Employee Postretirement Benefits

Substantially all regular employees in the U.S. and the United Kingdom are covered by defined benefit pension plans (the "Principal Plans") and/or defined contribution retirement plans. Certain other subsidiaries have defined benefit pension plans or, in certain countries, termination pay plans covering substantially all regular employees. The funding policy for our qualified defined benefit pension plans is to contribute assets at least equal in amount to regulatory minimum requirements. Nonqualified U.S. plans providing pension benefits in excess of limitations imposed by the U.S. income tax code are not funded.

Substantially all U.S. retirees and employees have access to our unfunded health care and life insurance benefit plans. The annual increase in the consolidated weighted-average health care cost trend rate is expected to be 6.0 percent in 2018 and to decline to 4.6 percent in 2028 and thereafter. Assumed health care cost trend rates affect the amounts reported for postretirement health care benefit plans. A one-percentage-point change in assumed health care trend rates would not have a significant effect on our financial results.

Effective January 2015, the U.S. pension plan was amended to include a lump-sum pension benefit payout option for certain plan participants. In addition, in April 2015, the U.S. pension plan completed the purchase of group annuity contracts that transferred to two insurance companies the pension benefit obligations totaling $2.5 billion for approximately 21,000 Kimberly-Clark retirees in the U.S. As a result of these changes, we recognized pension settlement-related charges of $0.8 billion after tax ($1.4 billion pre-tax in other (income) and expense, net) during 2015. In 2015, we made cash contributions of $410 related to these changes to the U.S. plan.

Summarized financial information about postretirement plans, excluding defined contribution retirement plans, is presented below:



	Pension Benefits						Other Benefits
	Year Ended December 31
	2017			2016			2017			2016
Change in Benefit Obligation
Benefit obligation at beginning of year	$	4,126		$	3,959		$	758		$	717
Service cost	41			42			12			11
Interest cost	129			148			32			33
Actuarial loss	20			501			16			41
Currency and other	221			(304		)	(3		)	9
Benefit payments from plans	(218		)	(202		)	—			—
Direct benefit payments	(8		)	(15		)	(50		)	(53		)
Settlements	(15		)	(3		)	—			—
Benefit obligation at end of year	4,296			4,126			765			758
Change in Plan Assets
Fair value of plan assets at beginning of year	3,534			3,508			—			—
Actual return on plan assets	333			413			—			—
Employer contributions	53			108			—			—
Currency and other	204			(290		)	—			—
Benefit payments	(218		)	(202		)	—			—
Settlements	(9		)	(3		)	—			—
Fair value of plan assets at end of year	3,897			3,534			—			—
Funded Status	$	(399	)	$	(592	)	$	(765	)	$	(758	)

Substantially all of the funded status of pension and other benefits is recognized in the consolidated balance sheet in noncurrent employee benefits, with the remainder recognized in accrued expenses and other assets.

Information for the Principal Plans and All Other Pension Plans



	Principal Plans				All Other Pension Plans				Total
	Year Ended December 31
	2017		2016		2017		2016		2017		2016
Projected benefit obligation (“PBO”)	$	3,567	$	3,427	$	729	$	699	$	4,296	$	4,126
Accumulated benefit obligation (“ABO”)	3,513		3,378		658		622		4,171		4,000
Fair value of plan assets	3,312		3,011		585		523		3,897		3,534

Approximately one-half of the PBO and fair value of plan assets for the Principal Plans relate to the U.S. qualified and nonqualified pension plans.

Information for Pension Plans with an ABO in Excess of Plan Assets



	December 31
	2017		2016
PBO	$	2,146	$	3,807
ABO	2,134		3,736
Fair value of plan assets	1,699		3,243

Components of Net Periodic Benefit Cost



	Pension Benefits									Other Benefits
	Year Ended December 31
	2017			2016			2015			2017			2016			2015
Service cost	$	41		$	42		$	38		$	12		$	11		$	12
Interest cost	129			148			187			32			33			32
Expected return on plan assets^(a)	(156		)	(158		)	(215		)	—			—			—
Recognized net actuarial loss	57			52			75			1			—			—
Settlements	7			1			1,357			—			—			—
Other	(9		)	(9		)	(10		)	(2		)	(1		)	(1		)
Net periodic benefit cost	$	69		$	76		$	1,432		$	43		$	43		$	43


(a)	The expected return on plan assets is determined by multiplying the fair value of plan assets at the remeasurement date, typically the prior year-end adjusted for estimated current year cash benefit payments and contributions, by the expected long-term rate of return.

Weighted-Average Assumptions Used to Determine Net Cost for Years Ended December 31



	Pension Benefits								Other Benefits
	Projected 2018		2017		2016		2015		2017		2016		2015
Discount rate	3.10	%	3.19	%	3.91	%	3.86	%	4.29	%	4.59	%	4.28	%
Expected long-term return on plan assets	4.54	%	4.46	%	4.84	%	5.21	%	—		—		—
Rate of compensation increase	2.27	%	2.29	%	2.32	%	2.63	%	—		—		—

Weighted-Average Assumptions Used to Determine Benefit Obligations at December 31



	Pension Benefits				Other Benefits
	2017		2016		2017		2016
Discount rate	3.10	%	3.19	%	3.91	%	4.29	%
Rate of compensation increase	2.27	%	2.29	%	—		—

Investment Strategies for the Principal Plans

Strategic asset allocation decisions are made considering several risk factors, including plan participants' retirement benefit security, the estimated payments of the associated liabilities, the plan funded status, and Kimberly-Clark's financial condition. The resulting strategic asset allocation is a diversified blend of equity and fixed income investments. Equity investments are typically diversified across geographies and market capitalization. Fixed income investments are diversified across multiple sectors including government issues and corporate debt instruments with a portfolio duration that is consistent with the estimated payment of the associated liability. Actual asset allocation is regularly reviewed and periodically rebalanced to the strategic allocation when considered appropriate. Our 2018 target plan asset allocation for the Principal Plans is 70 percent fixed income securities and 30 percent equity securities.

The expected long-term rate of return is evaluated on an annual basis. In setting this assumption, we consider a number of factors including projected future returns by asset class relative to the current asset allocation. The weighted-average expected long-term rate of return on pension fund assets used to calculate pension expense for the Principal Plans was 4.72 percent in 2017, 5.10 percent in 2016 and 5.35 percent in 2015, and will be 4.81 percent in 2018.

Set forth below are the pension plan assets of the Principal Plans measured at fair value, by level in the fair-value hierarchy. More than 70 percent of the assets are held in pooled funds and are measured using a net asset value (or its equivalent). Accordingly, such assets do not meet the Level 1, Level 2, or Level 3 criteria of the fair value hierarchy.



	Fair Value Measurements at December 31, 2017^(a)
	Total Plan Assets		Assets at Quoted Prices in Active Markets for Identical Assets (Level 1)		Assets at Significant Unobservable Inputs (Level 3)
Cash and Cash Equivalents
Held directly	$	28	$	28	$	—
Held through mutual and pooled funds measured at net asset value	24		—		—
Fixed Income
Held directly
U.S. government and municipals	522		522		—
Held through mutual and pooled funds measured at net asset value
U.S. government and municipals	150		—		—
U.S. corporate debt	686		—		—
International bonds	665		—		—
Equity
Held directly
U.S. equity	41		41		—
International equity	47		47		—
Held through mutual and pooled funds measured at net asset value
Non-U.S. equity	85		—		—
Global equity	730		—		—
Insurance Contracts	334		—		334
Total Plan Assets	$	3,312	$	638	$	334


(a)	There were no plan assets measured at Level 2.

For the U.S. pension plan, Treasury futures contracts are used when appropriate to manage duration targets. As of December 31, 2017 and 2016, the U.S. plan had Treasury futures contracts in place with a total notional value of approximately $138 and $216, respectively, and an insignificant fair value. During 2017 and 2016, the plan assets did not include a significant amount of Kimberly-Clark common stock.



	Fair Value Measurements at December 31, 2016^(a)
	Total Plan Assets		Assets at Quoted Prices in Active Markets for Identical Assets (Level 1)
Cash and Cash Equivalents
Held directly	$	33	$	33
Held through mutual and pooled funds measured at net asset value	17		—
Fixed Income
Held directly
U.S. government and municipals	122		122
Held through mutual and pooled funds measured at net asset value
U.S. government and municipals	128		—
U.S. corporate debt	648		—
International bonds	1,223		—
Equity
Held directly
U.S. equity	41		41
International equity	44		44
Held through mutual and pooled funds measured at net asset value
Non-U.S. equity	68		—
Global equity	687		—
Total Plan Assets	$	3,011	$	240


(a)	There were no plan assets measured at Level 2 or Level 3.

Inputs and valuation techniques used to measure the fair value of plan assets vary according to the type of security being valued. Substantially all of the equity securities held directly by the plans are actively traded and fair values are determined based on quoted market prices. Fair values of U.S. Treasury securities are determined based on trading activity in the marketplace.

Fair values of U.S. corporate debt, U.S. securitized fixed income and international bonds are typically determined by reference to the values of similar securities traded in the marketplace and current interest rate levels. Multiple pricing services are typically employed to assist in determining these valuations.

Fair values of equity securities and fixed income securities held through units of pooled funds are based on net asset value of the units of the pooled fund determined by the fund manager. Pooled funds are similar in nature to retail mutual funds, but are typically more efficient for institutional investors. The fair value of pooled funds is determined by the value of the underlying assets held by the fund and the units outstanding.

Equity securities held directly by the pension trusts and those held through units in pooled funds are monitored as to issuer and industry. Except for U.S. Treasuries, concentrations of fixed income securities are similarly monitored for concentrations by issuer and industry. As of December 31, 2017, there were no significant concentrations of equity or debt securities in any single issuer or industry.

No level 3 transfers (in or out) were made in 2017 or 2016, other than an insurance contract purchase in 2017. Fair values of insurance contracts are based on an evaluation of various factors, including purchase price.

We expect to contribute up to $100 to our defined benefit pension plans in 2018. Over the next ten years, we expect that the following gross benefit payments will occur:



	Pension Benefits		Other Benefits
2018	$	245	$	58
2019	259		60
2020	263		60
2021	261		62
2022	272		63
2023-2027	1,322		299

Defined Contribution Pension Plans

Our 401(k) profit sharing plan and supplemental plan provide for a matching contribution of a U.S. employee's contributions and accruals, subject to predetermined limits, as well as a discretionary profit sharing contribution, in which contributions will be based on our profit performance. We also have defined contribution pension plans for certain employees outside the U.S. Costs charged to expense for our defined contribution pension plans were $128 in 2017, $126 in 2016, and $107 in 2015. Approximately one-fourth of these costs were for plans outside the U.S.