PENSION AND OTHER POSTRETIREMENT BENEFITS

12 Months Ended

Dec. 31, 2018

Pension and Other Post Retirements Disclosure Paragraph Details [Abstract]

Pension and Other Postretirement Benefits

Note 21. Pension and Other Postretirement Benefits

We sponsor a number of both funded and unfunded U.S. and non-U.S. defined benefit pension plans. Pension benefits for many of our 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. None of Honeywell’s U.S. employees are eligible for a retiree medical subsidy from the Company. In addition, the vast majority of Honeywell’s U.S. 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
		2018		2017		2018		2017
Change in benefit obligation:
	Benefit obligation at beginning of year	$	18,151	$	17,414	$	7,019	$	6,483
	Service cost		140		172		26		40
	Interest cost		573		586		143		147
	Plan amendments		-		-		30		(1)
	Actuarial (gains) losses		(1,111)		1,234		(356)		(24)
	Benefits paid		(1,137)		(1,146)		(264)		(253)
	Settlements and curtailments		-		(109)		(9)		-
	Foreign currency translation		-		-		(342)		614
	Other		(475)		-		(65)		13
	Benefit obligation at end of year		16,141		18,151		6,182		7,019
Change in plan assets:
	Fair value of plan assets at beginning of year		18,985		16,814		7,151		6,120
	Actual return on plan assets		(303)		3,287		(173)		539
	Company contributions		34		139		137		161
	Benefits paid		(1,137)		(1,146)		(264)		(253)
	Settlements and curtailments		-		(109)		-		-
	Foreign currency translation		-		-		(378)		569
	Other		(470)		-		8		15
	Fair value of plan assets at end of year		17,109		18,985		6,481		7,151
Funded status of plans		$	968	$	834	$	299	$	132
Amounts recognized in Consolidated Balance
Sheet consist of:
	Prepaid pension benefit cost⁽¹⁾	$	1,295	$	1,205	$	1,094	$	944
	Accrued pension liabilities - current⁽²⁾		(27)		(27)		(12)		(12)
	Accrued pension liabilities - noncurrent⁽³⁾		(300)		(344)		(783)		(800)
Net amount recognized		$	968	$	834	$	299	$	132

(1) Included in Other assets on Consolidated Balance Sheet
(2) Included in Accrued liabilities on Consolidated Balance Sheet
(3) Included in Other liabilities on Consolidated Balance Sheet

		Other Postretirement Benefits
		2018		2017
Change in benefit obligation:
	Benefit obligation at beginning of year	$	530	$	492
	Service cost		-		-
	Interest cost		15		19
	Plan amendments		(34)		91
	Actuarial (gains) losses		(110)		(14)
	Benefits paid		(37)		(58)
	Benefit obligation at end of year		364		530
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		$	(364)	$	(530)

Amounts recognized in Consolidated Balance Sheet consist of:
	Accrued liabilities	$	(62)	$	(62)
	Postretirement benefit obligations other than pensions⁽¹⁾		(302)		(468)
Net amount recognized		$	(364)	$	(530)

(1) Excludes non-U.S. plans of $42 million and $44 million in 2018 and 2017.

Amounts recognized in Accumulated other comprehensive (income) loss associated with our significant pension and other postretirement benefit plans at December 31, 2018 and 2017 are as follows:

	Pension Benefits
	U.S. Plans				Non-U.S. Plans
	2018		2017		2018		2017
Prior service (credit) cost	$	(218)	$	(268)	$	20	$	(13)
Net actuarial loss		860		248		600		427
Net amount recognized	$	642	$	(20)	$	620	$	414

	Other Postretirement Benefits
	2018		2017
Prior service (credit)	$	(226)	$	(244)
Net actuarial (gain) loss		(4)		109
Net amount recognized	$	(230)	$	(135)

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				2018		2017		2016		2018		2017		2016
Service cost			$	140	$	172	$	191	$	26	$	40	$	47
Interest cost				573		586		600		143		147		179
Expected return on plan assets				(1,426)		(1,262)		(1,226)		(443)		(411)		(377)
Amortization of prior service
	(credit) cost			(43)		(43)		(43)		(1)		(1)		(3)
Recognition of actuarial losses				-		41		27		37		46		246
Settlements and curtailments				-		18		-		(3)		-		(7)
Net periodic benefit (income) cost			$	(756)	$	(488)	$	(451)	$	(241)	$	(179)	$	85

Other Changes in Plan Assets and
Benefits Obligations Recognized in			U.S. Plans						Non-U.S. Plans
Other Comprehensive (Income) Loss				2018		2017		2016		2018		2017		2016
Actuarial (gains) losses			$	619	$	(792)	$	121	$	250	$	(153)	$	447
Prior service cost (credit)				-		-		-		30		(1)		-
Prior service credit
	recognized during year			43		43		43		4		1		10
Actuarial losses recognized
	during year			-		(59)		(27)		(37)		(46)		(246)
Foreign currency translation				-		-		-		(34)		43		(83)
	Total recognized in other
		comprehensive (income) loss	$	662	$	(808)	$	137	$	213	$	(156)	$	128
	Total recognized in net periodic
		benefit (income) cost and other comprehensive
		(income) loss	$	(94)	$	(1,296)	$	(314)	$	(28)	$	(335)	$	213

The estimated prior service (credit) for pension benefits that will be amortized from Accumulated other comprehensive (income) loss into net periodic benefit (income) cost in 2019 are expected to be ($42) million and $0 million for U.S. and non-U.S. pension plans.

		Other Postretirement Benefits
		Years Ended December 31,
Net Periodic Benefit Cost			2018		2017		2016
Service cost		$	-	$	-	$	-
Interest cost			15		19		20
Amortization of prior service (credit)			(52)		(58)		(76)
Recognition of actuarial losses			3		13		22
Net periodic benefit (income) cost		$	(34)	$	(26)	$	(34)


		Years Ended December 31,
Other Changes in Plan Assets and Benefits Obligations			2018		2017		2016
Recognized in Other Comprehensive (Income) Loss
Actuarial (gains) losses		$	(110)	$	(14)	$	(31)
Prior service cost (credit)			(34)		91		27
Prior service credit recognized during year			52		58		76
Actuarial losses recognized during year			(3)		(13)		(22)
Total recognized in other comprehensive (income) loss		$	(95)	$	122	$	50
Total recognized in net periodic benefit (income) cost and
	other comprehensive (income) loss	$	(129)	$	96	$	16

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 (income) cost in 2019 are expected to be $0 and ($62) 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
	2018		2017		2016		2018		2017		2016
Actuarial assumptions used to determine
benefit obligations as of December 31:
Discount rate	4.35	%	3.68	%	4.20	%	2.63	%	2.36	%	2.51	%
Expected annual rate of
compensation increase	3.25	%	4.50	%	4.50	%	2.46	%	0.73	%	2.17	%

Actuarial assumptions used to determine
net periodic benefit (income) cost for
years ended December 31:
Discount rate - benefit obligation	3.68	%	4.20	%	4.46	%	2.36	%	2.51	%	3.49	%
Discount rate - service cost	3.77	%	4.42	%	4.69	%	2.20	%	2.14	%	2.92	%
Discount rate - interest cost	3.27	%	3.49	%	3.59	%	2.08	%	2.19	%	3.07	%
Expected rate of return
on plan assets	7.75	%	7.75	%	7.75	%	6.23	%	6.43	%	6.65	%
Expected annual rate of
compensation increase	4.50	%	4.50	%	4.48	%	2.49	%	2.17	%	2.11	%

			Other Postretirement Benefits
			2018		2017		2016
Actuarial assumptions used to determine benefit
	obligations as of December 31:
		Discount rate	4.07	%	3.39	%	3.65	%

Actuarial assumptions used to determine net periodic
	benefit cost for years ended December 31:
		Discount rate (1)	3.39	%	3.60	%	3.80	%

		(1) Discount rate was 3.65% for 1/1/17 through 2/28/17. Rate was changed to 3.60% for the remainder of 2017 due to Plan remeasurement as of 3/1/17.

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 single weighted-average yield of this hypothetical portfolio as a discount rate benchmark. We utilize a full yield curve approach in the estimation of the service and interest cost components of net periodic pension benefit (income) for our significant pension plans. This approach applies the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows and provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates. For our U.S. pension plans, the single weighted average spot rates used to determine service and interest costs for 2019 are 4.47% and 3.94%. 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 6.75% at December 31, 2018 was down from 7.75% at December 31, 2017 reflecting a re-balancing of assets to more fixed income during 2018. Our asset return assumption is based on historical plan asset returns over varying long-term periods combined with current market conditions and broad asset mix considerations with a focus on long-term trends rather than short-term market conditions. 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.

Pension Benefits

The following amounts relate to our significant pension plans with accumulated benefit obligations exceeding the fair value of plan assets.

	December 31,
	U.S. Plans		Non-U.S. Plans
	2018	2017	2018	2017
Projected benefit obligation	$327	$371	$1,668	$1,082
Accumulated benefit obligation	$321	$360	$1,604	$1,018
Fair value of plan assets	-	-	$873	$269

Accumulated benefit obligation for our U.S. defined benefit pension plans were $16.1 billion and $18.1 billion and for our Non-U.S. defined benefit pension plans were $6.1 billion and $6.9 billion at December 31, 2018 and 2017.

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. During 2018, we began to employ a de-risking strategy which increases the matching characteristics of our assets relative to our obligation. Our long-term target allocations are as follows: 45%-70% fixed income securities and cash, 35%-50% equity securities, 5%-10% 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 funding and investment guidance. Our non-U.S. investment policies are different for each country as local regulations, funding requirements, and financial and tax considerations are part of the funding and investment allocation process in each country.

In accordance with ASU 2015-07, “Fair Value Measurement (Topic 820)”, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the following tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan 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, 2018
			Total		Level 1		Level 2		Level 3
Equities:
	Honeywell common stock	$	2,438	$	2,438		-		-
	U.S. equities		1,365		1,365		-		-
	Non-U.S. equities		753		753		-		-
	Real estate investment trusts		244		244		-		-
Fixed income:
	Short term investments		877		877		-		-
	Government securities		993		-		993		-
	Corporate bonds		6,824		-		6,824		-
	Mortgage/Asset-backed securities		1,032		-		1,032		-
	Insurance contracts		8		-		8		-
Direct investments:
	Direct private investments		829		-		-		829
	Real estate properties		657		-		-		657
Total			16,020	$	5,677	$	8,857	$	1,486
Investments measured at NAV:
	Private funds		931
	Real estate funds		56
	Hedge funds		1
	Commingled Funds		101
Total assets at fair value		$	17,109

		U.S. Plans
		December 31, 2017
			Total		Level 1		Level 2		Level 3
Equities:
	Honeywell common stock	$	2,832	$	2,832	$	-	$	-
	U.S. equities		3,573		3,573		-		-
	Non-U.S. equities		2,631		2,618		13		-
	Real estate investment trusts		265		265		-		-
Fixed income:
	Short term investments		919		919		-		-
	Government securities		428		-		428		-
	Corporate bonds		5,052		-		5,052		-
	Mortgage/Asset-backed securities		742		-		742		-
	Insurance contracts		8		-		8		-
Direct investments:
	Direct private investments		752		-		-		752
	Real estate properties		597		-		-		597
Total			17,799	$	10,207	$	6,243	$	1,349
Investments measured at NAV:
	Private funds		901
	Real estate funds		84
	Hedge funds		20
	Commingled funds		181
Total assets at fair value		$	18,985

		Non-U.S. Plans
		December 31, 2018
			Total		Level 1		Level 2		Level 3
Equities:
	U.S. equities	$	429	$	297		132		-
	Non-U.S. equities		1,356		44		1,312		-
Fixed income:
	Short-term investments		189		189		-		-
	Government securities		2,572		-		2,572		-
	Corporate bonds		1,468		-		1,468		-
	Mortgage/Asset-backed securities		60		-		60		-
	Insurance contracts		137		-		137		-
Investments in private funds:
	Private funds		46		-		12		34
	Real estate funds		144		-		-		144
Total			6,401	$	530	$	5,693	$	178
Investments measured at NAV:
	Private funds		26
	Real estate funds		54
Total assets at fair value		$	6,481

		Non-U.S. Plans
		December 31, 2017
			Total		Level 1		Level 2		Level 3
Equities:
	U.S. equities	$	573	$	420	$	153	$	-
	Non-U.S. equities		2,801		99		2,702		-
Fixed income:
	Short-term investments		238		238		-		-
	Government securities		1,685		-		1,685		-
	Corporate bonds		1,364		-		1,364		-
	Mortgage/Asset-backed securities		47		-		47		-
	Insurance contracts		157		-		157		-
Investments in private funds:
	Private funds		52		-		21		31
	Real estate funds		149		-		-		149
Total			7,066	$	757	$	6,129	$	180
Investments measured at NAV:
	Private funds		29
	Real estate funds		56
Total assets at fair value		$	7,151

The following table summarizes changes in the fair value of Level 3 assets for both U.S. and Non-U.S. plans:

			U.S. Plans					Non-U.S. Plans
				Direct
				Private		Real Estate		Private		Real Estate
				Investments		Properties		Funds		Funds
Balance at December 31, 2016				$	609	$	664	$	23	$	124
Actual return on plan assets:
	Relating to assets still held
		at year-end			33		2		5		26
	Relating to assets sold
		during the year			51		31		-		-
Purchases					148		18		6		-
Sales and settlements					(89)		(118)		(3)		(1)

Balance at December 31, 2017					752		597		31		149
Actual return on plan assets:
	Relating to assets still held
		at year-end			36		33		1		(4)
	Relating to assets sold
		during the year			65		2		-		-
Purchases					95		47		2		-
Sales and settlements					(119)		(22)		-		(1)
Balance at December 31, 2018				$	829	$	657	$	34	$	144

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, 2018 and 2017, our U.S. plans had contracts with notional amounts of $2,808 million and $4,188 million. At December 31, 2018 and 2017, our non-U.S. plans had contracts with notional amounts of $111 million and $133 million. In both our U.S. and non-U.S. pension plans, the notional derivative exposure is related to outstanding equity and fixed income 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 collective trust 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 funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. In 2018, 2017, and 2016, we were not required to make contributions to our U.S. pension plans and no contributions were made. We are not required to make any contributions to our U.S. pension plans in 2019. In 2018, contributions of $115 million were made to our non-U.S. pension plans to satisfy regulatory funding requirements. In 2019, we expect to make contributions of cash and/or marketable securities of approximately $42 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:

		U.S. Plans		Non-U.S. Plans
2019	$	1,177	$	254
2020		1,171		259
2021		1,167		266
2022		1,163		273
2023		1,160		280
2024-2028		5,564		1,519