We sponsor both funded and unfunded U.S. and non-U.S. defined benefit pension plans covering the majority of our employees and retirees. Pension benefits for substantially all U.S. employees are provided through non-contributory, qualified and non-qualified defined benefit plans. All non-union hourly and salaried employees joining Honeywell for the first time after December 31, 2012, are not eligible to participate in Honeywell's U.S. defined benefit pension plans. We also sponsor defined benefit pension plans which cover non-U.S. employees who are not U.S. citizens, in certain jurisdictions, principally the UK, Netherlands, Germany, and Canada. Other pension plans outside of the U.S. are not material to the Company either individually or in the aggregate.

We also sponsor postretirement benefit plans that provide health care benefits and life insurance coverage mainly to U.S. eligible retirees. Less than 1% of Honeywell's U.S. employees are eligible for a retiree medical subsidy from the Company; and this subsidy is limited to a fixed-dollar amount. In addition, more than 75% of Honeywell's current retirees either have no Company subsidy or have a fixed-dollar subsidy amount. This significantly limits our exposure to the impact of future health care cost increases. The retiree medical and life insurance plans are not funded. Claims and expenses are paid from our operating cash flow.

The following tables summarize the balance sheet impact, including the benefit obligations, assets and funded status associated with our significant pension and other postretirement benefit plans.

		Pension Benefits
		U.S. Plans				Non-U.S. Plans
		2014		2013		2014		2013
Change in benefit obligation:
	Benefit obligation at beginning of year	$	16,290	$	17,117	$	5,523	$	5,272
	Service cost		241		272		56		58
	Interest cost		771		677		231		215
	Plan amendments		-		14		(17)		-
	Actuarial (gains) losses		1,718		(975)		601		72
	Acquisitions		-		190		-		44
	Divestitures		-		-		(61)		-
	Benefits paid		(996)		(1,005)		(210)		(198)
	Foreign currency and other		11		-		(362)		60
	Benefit obligation at end of year		18,035		16,290		5,761		5,523
Change in plan assets:
	Fair value of plan assets at beginning of year		16,727		14,345		5,037		4,527
	Actual return on plan assets		1,290		3,191		622		428
	Company contributions		36		28		187		183
	Acquisitions		-		168		-		45
	Benefits paid		(996)		(1,005)		(210)		(198)
	Foreign currency and other		9		-		(303)		52
	Fair value of plan assets at end of year		17,066		16,727		5,333		5,037
Funded status of plans		$	(969)	$	437	$	(428)	$	(486)
Amounts recognized in Consolidated Balance
Sheet consist of:
	Prepaid pension benefit cost⁽¹⁾	$	-	$	839	$	270	$	120
	Accrued pension liabilities - current⁽²⁾		(74)		(36)		(8)		(13)
	Accrued pension liabilities - noncurrent⁽³⁾		(895)		(366)		(690)		(593)
Net amount recognized		$	(969)	$	437	$	(428)	$	(486)

(1) Included in Other Assets on Consolidated Balance Sheet
(2) Included in Accrued Liabilities on Consolidated Balance Sheet
(3) Included in Other Liabilities - Non-Current on Consolidated Balance Sheet

		Other Postretirement Benefits
		2014		2013
Change in benefit obligation:
	Benefit obligation at beginning of year	$	1,096	$	1,477
	Service cost		-		-
	Interest cost		42		44
	Plan amendments⁽¹⁾		(87)		(175)
	Actuarial (gains) losses		46		(108)
	Benefits paid		(124)		(142)
	Benefit obligation at end of year		973		1,096
Change in plan assets:
	Fair value of plan assets at beginning of year		-		-
	Actual return on plan assets		-		-
	Company contributions		-		-
	Benefits paid		-		-
	Fair value of plan assets at end of year		-		-
Funded status of plans		$	(973)	$	(1,096)

Amounts recognized in Consolidated Balance Sheet consist of:
	Accrued liabilities	$	(111)	$	(130)
	Postretirement benefit obligations other than pensions⁽²⁾		(862)		(966)
Net amount recognized		$	(973)	$	(1,096)

(1) Elimination of retiree medical and life insurance coverage for certain retirees and union employees. Amount will be recognized as part of net postretirement benefit cost over the expected future lifetime of the remaining participants in the plan.
(2) Excludes non-U.S. plans of $49 million and $53 million in 2014 and 2013, respectively.

Amounts recognized in Accumulated Other Comprehensive (Income) Loss associated with our significant pension and other postretirement benefit plans at December 31, 2014 and 2013 are as follows

The components of net periodic benefit (income) cost and other amounts recognized in other comprehensive (income) loss for our significant pension and other postretirement benefit plans include the following components:

			Pension Benefits
			U.S. Plans						Non-U.S. Plans
Net Periodic Benefit Cost			2014		2013		2012		2014		2013		2012
Service cost			$	241	$	272	$	256	$	56	$	58	$	48
Interest cost				771		677		738		231		215		221
Expected return on plan assets				(1,257)		(1,076)		(1,020)		(354)		(308)		(291)
Amortization of transition
	obligation			-		-		-		2		2		2
Amortization of prior service
	cost (credit)			23		23		28		(2)		(2)		(2)
Recognition of actuarial losses				26		-		707		223		51		250
Settlements and curtailments				-		-		-		-		-		2
Net periodic benefit (income) cost			$	(196)	$	(104)	$	709	$	156	$	16	$	230

Other Changes in Plan Assets and
Benefits Obligations Recognized in			U.S. Plans						Non-U.S. Plans
Other Comprehensive (Income) Loss			2014		2013		2012		2014		2013		2012
Actuarial (gains) losses			$	1,686	$	(3,090)	$	859	$	333	$	(48)	$	327
Prior service cost (credit)				-		14		-		(17)		-		-
Transition obligation
	recognized during year			-		-		-		(2)		(2)		(2)
Prior service (cost) credit
	recognized during year			(23)		(23)		(28)		2		2		2
Actuarial losses recognized
	during year			(26)		-		(707)		(223)		(51)		(250)
Foreign exchange translation
	adjustments			-		-		-		(50)		3		23
	Total recognized in other
		comprehensive (income) loss	$	1,637	$	(3,099)	$	124	$	43	$	(96)	$	100
	Total recognized in net periodic
		benefit (income) cost and other comprehensive
		(income) loss	$	1,441	$	(3,203)	$	833	$	199	$	(80)	$	330

The estimated prior service cost (credit) for pension benefits that will be amortized from accumulated other comprehensive (income) loss into net periodic benefit (income) cost in 2015 are expected to be $23 million and ($3) million for U.S. and non-U.S. pension plans, respectively.

		Other Postretirement Benefits
		Years Ended December 31,
Net Periodic Benefit Cost		2014		2013		2012
Service cost		$	-	$	-	$	1
Interest cost			42		44		53
Amortization of prior service (credit)			(20)		(13)		(14)
Recognition of actuarial losses			24		27		34
Settlements and curtailments⁽¹⁾			-		(42)		(6)
Net periodic benefit cost		$	46	$	16	$	68

	(1) Curtailment gain in 2013 related to elimination of retiree medical coverage for a union group
	in connection with a new collective bargaining agreement.

		Years Ended December 31,
Other Changes in Plan Assets and Benefits Obligations		2014		2013		2012
Recognized in Other Comprehensive (Income) Loss
Actuarial (gains) losses		$	46	$	(108)	$	34
Prior service (credit)			(87)		(175)		(1)
Prior service credit recognized during year			20		13		14
Actuarial losses recognized during year			(24)		(27)		(34)
Settlements and curtailments			-		42		6
Total recognized in other comprehensive (income) loss		$	(45)	$	(255)	$	19
Total recognized in net periodic benefit cost and
	other comprehensive (income) loss	$	1	$	(239)	$	87

The estimated net loss and prior service (credit) for other postretirement benefits that will be amortized from accumulated other comprehensive (income) loss into net periodic benefit cost in 2015 are both expected to be $30 million.

Major actuarial assumptions used in determining the benefit obligations and net periodic benefit (income) cost for our significant benefit plans are presented in the following table as weighted averages.

	Pension Benefits
	U.S. Plans						Non-U.S. Plans
	2014		2013		2012		2014		2013		2012
Actuarial assumptions used to determine
benefit obligations as of December 31:
Discount rate	4.08	%	4.89	%	4.06	%	3.26	%	4.29	%	4.29	%
Expected annual rate of
compensation increase	4.50	%	4.50	%	4.50	%	2.53	%	2.81	%	3.55	%

Actuarial assumptions used to determine
net periodic benefit (income) cost for
years ended December 31:
Discount rate	4.89	%	4.06	%	4.89	%	4.29	%	4.29	%	4.84	%
Expected rate of return
on plan assets	7.75	%	7.75	%	8.00	%	6.96	%	6.99	%	7.03	%
Expected annual rate of
compensation increase	4.50	%	4.50	%	4.50	%	2.81	%	3.55	%	3.67	%

			Other Postretirement Benefits
			2014		2013		2012
Actuarial assumptions used to determine benefit
	obligations as of December 31:
		Discount rate	3.45	%	4.05	%	3.40	%

Actuarial assumptions used to determine net periodic
	benefit cost for years ended December 31:
		Discount rate	4.05	%	3.40	%	4.00	%

The discount rate for our U.S. pension and other postretirement benefits plans reflects the current rate at which the associated liabilities could be settled at the measurement date of December 31. To determine discount rates for our U.S. pension and other postretirement benefit plans, we use a modeling process that involves matching the expected cash outflows of our benefit plans to a yield curve constructed from a portfolio of high quality, fixed-income debt instruments. We use the average yield of this hypothetical portfolio as a discount rate benchmark. The discount rate used to determine the other postretirement benefit obligation is lower principally due to a shorter expected duration of other postretirement plan obligations as compared to pension plan obligations.

Our expected rate of return on U.S. plan assets of 7.75% is a long-term rate based on historical plan asset returns over varying long-term periods combined with current market conditions and broad asset mix considerations. We review the expected rate of return on an annual basis and revise it as appropriate.

For non-U.S. benefit plans actuarial assumptions reflect economic and market factors relevant to each country.

Included in the aggregate data in the tables above are the amounts applicable to our pension plans with accumulated benefit obligations exceeding the fair value of plan assets. Amounts related to such plans were as follows:

Accumulated benefit obligation for our U.S. defined benefit pension plans were $17.2 billion and $15.7 billion and for our Non-U.S. defined benefit plans were $5.5 billion and $5.3 billion at December 31, 2014 and 2013, respectively.

Our asset investment strategy for our U.S. pension plans focuses on maintaining a diversified portfolio using various asset classes in order to achieve our long-term investment objectives on a risk adjusted basis. Our actual invested positions in various securities change over time based on short and longer-term investment opportunities. To achieve our objectives, we have established long-term target allocations as follows: 60%-70% equity securities, 10%-20% fixed income securities and cash, 5%-15% real estate investments, and 10%-20% other types of investments. Equity securities include publicly-traded stock of companies located both inside and outside the United States. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities, and U.S. Treasuries. Real estate investments include direct investments in commercial properties and investments in real estate funds. Other types of investments include investments in private equity and hedge funds that follow several different strategies. We review our assets on a regular basis to ensure that we are within the targeted asset allocation ranges and, if necessary, asset balances are adjusted back within target allocations.

Our non-U.S. pension assets are typically managed by decentralized fiduciary committees with the Honeywell Corporate Investments group providing standard funding and investment guidance. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment allocation process in each country. While our non-U.S. investment policies are different for each country, the long-term investment objectives are generally the same as those for the U.S. pension assets.

The fair values of both our U.S. and non-U.S. pension plans assets by asset category are as follows:

		U.S. Plans
		December 31, 2014
			Total		Level 1		Level 2		Level 3
Common stock/preferred stock:
	Honeywell common stock	$	1,851	$	1,851	$	-	$	-
	U.S. large cap stocks		3,913		3,867		46		-
	U.S. mid cap stocks		1,028		1,018		10		-
	U.S. small cap stocks		219		219		-		-
	International stocks		2,576		2,400		176		-
	Real estate investment trusts		204		204		-		-
Fixed income investments:
	Short term investments		1,078		1,078		-		-
	Government securities		438		-		438		-
	Corporate bonds		2,988		-		2,988		-
	Mortgage/Asset-backed securities		635		-		635		-
	Insurance contracts		7		-		7		-
Investments in private funds:
	Private funds		999		-		-		999
	Hedge funds		3		-		-		3
	Real estate funds		226		-		-		226
Direct investments:
	Direct private investments		301		-		-		301
	Real estate properties		600		-		-		600
		$	17,066	$	10,637	$	4,300	$	2,129

		U.S. Plans
		December 31, 2013
			Total		Level 1		Level 2		Level 3
Common stock/preferred stock:
	Honeywell common stock	$	1,697	$	1,697	$	-	$	-
	U.S. large cap stocks		4,147		4,107		40		-
	U.S. mid cap stocks		757		752		5		-
	U.S. small cap stocks		215		210		5		-
	International stocks		2,685		2,503		182		-
	Real estate investment trusts		90		90		-		-
Fixed income investments:
	Short term investments		956		955		1		-
	Government securities		266		-		266		-
	Corporate bonds		2,931		-		2,931		-
	Mortgage/Asset-backed securities		770		-		770		-
	Insurance contracts		7		-		7		-
Investments in private funds:
	Private funds		1,058		-		-		1,058
	Hedge funds		6		-		-		6
	Real estate funds		237		-		-		237
Direct investments:
	Direct private investments		278		-		-		278
	Real estate properties		627		-		-		627
		$	16,727	$	10,314	$	4,207	$	2,206

		Non-U.S. Plans
		December 31, 2014
			Total		Level 1		Level 2		Level 3
Common stock/preferred stock:
	U.S. companies	$	534	$	464	$	70	$	-
	Non-U.S. companies		1,876		225		1,651		-
Fixed income investments:
	Short-term investments		117		113		4		-
	Government securities		1,495		-		1,495		-
	Corporate bonds		857		-		857		-
	Mortgage/Asset-backed securities		19		-		19		-
	Insurance contracts		186		-		186		-
Investments in private funds:
	Private funds		62		-		-		62
	Hedge funds		2		-		-		2
	Real estate funds		185		-		-		185
		$	5,333	$	802	$	4,282	$	249

		Non-U.S. Plans
		December 31, 2013
			Total		Level 1		Level 2		Level 3
Common stock/preferred stock:
	U.S. companies	$	459	$	394	$	65	$	-
	Non-U.S. companies		1,929		244		1,685		-
Fixed income investments:
	Short-term investments		147		140		7		-
	Government securities		1,303		-		1,303		-
	Corporate bonds		656		-		656		-
	Mortgage/Asset-backed securities		25		-		25		-
	Insurance contracts		208		-		208		-
Investments in private funds:
	Private funds		67		-		-		67
	Hedge funds		62		-		-		62
	Real estate funds		181		-		-		181
		$	5,037	$	778	$	3,949	$	310

			U.S. Plans
						Direct
				Private		Private		Hedge		Real Estate		Real Estate
				Funds		Investments		Funds		Funds		Properties
Balance at December 31, 2012				$	1,100	$	227	$	52	$	254	$	595
Actual return on plan assets:
	Relating to assets still held
		at year-end			(10)		34		(22)		11		61
	Relating to assets sold
		during the year			117		1		22		1		4
Purchases					94		37		9		15		15
Sales and settlements					(243)		(21)		(55)		(44)		(48)

Balance at December 31, 2013					1,058		278		6		237		627
Actual return on plan assets:
	Relating to assets still held
		at year-end			(50)		(10)		(2)		21		10
	Relating to assets sold
		during the year			94		59		2		-		53
Purchases					168		92		3		8		38
Sales and settlements					(271)		(118)		(6)		(40)		(128)
Balance at December 31, 2014				$	999	$	301	$	3	$	226	$	600

						Non-U.S. Plans

						Private		Hedge		Real Estate
						Funds		Funds		Funds
Balance at December 31, 2012						$	136	$	56	$	157
Actual return on plan assets:
	Relating to assets still held at year-end						(6)		4		18
	Relating to assets sold during the year						3		-		(1)
Purchases							4		2		12
Sales and settlements							(70)		-		(5)

Balance at December 31, 2013							67		62		181
Actual return on plan assets:
	Relating to assets still held at year-end						(4)		(11)		17
	Relating to assets sold during the year						6		12		1
Purchases							-		-		4
Sales and settlements							(7)		(61)		(18)
Balance at December 31, 2014						$	62	$	2	$	185

The Company enters into futures contracts to gain exposure to certain markets. Sufficient cash or cash equivalents are held by our pension plans to cover the notional value of the futures contracts. At December 31, 2014 and 2013, our U.S. plans had contracts with notional amounts of $2,354 million and $1,938 million, respectively. At December 31, 2014 and 2013, our non-U.S. plans had contracts with notional amounts of $65 million and $61 million, respectively. In both our U.S. and non-U.S. pension plans, the notional derivative exposure is primarily related to outstanding equity futures contracts.

Common stocks, preferred stocks, real estate investment trusts, and short-term investments are valued at the closing price reported in the active market in which the individual securities are traded. Corporate bonds, mortgages, asset-backed securities, and government securities are valued either by using pricing models, bids provided by brokers or dealers, quoted prices of securities with similar characteristics or discounted cash flows and as such include adjustments for certain risks that may not be observable such as credit and liquidity risks. Certain securities are held in commingled funds which are valued using net asset values provided by the administrators of the funds. Investments in private equity, debt, real estate and hedge funds and direct private investments are valued at estimated fair value based on quarterly financial information received from the investment advisor and/or general partner. Investments in real estate properties are valued on a quarterly basis using the income approach. Valuation estimates are periodically supplemented by third party appraisals.

Our general funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. In 2014, 2013 and 2012, we were not required to make contributions to our U.S. pension plans and no contributions were made in 2014 and 2013. In 2012 we made voluntary contributions of $792 million to our U.S. pension plans primarily to improve the funded status. We are not required to make any contributions to our U.S. pension plans in 2015. In 2014, contributions of $160 million were made to our non-U.S. pension plans to satisfy regulatory funding requirements. In 2015, we expect to make contributions of cash and/or marketable securities of approximately $140 million to our non-U.S. pension plans to satisfy regulatory funding standards. Contributions for both our U.S. and non-U.S. pension plans do not reflect benefits paid directly from Company assets.

Benefit payments, including amounts to be paid from Company assets, and reflecting expected future service, as appropriate, are expected to be paid as follows:

The assumed health care cost trend rate has a significant effect on the amounts reported. A one-percentage-point change in the assumed health care cost trend rate would have the following effects: