Employee Benefits

Defined Contribution Savings Plans

Aon maintains defined contribution savings plans for the benefit of its U.S, U.K, Netherlands and Canada employees. The expense recognized for these plans is included in Compensation and benefits in the Consolidated Statements of Income, as follows (in millions):



Years ended December 31	2014		2013		2012
U.S.	$	123	$	123	$	115
U.K.	42		45		41
Other (1)	30		18		13
	$	195	$	186	$	169

(1) Other includes the Netherlands and Canada

Pension and Other Post-retirement Benefits

The Company sponsors defined benefit pension and post-retirement health and welfare plans that provide retirement, medical, and life insurance benefits. The post-retirement healthcare plans are contributory, with retiree contributions adjusted annually, and the life insurance and pension plans are generally noncontributory. The significant U.S, U.K, Netherlands and Canadian pension plans are closed to new entrants.

Pension Plans

The following tables provide a reconciliation of the changes in the projected benefit obligations and fair value of assets for the years ended December 31, 2014 and 2013 and a statement of the funded status as of December 31, 2014 and 2013, for the material U.K. plans, U.S. plans and other plans, which are located in the Netherlands and Canada. These plans represent approximately 93% of the Company's projected benefit obligations.



	U.K.						U.S.						Other
(millions)	2014			2013			2014			2013			2014			2013
Change in projected benefit obligation
At January 1	$	5,106		$	4,944		$	2,744		$	2,884		$	1,252		$	1,323
Service cost	1			1			2			7			—			18
Interest cost	230			210			129			114			47			45
Participant contributions	—			—			—			—			—			1
Plan amendment	—			—			—			12			—			—
Curtailments	—			—			—			—			(16		)	(1		)
Plan transfer and acquisitions	—			—			13			115			—			—
Actuarial loss (gain)	(211		)	145			265			17			(5		)	1
Benefit payments	(192		)	(186		)	(130		)	(128		)	(51		)	(44		)
Actual expenses	—			—			—			—			(2		)	(1		)
Change in discount rate	902			(95		)	327			(277		)	324			(85		)
Foreign currency impact	(307		)	87			—			—			(150		)	(5		)
At December 31	$	5,529		$	5,106		$	3,350		$	2,744		$	1,399		$	1,252
Accumulated benefit obligation at end of year	$	5,529		$	5,106		$	3,350		$	2,744		$	1,316		$	1,177
Change in fair value of plan assets
At January 1	$	5,398		$	4,860		$	1,855		$	1,631		$	1,061		$	1,009
Actual return on plan assets	1,199			304			190			199			253			34
Participant contributions	—			—			—			—			—			1
Employer contributions	166			316			121			153			28			55
Plan transfer and acquisitions	—			—			—			—			—			—
Benefit payments	(192		)	(186		)	(130		)	(128		)	(51		)	(44		)
Actual Expenses	—			—			—			—			(2		)	(1		)
Foreign currency impact	(347		)	104			—			—			(128		)	7
At December 31	$	6,224		$	5,398		$	2,036		$	1,855		$	1,161		$	1,061
Market related value at end of year	$	6,224		$	5,398		$	1,950		$	1,765		$	1,161		$	1,061
Amount recognized in Statement of Financial Position at December 31
Funded status	$	695		$	292		$	(1,314	)	$	(889	)	$	(238	)	$	(191	)
Unrecognized prior-service cost	22			24			11			12			3			3
Unrecognized loss	1,687			2,012			1,737			1,219			456			402
Net amount recognized	$	2,404		$	2,328		$	434		$	342		$	221		$	214

Amounts recognized in the Consolidated Statements of Financial Position consist of (in millions):



	U.K.						U.S.						Other
	2014			2013			2014			2013			2014			2013
Prepaid benefit cost (1)	$	918		$	549		$	—		$	—		$	—		$	1
Accrued benefit liability (2)	(223		)	(257		)	(1,314		)	(889		)	(238		)	(192		)
Accumulated other comprehensive loss	1,709			2,036			1,748			1,231			459			405
Net amount recognized	$	2,404		$	2,328		$	434		$	342		$	221		$	214


(1)	Included in Other non-current assets


(2)	Included in Pension, other post retirement, and post employment liabilities

Amounts recognized in Accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at December 31, 2014 and 2013 consist of (in millions):



	U.K.				U.S.				Other
	2014		2013		2014		2013		2014		2013
Net loss	$	1,687	$	2,012	$	1,737	$	1,219	$	456	$	402
Prior service cost	22		24		11		12		3		3
	$	1,709	$	2,036	$	1,748	$	1,231	$	459	$	405

In 2014, U.S. plans with a projected benefit obligation ("PBO") and an accumulated benefit obligation ("ABO") in excess of the fair value of plan assets had a PBO of $3.3 billion, an ABO of $3.3 billion, and plan assets of $2.0 billion. U.K. plans with a PBO in excess of the fair value of plan assets had a PBO of $1.3 billion and plan assets with a fair value of $1.1 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $1.3 billion and plan assets with a fair value of $1.1 billion. Other plans with a PBO in excess of the fair value of plan assets had a PBO of $1.4 billion and plan assets with a fair value of $1.2 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $1.3 billion and plan assets with a fair value of $1.2 billion.

In 2013, U.S. plans with a PBO and an ABO in excess of the fair value of plan assets had a PBO of $2.7 billion, an ABO of $2.7 billion, and plan assets of $1.9 billion. U.K. plans with a PBO in excess of the fair value of plan assets had a PBO of $1.2 billion and plan assets with a fair value of $1.0 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $1.2 billion and plan assets with a fair value of $1.0 billion. Other plans with a PBO in excess of the fair value of plan assets had a PBO of $1.2 billion and plan assets with a fair value of $1.0 billion, and plans with an ABO in excess of the fair value of plan assets had an ABO of $0.4 billion and plan assets with a fair value of $0.3 billion.

The following table provides the components of net periodic benefit cost for the plans (in millions):



	U.K.									U.S.									Other
	2014			2013			2012			2014			2013			2012			2014			2013			2012
Service cost	$	1		$	1		$	1		$	2		$	7		$	—		$	—		$	18		$	14
Interest cost	230			210			217			129			114			119			47			45			48
Expected return on plan assets	(326		)	(302		)	(274		)	(157		)	(139		)	(127		)	(59		)	(59		)	(49		)
Amortization of prior-service cost	1			1			1			2			—			—			—			—			—
Amortization of net actuarial loss	52			49			43			42			52			43			10			23			17
Curtailment loss (gain) and other	—			—			—			—			—			—			(2		)	—			—
Net periodic benefit cost	$	(42	)	$	(41	)	$	(12	)	$	18		$	34		$	35		$	(4	)	$	27		$	30

The weighted-average assumptions used to determine future benefit obligations are as follows:



	U.K.		U.S.		Other
	2014	2013	2014	2013	2014	2013
Discount rate	3.70%	4.55%	3.37-4.08%	3.97-4.87%	2.03-3.91%	3.60 - 4.71%
Rate of compensation increase	3.35-4.05%	3.70 - 4.40%	N/A	N/A	2.25-3.50%	2.25 - 3.50%
Underlying price inflation	1.95%	2.4%	N/A	N/A	2.00-2.50%	1.50 - 2.50%

The weighted-average assumptions used to determine the net periodic benefit cost are as follows:



	U.K.			U.S.			Other
	2014	2013	2012	2014	2013	2012	2014	2013	2012
Discount rate	4.55%	4.45%	4.80%	3.97- 4.87%	3.73 - 4.05%	4.33 – 4.60%	3.60- 4.71%	3.25 - 3.89%	4.40 - 4.94%
Expected return on plan assets	6.00%	6.30%	6.30%	8.80%	8.80%	8.80%	4.70 - 6.50%	4.60 - 6.50%	4.90 - 6.75%
Rate of compensation increase	3.70- 4.40%	3.25 - 3.85%	3.55%	NA	N/A	N/A	2.25- 3.50%	2.25 - 3.50%	2.25 - 3.50%

The amounts in Accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during 2015 are $56 million in the U.S. and $54 million outside the U.S.

Expected Return on Plan Assets

To determine the expected long-term rate of return on plan assets, the historical performance, investment community forecasts and current market conditions are analyzed to develop expected returns for each asset class used by the plans. The expected returns for each asset class are weighted by the target allocations of the plans. The expected return on plan assets in the U.S. of 8.8% reflects a portfolio that is seeking asset growth through a higher equity allocation while maintaining prudent risk levels. The portfolio contains certain assets that have historically resulted in higher returns and other financial instruments to minimize downside risk.

No plan assets are expected to be returned to the Company during 2015.

Fair value of plan assets

The Company determined the fair value of plan assets through numerous procedures based on the asset class and available information. See Note 15 "Fair Value Measurements and Financial Instruments" for a description of the procedures performed to determine the fair value of the plan assets.

The fair values of the Company's U.S. pension plan assets at December 31, 2014 and December 31, 2013, by asset category, are as follows (in millions):



				Fair Value Measurements Using
Asset Category	Balance at December 31, 2014			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Cash and cash equivalents (1)	$	68		$	68				$	—
Equity investments: (2)
Large cap domestic	329			329		—			—
Small cap domestic	85			22		63			—
Large cap international	258			114		144			—
Equity derivatives	285			209		76			—
Fixed income investments: (3)
Corporate bonds	503			—		151			352
Government and agency bonds	109			29		80			—
Asset-backed securities	20			—		20			—
Fixed income derivatives	49					49			—
Other investments:
Alternative investments (4)	272			—		—			272
Commodity derivatives (5)	(8		)	—		(8		)	—
Real estate and REITS (6)	66			66		—			—
Total	$	2,036		$	837	$	575		$	624


(1)	Consists of cash and institutional short-term investment funds.


(2)	Consists of equity securities, equity derivatives, and pooled equity funds.


(3)	Consists of corporate and government bonds, asset-backed securities, and fixed income derivatives.


(4)	Consists of limited partnerships, private equity and hedge funds.


(5)	Consists of long-dated options on a commodity index.


(6)	Consists of exchange traded REITS.



			Fair Value Measurements Using
Asset Category	Balance at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents (1)	$	53	$	53	$	—	$	—
Equity investments: (2)
Large cap domestic	303		303		—		—
Small cap domestic	66		5		61		—
Large cap international	212		66		146		—
Equity derivatives	361		146		215		—
Fixed income investments: (3)
Corporate bonds	395		—		395		—
Government and agency bonds	96		—		96		—
Asset-backed securities	25		—		25		—
Fixed income derivatives	13		—		13		—
Other investments:
Alternative investments (4)	266		—		—		266
Commodity derivatives (5)	14		—		14		—
Real estate and REITS (6)	51		51		—		—
Total	$	1,855	$	624	$	965	$	266


(1)	Consists of cash and institutional short-term investment funds.


(2)	Consists of equity securities, equity derivatives, and pooled equity funds.


(3)	Consists of corporate and government bonds, asset-backed securities, and fixed income derivatives.


(4)	Consists of limited partnerships, private equity and hedge funds.


(5)	Consists of long-dated options on a commodity index.


(6)	Consists of exchange traded REITS.

The following table presents the changes in the Level 3 fair-value category in the Company's U.S. pension plans for the years ended December 31, 2014 and December 31, 2013 (in millions):



	Fair Value Measurement Using Level 3 Inputs
Balance at January 1, 2013	$	262
Actual return on plan assets:
Relating to assets still held at December 31, 2013	26
Relating to assets sold during 2013	4
Purchases, sales and settlements—net	(26		)
Transfer in/(out) of Level 3	—
Balance at December 31, 2013	266
Actual return on plan assets:
Relating to assets still held at December 31, 2014	32
Relating to assets sold during 2014	5
Purchases, sales and settlements—net	321
Transfer in/(out) of Level 3	—
Balance at December 31, 2014	$	624

The fair values of the Company's major U.K. pension plan assets at December 31, 2014 and December 31, 2013, by asset category, are as follows (in millions):



			Fair Value Measurements Using
	Balance at December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	224	$	224	$	—	$	—
Equity investments:
Pooled funds: (1)
Global	203				203		—
Europe	16		—		16		—
Equity securities — global (2)	127		127		—		—
Derivatives (2)	—		—		—		—
Fixed income investments:
Pooled funds: (1)
Fixed income securities	279				279		—
Fixed income securities (3)	3,292		3,292				—
Annuities	836		—		—		836
Derivatives (3)	233		—		233		—
Other investments:
Pooled funds: (1)
Real estate (4)	39		—		—		39
Alternative investments (5)	968		—		—		968
Real estate	7						7
Total	$	6,224	$	3,643	$	731	$	1,850


(1)	Consists of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles.


(2)	Consists of equity securities and equity derivatives.


(3)	Consists of corporate and government bonds and fixed income derivatives.


(4)	Consists of property funds and trusts holding direct real estate investments.


(5)	Consists of limited partnerships, private equity and hedge funds.



			Fair Value Measurements Using
	Balance at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	555	$	555	$	—	$	—
Equity investments:
Pooled funds: (1)
Global	668		—		668		—
Europe	155		—		155		—
Equity securities — global (2)	171		171		—		—
Derivatives (2)	31		—		31		—
Fixed income investments:
Pooled funds: (1)
Fixed income securities	500		—		500		—
Fixed income securities (3)	2,043		2,043		—		—
Annuities	564		—		—		564
Derivatives (3)	142		—		142		—
Other investments:
Pooled funds: (1)
Real estate (4)	23		—		—		23
Alternative investments (5)	546		—		—		546
Total	$	5,398	$	2,769	$	1,496	$	1,133


(1)	Consists of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles.


(2)	Consists of equity securities and equity derivatives.


(3)	Consists of corporate and government bonds and fixed income derivatives.


(4)	Consists of property funds and trusts holding direct real estate investments.


(5)	Consists of limited partnerships, private equity and hedge funds.

The following table presents the changes in the Level 3 fair-value category in the Company's U.K. pension plans for the years ended December 31, 2014 and December 31, 2013 (in millions):



	Fair Value Measurements Using Level 3 Inputs
	Annuities			Real Estate			Alternative Investments			Total
Balance at January 1, 2013	$	568		$	70		$	446		$	1,084
Actual return on plan assets:
Relating to assets still held at December 31, 2013	(13		)	1			32			20
Relating to assets sold during 2013	—			3			5			8
Purchases, sales and settlements—net	—			(50		)	51			1
Transfers in/(out) of Level 3	—			—			—			—
Foreign exchange	9			(1		)	12			20
Balance at December 31, 2013	564			23			546			1,133
Actual return on plan assets:
Relating to assets still held at December 31, 2014	(13		)	3			319			309
Relating to assets sold during 2014	—			1			5			6
Purchases, sales and settlements—net	333			21			359			713
Transfers in/(out) of Level 3	—			—			(206		)	(206		)
Foreign exchange	(48		)	(2		)	(55		)	(105		)
Balance at December 31, 2014	$	836		$	46		$	968		$	1,850

The fair values of the Company's major other pension plan assets at December 31, 2014 and December 31, 2013, by asset category, are as follows (in millions):



			Fair Value Measurements Using
	Balance at December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	12	$	12	$	—	$	—
Equity investments:
Pooled funds: (1)
Global	295		—		295		—
North America	42		—		42		—
Fixed income investments:
Pooled funds: (1)
Fixed income securities	629		—		629		—
Derivatives	18		—		18		—
Fixed income securities (2)	35		—		35		—
Derivatives (2)	74		—		74		—
Other investments:
Pooled funds: (1)
Commodities	21		—		21		—
REITS	3		—		3		—
Alternative investments (4)	8		—		—		8
Derivatives	24		—		24		—
Total	$	1,161	$	12	$	1,141	$	8


(1)	Consists of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles.


(2)	Consists of corporate and government bonds and fixed income derivatives.


(3)	Consists of property funds and trusts holding direct real estate investments.


(4)	Consists of limited partnerships, private equity and hedge funds.



			Fair Value Measurements Using
	Balance at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	11	$	11	$	—	$	—
Equity investments:
Pooled funds: (1)
Global	318		—		318		—
North America	52		—		52		—
Fixed income investments:
Pooled funds: (1)
Fixed income securities	509		—		509		—
Derivatives	20		—		20		—
Fixed income securities (2)	61		—		61		—
Derivatives (2)	14		—		14		—
Other investments:
Pooled funds: (1)
Commodities	32		—		32		—
REITS	5		—		5		—
Real estate (3)	17		—		—		17
Alternative investments (4)	8		—		—		8
Derivatives	14		—		14		—
Total	$	1,061	$	11	$	1,025	$	25


(1)	Consists of various equity, fixed income, commodity, and real estate mutual fund type investment vehicles.


(2)	Consists of corporate and government bonds and fixed income derivatives.


(3)	Consists of property funds and trusts holding direct real estate investments.


(4)	Consists of limited partnerships, private equity and hedge funds.

The following table presents the changes in the Level 3 fair-value category in the Company's other pension plans for the years ended December 31, 2014 and December 31, 2013 (in millions):



	Fair Value Measurements Using Level 3 Inputs
	Real Estate			Alternative Investments			Total
Balance at January 1, 2013	$	17		$	11		$	28
Actual return on plan assets:
Relating to assets still held at December 31, 2013	(1		)	1			—
Relating to assets sold during 2013	—			1			1
Purchases, sales and settlements—net	—			(4		)	(4		)
Transfers in/(out) of Level 3	—			—			—
Foreign exchange	1			(1		)	—
Balance at December 31, 2013	17			8			25
Actual return on plan assets:
Relating to assets still held at December 31, 2014	—			1			1
Relating to assets sold during 2014	—			—			—
Purchases, sales and settlements—net	(17		)	—			(17		)
Transfers in/(out) of Level 3	—			—			—
Foreign exchange	—			(1		)	(1		)
Balance at December 31, 2014	$	—		$	8		$	8

Investment Policy and Strategy

The U.S. investment policy, as established by the Aon Retirement Plan Governance and Investment Committee ("RPGIC"), seeks reasonable asset growth at prudent risk levels within target allocations, which are 49% equity investments, 30% fixed income investments, and 21% other investments. Aon believes that plan assets are well-diversified and are of appropriate quality. The investment portfolio asset allocation is reviewed quarterly and re-balanced to be within policy target allocations. The investment policy is reviewed at least annually and revised, as deemed appropriate by the RPGIC. The investment policies for international plans are generally established by the local pension plan trustees and seek to maintain the plans' ability to meet liabilities and to comply with local minimum funding requirements. Plan assets are invested in diversified portfolios that provide adequate levels of return at an acceptable level of risk. The investment policies are reviewed at least annually and revised, as deemed appropriate to ensure that the objectives are being met. At December 31, 2014, the weighted average targeted allocation for the U.K. and non-U.S. plans was 21% for equity investments and 79% for fixed income investments.

Cash Flows

Contributions

Based on current assumptions, in 2015, the Company expects to contribute approximately $65 million, $132 million, and $23 million to its U.K., U.S. and other significant international pension plans, respectively.

Estimated Future Benefit Payments

Estimated future benefit payments for plans are as follows at December 31, 2014 (in millions):



	U.K.		U.S.		Other
2015	$	136	$	155	$	44
2016	145		163		46
2017	153		171		47
2018	161		182		48
2019	174		180		49
2020 – 2024	1,043		932		263

U.S. and Canadian Other Post-Retirement Benefits

The following table provides an overview of the accumulated projected benefit obligation, fair value of plan assets, funded status and net amount recognized as of December 31, 2014 and 2013 for the Company's other significant post-retirement benefit plans located in the U.S. and Canada (in millions):



	2014			2013
Accumulated projected benefit obligation	$	116		$	118
Fair value of plan assets	19			20
Funded status	(97		)	(98		)
Unrecognized prior-service credit	(4		)	(9		)
Unrecognized loss	15			18
Net amount recognized	$	(86	)	$	(89	)

Other information related to the Company's other post-retirement benefit plans are as follows:



	2014	2013	2012
Net periodic benefit cost recognized (millions)	$3	$4	$1
Weighted-average discount rate used to determine future benefit obligations	3.83 - 4.08	4.44 - 4.95	3.67 - 4.00
Weighted-average discount rate used to determine net periodic benefit costs	4.44 - 4.95	3.67 - 4.00	4.33 - 5.00

Amounts recognized in Accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at December 31, 2014 are $15 million and $4 million of net loss and prior service credit, respectively. The amount in Accumulated other comprehensive income expected to be recognized as a component of net periodic benefit cost during 2015 is $0.5 million and $1 million of net loss and prior service credit, respectively.

Based on current assumptions, the Company expects:


•	To contribute $5 million to fund significant other post-retirement benefit plans during 2015.


•	Estimated future benefit payments will be approximately $6 million each year for 2015 through 2019, and $33 million in aggregate for 2020-2024.

The accumulated post-retirement benefit obligation is increased by $6 million and decreased by $6 million by a respective 1% increase or decrease to the assumed health care trend rate. The service cost and interest cost components of net periodic benefits cost is increased by $0.6 million and decreased by $0.6 million by a respective 1% increase or decrease to the assumed healthcare trend rate.

For most of the participants in the U.S. plan, Aon's liability for future plan cost increases for pre-65 and Medical Supplement plan coverage is limited to 5% per annum. Although the net employer trend rates range from 7% to 4% per year, because of this cap, these plans are effectively limited to 4% per year in the future. During 2012, Aon recognized a plan amendment that phases out post-retirement coverage in its U.S. plan over the next two years. The amendment resulted in recognition of prior service credits of $5 million in 2012 in net periodic benefit cost. The impact of this amendment also resulted in a new prior service credit of $10 million which will impact net periodic benefit cost in future periods as it is recognized over the average remaining service life of the employees.