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Pension Benefit Plans | 12 Months Ended
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Dec. 31, 2020
Pension benefit plans |
Defined Benefit Plans and Other Post-Retirement Benefit Plans [Line Items] |
Pension Benefit Plans | PENSION BENEFIT PLANS The Company has noncontributory defined benefit pension plans which cover certain of its U.S. employees. During 2012, all remaining benefit accruals under the U.S. plans ceased. Defined benefit plans from acquisitions subsequent to 2012 are ceased as soon as practical. The Company also has noncontributory defined benefit pension plans which cover certain of its non-U.S. employees, and under certain of these plans, benefit accruals continue. In general, the Company’s policy is to fund these plans based on considerations relating to legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax deductibility of the contribution, local practices, market conditions, interest rates and other factors. The following sets forth the funded status of the U.S. and non-U.S. plans as of the most recent actuarial valuations using measurement dates of December 31 ($ in millions):
| U.S. Pension Benefits |  | Non-U.S. Pension Benefits
| 2020 |  | 2019 |  | 2020 |  | 2019
Change in pension benefit obligation: |  |  |  |  |  |  |
Benefit obligation at beginning of year | $ | (2,468) |  |  | $ | (2,340) |  |  | $ | (1,446) |  |  | $ | (1,315) |
Service cost | — |  |  | (6) |  |  | (40) |  |  | (25) |
Interest cost | (69) |  |  | (89) |  |  | (22) |  |  | (24) |
Employee contributions | — |  |  | — |  |  | (6) |  |  | (5) |
Benefits and other expenses paid | 165 |  |  | 164 |  |  | 59 |  |  | 48 |
Acquisitions and other | (96) |  |  | — |  |  | (436) |  |  | — |
Actuarial loss | (273) |  |  | (237) |  |  | (106) |  |  | (152) |
Amendments, settlements and curtailments | 23 |  |  | 40 |  |  | 4 |  |  | 47 |
Foreign exchange rate impact | — |  |  | — |  |  | (168) |  |  | (20) |
Benefit obligation at end of year | (2,718) |  |  | (2,468) |  |  | (2,161) |  |  | (1,446) |
Change in plan assets: |  |  |  |  |  |  |
Fair value of plan assets at beginning of year | 1,866 |  |  | 1,778 |  |  | 1,138 |  |  | 1,032 |
Actual return on plan assets | 227 |  |  | 283 |  |  | 104 |  |  | 115 |
Employer contributions | 140 |  |  | 10 |  |  | 51 |  |  | 44 |
Employee contributions | — |  |  | — |  |  | 6 |  |  | 5 |
Amendments and settlements | (22) |  |  | (41) |  |  | (7) |  |  | (37) |
Benefits and other expenses paid | (165) |  |  | (164) |  |  | (59) |  |  | (48) |
Acquisitions and other | 79 |  |  | — |  |  | 30 |  |  | — |
Foreign exchange rate impact | — |  |  | — |  |  | 68 |  |  | 27 |
Fair value of plan assets at end of year | 2,125 |  |  | 1,866 |  |  | 1,331 |  |  | 1,138 |
Funded status | $ | (593) |  |  | $ | (602) |  |  | $ | (830) |  |  | $ | (308) |
The largest contributor to the net actuarial losses affecting the benefit obligation in both 2020 and 2019 for the U.S. plans and the non-U.S. plans is decreases in the discount rates, partially offset by return on plan assets exceeding expectations. Projected benefit obligation (“PBO”) and fair value of plan assets for pension plans with PBO’s in excess of plan assets ($ in millions):
| U.S. Pension Benefits |  | Non-U.S. Pension Benefits
| 2020 |  | 2019 |  | 2020 |  | 2019
Projected benefit obligation | $ | 2,718 |  |  | $ | 2,468 |  |  | $ | 1,366 |  |  | $ | 778 |
Fair value of plan assets | 2,125 |  |  | 1,866 |  |  | 441 |  |  | 370 |
Accumulated benefit obligation (“ABO”) and fair value of plan assets for pension plans with ABO’s in excess of plan assets ($ in millions):
| U.S. Pension Benefits |  | Non-U.S. Pension Benefits
| 2020 |  | 2019 |  | 2020 |  | 2019
Accumulated benefit obligation | $ | 2,718 |  |  | $ | 2,468 |  |  | $ | 1,257 |  |  | $ | 730 |
Fair value of plan assets | 2,125 |  |  | 1,866 |  |  | 434 |  |  | 370 |
Weighted average assumptions used to determine benefit obligations at date of measurement:
| U.S. Plans |  | Non-U.S. Plans
| 2020 |  | 2019 |  | 2020 |  | 2019
Discount rate | 2.3 | % |  | 3.2 | % |  | 1.1 | % |  | 1.4 | %
Rate of compensation increase | N/A |  | 4.0 | % |  | 2.5 | % |  | 2.4 | %
Components of net periodic pension benefit (cost) ($ in millions):
| U.S. Pension Benefits |  | Non-U.S. Pension Benefits
| 2020 |  | 2019 |  | 2020 |  | 2019
Service cost | $ | — |  |  | $ | (6) |  |  | $ | (40) |  |  | $ | (25) |
Interest cost | (69) |  |  | (89) |  |  | (22) |  |  | (24) |
Expected return on plan assets | 121 |  |  | 126 |  |  | 37 |  |  | 40 |
Amortization of prior service (cost) credit | (1) |  |  | (1) |  |  | 1 |  |  | — |
Amortization of net loss | (37) |  |  | (26) |  |  | (10) |  |  | (4) |
Curtailment and settlement gains (losses) recognized | — |  |  | — |  |  | (1) |  |  | (7) |
Net periodic pension benefit (cost) | $ | 14 |  |  | $ | 4 |  |  | $ | (35) |  |  | $ | (20) |
The net periodic benefit (cost) of the noncontributory defined benefit pension plans incurred during the years ended December 31, 2020, 2019 and 2018 are reflected in the following captions in the accompanying Consolidated Statements of Earnings ($ in millions):
| Year Ended December 31
| 2020 |  | 2019 |  | 2018
Service cost: |  |  |  |  |
Cost of sales | $ | (7) |  |  | $ | (6) |  |  | $ | (11) |
Selling, general and administrative expenses | (33) |  |  | (25) |  |  | (21) |
Total service cost expense | (40) |  |  | (31) |  |  | (32) |
Other net periodic pension costs: |  |  |  |  |
Other income (expense), net | 19 |  |  | 15 |  |  | 37 |
Total (expense) income | $ | (21) |  |  | $ | (16) |  |  | $ | 5 |
Weighted average assumptions used to determine net periodic pension benefit (cost) at date of measurement:
| U.S. Plans |  | Non-U.S. Plans
| 2020 |  | 2019 |  | 2020 |  | 2019
Discount rate | 3.2 | % |  | 4.3 | % |  | 1.4 | % |  | 2.1 | %
Expected long-term return on plan assets | 7.0 | % |  | 7.0 | % |  | 3.4 | % |  | 3.9 | %
Rate of compensation increase | 4.0 | % |  | 4.0 | % |  | 2.4 | % |  | 2.4 | %
The discount rate reflects the market rate on December 31 of the prior year for high-quality fixed-income investments with maturities corresponding to the Company’s benefit obligations and is subject to change each year. For non-U.S. plans, rates appropriate for each plan are determined based on investment-grade instruments with maturities approximately equal to the average expected benefit payout under the plan. During 2019, the Company updated the mortality assumptions used to estimate the projected benefit obligation to reflect updated mortality tables. Included in accumulated other comprehensive income (loss) as of December 31, 2020 are the following amounts that have not yet been recognized in net periodic pension cost: unrecognized prior service credit of $1 million ($1 million, net of tax) and unrecognized actuarial losses of approximately $1.2 billion ($919 million, net of tax). The unrecognized losses and prior service cost, net, is calculated as the difference between the actuarially determined projected benefit obligation and the value of the plan assets less accrued pension costs as of December 31, 2020. Selection of Expected Rate of Return on Assets For the years ended December 31, 2020, 2019 and 2018, the Company used an expected long-term rate of return assumption of 7.0% for its U.S. defined benefit pension plan. The Company intends to use an expected long-term rate of return assumption of 6.75% for 2021 for its U.S. plan. This expected rate of return reflects the asset allocation of the plan, and is based primarily on broad, publicly-traded equity and fixed-income indices and forward-looking estimates of active portfolio and investment management. Long-term rate of return on asset assumptions for the non-U.S. plans were determined on a plan-by-plan basis based on the composition of assets and ranged from 0.5% to 5.0% in 2020 and 0.8% to 5.0% in 2019, with a weighted average rate of return assumption of 3.4% in 2020 and 3.9% in 2019. Plan Assets The U.S. plan’s goal is to maintain between 60% and 70% of its assets in equity portfolios, which are invested in individual equity securities or funds that are expected to mirror broad market returns for equity securities or in assets with characteristics similar to equity investments, such as venture capital funds and partnerships. Asset holdings are periodically rebalanced when equity holdings are outside this range. The balance of the U.S. plan asset portfolio is invested in bond funds, real estate funds, various absolute and real return funds and private equity funds. Non-U.S. plan assets are invested in various insurance contracts, equity and debt securities as determined by the administrator of each plan. The value of the plan assets directly affects the funded status of the Company’s pension plans recorded in the Consolidated Financial Statements. The Company has some investments that are valued using Net Asset Value (“NAV”) as the practical expedient. In addition, some of the investments valued using NAV as the practical expedient have limits on their redemption to monthly, quarterly, semiannually or annually and require up to 90 days prior written notice. These investments valued using NAV consist of mutual funds, venture capital funds, partnerships, and other private investments, which allow the Company to allocate investments across a broad array of types of funds and diversify the portfolio. The fair values of the Company’s pension plan assets for both the U.S. and non-U.S. plans as of December 31, 2020, by asset category were as follows ($ in millions):
| Quoted Prices in Active Market (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Cash and equivalents | $ | 175 |  |  | $ | — |  |  | $ | — |  |  | $ | 175 |
Equity securities: |  |  |  |  |  |  |
Common stock | 503 |  |  | — |  |  | — |  |  | 503 |
Preferred stock | 6 |  |  | — |  |  | — |  |  | 6 |
Fixed income securities: |  |  |  |  |  |  |
Corporate bonds | — |  |  | 42 |  |  | — |  |  | 42 |
Government issued | — |  |  | 58 |  |  | — |  |  | 58 |
Mutual funds | 244 |  |  | 51 |  |  | — |  |  | 295 |
Insurance contracts | — |  |  | 354 |  |  | — |  |  | 354 |
Total | $ | 928 |  |  | $ | 505 |  |  | $ | — |  |  | 1,433 |
Investments measured at NAV (a): |  |  |  |  |  |  |
Common/collective trusts |  |  |  |  |  |  | 1,198 |
Venture capital, partnerships and other private investments |  |  |  |  |  |  | 825 |
Total assets at fair value |  |  |  |  |  |  | $ | 3,456 |
(a) The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total plan assets. The fair values of the Company’s pension plan assets for both the U.S. and non-U.S. plans as of December 31, 2019, by asset category were as follows ($ in millions):
| Quoted Prices in Active Market (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Cash and equivalents | $ | 68 |  |  | $ | — |  |  | $ | — |  |  | $ | 68 |
Equity securities: |  |  |  |  |  |  |
Common stock | 390 |  |  | — |  |  | — |  |  | 390 |
Preferred stock | 6 |  |  | — |  |  | — |  |  | 6 |
Fixed income securities: |  |  |  |  |  |  |
Corporate bonds | — |  |  | 35 |  |  | — |  |  | 35 |
Government issued | — |  |  | 22 |  |  | — |  |  | 22 |
Mutual funds | 287 |  |  | 132 |  |  | — |  |  | 419 |
Insurance contracts | — |  |  | 299 |  |  | — |  |  | 299 |
Total | $ | 751 |  |  | $ | 488 |  |  | $ | — |  |  | 1,239 |
Investments measured at NAV (a): |  |  |  |  |  |  |
Common/collective trusts |  |  |  |  |  |  | 1,071 |
Venture capital, partnerships and other private investments |  |  |  |  |  |  | 694 |
Total assets at fair value |  |  |  |  |  |  | $ | 3,004 |
(a) The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total plan assets. Preferred stock and common stock traded on an active market, as well as mutual funds are valued at the quoted closing price reported on the active market on which the individual securities are traded. Preferred stock, common stock, corporate bonds, U.S. government securities and mutual funds that are not traded on an active market are valued at quoted prices reported by investment brokers and dealers based on the underlying terms of the security and comparison to similar securities traded on an active market. Insurance contracts are valued based upon the quoted prices of the underlying investments with the insurance company. Common/collective trusts are valued based on the plan’s interest, represented by investment units, in the underlying investments held within the trust that are traded in an active market by the trustee. Venture capital, partnerships and other private investments are valued using the NAV based on the information provided by the asset fund managers, which reflects the plan’s share of the fair value of the net assets of the investment. Depending on the nature of the assets, the underlying investments are valued using a combination of either discounted cash flows, earnings and market multiples, third-party appraisals or through reference to the quoted market prices of the underlying investments held by the venture, partnership or private entity where available. Valuation adjustments reflect changes in operating results, financial condition, or prospects of the applicable portfolio company. The methods described above may produce a fair value estimate that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes the valuation methods are appropriate and consistent with the methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Expected Contributions During 2020, the Company contributed $140 million to its U.S. defined benefit pension plan and $51 million to its non-U.S. defined benefit pension plans. During 2021, the Company’s cash contribution requirements for its U.S. and its non-U.S. defined benefit pension plans are expected to be approximately $10 million and $44 million, respectively. The following sets forth benefit payments, which reflect expected future service, as appropriate, expected to be paid by the plans in the periods indicated ($ in millions):
| U.S. Pension Plans |  | Non-U.S. Pension Plans |  | All Pension Plans
2021 | $ | 188 |  |  | $ | 61 |  |  | $ | 249 |
2022 | 187 |  |  | 68 |  |  | 255 |
2023 | 187 |  |  | 66 |  |  | 253 |
2024 | 182 |  |  | 68 |  |  | 250 |
2025 | 173 |  |  | 68 |  |  | 241 |
2026 - 2030 | 789 |  |  | 379 |  |  | 1,168 |
Other Matters Substantially all employees not covered by defined benefit plans are covered by defined contribution plans, which generally provide for Company funding based on a percentage of compensation. A limited number of the Company’s subsidiaries participate in multiemployer defined benefit and contribution plans, primarily outside of the United States, that require the Company to periodically contribute funds to the plan. The risks of participating in a multiemployer plan differ from the risks of participating in a single-employer plan in the following respects: (1) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a participating employer ceases contributing to the plan, the unfunded obligations of the plan may be required to be borne by the remaining participating employers and (3) if the Company elects to stop participating in the plan, the Company may be required to pay the plan an amount based on the unfunded status of the plan. None of the multiemployer plans in which the Company’s subsidiaries participate are considered to be quantitatively or qualitatively significant, either individually or in the aggregate. In addition, contributions made to these plans during 2020, 2019 and 2018 were not considered significant, either individually or in the aggregate. The Company’s net periodic pension cost for the year ended December 31, 2019 includes a settlement loss of $7 million ($6 million after tax or $0.01 per diluted common share) as a result of the transfer of a portion of its non-U.S. pension liabilities related to one defined benefit plan to a third party. Expense for all defined benefit and defined contribution pension plans amounted to $224 million, $203 million and $167 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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