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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: