Employee benefits

12 Months Ended

Dec. 31, 2023

Employee benefits

Employee benefits

Defined pension benefits

Switzerland

International

($ in millions)

2023

2022

2023

2022

Benefit obligation at January 1,

2,457

3,434

3,572

5,115

Service cost

40

50

30

38

Interest cost

48

13

166

87

Contributions by plan participants

34

34

11

10

Benefit payments

(134)

(96)

(236)

(234)

Settlements

(97)

(92)

(69)

(36)

Benefit obligations of businesses acquired (divested)

—

(328)

—

(2)

Actuarial (gain) loss

224

(478)

91

(1,075)

Plan amendments and other

1

—

5

(3)

Exchange rate differences

261

(80)

99

(328)

Benefit obligation at December 31, 

2,834

2,457

3,669

3,572

Fair value of plan assets at January 1, 

3,183

4,113

3,172

4,463

Actual return on plan assets

147

(310)

178

(789)

Contributions by employer

18

37

89

58

Contributions by plan participants

34

34

11

10

Benefit payments

(134)

(96)

(236)

(234)

Settlements

(97)

(92)

(69)

(36)

Plan assets of businesses acquired (divested)

—

(414)

1

(1)

Exchange rate differences

325

(89)

93

(299)

Fair value of plan assets at December 31, 

3,476

3,183

3,239

3,172

Funded status — overfunded (underfunded)

642

726

(430)

(400)

The amounts recognized in Accumulated other comprehensive loss and Noncontrolling interests were:

Defined pension benefits

December 31, ($ in millions)

2023

2022

2021

Net actuarial (loss) gain

(1,439)

(1,183)

(1,540)

Prior service credit

39

56

72

Amount recognized in OCI

(1)

 and NCI

(2)

(1,400)

(1,127)

(1,468)

Taxes associated with amount recognized

in OCI and NCI

311

266

352

Amount recognized in OCI

(1)

 and NCI, net of tax

(3)

(1,089)

(861)

(1,116)

(1) OCI represents Accumulated other comprehensive loss and, in addition, includes $

14

 million, $

37

 million and $

28

 million at December 31,

2023, 2022 and 2021, recognized for Other postretirement benefits.

(2) NCI represents Noncontrolling interests.

(3) NCI, net of tax, amounted to $

0

 million, $

(1)

 million and $

0

 million at December 31, 2023, 2022 and 2021.

In addition, the following amounts were recognized in the Company's Consolidated Balance Sheets:

Defined pension benefits

Switzerland

International

December 31, ($ in millions)

2023

2022

2023

2022

Overfunded plans

642

726

137

189

Underfunded plans — current

—

—

(16)

(22)

Underfunded plans — non-current

—

—

(551)

(567)

Funded status — overfunded (underfunded)

642

726

(430)

(400)

December 31, ($ in millions)

2023

2022

Non-current assets

Overfunded pension plans

779

915

Other employee-related benefits

1

1

Pension and other employee benefits

780

916

December 31, ($ in millions)

2023

2022

Current liabilities

Underfunded pension plans

(16)

(22)

Underfunded other postretirement benefit plans

(3)

(6)

Other employee-related benefits

(14)

(10)

Pension and other employee benefits

(33)

(38)

December 31, ($ in millions)

2023

2022

Non-current liabilities

Underfunded pension plans

(551)

(567)

Underfunded other postretirement benefit plans

(18)

(44)

Other employee-related benefits

(117)

(108)

Pension and other employee benefits

(686)

(719)

PBO exceeds fair value of plan assets

ABO exceeds fair value of plan assets

December 31,

Switzerland

International

Switzerland

International

($ in millions)

2023

2022

2023

2022

2023

2022

2023

2022

PBO

—

9

2,315

2,274

—

9

2,311

2,274

ABO

—

9

2,257

2,222

—

9

2,253

2,222

Fair value of plan assets

—

9

1,749

1,689

—

9

1,745

1,689

Components of net periodic benefit cost

Net periodic benefit cost mainly consisted of the following:

Defined pension benefits

Switzerland

International

($ in millions)

2023

2022

2021

2023

2022

2021

Operational pension cost:

Service cost

40

50

61

30

38

47

Operational pension cost

40

50

61

30

38

47

Non-operational pension cost (credit):

Interest cost (credit)

48

13

(5)

166

87

72

Expected return on plan assets

(129)

(117)

(116)

(157)

(153)

(178)

Amortization of prior service cost (credit)

(8)

(9)

(9)

(2)

(2)

(2)

Amortization of net actuarial loss

—

—

—

52

58

67

Curtailments, settlements and special

termination benefits

13

4

1

19

7

7

Non-operational pension cost (credit)

(1)

(76)

(109)

(129)

78

(3)

(34)

Net periodic benefit cost (credit)

(36)

(59)

(68)

108

35

13

The components of net periodic benefit cost other than the service cost component are included in

Non-operational pension cost (credit) in the Consolidated Income Statements.

Assumptions

The following weighted-average assumptions were used to determine projected benefit obligations:

Defined pension benefits

Switzerland

International

December 31, (in %)

2023

2022

2023

2022

Discount rate

1.4

2.2

4.5

4.8

Rate of compensation increase 

—

—

1.7

1.8

Rate of pension increase

—

—

1.6

1.8

Cash balance interest credit rate

2.0

2.0

3.2

2.7

For the Company’s significant benefit plans, the discount rate used at each measurement date is set based

on a high-quality corporate bond yield curve (derived based on bond universe information sourced from

reputable third-party index and data providers and rating agencies) reflecting the timing, amount and currency

of the future expected benefit payments for the respective plan. Consistent discount rates are used across all

plans in each currency zone, based on the duration of the applicable plan(s) in that zone. For plans in the

other countries, the discount rate is based on high quality corporate or government bond yields applicable in

the respective currency, as appropriate at each measurement date with a duration broadly consistent with the

respective plan’s obligations.

The following weighted-average assumptions were used to determine the “Net periodic benefit cost”:

Defined pension benefits

Switzerland

International

(in %)

2023

2022

2021

2023

2022

2021

Discount rate

2.0

0.7

—

4.8

2.1

1.6

Expected long-term rate of return on plan assets

4.0

3.3

3.0

5.0

3.7

4.0

Rate of compensation increase

—

—

—

1.8

1.5

1.0

Cash balance interest credit rate

2.0

1.3

1.0

2.7

2.1

2.1

The “Expected long-term rate of return on plan assets” is derived for each benefit plan by considering the

expected future long-term return assumption for each individual asset class. A single long-term return

assumption is then derived for each plan based upon the plan’s target asset allocation.

Plan assets

The Company has pension plans in various countries with the majority of the Company’s pension liabilities

deriving from a limited number of these countries.

The pension plans are typically funded by regular contributions from employees and the Company. These

plans are typically administered by boards of trustees (which include Company representatives) whose

primary responsibilities include ensuring that the plans meet their liabilities through contributions and

investment returns. The boards of trustees have the responsibility for making key investment strategy

decisions within a risk-controlled framework.

The pension plan assets are invested in diversified portfolios that are managed by third-party asset

managers, in accordance with local statutory regulations, pension plan rules and the respective plans’

investment guidelines, as approved by the boards of trustees.

Plan assets are generally segregated from those of the Company and invested with the aim of meeting the

respective plans’ projected future pension liabilities. Plan assets are measured at fair value at the balance

sheet date.

The boards of trustees manage the assets of the pension plans in a risk-controlled manner and assess the

risks embedded in the pension plans through asset/liability management studies. Asset/liability management

studies typically take place every

three years

. However, the risks of the plans are monitored on an ongoing

basis.

The boards of trustees’ investment goal is to maximize the long-term returns of plan assets within specified

risk parameters, while considering the future liabilities and liquidity needs of the individual plans. Risk

measures taken into account include the funding ratio of the plan, the likelihood of extraordinary cash

contributions being required, the risk embedded in each individual asset class, and the plan asset portfolio as

a whole.

The Company’s global pension asset allocation is the result of the asset allocations of the individual plans,

which are set by the respective boards of trustees. The target asset allocation of the Company’s plans on a

weighted-average basis is as follows:

Target

(in %)

Switzerland

International

Asset class

Equity

13

15

Fixed income

56

68

Real estate

26

4

Other

5

13

Total

100

100

The actual asset allocations of the plans are in line with the target asset allocations.

Equity securities primarily include investments in large-cap and mid-cap publicly traded companies. Fixed

income assets primarily include corporate bonds of companies from diverse industries and government

bonds. Both fixed income and equity assets are invested either via funds or directly in segregated investment

mandates, and include an allocation to emerging markets. Real estate consists primarily of investments in

real estate in Switzerland held in the Swiss plans. The “Other” asset class includes investments in private

equity, insurance contracts, cash, and reflects a variety of investment strategies.

Based on the above global asset allocation and the fair values of the plan assets, the expected long-term

return on assets at December 31, 2023, is

4.6

 percent. The Company and the local boards of trustees

regularly review the investment performance of the asset classes and individual asset managers. Due to the

diversified nature of the investments, the Company is of the opinion that no significant concentration of risks

exists in its pension fund assets.

At December 31, 2023 and 2022, plan assets include ABB Ltd’s shares (as well as an insignificant amount of

the Company’s debt instruments) with a total value of $

9

 million and $

7

 million, respectively.

The fair values of the Company’s pension plan assets by asset class are presented below. For further

information on the fair value hierarchy and an overview of the Company’s valuation techniques applied, see

the “Fair value measures” section of Note 2.

Not

subject to

Total

December 31, 2023 ($ in millions)

Level 1

Level 2

Level 3

leveling

(1)

fair value

Asset class

Equity

Equity securities

64

64

Mutual funds/commingled funds

751

751

Emerging market mutual funds/commingled funds

76

76

Fixed income

Government and corporate securities

160

953

1,113

Government and corporate—mutual funds/commingled funds

2,410

2,410

Emerging market bonds—mutual funds/commingled funds

367

367

Real estate

1,225

1,225

Insurance contracts

215

215

Cash and short-term investments

99

85

184

Private equity

60

250

310

Total

323

4,642

275

1,475

6,715

Not

subject to

Total

December 31, 2022 ($ in millions)

Level 1

Level 2

Level 3

leveling

(1)

fair value

Asset class

Equity

Equity securities

77

77

Mutual funds/commingled funds

748

748

Emerging market mutual funds/commingled funds

96

96

Fixed income

Government and corporate securities

121

1,036

1,157

Government and corporate—mutual funds/commingled funds

2,189

2,189

Emerging market bonds—mutual funds/commingled funds

315

315

Real estate

1,172

1,172

Insurance contracts

57

57

Cash and short-term investments

124

129

253

Private equity

54

237

291

Total

322

4,513

111

1,409

6,355

Amounts relate to assets measured using the NAV practical expedient which are not subject to leveling

The Company applies accounting guidance related to the presentation of certain investments using the net

asset value (NAV) practical expedient. This accounting guidance exempts investments using this practical

expedient from categorization within the fair value hierarchy. Investments measured at NAV are primarily

non exchange-traded commingled or collective funds in private equity and real estate where the fair value of

the underlying assets is determined by the investment manager. Investments in private equity can never be

redeemed, but instead the funds will make distributions through liquidation of the underlying assets. Total

unfunded commitments for the private equity funds were approximately $

108

 million and $

114

 million at

December 31, 2023 and 2022, respectively. The real estate funds are typically subject to a lock-in period of

up to

three years

 after subscribing. After this period, the real estate funds typically offer a redemption notice

of three to twelve months.

Contributions

Employer contributions were as follows:

Defined pension benefits

Switzerland

International

($ in millions)

2023

2022

2023

2022

Total contributions to defined benefit

pension plans

18

37

89

58

Of which, discretionary contributions to 

defined benefit pension plans

—

—

67

18

The Company expects to contribute approximately $

93

 million to its defined benefit pension plans in 2024. Of

these contributions, $

4

 million are expected to be non-cash contributions. 

The Company also contributes to a number of defined contribution plans. The aggregate expense for these

plans in continuing operations was $

293

 million, $

269

 million and $

278

 million in 2023, 2022 and 2021,

respectively. Contributions to multi-employer plans were not significant in 2023, 2022 and 2021. 

Estimated future benefit payments

The expected future cash flows to be paid by the Company’s plans in respect of pension at December 31,

2023, are as follows:

Defined pension benefits

($ in millions)

Switzerland

International

2024

257

259

2025

219

261

2026

215

260

2027

205

266

2028

200

264

Years 2029 - 2033

909

1,267

Note 17

Employee benefits

The Company operates defined benefit pension plans, defined contribution pension plans, and termination

indemnity plans, in accordance with local regulations and practices. At December 31, 2023, the Company’s

most significant defined benefit pension plans are in Switzerland as well as in Germany, the United Kingdom,

and the United States. These plans cover a large portion of the Company’s employees and provide benefits

to employees in the event of death, disability, retirement, or termination of employment. Certain of these

plans are multi

‑

employer plans. The Company also operates other postretirement benefit plans including

postretirement health care benefits and other employee

‑

related benefits for active employees including

long

‑

service award plans. The postretirement benefit plans are not significant. The measurement date used

for the Company’s employee benefit plans is December 31. The funding policies of the Company’s plans are

consistent with local government and tax requirements.

The Company recognizes in its Consolidated Balance Sheets the funded status of its defined benefit pension

plans, postretirement plans and other employee

‑

related benefits measured as the difference between the fair

value of the plan assets and the benefit obligation.

Unless otherwise indicated, the following tables include amounts relating to both continuing and discontinued

operations.

Obligations and funded status of the plans

The change in benefit obligation, change in fair value of plan assets, and funded status recognized in the

Consolidated Balance Sheets were as follows:

The accumulated benefit obligation (ABO) for all defined benefit pension plans was $

6,427

 million and

$

5,953

 million at December 31, 2023 and 2022, respectively. The projected benefit obligation (PBO), ABO

and fair value of plan assets, for pension plans with a PBO in excess of fair value of plan assets or ABO in

excess of fair value of plan assets, was: