Employee Benefit Plans

12 Months Ended

Dec. 31, 2021

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

Employee Benefit Plans

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.

Where legally possible, we have amended our major defined benefit pension plans to freeze current benefits and eliminate benefit 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. 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. Our pension plan in the Netherlands was changed to a Collective Defined Contribution (CDC) plan. From a Company risk perspective, this plan operates just like a defined contribution plan as the company is only responsible for a contribution for annual benefit accruals under 5-year agreements. Although the Company's risk has been mitigated, under U.S. GAAP this plan doesn’t meet the definition of a defined contribution plan and therefore is accounted for as a defined benefit plan.

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 our primary domestic 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 assets, 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
	2021		2020		2021		2020		2021		2020
Change in Benefit Obligation:
Benefit obligation, January 1	$	3,747	$	3,598	$	7,159	$	6,492	$	370	$	385
Service cost	2		2		20		20		2		2
Interest cost	80		196		88		113		8		12
Plan participants' contributions	—		—		3		3		8		10
Actuarial (gain) loss	(86)		240		(233)		439		(1)		4
Currency exchange rate changes	—		—		(193)		374		—		3
Plan Amendments/Curtailments	—		—		(4)		2		(50)		(11)
Benefits paid/settlements	(371)		(289)		(297)		(284)		(34)		(35)
Other	—		—		—		—		—		—
Benefit Obligation, December 31	$	3,372	$	3,747	$	6,543	$	7,159	$	303	$	370
Change in Plan Assets:
Fair value of plan assets, January 1	$	2,802	$	2,493	$	7,199	$	6,385	$	—	$	—
Actual return on plan assets	89		563		415		637		—		—
Employer contributions	24		35		111		104		25		25
Plan participants' contributions	—		—		3		3		8		10
Currency exchange rate changes	—		—		(178)		354		—		—
Benefits paid/settlements	(371)		(289)		(297)		(284)		(33)		(35)
Other	—		—		(1)		—		—		—
Fair Value of Plan Assets, December 31	$	2,544	$	2,802	$	7,252	$	7,199	$	—	$	—
Net Funded Status at December 31(1)	$	(828)	$	(945)	$	709	$	40	$	(303)	$	(370)
Amounts Recognized in the Consolidated Balance Sheets:
Other long-term assets	$	—	$	—	$	1,211	$	617	$	—	$	—
Accrued compensation and benefit costs	(24)		(24)		(21)		(24)		(26)		(30)
Pension and other benefit liabilities	(804)		(921)		(481)		(553)		—		—
Post-retirement medical benefits	—		—		—		—		(277)		(340)
Net Amounts Recognized	$	(828)	$	(945)	$	709	$	40	$	(303)	$	(370)
Accumulated Benefit Obligation	$	3,372	$	3,747	$	6,412	$	7,018

  _____________

(1)Includes under-funded and unfunded plans.

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

	Pension Benefits
	U.S. Plans				Non-U.S. Plans				Retiree Health
	2021		2020		2021		2020		2021		2020
Net actuarial loss (gain)	$	745	$	874	$	939	$	1,471	$	(25)	$	(23)
Prior service (credit) cost	—		(1)		29		27		(83)		(99)
Total Pre-tax loss (gain)	$	745	$	873	$	968	$	1,498	$	(108)	$	(122)

Aggregate information for pension plans with an Accumulated benefit obligation in excess of plan assets is presented below. Information for Retiree Health plans with an accumulated post-retirement benefit obligation in excess of plan assets has been disclosed in the preceding table on Benefit obligations and Net funded status as all Retiree Health plans are unfunded.

	December 31, 2021				December 31, 2020
	Accumulated Benefit Obligation		Fair Value of Plan Assets		Accumulated Benefit Obligation		Fair Value of Plan Assets
Underfunded Plans:
U.S.	$	3,056	$	2,544	$	3,408	$	2,802
Non U.S.	181		144		921		873
Unfunded Plans:
U.S.	$	316	$	—	$	339	$	—
Non U.S.	440		—		502		—
Total Underfunded and Unfunded Plans:
U.S.	$	3,372	$	2,544	$	3,747	$	2,802
Non U.S.	621		144		1,423		873
Total	$	3,993	$	2,688	$	5,170	$	3,675

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

	December 31, 2021				December 31, 2020
	Benefit Obligation		Fair Value of Plan Assets		Benefit Obligation		Fair Value of Plan Assets
Underfunded Plans:
U.S.	$	3,056	$	2,544	$	3,408	$	2,802
Non U.S.	810		751		942		873
Unfunded Plans:
U.S.	$	316	$	—	$	339	$	—
Non U.S.	447		—		512		—
Total Underfunded and Unfunded Plans:
U.S.	$	3,372	$	2,544	$	3,747	$	2,802
Non U.S.	1,257		751		1,454		873
Total	$	4,629	$	3,295	$	5,201	$	3,675

Pension plan assets and benefit obligations by country were as follows:

	December 31, 2021						December 31, 2020
	Fair Value of Pension Plan Assets		Pension Benefit Obligations		Net Funded Status		Fair Value of Pension Plan Assets		Pension Benefit Obligations		Net Funded Status
U.S. funded	$	2,544	$	3,056	$	(512)	$	2,802	$	3,408	$	(606)
U.S. unfunded	—		316		(316)		—		339		(339)
Total U.S.	2,544		3,372		(828)		2,802		3,747		(945)
U.K.	4,914		3,870		1,044		4,707		4,218		489
Netherlands	1,174		1,145		29		1,266		1,226		40
Canada	746		747		(1)		794		797		(3)
Germany	—		346		(346)		—		395		(395)
Other	418		435		(17)		432		523		(91)
Total	$	9,796	$	9,915	$	(119)	$	10,001	$	10,906	$	(905)

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
	2021		2020		2019		2021		2020		2019		2021		2020		2019
Components of Net Periodic Benefit Costs:
Service cost	$	2	$	2	$	2	$	20	$	20	$	22	$	2	$	2	$	2
Interest cost(1)	80		196		218		88		113		153		8		12		15
Expected return on plan assets(2)	(117)		(217)		(210)		(208)		(191)		(233)		—		—		—
Recognized net actuarial loss (gain)	17		27		24		59		58		43		1		(1)		(5)
Amortization of prior service credit	(1)		(2)		(2)		(1)		(1)		(2)		(66)		(76)		(77)
Recognized settlement loss	54		53		93		1		1		1		—		—		—
Recognized curtailment gain	—		—		—		(4)		(1)		—		—		—		—
Defined Benefit Plans	35		59		125		(45)		(1)		(16)		(55)		(63)		(65)
Defined contribution plans	—		1		26		18		18		23		n/a		n/a		n/a
Net Periodic Benefit Cost (Credit)	35		60		151		(27)		17		7		(55)		(63)		(65)
Other changes in plan assets and benefit obligations recognized in Other Comprehensive Income (Loss):
Net actuarial (gain) loss	(57)		(105)		243		(425)		(9)		24		(1)		4		8
Prior service (credit) cost	—		—		—		(4)		4		—		(50)		(11)		—
Amortization of net actuarial (loss) gain	(71)		(80)		(117)		(60)		(59)		(44)		(1)		1		5
Amortization of net prior service credit	1		2		2		1		1		2		66		76		77
Curtailment gain	—		—		—		4		1		—		—		—		—
Total Recognized in Other Comprehensive Income (Loss)(3)	(127)		(183)		128		(484)		(62)		(18)		14		70		90
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income (Loss)	$	(92)	$	(123)	$	279	$	(511)	$	(45)	$	(11)	$	(41)	$	7	$	25

_____________

(1)Interest cost for Pension Benefits includes interest expense on non-TRA obligations of $150, $184 and $243 and interest expense (income) directly allocated to TRA participant accounts of $18, $125 and $128 for the years ended December 31, 2021, 2020 and 2019, respectively.

(2)Expected return on plan assets includes expected investment income on non-TRA assets of $307, $283 and $315 and actual investment income (loss) on TRA assets of $18, $125 and $128 for the years ended December 31, 2021, 2020 and 2019, respectively.

(3)Amounts represent the pre-tax effect included in Other comprehensive income. Refer to Note 25 - Other Comprehensive Income (Loss) for the related tax effects and the net of tax amounts.

Plan Amendments

Pension:

In October 2018, the High Court of Justice in the United Kingdom (the High Court) ruled that Lloyds Bank PLC was required to equalize benefits payable to men and women under its U.K. defined benefit pension plans by amending those plans to increase the pension benefits payable to participants that accrued such benefits during the period from 1990 to 1997. The inequalities arose from statutory differences in the retirement ages and rates of accrual of benefits for men and women related to Guaranteed Minimum Pension (GMP) benefits that are included in U.K. defined benefit pension plans.

Based on the above ruling, we estimated the cost of equalization under the minimum cost approach permitted by the High Court’s ruling to be approximately 1.2% of our U.K. defined benefit plan obligation at December 31, 2018 or approximately GBP 33 million (approximately USD $42). This increase in the benefit obligation was recorded as a plan amendment in 2018. In November 2020, the High Court made another ruling in this matter related to benefit transfers out of the plan prior to the date of the 2018 ruling, which increased our estimated cost of equalization by a further GBP 3 million (approximately USD $4). Consistent with our approach to the estimate in 2018, the increase in the benefit obligation was recorded as a plan amendment in 2020 and together with the 2018 adjustment will be amortized to future net periodic benefit costs as a prior service cost (total approximately USD $2 per year covering both adjustments).

At December 31, 2021, the aggregate cost for this matter is estimated to be approximately 0.8% of the U.K. defined benefit plan obligation before equalization or approximately GBP 23 million (approximately USD $31) a reduction of

approximately GBP 13 million (approximately USD $18) from prior estimates, which was accounted for as an actuarial gain. This latest estimate reflects a more recent analysis completed by the Plan Actuary. However, several significant uncertainties remain and therefore our estimate is subject to future change and adjustment. In particular, the cost is very sensitive to i) the method of GMP equalization; ii) actuarial assumptions and market conditions; iii) the benefit structure of our plan and operational practices; and iv) the demographic profile of our plan. In addition, we are continuing to evaluate the acceptable methodologies that the High Court has determined, and we still need to agree upon the appropriate methodology with our plan trustees.

Retiree Health Plans:

In December 2021, we amended our U.S. Retiree Health Plan to reduce certain benefits for existing union retirees through the reduction or elimination of coverage or cost-sharing subsidies for retiree health care and life insurance costs. This negative plan amendment resulted in a reduction of $50 in the postretirement benefit obligation. The amount for the plan amendment will be amortized to future net periodic benefit costs as a prior service credit beginning in 2022.

In October 2020, we reduced the level of Company cost sharing for retiree health care benefits provided to certain existing non-union retirees. This change to our U.S. Retiree Health Plan was effective January 1, 2021. The change in cost sharing is considered a negative plan amendment resulting in a reduction in the postretirement benefit obligation of $11. The amount for the plan amendment will be amortized to future net periodic benefit costs as a prior service credit.

Plan Assets

Current Allocation

As of the 2021 and 2020 measurement dates, the global pension plan assets were $9,796 and $10,001, 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, 2021
	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	$	3	$	—	$	—	$	—	$	3	$	477	$	—	$	—	$	—	$	477
Equity Securities:
U.S.	148		—		—		—		148		35		36		—		—		71
International	161		—		—		230		391		699		339		—		37		1,075
Fixed Income Securities:
U.S. treasury securities	—		214		—		—		214		—		61		—		—		61
Debt security issued by government agency	—		119		—		—		119		—		2,181		—		—		2,181
Corporate bonds	—		1,134		—		—		1,134		—		985		—		—		985
Derivatives	—		5		—		—		5		—		300		—		—		300
Real estate	—		—		51		10		61		—		—		164		112		276
Private equity/venture capital	—		—		—		239		239		—		—		4		1,684		1,688
Guaranteed insurance contracts	—		—		—		—		—		—		—		75		—		75
Other(2)(3)	95		—		—		135		230		22		41		—		—		63
Total Fair Value of Plan Assets	$	407	$	1,472	$	51	$	614	$	2,544	$	1,233	$	3,943	$	243	$	1,833	$	7,252

 _____________

(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 NAV includes mutual funds of $75 (measured at NAV) which are invested approximately 75% in fixed income securities and approximately 25% in equity securities.

(3)Other Level 1 includes mutual funds of $93, which are invested in equity securities, and net non-financial assets of $2 U.S. and $22 Non-U.S., respectively, such as due to/from broker, interest receivables and accrued expenses.

	December 31, 2020
	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	$	17	$	—	$	—	$	—	$	17	$	401	$	—	$	—	$	—	$	401
Equity Securities:
U.S.	224		—		—		39		263		178		56		—		—		234
International	243		—		—		204		447		559		321		—		151		1,031
Fixed Income Securities:
U.S. treasury securities	—		325		—		—		325		—		77		—		—		77
Debt security issued by government agency	—		78		—		—		78		—		2,026		—		—		2,026
Corporate bonds	—		1,252		—		—		1,252		—		921		—		—		921
Derivatives	—		11		—		—		11		—		488		—		—		488
Real estate	—		—		31		10		41		—		—		208		108		316
Private equity/venture capital	—		—		—		209		209		—		—		3		1,557		1,560
Guaranteed insurance contracts	—		—		—		—		—		—		—		86		—		86
Other(2)(3)	7		—		—		152		159		21		38		—		—		59
Total Fair Value of Plan Assets	$	491	$	1,666	$	31	$	614	$	2,802	$	1,159	$	3,927	$	297	$	1,816	$	7,199

 _____________

(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 NAV includes mutual funds of $73 (measured at NAV) which are invested approximately 70% in fixed income securities and approximately 30% in equity securities.

(3)Other Level 1 includes net non-financial (liabilities) assets of $7 U.S. and $21 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, 2019	$	5	$	219	$	5	$	90	$	314
Purchases	27		—		3		—		3
Sales	—		(15)		—		(4)		(19)
Unrealized losses	(1)		(8)		(4)		(8)		(20)
Currency translation	—		12		(1)		8		19
Balance at December 31, 2020	$	31	$	208	$	3	$	86	$	297
Purchases	15		10		—		—		10
Sales	—		(33)		—		(5)		(38)
Unrealized gains (losses)	5		(12)		1		1		(10)
Currency translation	—		(9)		—		(7)		(16)
Balance at December 31, 2021	$	51	$	164	$	4	$	75	$	243

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 is 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:

	2021		2020
	U.S.	Non-U.S.	U.S.	Non-U.S.
Equity investments(1)	24%	15%	23%	15%
Fixed income investments	60%	44%	61%	44%
Real estate	6%	4%	6%	4%
Private equity/venture capital	8%	24%	8%	22%
Other	2%	13%	2%	15%
Total Investment Strategy	100%	100%	100%	100%

 _____________

(1)Target allows for an additional allocation to synthetic equity which is offset by cash.

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, timely and cost-effective manner; however, derivatives may not be used to speculate or 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,
	2021		Estimated 2022
U.S. Plans	$	24	$	25
Non-U.S. Plans	111		110
Total	$	135	$	135
Retiree Health	$	25	$	25

The 2021 U.S. Defined benefit plans contributions did not include any contributions for our domestic tax-qualified defined benefit plans because none were required to meet the minimum funding requirements. There are no contributions required in 2022 for our U.S. tax-qualified defined benefit plans to meet the minimum funding requirements.

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
2022	$	349	$	284	$	633	$	25
2023	301		291		592		25
2024	287		301		588		24
2025	276		304		580		22
2026	263		313		576		21
Years 2027-2031	1,095		1,681		2,776		87

Assumptions

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

	Pension Benefits
	2021				2020				2019
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
Discount rate	2.7	%	1.8	%	2.2	%	1.3	%	3.1	%	1.8	%
Rate of compensation increase	0.1	%	2.8	%	0.1	%	2.6	%	0.2	%	2.6	%
Interest crediting rate	2.8	%	1.5	%	2.8	%	1.5	%	2.8	%	1.5	%

 

	Retiree Health
	2021		2020		2019
Discount rate	2.7	%	2.2	%	3.0	%

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

	Pension Benefits
	2022				2021				2020				2019
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
Discount rate	2.7	%	1.8	%	2.2	%	1.3	%	3.1	%	1.8	%	4.2	%	2.6	%
Expected return on plan assets	5.9	%	3.2	%	5.9	%	3.1	%	6.0	%	3.3	%	6.0	%	4.0	%
Rate of compensation increase	0.1	%	2.8	%	0.1	%	2.6	%	0.2	%	2.6	%	0.2	%	2.6	%
Interest crediting rate	2.5	%	1.5	%	2.8	%	1.5	%	2.8	%	1.5	%	2.8	%	1.5	%

 

	Retiree Health
	2022		2021		2020		2019
Discount rate	2.7	%	2.2	%	3.0	%	4.1	%

_____________

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,
	2021		2020
Health care cost trend rate assumed for next year	5.3	%	5.7	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.3	%	4.3	%
Year that the rate reaches the ultimate trend rate	2026		2025

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 $18 in 2021, $19 in 2020 and $49 in 2019.

During 2021, the Company suspended, and did not make, its full year 2021 employer matching contribution for its U.S. based 401(k) plan for salaried (non-union) employees. The suspension resulted in savings of $20 for the year ended December 31, 2021.