Pension and Postretirement Plans

12 Months Ended

Sep. 30, 2021

Retirement Benefits [Abstract]

Pension and Postretirement Plans

RETIREMENT PLANS

Retirement plans expense includes the following components:

	U.S. Plans				Non-U.S. Plans
	2019		2020	2021	2019	2020	2021
Defined benefit plans:
Service cost (benefits earned during the period)	$	47	57	54	24	30	29
Interest cost	155		125	94	38	30	32
Expected return on plan assets	(281)		(268)	(264)	(68)	(72)	(74)
Net amortization and other	81		148	143	6	17	14
Net periodic pension expense	2		62	27	—	5	1
Defined contribution plans	125		112	114	56	56	52
Total retirement plans expense	$	127	174	141	56	61	53

Net periodic pension expense decreased in 2021 primarily due to lower interest cost. For defined contribution plans, the Company makes cash contributions based on plan requirements, which are expensed as incurred.

The Company's principal U.S. defined benefit plan is closed to employees hired after January 1, 2016 while shorter-tenured employees ceased accruing benefits effective October 1, 2016.

Details of the changes in the actuarial present value of the projected benefit obligation and the fair value of plan assets for defined benefit pension plans follow:

	U.S. Plans			Non-U.S. Plans
	2020		2021	2020	2021
Projected benefit obligation, beginning	$	4,410	4,525	1,584	1,633
Service cost	57		54	30	29
Interest cost	125		94	30	32
Actuarial loss (gain)	260		(13)	3	(101)
Benefits paid	(202)		(218)	(37)	(39)
Settlements	(111)		(105)	(46)	(35)
Foreign currency translation and other	(14)		1	69	43
Projected benefit obligation, ending	$	4,525	4,338	1,633	1,562
Fair value of plan assets, beginning	$	4,208	4,383	1,284	1,367
Actual return on plan assets	466		771	58	100
Employer contributions	20		12	46	29
Benefits paid	(202)		(218)	(37)	(39)
Settlements	(111)		(105)	(46)	(35)
Foreign currency translation and other	2		1	62	52
Fair value of plan assets, ending	$	4,383	4,844	1,367	1,474
Net amount recognized in the balance sheet	$	(142)	506	(266)	(88)
Location of net amount recognized in the balance sheet:
Noncurrent asset	$	140	732	125	283
Current liability	(11)		(13)	(15)	(16)
Noncurrent liability	(271)		(213)	(376)	(355)
Net amount recognized in the balance sheet	$	(142)	506	(266)	(88)
Pretax accumulated other comprehensive loss	$	(937)	(274)	(316)	(182)

Actuarial gains in 2021 were largely due to an increase in the discount rates used to estimate the benefit obligations for the U.S. and non-U.S. plans, which were 2.92% and 2.2% at September 30, 2021 compared to 2.81% and 1.9% at September 30, 2020, respectively. Actuarial losses in 2020 were largely due to a decrease in the discount rate used to estimate the benefit obligations for the U.S. plan, which was 2.81% at September 30, 2020 compared to 3.22% at September 30, 2019. As of September 30, 2021, U.S. pension plans were overfunded by $506 in total, including unfunded plans totaling $220. The non-U.S. plans were underfunded by $88, including unfunded plans totaling $318.

As of the September 30, 2021 and 2020 measurement dates, the plans' total accumulated benefit obligation was $5,634 and $5,859, respectively. The total projected benefit obligation, accumulated benefit obligation and fair value of plan assets for individual plans with projected benefit obligations in excess of plan assets were $1,142, $1,016 and $544, respectively, for 2021, and $1,200, $1,055 and $527, respectively, for 2020. The total projected benefit obligation, accumulated benefit obligation and fair value of plan assets for individual plans with accumulated benefit obligations in excess of plan assets were $711, $626 and $123, respectively, for 2021, and $1,153, $1,034 and $492, respectively, for 2020.

Future benefit payments by U.S. plans are estimated to be $212 in 2022, $217 in 2023, $222 in 2024, $227 in 2025, $231 in 2026 and $1,192 in total over the five years 2027 through 2031. Based on foreign currency exchange rates as of September 30, 2021, future benefit payments by non-U.S. plans are estimated to be $68 in 2022, $66 in 2023, $70 in 2024, $71 in 2025, $74 in 2026 and $415 in total over the five years 2027 through 2031. The Company expects to contribute approximately $50 to its retirement plans in 2022.

The weighted-average assumptions used in the valuation of pension benefits follow:

	U.S. Plans						Non-U.S. Plans
	2019		2020		2021		2019		2020		2021
Net pension expense
Discount rate used to determine service cost	4.33	%	3.40	%	3.16	%	2.7	%	1.9	%	1.9	%
Discount rate used to determine interest cost	3.98	%	2.87	%	2.10	%	2.7	%	1.9	%	1.9	%
Expected return on plan assets	7.00	%	6.75	%	6.50	%	6.1	%	5.8	%	5.6	%
Rate of compensation increase	3.25	%	3.25	%	3.25	%	3.5	%	3.7	%	3.6	%
Benefit obligations
Discount rate	3.22	%	2.81	%	2.92	%	1.9	%	1.9	%	2.2	%
Rate of compensation increase	3.25	%	3.25	%	3.25	%	3.7	%	3.6	%	3.7	%

The discount rate for the U.S. retirement plans was 2.92 percent as of September 30, 2021. An actuarially developed, company-specific yield curve is used to determine the discount rate. To determine the service and interest cost components of pension expense for its U.S. retirement plans, the Company applies the specific spot rates along the yield curve, rather than the single weighted-average rate, to the projected cash flows to provide more precise measurement of these costs. The expected return on plan assets assumption is determined by reviewing the investment returns of the plans for the past 10 years plus longer-term historical returns of an asset mix approximating the Company's asset allocation targets, and periodically comparing these returns to expectations of investment advisors and actuaries to determine whether long-term future returns are expected to differ significantly from the past.

The Company's asset allocations at September 30, 2021 and 2020, and weighted-average target allocations follow:

	U.S. Plans					Non-U.S. Plans
	2020		2021		Target	2020		2021		Target
Equity securities	49	%	39	%	35-45%	41	%	35	%	30-40%
Debt securities	45		55		50-60	48		55		50-60
Other	6		6		0-10	11		10		5-15
Total	100	%	100	%	100%	100	%	100	%	100%

The primary objective for the investment of pension assets is to secure participant retirement benefits by earning a reasonable rate of return. Plan assets are invested consistent with the provisions of the prudence and diversification rules of ERISA and with a long-term investment horizon. The Company continuously monitors the value of assets by class and routinely rebalances to remain within target allocations. The equity strategy is to minimize concentrations of risk by investing primarily in a mix of companies that are diversified across geographies, market capitalization, style, sectors and industries worldwide. The approach for bonds emphasizes investment-grade corporate and government debt with maturities matching a portion of the longer duration pension liabilities. The bonds strategy also includes a high-yield element which is generally shorter in duration. For diversification, a small portion of U.S. plan assets is allocated to private equity partnerships and real asset fund investments, providing opportunities for above market returns. Leveraging techniques are not used and the use of derivatives in any fund is limited and inconsequential.

The fair values of defined benefit pension assets as of September 30, organized by asset class and by the fair value hierarchy of ASC 820, Fair Value Measurement, follow. Investments valued based on the net asset value (NAV) of fund units held, as derived from the fair value of the underlying assets, are excluded from the fair value hierarchy.

	Level 1		Level 2	Level 3	Measured at NAV	Total	%
2021
U.S. equities	$	591	9	—	670	1,270	20	%
International equities	356		17	—	563	936	15	%
Emerging market equities	—		1	—	212	213	3	%
Corporate bonds	—		1,516	—	565	2,081	33	%
Government bonds	—		642	—	730	1,372	22	%
Other	46		8	135	257	446	7	%
Total	$	993	2,193	135	2,997	6,318	100	%
2020
U.S. equities	$	785	10	—	536	1,331	23	%
International equities	513		16	—	635	1,164	20	%
Emerging market equities	—		—	—	237	237	4	%
Corporate bonds	—		1,202	—	446	1,648	29	%
Government bonds	—		450	—	531	981	17	%
Other	4		8	133	244	389	7	%
Total	$	1,302	1,686	133	2,629	5,750	100	%

Asset Classes

U.S. equities reflect companies domiciled in the U.S., including multinational companies. International equities are comprised of companies domiciled in developed nations outside the U.S. Emerging market equities are comprised of companies domiciled in portions of Asia, Eastern Europe and Latin America. Corporate bonds represent investment-grade debt of issuers primarily from the U.S. Government bonds include investment-grade instruments issued by federal, state and local governments, primarily in the U.S. Other includes cash, interests in mixed asset funds investing in commodities, natural resources, agriculture, real estate and infrastructure funds, life insurance contracts (U.S.), and shares in certain general investment funds of financial institutions or insurance arrangements (non-U.S.) that typically ensure no market losses or provide for a small minimum return guarantee.

Fair Value Hierarchy Categories

Valuations of Level 1 assets for all classes are based on quoted closing market prices from the principal exchanges where the individual securities are traded. Cash is valued at cost, which approximates fair value. Debt securities categorized as Level 2 assets are generally valued based on independent broker/dealer bids or by comparison to other debt securities having similar durations, yields and credit ratings. Valuation techniques and inputs for these assets include discounted cash flow analysis, earnings multiple approaches, recent transactions, transfer restrictions, prevailing discount rates, volatilities, credit ratings and other factors. In the Other class, interests in mixed asset funds are Level 2, and U.S. life insurance contracts and non-U.S. general fund investments and insurance arrangements are Level 3. Investments measured at NAV are primarily nonexchange-traded commingled or collective funds where the underlying securities have observable prices available from active markets and typically provide liquidity daily or within a few days. The NAV category also includes fund investments in private equities, real estate and infrastructure where the fair value of the underlying assets is determined by the investment manager. Total unfunded commitments for the private equity funds were approximately $270 at September 30, 2021. These investments cannot be redeemed, but instead the funds will make distributions through liquidation of the underlying assets, which is expected to occur over approximately the next 10 years. The real estate and infrastructure funds typically offer quarterly redemption.

Postretirement Plans

The Company also sponsors unfunded postretirement benefit plans (primarily health care) for certain U.S. retirees and their dependents. The Company’s principal U.S. postretirement plan has been frozen to new employees since 1993. The postretirement benefit liability for all plans was $119 and $135 as of September 30, 2021 and 2020, respectively, and included deferred actuarial gains in accumulated other comprehensive income of $98 and $106, respectively. Service and interest costs are negligible and more than offset by the amortization of deferred actuarial gains, which resulted in net postretirement income of $15 for 2021 and $12 for 2020 and 2019. Benefits paid were

$9 and $12 for 2021 and 2020, respectively, and the Company estimates that future health care benefit payments will be approximately $10 per year for 2022 through 2026, and $38 in total over the five years 2027 through 2031