Retirement Benefits

The Company maintains qualified and non-qualified defined benefit pension plans for its U.S. and non-U.S. eligible employees. The Company’s policy for funding its tax qualified defined benefit retirement plans is to contribute amounts at least sufficient to meet the funding requirements set forth by U.S. law and the laws of the non-U.S. jurisdictions in which the Company offers defined benefit plans.

Combined U.S. and non-U.S. Plans

The weighted average actuarial assumptions utilized for the U.S. and significant non-U.S. defined benefit plans and postretirement benefit plans are as follows:



	Pension Benefits				Postretirement Benefits
	2014		2013		2014		2013
Weighted average assumptions:
Discount rate (for expense)	4.82	%	4.38	%	4.92	%	4.32	%
Expected return on plan assets	7.52	%	7.68	%	—		—
Rate of compensation increase (for expense)	2.64	%	2.43	%	—		—
Discount rate (for benefit obligation)	3.79	%	4.82	%	4.08	%	5.03	%
Rate of compensation increase (for benefit obligation)	2.42	%	2.64	%	—		—

The Company uses actuaries from Mercer, a subsidiary of the Company, to perform valuations of its pension plans. The long-term rate of return on plan assets assumption is determined for each plan based on the facts and circumstances that exist as of the measurement date, and the specific portfolio mix of each plan’s assets. The Company utilizes a model developed by the Mercer actuaries to assist in the determination of this assumption. The model takes into account several factors, including: actual and target portfolio allocation; investment, administrative and trading expenses incurred directly by the plan trust; historical portfolio performance; relevant forward-looking economic analysis; and expected returns, variances and correlations for different asset classes. These measures are used to determine probabilities using standard statistical techniques to calculate a range of expected returns on the portfolio. The Company generally does not adjust the rate of return assumption from year to year if, at the measurement date, it is within the range between the 25^th and 75^th percentile of the expected long-term annual returns. Historical long-term average asset returns of each plan are also reviewed to determine whether they are consistent and reasonable compared with the rate selected. The expected return on plan assets is determined by applying the assumed long-term rate of return to the market-related value of plan assets. This market-related value recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future market-related value of the assets will be impacted as previously deferred gains or losses are reflected.

The target asset allocation for the U.S. Plan is 62% equities and equity alternatives and 38% fixed income. At the end of 2014, the actual allocation for the U.S. Plan was 59% equities and equity alternatives and 41% fixed income. The target asset allocation for the U.K. Plans, which comprise approximately 83% of non-U.S. Plan assets, is 50% equities and equity alternatives and 50% fixed income. At the end of 2014, the actual allocation for the U.K. Plans was 43% equities and equity alternatives and 57% fixed income. The assets of the Company's defined benefit plans are diversified and are managed in accordance with applicable laws and with the goal of maximizing the plans' real return within acceptable risk parameters. The Company uses threshold-based portfolio re-balancing to ensure the actual portfolio remains consistent with target asset allocation ranges.

The discount rate selected for each U.S. plan is based on a model bond portfolio with coupons and redemptions that closely match the expected liability cash flows from the plan. Discount rates for non-U.S. plans are based on appropriate bond indices such as the Markit iBoxx £ Corporates AA 15+ index in the U.K. Projected compensation increases reflect current expectations as to future levels of inflation.

The components of the net periodic benefit cost for defined benefit and other postretirement plans are as follows:



Combined U.S. and significant non-U.S. Plans	Pension									Postretirement
For the Years Ended December 31,	Benefits									Benefits
(In millions of dollars)	2014			2013			2012			2014			2013		2012
Service cost	$	213		$	252		$	240		$	4		$	5	$	5
Interest cost	641			581			596			11			11		13
Expected return on plan assets	(990		)	(911		)	(905		)	—			—		—
Amortization of prior service credit	(16		)	(22		)	(19		)	—			—		(14		)
Recognized actuarial loss (credit)	243			315			270			(1		)	2		—
Net periodic benefit cost	$	91		$	215		$	182		$	14		$	18	$	4
Curtailment gain	(65		)	—			—			—			—		—
Total cost	$	26		$	215		$	182		$	14		$	18	$	4

Plan Assets

For the U.S. Plan, investment allocation decisions are made by a fiduciary committee composed of senior executives appointed by the Company’s Chief Executive Officer. For the non-U.S. plans, investment allocation decisions are made by local fiduciaries, in consultation with the Company for the larger plans. Plan assets are invested in a manner consistent with the fiduciary standards set forth in all relevant laws relating to pensions and trusts in each country. Primary investment objectives are (1) to achieve an investment return that, in combination with current and future contributions, will provide sufficient funds to pay benefits as they become due, and (2) to minimize the risk of large losses. The investment allocations are designed to meet these objectives by broadly diversifying plan assets among numerous asset classes with differing expected returns, volatilities, and correlations.

The major categories of plan assets include equity securities, equity alternative investments, and fixed income securities. For the U.S. qualified plan, the category ranges are 57-67% for equities and equity alternatives, and 33-43% for fixed income. For the U.K. Plan, the category ranges are 47-53% for equities and equity alternatives, and 47-53% for fixed income. Asset allocation is monitored frequently and re-balancing actions are taken as appropriate. Re-balancing in the U.K. Plan was suspended in 2014 while a contingent guarantee agreement was put in place and the investment strategy of the plan was finalized. After the contingent guarantee agreement was executed in January 2015, re-balancing resumed in February 2015 with target asset allocation of 48% equities and equity alternatives and 52% fixed income.

Plan investments are exposed to stock market, interest rate, and credit risk. Concentrations of these risks are generally limited due to diversification by investment style within each asset class, diversification by investment manager, diversification by industry sectors and issuers, and the dispersion of investments across many geographic areas.

Unrecognized Actuarial Gains/Losses

In accordance with applicable accounting guidance, the funded status of the Company's pension plans is recorded in the consolidated balance sheets and provides for a delayed recognition of actuarial gains or losses arising from changes in the projected benefit obligation due to changes in the assumed discount rates, differences between the actual and expected value of plan assets and other assumption changes. The unrecognized pension plan actuarial gains or losses and prior service costs not yet recognized in net periodic pension cost are recognized in Accumulated Other Comprehensive Income, net of tax. These gains and losses are amortized prospectively out of AOCI over a period that approximates the average remaining service period of active employees, or for plans in which substantially all the participants are inactive, over the remaining life expectancy of the inactive employees.

U.S. Plans

The following schedules provide information concerning the Company’s U.S. defined benefit pension plans and postretirement benefit plans:



	U.S. Pension Benefits						U.S. Postretirement Benefits
(In millions of dollars)	2014			2013			2014			2013
Change in benefit obligation:
Benefit obligation at beginning of year	$	4,827		$	5,197		$	158		$	176
Service cost	91			104			2			3
Interest cost	253			229			7			7
Employee contributions	—			—			13			—
Plan amendments	—			—			(4		)	—
Plan combination	—			36			—			—
Actuarial loss (gain)	955			(547		)	21			(15		)
Medicare Part D subsidy	—			—			1			1
Benefits paid	(202		)	(192		)	(21		)	(14		)
Benefit obligation, December 31	$	5,924		$	4,827		$	177		$	158
Change in plan assets:
Fair value of plan assets at beginning of year	$	4,279		$	3,936		$	—		$	—
Plan combination	—			21			—			—
Actual return on plan assets	414			488			—			—
Employer contributions	25			26			13			13
Employee contributions	—			—			13			—
Medicare Part D subsidy	—			—			1			1
Benefits paid	(202		)	(192		)	(21		)	(14		)
Other	—			—			12			—
Fair value of plan assets, December 31	$	4,516		$	4,279		$	18		$	—
Net funded status, December 31	$	(1,408	)	$	(548	)	$	(159	)	$	(158	)
Amounts recognized in the consolidated balance sheets:
Current liabilities	$	(25	)	$	(24	)	$	(2	)	$	(8	)
Noncurrent liabilities	(1,383		)	(524		)	(157		)	(150		)
Net liability recognized, December 31	$	(1,408	)	$	(548	)	$	(159	)	$	(158	)
Amounts recognized in other comprehensive income (loss):
Prior service credit	$	—		$	7		$	4		$	—
Net actuarial (loss) gain	(1,749		)	(974		)	2			13
Total recognized accumulated other comprehensive (loss) income, December 31	$	(1,749	)	$	(967	)	$	6		$	13
Cumulative employer contributions in excess (deficient) of net periodic cost	341			419			(165		)	(171		)
Net amount recognized in consolidated balance sheet	$	(1,408	)	$	(548	)	$	(159	)	$	(158	)
Accumulated benefit obligation at December 31	$	5,825		$	4,753		$	—		$	—



	U.S. Pension Benefits						U.S. Postretirement Benefits
(In millions of dollars)	2014			2013			2014		2013
Reconciliation of prior service credit (cost) recognized in accumulated other comprehensive income (loss):
Beginning balance	$	7		$	23		$	—	$	—
Recognized as component of net periodic benefit cost	(7		)	(16		)	—		—
Plan amendment	—			—			4		—
Prior service credit, December 31	$	—		$	7		$	4	$	—



	U.S. Pension Benefits						U.S. Postretirement Benefits
(In millions of dollars)	2014			2013			2014			2013
Reconciliation of net actuarial gain (loss) recognized in accumulated other comprehensive income (loss):
Beginning balance	$	(974	)	$	(1,887	)	$	13		$	(2	)
Recognized as component of net periodic benefit cost (credit)	112			208			(2		)	—
Changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Liability experience	(955		)	541			(21		)	15
Asset experience	68			164			12			—
Total (loss) gain recognized as change in plan assets and benefit obligations	(887		)	705			(9		)	15
Net actuarial (loss) gain, December 31	$	(1,749	)	$	(974	)	$	2		$	13



For the Years Ended December 31,	U.S. Pension Benefits							U.S. Postretirement Benefits
(In millions of dollars)	2014		2013			2012		2014		2013			2012
Total recognized in net periodic benefit cost and other comprehensive loss (income)	$	885	$	(696	)	$	346	$	14	$	(5	)	$	24

Estimated amounts that will be amortized from accumulated other comprehensive loss in the next fiscal year:



	U.S. Pension Benefits		U.S. Postretirement Benefits
(In millions of dollars)	2015		2015
Prior service credit	$	—	$	1
Net actuarial loss	181		1
Projected cost	$	181	$	2

The weighted average actuarial assumptions utilized in determining the above amounts for the U.S. defined benefit and other U.S. postretirement plans as of the end of the year are as follows:



	U.S. Pension Benefits				U.S. Postretirement Benefits
	2014		2013		2014		2013
Weighted average assumptions:
Discount rate (for expense)	5.30	%	4.45	%	4.99	%	4.25	%
Expected return on plan assets	8.75	%	8.75	%	—		—
Rate of compensation increase (for expense)	2.00	%	2.00	%	—		—
Discount rate (for benefit obligation)	4.30	%	5.30	%	4.19	%	5.17	%
Rate of compensation increase (for benefit obligation)	2.00	%	2.00	%	—		—

In 2014, the Society of Actuaries in the United States issued a new mortality table (RP-2014) and an updated improvement scale. The Company considered the effect of RP-2014, along with other available information on mortality improvement and industry specific mortality studies, to select its assumptions for measurement of the plans’ benefit obligations at December 31, 2014.

The projected benefit obligation, accumulated benefit obligation and aggregate fair value of plan assets for U.S. pension plans with accumulated benefit obligations in excess of plan assets were $5.9 billion, $5.8 billion and $4.5 billion, respectively, as of December 31, 2014 and $4.8 billion, $4.8 billion and $4.3 billion, respectively, as of December 31, 2013.

The projected benefit obligation and fair value of plan assets for U.S. pension plans with projected benefit obligations in excess of plan assets was $5.9 billion and $4.5 billion, respectively, as of December 31, 2014 and $4.8 billion and $4.3 billion, respectively, as of December 31, 2013.

As of December 31, 2014, the U.S. qualified plan holds 4 million shares of the Company’s common stock which were contributed to the Plan by the Company in 2005. This represented approximately 5.1% of that plan’s assets as of December 31, 2014. In addition, plan assets may be invested in funds managed by Mercer Investments, a subsidiary of the Company.

The components of the net periodic benefit cost for the U.S. defined benefit and other postretirement benefit plans are as follows:



U.S. Plans only	Pension Benefits									Postretirement Benefits
For the Years Ended December 31,	Pension Benefits									Postretirement Benefits
(In millions of dollars)	2014			2013			2012			2014			2013		2012
Service cost	$	91		$	104		$	93		$	2		$	3	$	3
Interest cost	253			229			230			7			7		8
Expected return on plan assets	(346		)	(324		)	(322		)	—			—		—
Amortization of prior service credit	(7		)	(16		)	(16		)	—			—		(13		)
Recognized actuarial loss (credit)	112			207			152			(2		)	—		(1		)
Net periodic benefit cost (credit)	$	103		$	200		$	137		$	7		$	10	$	(3	)

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 became law. The net periodic benefit cost for all periods shown above includes the subsidy.

The assumed health care cost trend rate for Medicare eligibles and non-Medicare eligibles is approximately 7.55% in 2014, gradually declining to 4.5% in 2028. Assumed health care cost trend rates have a small effect on the amounts reported for the U.S. health care plans because the Company caps its share of health care trend at 5%. A one percentage point change in assumed health care cost trend rates would have no effect on the total service and interest cost components or the postretirement benefit obligation.

Estimated Future Contributions

The Company expects to fund approximately $25 million for its U.S. non-qualified plans in 2015. The Company’s policy for funding its tax-qualified defined benefit retirement plans is to contribute amounts at least sufficient to meet the funding requirements set forth in the U.S. and applicable foreign law. There is currently no ERISA funding requirement for the U.S. qualified plan for 2015.

Non-U.S. Plans

The following schedules provide information concerning the Company’s non-U.S. defined benefit pension plans and non-U.S. postretirement benefit plans:



	Non-U.S. Pension Benefits						Non-U.S. Postretirement Benefits
(In millions of dollars)	2014			2013			2014			2013
Change in benefit obligation:
Benefit obligation at beginning of year	$	8,711		$	8,579		$	97		$	107
Service cost	122			148			2			2
Interest cost	388			352			4			4
Employee contributions	10			11			—			—
Actuarial loss (gain)	1,619			(53		)	(1		)	(8		)
Plan amendments	13			—			—			—
Effect of settlement	(11		)	(2		)	—			—
Benefits paid	(311		)	(293		)	(3		)	(4		)
Foreign currency changes	(585		)	(31		)	(6		)	(4		)
Other	62			—			—			—
Benefit obligation December 31	$	10,018		$	8,711		$	93		$	97
Change in plan assets:
Fair value of plan assets at beginning of year	$	9,351		$	8,312		$	—		$	—
Actual return on plan assets	1,756			698			—			—
Effect of settlement	(11		)	(2		)	—			—
Company contributions	156			620			3			4
Employee contributions	10			11			—			—
Benefits paid	(311		)	(293		)	(3		)	(4		)
Foreign currency changes	(578		)	5			—			—
Other	37			—			—			—
Fair value of plan assets, December 31	$	10,410		$	9,351		$	—		$	—
Net funded status, December 31	$	392		$	640		$	(93	)	$	(97	)
Amounts recognized in the consolidated balance sheets:
Non-current assets	$	967		$	977		$	—		$	—
Current liabilities	(6		)	(5		)	(4		)	(4		)
Non-current liabilities	(569		)	(332		)	(89		)	(93		)
Net asset (liability) recognized, December 31	$	392		$	640		$	(93	)	$	(97	)
Amounts recognized in other comprehensive (loss) income:
Prior service (cost) credit	$	(2	)	$	85		$	—		$	—
Net actuarial loss	(3,215		)	(3,010		)	(14		)	(16		)
Total recognized accumulated other comprehensive (loss) income, December 31	$	(3,217	)	$	(2,925	)	$	(14	)	$	(16	)
Cumulative employer contributions in excess (deficient) of net periodic cost	3,609			3,565			(79		)	(81		)
Net asset (liability) recognized in consolidated balance sheet, December 31	$	392		$	640		$	(93	)	$	(97	)
Accumulated benefit obligation, December 31	$	9,731		$	8,413		$	—		$	—



	Non-U.S. Pension Benefits						Non-U.S. Postretirement Benefits
(In millions of dollars)	2014			2013			2014		2013
Reconciliation of prior service credit (cost):
Beginning balance	$	85		$	93		$	—	$	—
Recognized as component of net periodic benefit credit	(9		)	(6		)	—		—
Effect of curtailment	(65		)	—			—		—
Changes in plan assets and benefit obligations recognized in other comprehensive income:
Plan amendments	(13		)	—			—		—
Exchange rate adjustments	—			(2		)	—		—
Prior service (cost) credit, December 31	$	(2	)	$	85		$	—	$	—



	Non-U.S. Pension Benefits						Non-U.S. Postretirement Benefits
(In millions of dollars)	2014			2013			2014			2013
Reconciliation of net actuarial (loss) gain:
Beginning balance	$	(3,010	)	$	(3,309	)	$	(16	)	$	(27	)
Recognized as component of net periodic benefit cost	131			108			1			2
Effect of settlement	—			—			—			—
Changes in plan assets and benefit obligations recognized in other comprehensive (loss) income:
Liability experience	(1,619		)	53			1			8
Asset experience	1,112			111			—			—
Other	(14		)	—			—			—
Total amount recognized as change in plan assets and benefit obligations	(521		)	164			1			8
Exchange rate adjustments	185			27			—			1
Net actuarial loss, December 31	$	(3,215	)	$	(3,010	)	$	(14	)	$	(16	)



For the Years Ended December 31,	Non-U.S. Pension Benefits							Non-U.S. Postretirement Benefits
(In millions of dollars)	2014		2013			2012		2014		2013			2012
Total recognized in net periodic benefit cost and other comprehensive loss (income)	$	201	$	(276	)	$	246	$	5	$	(2	)	$	16

Estimated amounts that will be amortized from accumulated other comprehensive income in the next fiscal year:



	Non-U.S. Pension Benefits			Non-U.S. Postretirement Benefits
(In millions of dollars)	2015			2015
Prior service credit	$	(2	)	$	—
Net actuarial loss	140			1
Projected cost	$	138		$	1

The weighted average actuarial assumptions utilized for the non-U.S. defined and postretirement benefit plans as of the end of the year are as follows:



	Non-U.S. Pension Benefits				Non-U.S. Postretirement Benefits
	2014		2013		2014		2013
Weighted average assumptions:
Discount rate (for expense)	4.55	%	4.33	%	4.80	%	4.45	%
Expected return on plan assets	6.95	%	7.17	%	—		—
Rate of compensation increase (for expense)	2.99	%	2.69	%	—		—
Discount rate (for benefit obligation)	3.49	%	4.55	%	3.85	%	4.80	%
Rate of compensation increase (for benefit obligation)	2.67	%	2.99	%	—		—

The non-U.S. defined benefit plans do not have any direct ownership of the Company’s common stock.

The pension plan in the United Kingdom holds a limited partnership interest in the Trident III private equity fund valued at approximately $53 million at December 31, 2014.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the non-U.S. pension plans with accumulated benefit obligations in excess of plan assets were $2.1 billion, $2.0 billion and $1.6 billion, respectively, as of December 31, 2014 and $1.7 billion, $1.5 billion and $1.3 billion, respectively, as of December 31, 2013.

The projected benefit obligation and fair value of plan assets for non-U.S. pension plans with projected benefit obligations in excess of plan assets was $2.2 billion and $1.6 billion, respectively, as of December 31, 2014 and $1.7 billion and $1.3 billion, respectively, as of December 31, 2013.

U.K. Plan Amendment

After completion of a consultation period with affected colleagues, in January 2014, the Company amended its U.K. defined benefit pension plans to close those plans to future benefit accruals effective August 1, 2014 and replaced those plans, along with its existing defined contribution plans, with a new, comprehensive defined contribution arrangement. This change resulted in a curtailment of the U.K. defined benefit plans and, as required under GAAP, the Company re-measured the defined benefit plans’ assets and liabilities at the date the employee consultations concluded and the local operating companies approved the plan amendment, based on assumptions and market conditions at that date. As a result of the re-measurement, the projected benefit obligation ("PBO") increased by approximately $147 million and the funded status decreased by approximately $137 million. The change in the PBO and in the funded status relates primarily to a decrease in the discount rate at the re-measurement date. The net periodic benefit costs recognized in 2014 are the weighted average resulting from the December 31, 2013 measurement and the January 2014 re-measurement.

Components of Net Periodic Benefits Costs

The components of the net periodic benefit cost for the non-U.S. defined benefit and other postretirement benefit plans and the curtailment, settlement and termination expenses are as follows:



For the Years Ended December 31,	Non-U.S. Pension Benefits									Non-U.S. Postretirement Benefits
(In millions of dollars)	2014			2013			2012			2014		2013		2012
Service cost	$	122		$	148		$	147		$	2	$	2	$	2
Interest cost	388			352			366			4		4		5
Expected return on plan assets	(644		)	(587		)	(583		)	—		—		—
Amortization of prior service cost	(9		)	(6		)	(3		)	—		—		(1		)
Recognized actuarial loss	131			108			118			1		2		1
Net periodic benefit (credit) cost	(12		)	15			45			7		8		7
Settlement loss	—			—			1			—		—		—
Curtailment gain	(65		)	—			(1		)	—		—		—
Total (credit) cost	$	(77	)	$	15		$	45		$	7	$	8	$	7

The assumed health care cost trend rate was approximately 5.76% in 2014, gradually declining to 4.92% in 2022. Assumed health care cost trend rates can have a significant effect on the amounts reported for the non-U.S. health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects:



(In millions of dollars)	1 Percentage Point Increase		1 Percentage Point Decrease
Effect on total of service and interest cost components	$	1	$	(1	)
Effect on postretirement benefit obligation	$	9	$	(7	)

Estimated Future Contributions

The Company expects to fund approximately $169 million to its non-U.S. pension plans in 2015. Funding requirements for non-U.S. plans vary by country. Contribution rates are generally based on local funding practices and requirements, which may differ significantly from measurements under U.S. GAAP. Funding amounts may be influenced by future asset performance, the level of discount rates and other variables impacting the assets and/or liabilities of the plan. Discretionary contributions may also be affected by alternative uses of the Company’s cash flows, including dividends, investments and share repurchases.

In the U.K., contributions to defined benefit pension plans are determined through a negotiation process between the Company and the plans' Trustee that typically occurs every three years in conjunction with the actuarial valuation of the plans. This process is governed by U.K. pension regulations. The assumptions that result from the funding negotiations are different from those used for U.S. GAAP and currently result in a lower funded status than under U.S. GAAP. In March 2014, the Company and the Trustee of the U.K. Defined Benefits Plans agreed to a funding deficit recovery plan for the U.K. defined benefit pension plans. The current agreement with the Trustee sets out the annual deficit contributions which would be due based on the deficit at December 31, 2012. The funding level is subject to re-assessment, in most cases on November 1^st of each year. If the funding level on November 1^st has sufficiently improved, no deficit funding contributions will be required in the following year, and the contribution amount will be deferred. As part of a long-term strategy, which depends on having greater influence over asset allocation and overall investment decisions, the Company has agreed to support annual deficit contributions by the U.K. operating companies under certain circumstances, up to GBP 450 million over a seven-year period.

Estimated Future Benefit Payments

The Plans' estimated future benefit payments for its pension and postretirement benefits (without reduction for Medicare subsidy receipts) are as follows:



For the Years Ended December 31,	Pension Benefits				Postretirement Benefits
(In millions of dollars)	U.S.		Non-U.S.		U.S.		Non-U.S.
2015	$	217	$	264	$	10	$	4
2016	$	232	$	280	$	10	$	4
2017	$	250	$	295	$	10	$	4
2018	$	263	$	312	$	10	$	4
2019	$	275	$	325	$	10	$	4
2020-2024	$	1,581	$	1,890	$	55	$	24

Defined Benefit Plans Fair Value Disclosures

In December 2008, the FASB issued guidance for Employers’ Disclosures About Pension and Other Post Retirement Benefit Plan Assets. The guidance requires fair value plan asset disclosures for an employer’s defined benefit pension and postretirement plans similar to the guidance on Fair Value Measurements as well as (a) how investment allocation decisions are made, (b) the major categories of plan assets, and (c) significant concentrations of risk within plan assets.

The U.S. and non-U.S. plan investments are classified into Level 1, which refers to investments valued using quoted prices from active markets for identical assets; Level 2, which refers to investments not traded on an active market but for which observable market inputs are readily available; and Level 3, which refers to investments valued based on significant unobservable inputs. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following table sets forth, by level within the fair value hierarchy, a summary of the U.S. and non-U.S. plans' investments measured at fair value on a recurring basis at December 31, 2014 and 2013:



	Fair Value Measurements at December 31, 2014
Assets (In millions of dollars)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Common/Collective trusts	$	172	$	6,766	$	184	$	7,122
Corporate obligations	—		2,938		3		2,941
Corporate stocks	2,087		6		1		2,094
Private equity/partnerships	—		—		727		727
Government securities	—		371		—		371
Real estate	—		6		375		381
Short-term investment funds	724		12		—		736
Company common stock	229		—		—		229
Other investments	16		23		239		278
Total investments	$	3,228	$	10,122	$	1,529	$	14,879



	Fair Value Measurements at December 31, 2013
Assets (In millions of dollars)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Common/Collective trusts	$	138	$	5,649	$	151	$	5,938
Corporate obligations	—		2,330		4		2,334
Corporate stocks	2,434		5		1		2,440
Private equity/partnerships	—		2		799		801
Government securities	10		340		2		352
Real estate	—		7		312		319
Short-term investment funds	824		15		—		839
Company common stock	261		—		—		261
Other investments	35		5		238		278
Total investments	$	3,702	$	8,353	$	1,507	$	13,562

In 2014, certain non U.S. government securities that were previously categorized as Level 1 were transferred to Level 2.

The tables below set forth a summary of changes in the fair value of the plans’ Level 3 assets for the years ended December 31, 2014 and December 31, 2013:



Assets (In millions)	Fair Value, January 1, 2014		Purchases		Sales			Unrealized Gain/ (Loss)			Realized Gain/ (Loss)		Exchange Rate Impact			Transfers in/(out) and Other			Fair Value, December 31, 2014
Private equity/Partnerships	$	799	$	158	$	(185	)	$	(173	)	$	137	$	(12	)	$	3		$	727
Real estate	312		97		(50		)	19			16		(19		)	—			375
Other investments	238		21		(16		)	18			—		(28		)	6			239
Common/Collective trusts	151		—		(1		)	50			—		(16		)	—			184
Corporate stocks	1		—		—			—			—		—			—			1
Corporate obligations	4		3		(1		)	—			—		—			(3		)	3
Government securities	2		—		—			—			—		—			(2		)	—
Total assets	$	1,507	$	279	$	(253	)	$	(86	)	$	153	$	(75	)	$	4		$	1,529



Assets (In millions)	Fair Value, January 1, 2013		Purchases		Sales			Unrealized Gain/ (Loss)			Realized Gain/ (Loss)		Exchange Rate Impact			Transfers in/(out) and Other			Fair Value, December 31, 2013
Private equity/Partnerships	$	824	$	146	$	(174	)	$	(155	)	$	150	$	(1	)	$	9		$	799
Real estate	357		21		(95		)	6			26		(3		)	—			312
Other investments	239		18		(13		)	10			—		6			(22		)	238
Common/Collective trusts	—		61		—			(4		)	—		(5		)	99			151
Corporate stocks	9		—		—			—			—		—			(8		)	1
Corporate obligations	1		1		—			—			—		—			2			4
Government securities	—		—		—			(1		)	—		—			3			2
Total assets	$	1,430	$	247	$	(282	)	$	(144	)	$	176	$	(3	)	$	83		$	1,507

The following is a description of the valuation methodologies used for assets measured at fair value:

Company common stock: Valued at the closing price reported on the New York Stock Exchange.

Common stocks, preferred stocks, convertible equity securities and rights/warrants (included in Corporate stocks): Valued at the closing price reported on the primary exchange.

Corporate bonds (included in Corporate obligations): The fair value of corporate bonds is estimated using recently executed transactions, market price quotations (where observable) and bond spreads. The spread data used are for the same maturity as the bond. If the spread data does not reference the issuer, then data that references a comparable issuer are used. When observable price quotations are not available, fair value is determined based on cash flow models.

Commercial paper (included in Corporate obligations): The fair value of commercial paper is estimated using observable market data such as maturity date, issue date, credit rating, current commercial paper rates and settlement date.

Commercial mortgage-backed and asset-backed securities (included in Corporate obligations): Fair value is determined using discounted cash flow models. Observable inputs are based on trade and quote activity of bonds with similar features including issuer vintage, purpose of underlying loan (first or second lien), prepayment speeds and credit ratings. The discount rate is the combination of the appropriate rate from the benchmark yield curve and the discount margin based on quoted prices.

Common/Collective trusts: Valued at the quoted market prices of the investments at year end.

U.S. government bonds (included in Government securities): The fair value of U.S. government bonds is estimated by pricing models that utilize observable market data including quotes, spreads and data points for yield curves.

U.S. agency securities (included in Government securities): U.S. agency securities are comprised of two main categories consisting of agency issued debt and mortgage pass-throughs. Agency issued debt securities are valued by benchmarking market-derived prices to quoted market prices and trade data for identical or comparable securities. Mortgage pass-throughs include certain “To-be-announced” (TBA) securities and mortgage pass-through pools. TBA securities are generally valued using quoted market prices or are benchmarked thereto. Fair value of mortgage pass-through pools are model driven with respect to spreads of the comparable TBA security.

Private equity and real estate partnerships: Investments in private equity and real estate partnerships are valued based on the fair value reported by the manager of the corresponding partnership. The managers provide unaudited quarterly financial statements and audited annual financial statements which set forth the value of the fund. The valuations obtained from the managers are based on various analyses on the underlying holdings in each partnership, including financial valuation models and projections, comparable valuations from the public markets, and precedent private market transactions. Investments are valued in the accompanying financial statements based on the Plan’s beneficial interest in the underlying net assets of the partnership as determined by the partnership agreement.

Insurance group annuity contracts: The fair values for these investments are based on the current market value of the aggregate accumulated contributions plus interest earned.

Swap assets and liabilities: Fair values for interest rate swaps, equity index swaps and inflation swaps are estimated using a discounted cash flow pricing model. These models use observable market data such as contractual fixed rate, broker quotes, spot equity price or index value and dividend data. The fair values of credit default swaps are estimated using an income approach model which determines expected cash flows based on default probabilities from the issuer-specific credit spread curve and credit loss recovery rates, both of which are dependent on market quotes.

Real estate investment trusts: Valued at the closing price reported on an exchange.

Short-term investment funds: Primarily high-grade money market instruments valued at net asset value at year-end.

Real estate: Valued by investment managers generally using proprietary pricing models.

Registered investment companies: Valued at the closing price reported on the primary exchange.

Defined Contribution Plans

The Company maintains certain defined contribution plans for its employees, including the Marsh & McLennan Companies 401(k) Savings & Investment Plan (“401(k) Plan”), that are qualified under U.S. tax laws. Under these plans, eligible employees may contribute a percentage of their base salary, subject to certain limitations. For the 401(k) Plan, the Company matches a fixed portion of the employees’ contributions. The 401(k) Plan contains an Employee Stock Ownership Plan feature under U.S. tax law. Approximately $453 million of the 401(k) Plan’s assets at both December 31, 2014 and December 31, 2013 were invested in the Company’s common stock. If a participant does not choose an investment direction for his or her future contributions, they are automatically invested in a BlackRock LifePath Portfolio that most closely matches the participant’s expected retirement year. The cost of these defined contribution plans was $49 million in 2014, $50 million in 2013 and $50 million in 2012. In addition, the Company has a significant defined contribution plan in the U.K. As noted above, effective August 1, 2014, a newly formed defined contribution plan replaced the existing defined contribution and defined benefit plans with regard to future service. The cost of the U.K. defined contribution plan was $65 million, $23 million and $21 million in 2014, 2013 and 2012, respectively.