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PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables)
 12 Months Ended
Oct. 31, 2016
PENSION AND OTHER POSTRETIREMENT BENEFITS  
Components of Pension and Postretirement Benefit Costs

The components of net periodic pension cost and the assumptions related to the cost consisted of the following in millions of dollars and in percents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2016

    

2015

    

2014

 

Pensions

 

 

 

 

 

 

 

 

 

 

Service cost

    

$
254

 

$
282

 

$
244

 

Interest cost

 

 
391

 

 
474

 

 
480

 

Expected return on plan assets

 

 
(775)

 

 
(769)

 

 
(776)

 

Amortization of actuarial loss

 

 
211

 

 
223

 

 
177

 

Amortization of prior service cost

 

 
16

 

 
25

 

 
25

 

Other postemployment benefits

 

 
2

 

 
1

 

 
5

 

Settlements/curtailments

 

 
11

 

 
11

 

 
9

 

Net cost

 

$
110

 

$
247

 

$
164

 

Weighted-average assumptions

 

 

 

 

 

 

 

 

 

 

Discount rates - service cost

 

 
4.3%

 

 
4.0%

 

 
4.5%

 

Discount rates - interest cost

 

 
3.4%

 

 
4.0%

 

 
4.5%

 

Rate of compensation increase

 

 
3.8%

 

 
3.8%

 

 
3.8%

 

Expected long-term rates of return

 

 
7.3%

 

 
7.3%

 

 
7.5%

 

 

The components of net periodic postretirement benefits cost and the assumptions related to the cost consisted of the following in millions of dollars and in percents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2016

    

2015

    

2014

 

Health care and life insurance

 

 

 

 

 

 

 

 

 

 

Service cost

 

$
38

 

$
46

 

$
44

 

Interest cost

 

 
204

 

 
259

 

 
267

 

Expected return on plan assets

 

 
(35)

 

 
(55)

 

 
(72)

 

Amortization of actuarial loss

 

 
73

 

 
91

 

 
33

 

Amortization of prior service credit

 

 
(78)

 

 
(77)

 

 
(3)

 

Settlements/curtailments

 

 

 

 

 
1

 

 
(1)

 

Net cost

 

$
202

 

$
265

 

$
268

 

Weighted-average assumptions

 

 

 

 

 

 

 

 

 

 

Discount rates - service cost

 

 
5.0%

 

 
4.2%

 

 
4.7%

 

Discount rates - interest cost

 

 
3.5%

 

 
4.2%

 

 
4.7%

 

Expected long-term rates of return

 

 
6.6%

 

 
7.0%

 

 
7.2%

 

 

Schedule of Benefit Plan Costs Recorded in Net Income and Other Changes in Plan Assets and Benefit Obligations Recorded in Other Comprehensive Income

The previous pension cost in net income and other changes in plan assets and benefit obligations in other comprehensive income in millions of dollars were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

2016

  

2015

  

2014

 

Pensions

 

 

 

 

 

 

 

 

 

 

Net cost

 

$
110

 

$
247

 

$
164

 

Retirement benefit adjustments included in other comprehensive (income) loss:

 

 

 

 

 

 

 

 

 

 

Net actuarial loss

 

 
1,140

 

 
361

 

 
940

 

Prior service cost

 

 
1

 

 
66

 

 

 

 

Amortization of actuarial loss

 

 
(211)

 

 
(223)

 

 
(177)

 

Amortization of prior service cost

 

 
(16)

 

 
(25)

 

 
(25)

 

Settlements/curtailments

 

 
(14)

 

 
(11)

 

 
(9)

 

Total loss recognized in other comprehensive (income) loss

 

 
900

 

 
168

 

 
729

 

Total recognized in comprehensive (income) loss

 

$
1,010

 

$
415

 

$
893

 

 

The previous postretirement benefits cost in net income and other changes in plan assets and benefit obligations in other comprehensive income in millions of dollars were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

2016

  

2015

  

2014

 

Health care and life insurance

 

 

 

 

 

 

 

 

 

 

Net cost

 

$
202

 

$
265

 

$
268

 

Retirement benefit adjustments included
in other comprehensive (income) loss:

 

 

 

 

 

 

 

 

 

 

Net actuarial (gain) loss

 

 
496

 

 
(141)

 

 
748

 

Prior service credit

 

 
(3)

 

 
(3)

 

 
(370)

 

Amortization of actuarial loss

 

 
(73)

 

 
(91)

 

 
(33)

 

Amortization of prior service credit

 

 
78

 

 
77

 

 
3

 

Settlements/curtailments

 

 

 

 

 
(2)

 

 
1

 

Total (gain) loss recognized in other comprehensive (income) loss

 

 
498

 

 
(160)

 

 
349

 

Total recognized in comprehensive (income) loss

 

$
700

 

$
105

 

$
617

 

 

Schedule of Benefit Plan Obligations, Funded Status and the Assumptions Related to Obligations

The benefit plan obligations, funded status and the assumptions related to the obligations at October 31 in millions of dollars follow:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

 

 

 

and

 

 

 

Pensions

 

Life Insurance

 

 

 

2016

 

2015

 

2016

 

2015

 

Change in benefit obligations

 

 

                 

 

 

                 

 

 

               

 

 

               

 

Beginning of year balance

 

$
(12,186)

 

$
(12,190)

 

$
(6,084)

 

$
(6,304)

 

Service cost

 

 
(254)

 

 
(282)

 

 
(38)

 

 
(46)

 

Interest cost

 

 
(391)

 

 
(474)

 

 
(204)

 

 
(259)

 

Actuarial gain (loss)

 

 
(1,001)

 

 
(174)

 

 
(478)

 

 
172

 

Amendments

 

 
(1)

 

 
(66)

 

 
3

 

 
3

 

Benefits paid

 

 
702

 

 
781

 

 
321

 

 
344

 

Health care subsidies

 

 

 

 

 

 

 

 
(16)

 

 
(20)

 

Other postemployment benefits

 

 
(2)

 

 
(1)

 

 

 

 

 

 

 

Settlements/curtailments

 

 
6

 

 
2

 

 

 

 

 
1

 

Foreign exchange and other

 

 
41

 

 
218

 

 
(4)

 

 
25

 

End of year balance

 

 
(13,086)

 

 
(12,186)

 

 
(6,500)

 

 
(6,084)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in plan assets (fair value)

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year balance

 

 
11,164

 

 
11,447

 

 
689

 

 
957

 

Actual return on plan assets

 

 
628

 

 
582

 

 
17

 

 
24

 

Employer contribution

 

 
80

 

 
83

 

 
47

 

 
48

 

Benefits paid

 

 
(702)

 

 
(781)

 

 
(321)

 

 
(344)

 

Settlements

 

 
(3)

 

 
(2)

 

 

 

 

 

 

 

Foreign exchange and other

 

 
(30)

 

 
(165)

 

 
3

 

 
4

 

End of year balance

 

 
11,137

 

 
11,164

 

 
435

 

 
689

 

Funded status

 

$
(1,949)

 

$
(1,022)

 

$
(6,065)

 

$
(5,395)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average assumptions

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rates

 

 
3.6%

 

 
4.1%

 

 
3.8%

 

 
4.3%

 

Rate of compensation increase

 

 
3.8%

 

 
3.8%

 

 

 

 

 

 

 

 

Schedule of Amounts Recognized in Balance Sheet and Accumulated Other Comprehensive Income - Pretax

The amounts recognized at October 31 in millions of dollars consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

 

 

 

and

 

 

 

Pensions

 

Life Insurance

 

 

 

2016

 

2015

 

2016

 

2015

 

Amounts recognized in
balance sheet

 

 

               

 

 

              

 

 

               

 

 

              

 

Noncurrent asset

 

$
94

 

$
216

 

 

 

 

 

 

 

Current liability

 

 
(33)

 

 
(44)

 

$
(32)

 

$
(20)

 

Noncurrent liability

 

 
(2,010)

 

 
(1,194)

 

 
(6,033)

 

 
(5,375)

 

Total

 

$
(1,949)

 

$
(1,022)

 

$
(6,065)

 

$
(5,395)

 

Amounts recognized in accumulated other comprehensive income – pretax

 

 

 

 

 

 

 

 

 

 

 

 

 

Net actuarial loss

 

$
5,309

 

$
4,393

 

$
1,865

 

$
1,442

 

Prior service cost (credit)

 

 
67

 

 
83

 

 
(259)

 

 
(334)

 

Total

 

$
5,376

 

$
4,476

 

$
1,606

 

$
1,108

 

 

Schedule of Accumulated Other Comprehensive Income Expected to be Amortized as Net Expense (Income) During Fiscal 2015

The amounts in accumulated other comprehensive income that are expected to be amortized as net expense (income) during fiscal 2017 in millions of dollars follow:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

and

 

 

    

    Pensions    

    

Life Insurance 

 

Net actuarial loss

 

$
240

 

$
101

 

Prior service cost (credit)

 

 
12

 

 
(77)

 

Total

 

$
252

 

$
24

 

 

Schedule of Future Benefits Expected to be Paid from the Benefit Plans

The benefits expected to be paid from the benefit plans, which reflect expected future years of service, are as follows in millions of dollars:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

    

 

 

and

 

 

    

    Pensions    

    

Life Insurance*

 

2017

 

$
717

 

$
339

 

2018

 

 
721

 

 
353

 

2019

 

 
709

 

 
356

 

2020

 

 
707

 

 
358

 

2021

 

 
696

 

 
362

 

2022 to 2026

 

 
3,454

 

 
1,834

 

*       Net of prescription drug group benefit subsidy under Medicare Part D.

Fair Values of Pension Plan and Health Care Assets

The fair values of the pension plan assets at October 31, 2016 follow in millions of dollars:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Level 1

 

Level 2

 

Cash and short-term investments

 

$
684

 

$
322

 

$
362

 

Equity:

 

 

 

 

 

 

 

 

 

 

U.S. equity securities and funds

 

 
3,000

 

 
2,965

 

 
35

 

International equity securities and funds

 

 
1,711

 

 
1,697

 

 
14

 

Fixed Income:

 

 

 

 

 

 

 

 

 

 

Government and agency securities

 

 
440

 

 
224

 

 
216

 

Corporate debt securities

 

 
1,205

 

 

 

 

 
1,205

 

Mortgage-backed securities

 

 
39

 

 

 

 

 
39

 

Fixed income funds

 

 
20

 

 
20

 

 

 

 

Real estate

 

 
121

 

 
118

 

 
3

 

Derivative contracts - assets*

 

 
191

 

 
3

 

 
188

 

Derivative contracts - liabilities**

 

 
(59)

 

 
(14)

 

 
(45)

 

Receivables, payables and other

 

 
6

 

 
5

 

 
1

 

Securities lending collateral

 

 
693

 

 
108

 

 
585

 

Securities lending liability

 

 
(693)

 

 
(108)

 

 
(585)

 

Securities sold short

 

 
(338)

 

 
(333)

 

 
(5)

 

Total of Level 1 and Level 2 assets

 

 
7,020

 

$
5,007

 

$
2,013

 

Investments at net asset value***:

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 
216

 

 

 

 

 

 

 

U.S. equity funds

 

 
30

 

 

 

 

 

 

 

International equity funds

 

 
595

 

 

 

 

 

 

 

Corporate debt funds

 

 
25

 

 

 

 

 

 

 

Fixed income funds

 

 
482

 

 

 

 

 

 

 

Real estate

 

 
515

 

 

 

 

 

 

 

Hedge funds

 

 
624

 

 

 

 

 

 

 

Private equity/venture capital

 

 
1,603

 

 

 

 

 

 

 

Other investments

 

 
27

 

 

 

 

 

 

 

Total net assets

 

$
11,137

 

 

 

 

 

 

 

*       Includes contracts for interest rates of $125 million, foreign currency of $59 million, equity of $4 million and other of $3 million.

**    Includes contracts for interest rates of $19 million, foreign currency of $33 million, equity of $6 million and other of $1 million.

***  Investments are measured at fair value using the net asset value per share practical expedient, and therefore, are not classified in the fair value hierarchy.

 

 

The fair values of the health care assets at October 31, 2016 follow in millions of dollars:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Level 1

 

Level 2

 

Cash and short-term investments

 

$
32

 

$
27

 

$
5

 

Equity:

 

 

 

 

 

 

 

 

 

 

U.S. equity securities and funds

 

 
138

 

 
138

 

 

 

 

International equity securities and funds

 

 
25

 

 
25

 

 

 

 

Fixed Income:

 

 

 

 

 

 

 

 

 

 

Government and agency securities

 

 
43

 

 
40

 

 
3

 

Corporate debt securities

 

 
30

 

 

 

 

 
30

 

Mortgage-backed securities

 

 
11

 

 

 

 

 
11

 

Real estate

 

 
2

 

 
2

 

 

 

 

Derivative contracts - assets*

 

 
3

 

 

 

 

 
3

 

Securities lending collateral

 

 
48

 

 
11

 

 
37

 

Securities lending liability

 

 
(48)

 

 
(11)

 

 
(37)

 

Securities sold short

 

 
(5)

 

 
(5)

 

 

 

 

Total of Level 1 and Level 2 assets

 

 
279

 

$
227

 

$
52

 

Investments at net asset value**:

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 
3

 

 

 

 

 

 

 

International equity funds

 

 
60

 

 

 

 

 

 

 

Fixed income funds

 

 
20

 

 

 

 

 

 

 

Real estate funds

 

 
7

 

 

 

 

 

 

 

Hedge funds

 

 
44

 

 

 

 

 

 

 

Private equity/venture capital

 

 
22

 

 

 

 

 

 

 

Total net assets

 

$
435

 

 

 

 

 

 

 

*    Includes contracts for interest rates of $2 million and foreign currency of $1 million.

**  Investments are measured at fair value using the net asset value per share practical expedient, and therefore, are not classified in the fair value hierarchy.

 

 

The fair values of the pension plan assets at October 31, 2015 follow in millions of dollars:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Level 1

 

Level 2

 

Cash and short-term investments

 

$
867

 

$
378

 

$
489

 

Equity:

 

 

 

 

 

 

 

 

 

 

U.S. equity securities and funds

 

 
3,075

 

 
3,053

 

 
22

 

International equity securities

 

 
1,802

 

 
1,781

 

 
21

 

Fixed Income:

 

 

 

 

 

 

 

 

 

 

Government and agency securities

 

 
386

 

 
197

 

 
189

 

Corporate debt securities

 

 
751

 

 
1

 

 
750

 

Mortgage-backed securities

 

 
83

 

 

 

 

 
83

 

Fixed income funds

 

 
26

 

 
26

 

 

 

 

Real estate

 

 
133

 

 
130

 

 
3

 

Derivative contracts - assets*

 

 
190

 

 
25

 

 
165

 

Derivative contracts - liabilities**

 

 
(26)

 

 
(4)

 

 
(22)

 

Receivables, payables and other

 

 
4

 

 
3

 

 
1

 

Securities lending collateral

 

 
745

 

 
92

 

 
653

 

Securities lending liability

 

 
(745)

 

 
(92)

 

 
(653)

 

Securities sold short

 

 
(470)

 

 
(466)

 

 
(4)

 

Total of Level 1 and Level 2 assets

 

 
6,821

 

$
5,124

 

$
1,697

 

Investments at net asset value***:

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 
195

 

 

 

 

 

 

 

U.S. equity funds

 

 
33

 

 

 

 

 

 

 

International equity funds

 

 
540

 

 

 

 

 

 

 

Corporate debt funds

 

 
26

 

 

 

 

 

 

 

Fixed income funds

 

 
495

 

 

 

 

 

 

 

Real estate

 

 
501

 

 

 

 

 

 

 

Hedge funds

 

 
625

 

 

 

 

 

 

 

Private equity/venture capital

 

 
1,604

 

 

 

 

 

 

 

Other investments

 

 
324

 

 

 

 

 

 

 

Total net assets

 

$
11,164

 

 

 

 

 

 

 

*      Includes contracts for interest rates of $137 million, foreign currency of $17 million, equity of $30 million and other of $6 million.

**    Includes contracts for interest rates of $7 million, foreign currency of $15 million and other of $4 million.

***  Investments are measured at fair value using the net asset value per share practical expedient, and therefore, are not classified in the fair value hierarchy.

 

The fair values of the health care assets at October 31, 2015 follow in millions of dollars:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Level 1

 

Level 2

 

Cash and short-term investments

 

$
35

 

$
25

 

$
10

 

Equity:

 

 

 

 

 

 

 

 

 

 

U.S. equity securities and funds

 

 
229

 

 
229

 

 

 

 

International equity securities

 

 
39

 

 
39

 

 

 

 

Fixed Income:

 

 

 

 

 

 

 

 

 

 

Government and agency securities

 

 
84

 

 
78

 

 
6

 

Corporate debt securities

 

 
35

 

 

 

 

 
35

 

Mortgage-backed securities

 

 
13

 

 

 

 

 
13

 

Fixed income funds

 

 
1

 

 
1

 

 

 

 

Real estate

 

 
4

 

 
4

 

 

 

 

Derivative contracts - assets*

 

 
4

 

 
1

 

 
3

 

Receivables, payables and other

 

 
1

 

 
1

 

 

 

 

Securities lending collateral

 

 
65

 

 
9

 

 
56

 

Securities lending liability

 

 
(65)

 

 
(9)

 

 
(56)

 

Securities sold short

 

 
(10)

 

 
(10)

 

 

 

 

Total of Level 1 and Level 2 assets

 

 
435

 

$
368

 

$
67

 

Investments at net asset value**:

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 
4

 

 

 

 

 

 

 

International equity funds

 

 
103

 

 

 

 

 

 

 

Fixed income funds

 

 
47

 

 

 

 

 

 

 

Real estate funds

 

 
10

 

 

 

 

 

 

 

Hedge funds

 

 
50

 

 

 

 

 

 

 

Private equity/venture capital

 

 
34

 

 

 

 

 

 

 

Other investments

 

 
6

 

 

 

 

 

 

 

Total net assets

 

$
689

 

 

 

 

 

 

 

*      Includes contracts for interest rates of $2 million, foreign currency of $1 million and equity of $1 million.

**    Investments are measured at fair value using the net asset value per share practical expedient, and therefore, are not classified in the fair value hierarchy.