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.

Over the past several years, where legally possible, we have amended 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. The Netherlands defined benefit pension plan has also been amended to reflect the Company's ability to reduce the indexation of future pension benefits within the plan in scenarios when the returns on plan assets are insufficient to cover that indexation.

Prior to the freeze of current benefits, 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).

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 below 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.



	Pension Benefits
	U.S. Plans						Non-U.S. Plans						Retiree Health
	2017			2016			2017			2016			2017			2016
Change in Benefit Obligation:
Benefit obligation, January 1	$	4,161		$	4,126		$	6,160		$	6,308		$	761		$	855
Service cost	2			4			29			31			5			6
Interest cost	226			184			158			195			28			32
Plan participants' contributions	—			—			4			4			2			1
Actuarial loss (gain)	392			114			(29		)	636			(16		)	(75		)
Currency exchange rate changes	—			—			635			(774		)	10			4
Plan Amendments/Curtailments	—			—			(4		)	—			—			—
Benefits paid/settlements	(606		)	(275		)	(246		)	(234		)	(66		)	(62		)
Other	5			8			(4		)	(6		)	(1		)	—
Benefit Obligation, December 31	$	4,180		$	4,161		$	6,703		$	6,160		$	723		$	761

Change in Plan Assets:
Fair value of plan assets, January 1	$	2,774		$	2,806		$	5,384		$	5,353		$	—		$	—
Actual return on plan assets	381			220			453			804			—			—
Employer contributions	675			24			161			154			64			61
Plan participants' contributions	—			—			4			4			2			1
Currency exchange rate changes	—			—			557			(694		)	—			—
Benefits paid/settlements	(606		)	(275		)	(246		)	(234		)	(66		)	(62		)
Other	—			(1		)	(5		)	(3		)	—			—
Fair Value of Plan Assets, December 31	$	3,224		$	2,774		$	6,308		$	5,384		$	—		$	—

Net Funded Status at December 31⁽¹⁾	$	(956	)	$	(1,387	)	$	(395	)	$	(776	)	$	(723	)	$	(761	)

Amounts Recognized in the Consolidated Balance Sheets:
Other long-term assets	$	—		$	—		$	193		$	17		$	—		$	—
Accrued compensation and benefit costs	(26		)	(24		)	(25		)	(22		)	(61		)	(63		)
Pension and other benefit liabilities	(930		)	(1,363		)	(563		)	(771		)	—			—
Post-retirement medical benefits	—			—			—			—			(662		)	(698		)
Net Amounts Recognized	$	(956	)	$	(1,387	)	$	(395	)	$	(776	)	$	(723	)	$	(761	)

_____________


(1)	Includes under-funded and unfunded plans.

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



	Pension Benefits
	U.S. Plans						Non-U.S. Plans						Retiree Health
	2017			2016			2017			2016			2017			2016
Net actuarial loss	$	1,178		$	1,094		$	1,562		$	1,741		$	22		$	37
Prior service credit	(7		)	(9		)	(28		)	(28		)	(26		)	(29		)
Total Pre-tax Loss	$	1,171		$	1,085		$	1,534		$	1,713		$	(4	)	$	8

Accumulated Benefit Obligation	$	4,179		$	4,161		$	6,483		$	5,931

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



	December 31, 2017						December 31, 2016
	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.	$	3,830	$	3,829	$	3,224	$	3,820	$	3,820	$	2,774
Non U.S.	814		799		723		4,535		4,368		4,194

Unfunded Plans:
U.S.	$	350	$	350	$	—	$	341	$	341	$	—
Non U.S.	496		485		—		445		436		—

Total Underfunded and Unfunded Plans:
U.S.	$	4,180	$	4,179	$	3,224	$	4,161	$	4,161	$	2,774
Non U.S.	1,310		1,284		723		4,980		4,804		4,194
Total	$	5,490	$	5,463	$	3,947	$	9,141	$	8,965	$	6,968

Our pension plan assets and benefit obligations at December 31, 2017 were as follows:



	Fair Value of Pension Plan Assets		Pension Benefit Obligations		Net Funded Status
U.S. funded	$	3,224	$	3,830	$	(606	)
U.S. unfunded	—		350		(350		)
Total U.S.	$	3,224	$	4,180	$	(956	)
U.K.	4,098		3,948		150
Canada	749		777		(28		)
Other	1,461		1,978		(517		)
Total	$	9,532	$	10,883	$	(1,351	)

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
	2017			2016			2015			2017			2016			2015			2017			2016			2015
Components of Net Periodic Benefit Costs:
Service cost	$	2		$	4		$	4		$	29		$	31		$	32		$	5		$	6		$	7
Interest cost⁽¹⁾	226			184			80			158			195			203			28			32			34
Expected return on plan assets⁽²⁾	(227		)	(190		)	(79		)	(221		)	(249		)	(284		)	—			—			—
Recognized net actuarial loss	21			26			24			79			65			70			1			2			1
Amortization of prior service credit	(2		)	(2		)	(2		)	(4		)	(3		)	4			(4		)	(5		)	(18		)
Recognized settlement loss	133			65			88			2			1			1			—			—			—
Recognized curtailment gain	—			—			—			(2		)	—			—			—			—			(22		)
Defined Benefit Plans	153			87			115			41			40			26			30			35			2
Defined contribution plans	25			30			33			29			31			33			n/a			n/a			n/a
Net Periodic Benefit Cost	178			117			148			70			71			59			30			35			2

Other changes in plan assets and benefit obligations recognized in Other Comprehensive Income:
Net actuarial (gain) loss	238			84			(74		)	(273		)	76			204			(16		)	(75		)	(4		)
Prior service credit	—			—			—			(1		)	—			(16		)	—			—			(32		)
Amortization of net actuarial loss	(154		)	(92		)	(112		)	(81		)	(66		)	(71		)	(1		)	(2		)	(1		)
Amortization of net prior service credit	2			2			2			4			3			(4		)	4			5			18
Curtailment gain	—			—			—			—			—			—			—			—			22
Total Recognized in Other Comprehensive Income	86			(6		)	(184		)	(351		)	13			113			(13		)	(72		)	3
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income	$	264		$	111		$	(36	)	$	(281	)	$	84		$	172		$	17		$	(37	)	$	5

_____________


(1)	Interest cost for Pension Benefits includes interest expense on non-TRA obligations of $257, $296 and $311 and interest expense (income) directly allocated to TRA participant accounts of $127, $83 and $(25) for the years ended December 31, 2017, 2016 and 2015, respectively.


(2)	Expected return on plan assets includes expected investment income on non-TRA assets of $321, $356 and $388 and actual investment income (loss) on TRA assets of $127, $83 and $(25) for the years ended December 31, 2017, 2016 and 2015, respectively.

The net actuarial loss and prior service credit for the defined benefit pension plans that will be amortized from Accumulated other comprehensive (loss) income into net periodic benefit cost over the next fiscal year are $(83) and $6, respectively, excluding amounts that may be recognized through settlement losses. The 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 is $3 and no amount is expected to be amortized for net actuarial loss.

Plan Amendments

Retiree-Health Plan

In 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 retired before December 31, 2015. As a result of this plan amendment, we recognized a pre-tax curtailment gain of $22 in 2015. The gain represented 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.

Plan Assets

Current Allocation

As of the 2017 and 2016 measurement dates, the global pension plan assets were $9,532 and $8,158, respectively. These assets were invested among several asset classes.

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



	December 31, 2017
	U.S. Plans												Non-U.S. Plans
Asset Class	Level 1		Level 2			Level 3		Assets measured at NAV⁽¹⁾		Total			Level 1		Level 2		Level 3		Assets measured at NAV⁽¹⁾		Total
Cash and cash equivalents	$	2	$	—		$	—	$	—	$	2		$	686	$	—	$	—	$	—	$	686
Equity Securities:
U.S.	104		—			—		31		135			310		24		—		—		334
International	134		—			—		52		186			441		676		—		127		1,244
Fixed Income Securities:
U.S. treasury securities	—		384			—		—		384			—		42		—		—		42
Debt security issued by government agency	—		127			—		—		127			—		1,938		—		—		1,938
Corporate bonds	—		1,866			—		—		1,866			—		784		—		—		784
Asset backed securities	—		—			—		—		—			—		—		—		—		—
Derivatives	—		(20		)	—		—		(20		)	—		74		—		—		74
Real estate	24		—			—		11		35			—		—		137		176		313
Private equity/venture capital	—		—			—		433		433			—		58		7		662		727
Guaranteed insurance contracts	—		—			—		—		—			—		—		100		—		100
Other⁽²⁾	33		—			—		43		76			6		60		—		—		66
Total Fair Value of Plan Assets	$	297	$	2,357		$	—	$	570	$	3,224		$	1,443	$	3,656	$	244	$	965	$	6,308

_____________


(1)	Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient, have not been classified in the fair value hierarchy.


(2)	Other Level 1 includes net non-financial (liabilities) assets of $33 U.S. and $15 Non-U.S., respectively, such as due to/from broker, interest receivables and accrued expenses.



	December 31, 2016
	U.S. Plans												Non-U.S. Plans
Asset Class	Level 1		Level 2			Level 3		Assets measured at NAV⁽¹⁾		Total			Level 1		Level 2		Level 3		Assets measured at NAV⁽¹⁾		Total
Cash and cash equivalents	$	—	$	—		$	—	$	—	$	—		$	544	$	—	$	—	$	—	$	544
Equity Securities:
U.S.	320		—			—		68		388			266		42		—		—		308
International	258		—			—		160		418			358		722		—		127		1,207
Fixed Income Securities:
U.S. treasury securities	—		233			—		—		233			—		44		—		—		44
Debt security issued by government agency	—		65			—		—		65			—		1,654		—		—		1,654
Corporate bonds	—		1,052			—		—		1,052			—		618		—		—		618
Asset backed securities	—		2			—		—		2			—		1		—		—		1
Derivatives	—		(38		)	—		—		(38		)	—		64		—		—		64
Real estate	36		—			12		34		82			—		—		121		168		289
Private equity/venture capital	—		—			—		490		490			—		60		6		425		491
Guaranteed insurance contracts	—		—			—		—		—			—		—		104		—		104
Other⁽²⁾	15		—			—		67		82			6		54		—		—		60
Total Fair Value of Plan Assets	$	629	$	1,314		$	12	$	819	$	2,774		$	1,174	$	3,259	$	231	$	720	$	5,384

_____________


(1)	Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.


(2)	Other Level 1 includes net non-financial (liabilities) assets of $15 U.S. and $6 Non-U.S., respectively, 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 at fair value using significant unobservable inputs (Level 3 assets):



	U.S.			Non-U.S.
	Real Estate			Real Estate			Private Equity/Venture Capital			Guaranteed Insurance Contracts			Total
Balance at December 31, 2015	$	17		$	145		$	4		$	120		$	269
Purchases	—			1			2			2			5
Sales	(3		)	(13		)	(1		)	(12		)	(26		)
Realized gains	—			6			—			1			7
Unrealized losses	(2		)	(5		)	(4		)	(3		)	(12		)
Currency translation	—			(13		)	5			(4		)	(12		)
Balance at December 31, 2016	$	12		$	121		$	6		$	104		$	231
Purchases	—			1			—			—			1
Transfers out of Level 3	(7		)	—			—			—			—
Sales	(5		)	—			—			(2		)	(2		)
Realized losses	(9		)	(1		)	—			—			(1		)
Unrealized gains (losses)	9			7			(16		)	(15		)	(24		)
Currency translation	—			9			17			13			39
Balance at December 31, 2017	$	—		$	137		$	7		$	100		$	244

Level 3 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:



	2017		2016
	U.S.	Non-U.S.	U.S.	Non-U.S.
Equity investments	12%	24%	30%	28%
Fixed income investments	73%	45%	48%	45%
Real estate	3%	5%	6%	5%
Private equity/venture capital	6%	12%	8%	9%
Other	6%	14%	8%	13%
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. 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

The following table summarizes cash contributions to our defined benefit pension plans and retiree health benefit plans.



	Year Ended December 31,
	2017		Estimated 2018
U.S. Plans	$	675	$	76
Non-U.S. Plans	161		116
Total	$	836	$	192

Retiree Health	$	64	$	62

The 2017 U.S. pension plan contributions of $675 include $650 contributed to our domestic tax-qualified defined benefit plans, which was comprised of $15 to meet the minimum funding requirements and $635 of additional voluntary contributions. The original estimate of 2017 voluntary contributions to our U.S. pension plans of $135 was increased by $500 to $635 as a result of funding provided from a Senior Note offering in the third quarter 2017. Refer to Note 14 - Debt for further information regarding the issuance of the Senior Notes.

There are no contributions required in 2018 for our U.S. tax-qualified defined benefit plans to meet the minimum funding requirements. However, our estimated 2018 contributions include $50 of voluntary contributions 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
2018	$	528	$	241	$	769	$	62
2019	301		246		547		60
2020	312		252		564		58
2021	293		260		553		57
2022	315		266		581		55
Years 2023-2027	1,456		1,436		2,892		239

Assumptions

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



	Pension Benefits
	2017				2016				2015
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
Discount rate	3.6	%	2.3	%	4.0	%	2.5	%	4.3	%	3.3	%
Rate of compensation increase	0.2	%	2.6	%	0.2	%	2.6	%	0.2	%	2.7	%



	Retiree Health
	2017		2016		2015
Discount rate	3.5	%	3.9	%	4.1	%

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



	Pension Benefits
	2018				2017				2016				2015
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
Discount rate	3.6	%	2.3	%	4.0	%	2.5	%	4.3	%	3.3	%	3.9	%	3.1	%
Expected return on plan assets	5.8	%	3.8	%	7.0	%	4.1	%	7.5	%	4.8	%	7.5	%	5.2	%
Rate of compensation increase	0.2	%	2.6	%	0.2	%	2.6	%	0.2	%	2.7	%	0.2	%	2.6	%



	Retiree Health
	2018		2017		2016		2015
Discount rate	3.5	%	3.9	%	4.1	%	3.8	%

_____________

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,
	2017		2016
Health care cost trend rate assumed for next year	6.8	%	7.2	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.8	%	4.8	%
Year that the rate reaches the ultimate trend rate	2026		2026

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	$	2	$	(2	)
Effect on post-retirement benefit obligation	53		(46		)

Defined Contribution Plans

We have post-retirement savings and investment plans in several countries, including the U.S., the U.K. and Canada. In many instances, employees who participated in the defined benefit pension plans that have been amended to freeze future service accruals 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 $54 in 2017, $61 in 2016 and $66 in 2015.