	%	6.1	%
Rate of compensation increase	0.2	%	2.6	%	0.2	%	2.6	%	0.2	%	2.7	%	0.2	%	2.6	%



	Retiree Health
	2016		2015		2014		2013
Discount rate	4.09	%	3.8	%	4.5	%	3.6	%

_____________________________

Note: Expected return on plan assets is not applicable to retiree health benefits as these plans are not funded. Rate of compensation increase is not applicable to retiree health benefits as compensation levels do not impact earned benefits.

Assumed health care cost trend rates were as follows:



	December 31,
	2015		2014
Health care cost trend rate assumed for next year	7.5	%	7.0	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.9	%	4.9	%
Year that the rate reaches the ultimate trend rate	2026		2023

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:



	1% increase		1% decrease
Effect on total service and interest cost components	$	4	$	(4	)
Effect on post-retirement benefit obligation	62		(54		)

Defined Contribution Plans

We have post-retirement savings and investment plans in several countries, including the U.S., U.K. and Canada. In many instances, employees from those defined benefit pension plans that have been amended to freeze future service accruals (see "Plan Amendments" for additional information) were transitioned to an enhanced defined contribution plan. In these plans employees are allowed to contribute a portion of their salaries and bonuses to the plans, and we match a portion of the employee contributions. We recorded charges related to our defined contribution plans of $100 in 2015, $102 in 2014 and $89 in 2013.