Employee Benefit Plans

12 Months Ended

Sep. 30, 2021

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plans

Note M. Employee Benefit Plans

The information below provides detail concerning the Company’s benefit obligations under the defined benefit and postretirement benefit plans it sponsors.

Defined benefit plans provide pre-determined benefits to employees that are distributed upon retirement. Cabot is making all sponsor required contributions to these plans. The accumulated benefit obligation was $3 million for the U.S. defined benefit plan and $209 million for the foreign plans as of September 30, 2021 and $99 million for the U.S. defined benefit plans and $215 million for the foreign plans as of September 30, 2020. As of September 30, 2021, the remaining U.S. defined benefit plan is the frozen Supplemental Cash Balance Plan.

The following provides information about projected benefit obligations, plan assets, the funded status and weighted-average assumptions of the defined benefit pension and postretirement benefit plans:

	Years Ended September 30
	2021						2020						2021						2020
	Pension Benefits												Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
	(In millions)
Change in Benefit Obligations:
Benefit obligation at beginning of    year	$	99		$	231		$	157		$	220		$	27		$	20		$	28		$	20
Service cost		—			6			1			5			—			—			—			—
Interest cost		—			3			4			3			—			1			1			—
Plan participants’ contribution		—			1			—			1			—			—			—			—
Foreign currency exchange rate    changes		—			6			—			7			—			1			—			—
(Gain) loss from changes in actuarial    assumptions and plan experience		(1	)		(11	)		2			5			—			(2	)		1			—
Benefits paid		(3	)		(8	)		(7	)		(8	)		(2	)		(1	)		(3	)		—
Settlements or curtailments		(92	)		(8	)		(57	)		(2	)		—			—			—			—
Other		—			1			(1	)		—			—			—			—			—
Benefit obligation at end of year	$	3		$	221		$	99		$	231		$	25		$	19		$	27		$	20

	Years Ended September 30
	2021						2020						2021						2020
	Pension Benefits												Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
	(In millions)
Change in Plan Assets:
Fair value of plan assets at beginning    of year	$	96		$	204		$	151		$	195		$	—		$	—		$	—		$	—
Actual return on plan assets		1			14			9			7			—			—			—			—
Employer contribution		—			7			1			6			2			1			3			—
Plan participants’ contribution		—			1			—			1			—			—			—			—
Foreign currency exchange rate    changes		—			7			—			5			—			—			—			—
Benefits paid		(3	)		(8	)		(7	)		(8	)		(2	)		(1	)		(3	)		—
Settlements or curtailments		(92	)		(8	)		(57	)		(2	)		—			—			—			—
Expenses paid from assets		—			—			(1	)		—			—			—			—			—
Other		(2	)		—			—			—			—			—
Fair value of plan assets at end    of year	$	—		$	217		$	96		$	204		$	—		$	—		$	—		$	—
Funded status	$	(3	)	$	(4	)	$	(3	)	$	(27	)	$	(25	)	$	(19	)	$	(27	)	$	(20	)
Recognized asset (liability)	$	(3	)	$	(4	)	$	(3	)	$	(27	)	$	(25	)	$	(19	)	$	(27	)	$	(20	)

Pension Assumptions and Strategy

The following assumptions were used to determine the pension benefit obligations and periodic benefit costs as of and for the years ended September 30:

	2021						2020						2019
	Pension Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
Actuarial assumptions as of the year-end    measurement date:
Discount rate		2.2	%		2.1	%		3.1	%		1.7	%		2.6	%		1.8	%
Rate of increase in compensation	N/A				2.9	%	N/A				3.0	%	N/A				3.0	%
Cash balance interest credit rate		2.0	%		1.7	%		0.9	%		1.7	%		0.9	%		1.9	%
Actuarial assumptions used to determine net    periodic benefit cost during the year:
Discount rate - benefit obligation		2.5	%		1.7	%		2.6	%		1.8	%		4.2	%		2.4	%
Discount rate - service cost	N/A				1.7	%	N/A				1.8	%	N/A				2.5	%
Discount rate - interest cost		1.4	%		1.4	%		2.6	%		1.6	%		3.9	%		2.1	%
Expected long-term rate of return on    plan assets	N/A				4.6	%		2.5	%		5.2	%		6.3	%		4.9	%
Rate of increase in compensation	N/A				3.0	%	N/A				3.0	%	N/A				2.7	%
Cash balance interest credit rate		2.1	%		1.7	%		0.9	%		1.9	%		3.3	%		2.0	%

Postretirement Assumptions and Strategy

The following assumptions were used to determine the postretirement benefit obligations and net costs as of and for the years ended September 30:

	2021						2020						2019
	Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
Actuarial assumptions as of the year-end    measurement date:
Discount rate		2.4	%		2.8	%		2.1	%		2.4	%		2.9	%		2.4	%
Initial health care cost trend rate		5.5	%		6.9	%		6.0	%		6.9	%		6.5	%		6.9	%
Actuarial assumptions used to determine    net cost during the year:
Discount rate - benefit obligation		2.1	%		2.4	%		2.9	%		2.4	%		4.1	%		3.2	%
Discount rate - service cost		1.5	%		3.0	%		2.6	%		2.9	%		4.0	%		3.5	%
Discount rate - interest cost		1.4	%		2.1	%		2.5	%		2.3	%		3.7	%		3.1	%
Initial health care cost trend rate		6.0	%		6.9	%		6.5	%		6.9	%		7.0	%		7.0	%

Cabot uses discount rates as of September 30, the plans’ measurement date, to determine future benefit obligations under its U.S. and foreign defined benefit plans. The discount rates for the defined benefit plans in Canada, the Eurozone, Japan, Switzerland, the United Arab Emirates, the United Kingdom and the U.S. are derived from yield curves that reflect high quality corporate bond yield or swap rate information in each region and reflect the characteristics of Cabot’s employee benefit plans. The discount rates for the defined benefit plans in Mexico, the Czech Republic and Indonesia are based on government bond indices that best reflect the durations of the plans, adjusted for credit spreads presented in selected AA corporate bond indices. The rates utilized are selected because they represent long-term, high quality, fixed income benchmarks that approximate the long-term nature of Cabot’s pension obligations and related payouts.

Amounts recognized in the Consolidated Balance Sheets at September 30, 2021 and 2020 related to the Company's defined benefit pension and postretirement benefit plans were as follows:

	September 30
	2021						2020						2021						2020
	Pension Benefits												Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
	(In millions)
Other assets	$	—		$	35		$	—		$	21		$	—		$	—		$	—		$	—
Accounts payable and accrued liabilities	$	(1	)	$	(1	)	$	—		$	(2	)	$	(3	)	$	(1	)	$	(3	)	$	(1	)
Other liabilities	$	(2	)	$	(38	)	$	(3	)	$	(46	)	$	(22	)	$	(18	)	$	(24	)	$	(19	)

Amounts recognized in AOCI at September 30, 2021 and 2020 related to the Company's defined benefit pension and postretirement benefit plans were as follows:

	September 30
	2021				2020				2021					2020
	Pension Benefits								Postretirement Benefits
	U.S.		Foreign		U.S.		Foreign		U.S.			Foreign		U.S.			Foreign
	(In millions)
Net actuarial (gain) loss	$	1	$	20	$	6	$	40	$	(4	)	$	2	$	(4	)	$	4
Net prior service credit		—		—		—		—		—			—		—			—
Balance in accumulated other    comprehensive income (loss), pretax	$	1	$	20	$	6	$	40	$	(4	)	$	2	$	(4	)	$	4

Estimated Future Benefit Payments

The Company expects that the following benefit payments will be made to plan participants in the years from 2022 to 2030:

	Pension Benefits				Postretirement Benefits
Years Ending September 30	U.S.		Foreign		U.S.		Foreign
	(In millions)
2022	$	—	$	10	$	2	$	1
2023	$	—	$	11	$	2	$	1
2024	$	—	$	12	$	2	$	1
2025	$	—	$	11	$	2	$	1
2026	$	—	$	11	$	2	$	1
2027 - 2030	$	1	$	59	$	8	$	4

Postretirement medical benefits are unfunded and impact Cabot’s cash flows as benefits become due, which is expected to be $3 million in fiscal 2022. The Company expects to contribute $3 million to its pension plans in fiscal 2022.

Net periodic defined benefit pension and other postretirement benefit costs include the following components:

	Years Ended September 30
	2021					2020						2019						2021				2020					2019
	Pension Benefits																	Postretirement Benefits
	U.S.		Foreign			U.S.			Foreign			U.S.			Foreign			U.S.		Foreign		U.S.			Foreign		U.S.			Foreign
	(In millions)
Service cost	$	—	$	6		$	1		$	5		$	1		$	7		$	—	$	—	$	—		$	—	$	—		$	—
Interest cost		—		3			4			3			5			5			—		1		1			—		1			1
Expected return on plan    assets		—		(10	)		(3	)		(9	)		(9	)		(10	)		—		—		—			—		—			—
Amortization of prior    service cost		—		—			—			—			—			2			—		—		—			—		(2	)		—
Amortization of net losses		—		3			—			3			—			2			—		—		(1	)		1		(1	)		—
Settlements or    curtailments cost		4		1			3			1			—			(7	)		—		—		—			—		—			—
Other		—		2			—			—			—			—			—		—		—			—		—			—
Net periodic (benefit) cost	$	4	$	5		$	5		$	3		$	(3	)	$	(1	)	$	—	$	1	$	—		$	1	$	(2	)	$	1

Other changes in plan assets and benefit obligations recognized in Other comprehensive income (loss) are as follows:

	Years Ended September 30
	2021						2020						2019					2021					2020					2019
	Pension Benefits																	Postretirement Benefits
	U.S.			Foreign			U.S.			Foreign			U.S.		Foreign			U.S.		Foreign			U.S.		Foreign			U.S.		Foreign
	(In millions)
Net (gains) losses	$	(2	)	$	(15	)	$	(4	)	$	8		$	14	$	(16	)	$	—	$	(2	)	$	1	$	(1	)	$	—	$	2
Prior service (credit) cost		—			(1	)		—			—			—		3			—		—			—		—			—		—
Amortization of prior    service credit		—			—			—			—			—		(2	)		—		—			—		—			2		—
Amortization of prior    unrecognized loss		—			(3	)		—			(3	)		—		(2	)		—		—			1		(1	)		1		—
Loss on divestiture		—			—			—			—			—		(2	)		—		—			—		—			—		—
Settlements or    curtailments cost		(4	)		(1	)		(3	)		(1	)		—		7			—		—			—		—			—		—
Net changes recognized in    Total other comprehensive    (income) loss (1)	$	(6	)	$	(20	)	$	(7	)	$	4		$	14	$	(12	)	$	—	$	(2	)	$	2	$	(2	)	$	3	$	2

⁽¹⁾ The tax impact on pension and other postretirement benefit liability adjustments arising during the period was a tax benefit of $8 million, a tax provision of less than $1 million, and a tax benefit of $5 million for fiscal 2021, 2020, and 2019, respectively.

In fiscal 2019, the Company adjusted the assumptions in its U.K. plan to calculate accrued benefits for a portion of the plan’s participants. As a result of this change, a prior service cost of $2 million was recorded in Other income (expense) in the Consolidated Statements of Operations.

Settlements of Employee Benefit Plans

In fiscal 2019, the Company’s Board of Directors approved a resolution to terminate the U.S. pension plan. The Company commenced the U.S. plan termination process during the third quarter of 2019 and completed the transfer of the U.S. plan’s assets in the first quarter of fiscal 2021. The pension liability was settled through a combination of lump-sum payments and purchased annuities, neither of which required an additional cash contribution. In the fourth quarter of fiscal 2020, the Company recognized a settlement loss of $3 million related to lump-sum payments made to participants who elected this option, which was recorded in Other income (expense) in the Consolidated Statements of Operations. In fiscal 2021, the company recognized an additional $4 million settlement loss in Other income (expense) related to the final asset transfers through purchased annuities.

In fiscal 2019, the Company transferred the majority of the defined benefit obligations and pension plan assets in one of its foreign defined benefit plans to a multi-employer plan. This action moved the administrative, asset custodial, asset investment, actuarial, communication and benefit payment obligations to the multi-employer fund administrator. As a result of the transfer, a pre-tax gain of $7 million was recorded in fiscal 2019, which is included in Other income (expense) in the Consolidated Statements of Operations. In addition, as part of the transfer, the Company recorded a $3 million charge in fiscal 2019 reflecting the Company’s agreement to fund the actuarial loss gap between the terminated plan and the multi-employer plan. This charge is included Other income (expense) in the Consolidated Statements of Operations.

In fiscal 2021 and 2020, Cabot’s pension benefit obligations decreased by $106 million and $47 million, respectively, which was driven by the U.S. pension plan termination and settlement discussed above.

 Plan Assets

The Company’s defined benefit pension plans weighted-average asset allocations at September 30, 2021 and 2020 by asset category, are as follows:

	September 30
	2021						2020
	Pension Assets
	U.S.			Foreign			U.S.			Foreign
Equity securities		—	%		21	%		—	%		39	%
Debt securities		—	%		73	%		95	%		50	%
Real estate		—	%		2	%		—	%		6	%
Cash and other securities		—	%		4	%		5	%		5	%
Total		—	%		100	%		100	%		100	%

To develop the expected long-term rate of return on plan assets assumption, the Company used a capital asset pricing model. The model considers the current level of expected returns on risk-free investments comprised of government bonds, the historical level of the risk premium associated with the other asset classes in which the portfolio is invested, and the expectations for future returns for each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return for each plan.

Cabot’s investment strategy for each of its foreign defined benefit plans is generally based on a set of investment objectives and policies that cover time horizons and risk tolerance levels consistent with plan liabilities. Periodic studies are performed to determine the asset mix that will meet pension obligations at a reasonable cost to the Company. The assets of the defined benefit plans are comprised principally of investments in equity and high-quality fixed income securities, which are broadly diversified across the capitalization and style spectrum and are managed using both active and passive strategies. The weighted average target asset allocation for the foreign plans is 21% in equity, 73% in fixed income, 2% in real estate, and 4% in cash and other securities.

For pension plan assets classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.

For pension plan assets classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.

The fair value of the Company’s pension plan assets at September 30, 2021 and 2020 by asset category is as follows:

	September 30
	2021						2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Total
	(In millions)
Cash	$	—	$	—	$	—	$	4	$	—	$	4
Direct investments:
U.S government bonds		—		—		—		12		—		12
U.S. corporate bonds		—		—		—		84		—		84
Non-U.S. equities		4		—		4		4		—		4
Non-U.S. government bonds		2		—		2		2		—		2
Non-U.S. corporate bonds		3		—		3		3		—		3
Mortgage backed securities		—		1		1		—		1		1
Other fixed income		1		—		1		1		—		1
Total direct investments		10		1		11		106		1		107
Investment funds:
Equity funds(1)		—		42		42		—		76		76
Fixed income funds(2)		—		155		155		—		95		95
Real estate funds(3)		—		3		3		—		12		12
Cash equivalent funds		1		—		1		1		—		1
Total investment funds		1		200		201		1		183		184
Alternative investments:
Insurance contracts(4)		—		5		5		—		5		5
Other alternative investments		—		—		—		—		—		—
Total alternative investments		—		5		5		—		5		5
Total pension plan assets	$	11	$	206	$	217	$	111	$	189	$	300

⁽¹⁾ The equity funds asset class includes funds that invest in U.S. equities as well as equity securities issued by companies incorporated, listed or domiciled in countries in developed and/or emerging markets. These companies may be in the small-, mid- or large-cap categories.

⁽²⁾ The fixed income funds asset class includes investments in high quality funds. High quality fixed income funds primarily invest in low risk U.S. and non-U.S. government securities, investment-grade corporate bonds, mortgages and asset-backed securities. A significant portion of the fixed income funds include investment in long-term bond funds.

⁽³⁾ The real estate funds asset class includes funds that primarily invest in entities which are principally engaged in the ownership, acquisition, development, financing, sale and/or management of income-producing real estate properties, both commercial and residential. These funds typically seek long-term growth of capital and current income that is above average relative to public equity funds.

⁽⁴⁾ Insurance contracts held by the Company’s non-U.S. plans are issued by well-known, highly rated insurance companies.

 Defined Contribution Plans

In addition to benefits provided under the defined benefit and postretirement benefit plans, the Company provides benefits under defined contribution plans. Cabot recognized expenses related to these plans of $18 million in fiscal 2021, $19 million in fiscal 2020, and $20 million in fiscal 2019.