Employee Benefit Plans

12 Months Ended

Sep. 30, 2023

Retirement Benefits [Abstract]

Employee Benefit Plans

NOTE L – EMPLOYEE BENEFIT PLANS

Pension plans

Ashland and its subsidiaries have several contributory and noncontributory qualified defined benefit pension plans that generally cover international employees and a small portion of certain U.S. manufacturing union employees. Pension obligations for applicable employees of non-U.S. consolidated subsidiaries are provided for in accordance with local practices and regulations of the respective countries. The majority of these foreign pension plans are closed to new participants while those that remain open relate to areas where jurisdictions require plans to operate within the applicable country.

Benefits for those eligible for Ashland’s U.S. pension plans generally are based on employees’ years of service and compensation during the years immediately preceding their retirement. The remaining U.S. plans are still open for enrollment for qualifying union employees within certain manufacturing sites.

Other postretirement benefit plans

Ashland and its subsidiaries maintain limited health care for certain eligible employees in the U.S. who are retired or disabled. Ashland shares the costs of providing health care coverage with certain eligible retired employees through premiums, deductibles and coinsurance provisions. Ashland funds its share of the costs of the postretirement benefit plans as the benefits are paid.

Postretirement health care plans include a limit on Ashland’s share of costs for recent and future retirees. The assumed pre-65 health care cost increase trend rate as of September 30, 2023 was 6.6% and continues to be reduced to 4.5% in 2040 and thereafter. The assumptions used to project the liability anticipate future cost-sharing changes to the written plans that are consistent with the increase in health care costs.

Plan Amendments and Remeasurements

Following the completion of the sale of its Performance Adhesives business segment on February 28, 2022, the post-retirement benefits for approximately 40 employees transferred to Arkema, all of whom participated in a non-contributory defined benefit plan in the U.S., were frozen. This resulted in a decrease in total expected future years of service within the plan and required Ashland to remeasure the plan as February 28, 2022. As a result, Ashland recorded a $1 million actuarial gain within the other net periodic benefit loss (income) caption of the Statements of Consolidated Comprehensive Income (Loss) for fiscal 2022.

Net periodic benefit loss (income) allocation

Consistent with Ashland’s historical accounting policies, service cost for continuing operations is allocated to each reportable segment, excluding the Unallocated and other segment, while all other costs for continuing operations are recorded within the Unallocated and other segment.

The following table summarizes the components of pension and other postretirement benefit costs for continuing operations and the assumptions used to determine net periodic benefit loss (income) for the plans.

	Pension benefits									Other postretirement benefits
(In millions)	2023			2022			2021			2023			2022			2021
Net periodic benefit loss (income)
Service cost (a)	$	3		$	4		$	5		$	1		$	1		$	1
Interest cost (b)		13			8			6			2			2			2
Curtailment, settlement and other (b)		—			(1	)		—			—			—			—
Expected return on plan assets (b)		(7	)		(7	)		(8	)		—			—			—
Actuarial (gain) loss (b)		—			(16	)		3			(2	)		(8	)		(2	)
	$	9		$	(12	)	$	6		$	1		$	(5	)	$	1
Weighted-average plan assumptions (c)
Discount rate for service cost		4.56	%		2.99	%		1.81	%		5.80	%		3.19	%		3.15	%
Discount rate for interest cost		5.44	%		3.33	%		1.69	%		5.54	%		2.10	%		1.93	%
Rate of compensation increase		3.07	%		2.50	%		2.53	%
Expected long-term rate of return on plan assets		4.25	%		2.89	%		2.43	%

(a)Service cost is classified within the selling, general and administrative expense and cost of sales captions on the Statements of Consolidated Comprehensive Income (Loss).

(b)These components are classified within the other net periodic benefit loss (income) caption on the Statements of Consolidated Comprehensive Income (Loss).

(c)The plan assumptions discussed are a blended weighted-average rate for Ashland’s U.S. and non-U.S. plans.

The changes in prior service credit recognized in accumulated other comprehensive income during both 2023 and 2022 were less than $1 million each. At September 30, 2023, Ashland expects to recognize less than $1 million of the prior service credit in accumulated other comprehensive income as net periodic benefit loss (income) during the next fiscal year.

At September 30, 2023 and 2022, the amounts included in accumulated other comprehensive income are shown in the following table.

	Pension				Postretirement
(In millions)	2023		2022		2023		2022
Prior service cost	$	2	$	2	$	—	$	—

Obligations and funded status

Actuarial valuations are performed for the pension and other postretirement benefit plans to determine Ashland’s obligation for each plan. In accordance with U.S. GAAP, Ashland recognizes the unfunded status of the plans as a liability in the Consolidated Balance Sheets. Summaries of the change in benefit obligations, plan assets, funded status of the plans, amounts recognized in the balance sheet, and assumptions used to determine the benefit obligations for 2023 and 2022 are as follows:

							Other postretirement
	Pension plans						benefit plans
(In millions)	2023			2022			2023			2022
Change in benefit obligations
Benefit obligations at October 1	$	250		$	422		$	36		$	47
Service cost		3			4			1			1
Interest cost		13			8			2			2
Participant contributions		—			—			—			—
Benefits paid		(16	)		(16	)		(4	)		(6	)
Actuarial (gain) loss		(10	)		(123	)		(1	)		(8	)
Curtailments		—			(1	)		—			—
Foreign currency exchange rate changes		15			(38	)		—			—
Other (including acquisitions)		—			(1	)		—			—
Settlements		—			(5	)		—			—
Benefit obligations at September 30	$	255		$	250		$	34		$	36
Change in plan assets
Value of plan assets at October 1	$	201		$	351		$	—		$	—
Actual return on plan assets		(2	)		(100	)		—			—
Employer contributions		8			5			—			—
Participant contributions		—			—			—			—
Benefits paid		(16	)		(16	)		—			—
Foreign currency exchange rate changes		14			(33	)		—			—
Settlements		—			(5	)		—			—
Other		(2	)		(1	)		—			—
Value of plan assets at September 30	$	203		$	201		$	—		$	—
Unfunded status of the plans	$	(52	)	$	(49	)	$	(34	)	$	(36	)
Amounts recognized in the balance sheet
Other assets (noncurrent)	$	17		$	21		$	—		$	—
Accrued expenses and other liabilities		(4	)		(3	)		(3	)		(4	)
Employee benefit obligations		(65	)		(67	)		(31	)		(32	)
Net amount recognized	$	(52	)	$	(49	)	$	(34	)	$	(36	)
Weighted-average plan assumptions
Discount rate		5.43	%		5.09	%		5.72	%		2.98	%
Rate of compensation increase		3.07	%		2.50	%

The accumulated benefit obligation for all pension plans was $250 million at September 30, 2023 and $245 million at September 30, 2022. All Ashland pension plans are either qualified U.S. or non-US plans. Information for pension plans with an accumulated benefit obligation in excess of plan assets follows:

(In millions)	2023		2022
Projected benefit obligation	$	149	$	146
Accumulated benefit obligation		144		141
Fair value of plan assets		80		76

Plan assets

The expected long-term rate of return on pension plan assets was 4.25% and 2.89% for September 30, 2023 and 2022, respectively. The basis for determining the expected long-term rate of return is a combination of future return assumptions for various asset classes in Ashland’s investment portfolio, historical analysis of previous returns, market indices and a projection of inflation.

The following table summarizes the various investment categories that the pension plan assets are invested in and the applicable fair value hierarchy that the financial instruments are classified within these investment categories as of September 30, 2023. For additional information and a detailed description of each level within the fair value hierarchy, see Note E.

			Quoted prices
			in active		Significant
			markets for		other		Significant
			identical		observable		unobservable
	Total fair		assets		inputs		inputs
(In millions)	value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	11	$	11	$	—	$	—
U.S. Government securities		6		—		6		—
Non-U.S. Government securities		39		—		39		—
Corporate debt instruments		80		—		80		—
Listed real assets		9		—		9		—
Asset-backed securities		7		—		7		—
Corporate stocks		25		—		25		—
Insurance contracts		26		—		26		—
Total assets at fair value	$	203	$	11	$	192	$	—

The following table summarizes the various investment categories that the pension plan assets are invested in and the applicable fair value hierarchy that the financial instruments are classified within these investment categories as of September 30, 2022.

			Quoted prices
			in active		Significant
			markets for		other		Significant
			identical		observable		unobservable
	Total fair		assets		inputs		inputs
(In millions)	value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	1	$	1	$	—	$	—
U.S. Government securities		10		—		10		—
Non-U.S. Government securities		24		—		24		—
Corporate debt instruments		90		—		90		—
Listed real assets		9		—		9		—
Asset-backed securities		17		—		17		—
Corporate stocks		27		—		27		—
Insurance contracts		23		—		23		—
Total assets at fair value	$	201	$	1	$	200	$	—

Ashland’s pension plan holds a variety of investments designed to diversify risk. Investments classified as a Level 1 fair value measure principally represent marketable securities priced in active markets. Cash and cash equivalents and public equity and debt securities are well diversified and invested in U.S. and international small-to-large companies across various asset managers and styles. Investments classified as a Level 2 fair value measure principally represents fixed-income securities and other investment grade corporate bonds and debt obligations.

Investments and Strategy

In developing an investment strategy for its defined benefit plans, Ashland has considered the following factors: the nature of the plans’ liabilities, the allocation of liabilities between active, deferred and retired members, the funded status of the plans, the applicable investment horizon, the respective size of the plans and historical and expected capital market returns. Ashland’s U.S. pension plan assets are managed by outside investment managers, which are monitored against investment return benchmarks and Ashland’s established investment strategy. Investment managers are selected based on an analysis of, among other things, their investment process, historical investment results, frequency of management turnover, cost structure and assets under management. Assets are periodically reallocated between investment managers to maintain an appropriate asset mix and diversification of investments and to optimize returns.

The current asset allocation for the U.S. plans is 47.6% fixed income securities, 38.8% equity securities and 13.6% other securities. Fixed income securities primarily include cash and cash equivalents, long duration corporate debt obligations and U.S. government debt obligations. In addition, Ashland’s non-U.S. plan fixed income securities include insurance contracts. Equity securities are comprised solely of traditional public equity investments. Investment managers may employ a limited use of derivatives to gain efficient exposure to markets.

Ashland’s investment strategy and management practices relative to plan assets of non-U.S. plans generally are consistent with those for U.S. plans, except in those countries where investment of plan assets is dictated by applicable regulations. Although the investment allocation may vary based on funding percentages and whether plans are still accruing additional liabilities, the weighted-average asset allocations for Ashland’s U.S. and non-U.S. plans at September 30, 2023 and 2022 by asset category follow.

		Actual at September 30
(In millions)	Target	2023			2022
Plan assets allocation
Equity securities	5 - 45%		18	%		14	%
Fixed income securities	55 - 95%		78	%		81	%
Other	0 - 5%		4	%		5	%
			100	%		100	%

Cash flows

During 2023 and 2022, Ashland contributed $3 million and less than $1 million to its U.S. pension plans, respectively, and $5 million in each year to its non-U.S. pension plans, respectively. Ashland expects to contribute approximately $6 million to its U.S. pension plans and expects to contribute approximately $5 million to its non-U.S. pension plans during 2024.

The following benefit payments, which reflect future service expectations, are projected to be paid from plan assets in each of the next five years and in aggregate for five years thereafter.

			Other
	Pension		postretirement
(In millions)	benefits		benefits
2024	$	15	$	3
2025		16		3
2026		17		3
2027		18		3
2028		17		3
2029 - 2033		90		15

Other plans

Ashland sponsors savings plans to assist eligible employees in providing for retirement or other future needs. Under such plans, company contributions amounted to $23 million in 2023 and 2022, respectively, and $21 million in 2021. Ashland also sponsors various other employee benefit plans, some of which are required by different countries. The total noncurrent liabilities associated with these plans was $4 million for September 30, 2023 and 2022, respectively.