XML 43 R22.htm IDEA: XBRL DOCUMENT v3.20.4
Pensions And Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2020
Retirement Benefits [Abstract]  
Pensions and Other Postretirement Benefits Pensions and Other Postretirement Benefits
Employee Pension and Other Postretirement Benefit Plans

Defined Benefit Pension Plans Defined benefit pension plans covering eligible U.S. hourly employees (hired prior to October 2007) and Canadian hourly employees (hired prior to October 2016) generally provide benefits of negotiated, stated amounts for each year of service and supplemental benefits for employees who retire with 30 years of service before normal retirement age. The benefits provided by the defined benefit pension plans covering eligible U.S. (hired prior to January 1, 2001) and Canadian salaried employees and employees in certain other non-U.S. locations are generally based on years of service and compensation history. Accrual of defined pension benefits ceased in 2012 for U.S. and Canadian salaried employees. There is also an unfunded nonqualified pension plan primarily covering U.S. executives for service prior to January 1, 2007 and it is based on an “excess plan” for service after that date.
The funding policy for qualified defined benefit pension plans is to contribute annually not less than the minimum required by applicable laws and regulations or to directly pay benefit payments where appropriate. In the year ended December 31, 2020 all legal funding requirements were met. The following table summarizes contributions made to the defined benefit pension plans:
Years Ended December 31,
202020192018
U.S. hourly and salaried$68 $83 $76 
Non-U.S.396 532 1,624 
Total$464 $615 $1,700 

We expect to contribute approximately $70 million to our U.S. non-qualified plans and approximately $500 million to our non-U.S. pension plans in 2021.

Based on our current assumptions, over the next five years we expect no significant mandatory contributions to our U.S. qualified pension plans and mandatory contributions totaling $366 million to our U.K. and Canada pension plans.

Other Postretirement Benefit Plans Certain hourly and salaried defined benefit plans provide postretirement medical, dental, legal service and life insurance to eligible U.S. and Canadian retirees and their eligible dependents. Certain other non-U.S. subsidiaries have postretirement benefit plans, although most non-U.S. employees are covered by government sponsored or administered programs. We made contributions to the U.S. OPEB plans of $343 million, $326 million and $325 million in the years ended December 31, 2020, 2019 and 2018. Plan participants' contributions were insignificant in the years ended December 31, 2020, 2019 and 2018.

Defined Contribution Plans We have defined contribution plans for eligible U.S. salaried and hourly employees that provide discretionary matching contributions. Contributions are also made to certain non-U.S. defined contribution plans. We made contributions to our defined contribution plans of $573 million, $537 million and $617 million in the years ended December 31, 2020, 2019 and 2018.

Significant Plan Amendments, Benefit Modifications and Related Events

Other Remeasurements The SOA issued mortality improvement tables in the three months ended December 31, 2020. We incorporated these SOA mortality improvement tables into the December 31, 2020 measurement of our U.S. pension and OPEB plans' benefit obligations. The change in these assumptions decreased the December 31, 2020 U.S. pension and OPEB plans' obligations by $686 million. We incorporated the mortality improvement tables issued by the SOA in the three months ended December 31, 2018, and updated our base mortality assumptions in the U.S. This change in assumption decreased the December 31, 2018 U.S. pension and OPEB plans' obligations by $264 million.
Pension and OPEB Obligations and Plan Assets
Year Ended December 31, 2020Year Ended December 31, 2019
Pension BenefitsGlobal OPEB PlansPension BenefitsGlobal OPEB Plans
U.S. Non-U.S. U.S. Non-U.S.
Change in benefit obligations
Beginning benefit obligation$64,684 $21,398 $6,304 $61,190 $19,904 $5,744 
Service cost177 133 19 179 120 17 
Interest cost1,716 362 173 2,264 456 220 
Actuarial losses4,757 1,506 551 6,444 1,653 641 
Benefits paid(4,600)(1,132)(408)(4,753)(1,234)(395)
Foreign currency translation adjustments— 870 (3)— 561 54 
Curtailments, settlements and other(266)(2,330)20 (640)(62)23 
Ending benefit obligation66,468 20,807 6,656 64,684 21,398 6,304 
Change in plan assets
Beginning fair value of plan assets59,239 14,961 — 56,102 13,528 — 
Actual return on plan assets6,635 1,573 — 8,454 1,669 — 
Employer contributions68 396 387 83 532 370 
Benefits paid(4,600)(1,132)(408)(4,753)(1,234)(395)
Foreign currency translation adjustments— 389 — — 668 — 
Settlements and other(265)(2,341)21 (647)(202)25 
Ending fair value of plan assets61,077 13,846 — 59,239 14,961 — 
Ending funded status$(5,391)$(6,961)$(6,656)$(5,445)$(6,437)$(6,304)
Amounts recorded in the consolidated balance sheets
Non-current assets$— $980 $— $— $698 $— 
Current liabilities(66)(364)(379)(68)(342)(369)
Non-current liabilities(5,325)

(7,577)(6,277)(5,377)(6,793)(5,935)
Net amount recorded$(5,391)$(6,961)$(6,656)$(5,445)$(6,437)$(6,304)
Amounts recorded in Accumulated other comprehensive loss
Net actuarial loss$(3,256)$(5,123)$(1,823)$(1,980)$(4,688)$(1,364)
Net prior service (cost) credit11 (60)20 14 (78)27 
Total recorded in Accumulated other comprehensive loss$(3,245)$(5,183)$(1,803)$(1,966)$(4,766)$(1,337)

In the years ended December 31, 2020 and 2019, the actuarial losses on the benefit obligations were primarily due to decreases in discount rates for all plans.
The following table summarizes the total accumulated benefit obligations (ABO), the ABO and fair value of plan assets for defined benefit pension plans with ABO in excess of plan assets, and the projected benefit obligation (PBO) and fair value of plan assets for defined benefit pension plans with PBO in excess of plan assets:
December 31, 2020December 31, 2019
U.S. Non-U.S. U.S. Non-U.S.
ABO$66,448 $20,721 $64,669 $21,319 
Plans with ABO in excess of plan assets
ABO$66,448 $12,042 $64,669 $10,996 
Fair value of plan assets$61,077 $4,185 $59,239 $3,940 
Plans with PBO in excess of plan assets
PBO$66,468 $12,128 $64,684 $11,079 
Fair value of plan assets$61,077 $4,186 $59,239 $3,940 

The following table summarizes the components of net periodic pension and OPEB expense along with the assumptions used to determine benefit obligations:

Year Ended December 31, 2020Year Ended December 31, 2019Year Ended December 31, 2018
Pension BenefitsGlobal OPEB PlansPension BenefitsGlobal OPEB PlansPension BenefitsGlobal OPEB Plans
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
Components of expense
Service cost$251 $145 $19 $393 $132 $17 $330 $163 $20 
Interest cost1,716 362 173 2,264 456 220 2,050 464 195 
Expected return on plan assets(3,267)(675)— (3,483)(786)— (3,890)(825)— 
Amortization of net actuarial losses16 171 74 11 122 30 10 144 54 
Curtailments, settlements and other17 241 (8)21 142 (23)(19)43 (19)
Net periodic pension and OPEB (income) expense$(1,267)$244 $258 $(794)$66 $244 $(1,519)$(11)$250 
Weighted-average assumptions used to determine benefit obligations(a)
Discount rate2.37 %1.62 %2.53 %3.20 %2.16 %3.24 %4.22 %2.86 %4.19 %
Weighted-average assumptions used to determine net expense(a)
Discount rate2.84 %2.80 %3.00 %3.92 %3.36 %4.07 %3.19 %2.99 %3.29 %
Expected rate of return on plan assets5.88 %4.96 %N/A6.37 %5.76 %N/A6.61 %6.09 %N/A
_________
(a)    The rate of compensation increase and the cash balance interest crediting rates do not have a significant effect on our U.S. pension and OPEB plans.

The non-service cost components of the net periodic pension and OPEB income are presented in Interest income and other non-operating income, net. Refer to Note 19 for additional information.

U.S. pension plan service cost includes administrative expenses and Pension Benefit Guarantee Corporation premiums were insignificant, $214 million and $121 million for the years ended December 31, 2020, 2019 and 2018. Weighted-average assumptions used to determine net expense are determined at the beginning of the period and updated for remeasurements. Non-U.S. pension plan administrative expenses included in service cost were insignificant in the years ended December 31, 2020, 2019 and 2018.

In the three months ended December 31, 2020, we completed a $1.5 billion annuity purchase for salaried retirees in Canada. This resulted in a non-operating pension settlement charge of $130 million.
Assumptions

Investment Strategies and Long-Term Rate of Return Detailed periodic studies are conducted by our internal asset management group as well as outside actuaries and are used to determine the long-term strategic mix among asset classes, risk mitigation strategies and the expected long-term return on asset assumptions for the U.S. pension plans. The U.S. study includes a review of alternative asset allocation and risk mitigation strategies, anticipated future long-term performance and risk of the individual asset classes that comprise the plans' asset mix. Similar studies are performed for the significant non-U.S. pension plans with the assistance of outside actuaries and asset managers. While the studies incorporate data from recent plan performance and historical returns, the expected rate of return on plan assets represents our estimate of long-term prospective rates of return.

We continue to pursue various options to fund and de-risk our pension plans, including continued changes to the pension asset portfolio mix to reduce funded status volatility. The strategic asset mix and risk mitigation strategies for the plans are tailored specifically for each plan. Individual plans have distinct liabilities, liquidity needs and regulatory requirements. Consequently there are different investment policies set by individual plan fiduciaries. Although investment policies and risk mitigation strategies may differ among plans, each investment strategy is considered to be appropriate in the context of the specific factors affecting each plan.

In setting new strategic asset mixes, consideration is given to the likelihood that the selected asset mixes will effectively fund the projected pension plan liabilities, while aligning with the risk tolerance of the plans' fiduciaries. The strategic asset mixes for U.S. defined benefit pension plans are increasingly designed to satisfy the competing objectives of improving funded positions (market value of assets equal to or greater than the present value of the liabilities) and mitigating the possibility of a deterioration in funded status.

Derivatives may be used to provide cost effective solutions for rebalancing investment portfolios, increasing or decreasing exposure to various asset classes and for mitigating risks, primarily interest rate, equity and currency risks. Equity and fixed income managers are permitted to utilize derivatives as efficient substitutes for traditional securities. Interest rate derivatives may be used to adjust portfolio duration to align with a plan's targeted investment policy and equity derivatives may be used to protect equity positions from downside market losses. Alternative investment managers are permitted to employ leverage, including through the use of derivatives, which may alter economic exposure.

In December 2020, an investment policy study was completed for the U.S. pension plans. As a result of changes to our capital market assumptions, the weighted-average long-term rate of return on assets decreased from 5.9% at December 31, 2019 to 5.6% at December 31, 2020. The expected long-term rate of return on plan assets used in determining pension expense for non-U.S. plans is determined in a similar manner to the U.S. plans.

Target Allocation Percentages The following table summarizes the target allocations by asset category for U.S. and non-U.S. defined benefit pension plans:
December 31, 2020December 31, 2019
U.S.Non-U.S.U.S.Non-U.S.
Equity12 %16 %12 %14 %
Debt64 %66 %64 %67 %
Other(a)24 %18 %24 %19 %
Total100 %100 %100 %100 %
__________
(a)    Primarily includes private equity, real estate and absolute return strategies which mainly consist of hedge funds.
Assets and Fair Value Measurements The following tables summarize the fair value of U.S. and non-U.S. defined benefit pension plan assets by asset class:
December 31, 2020December 31, 2019
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
U.S. Pension Plan Assets
Common and preferred stocks$7,429 $— $1 $7,430 $6,232 $19 $1 $6,252 
Government and agency debt securities(a)— 13,231 — 13,231 — 13,843 — 13,843 
Corporate and other debt securities— 26,475 — 26,475 — 24,809 — 24,809 
Other investments, net(b)(c)(834)(8)427 (415)(47)25 401 379 
Net plan assets subject to leveling$6,595 $39,698 $428 46,721 $6,185 $38,696 $402 45,283 
Plan assets measured at net asset value
Investment funds7,534 7,031 
Private equity and debt investments3,137 2,951 
Real estate investments3,061 3,484 
Total plan assets measured at net asset value13,732 13,466 
Other plan assets, net(d)624 490 
Net plan assets$61,077 $59,239 

December 31, 2020December 31, 2019
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Non-U.S. Pension Plan Assets
Common and preferred stocks$572 $— $— $572 $489 $1 $— $490 
Government and agency debt securities(a)— 3,178 — 3,178 — 3,927 — 3,927 
Corporate and other debt securities— 2,762 — 2,762 — 3,230 — 3,230 
Other investments, net(b)(e)31 (79)127 79 (5)(107)248 136 
Net plan assets subject to leveling$603 $5,861 $127 6,591 $484 $7,051 $248 7,783 
Plan assets measured at net asset value
Investment funds5,870 5,608 
Private equity and debt investments489 511 
Real estate investments917 982 
Total plan assets measured at net asset value7,276 7,101 
Other plan assets (liabilities), net(d)(21)77 
Net plan assets$13,846 $14,961 
__________
(a)Includes U.S. and sovereign government and agency issues.
(b)Includes net derivative assets (liabilities).
(c)Level 1 Other investments, net includes derivative liabilities approximating $1.0 billion related to equity option and futures contracts at December 31, 2020.
(d)Cash held by the plans, net of amounts receivable/payable for unsettled security transactions and payables for investment manager fees, custody fees and other expenses.
(e)Level 2 Other investments, net includes Canadian reverse repurchase agreements.

The activity attributable to U.S. and non-U.S. Level 3 defined benefit pension plan investments was insignificant in the years ended December 31, 2020 and 2019.

Investment Fund Strategies Investment funds include hedge funds, funds of hedge funds, equity funds and fixed income funds. Hedge funds and funds of hedge funds managers typically seek to achieve their objectives by allocating capital across a broad array of funds and/or investment managers. Equity funds invest in U.S. common and preferred stocks as well as similar equity securities issued by companies incorporated, listed or domiciled in developed and/or emerging market countries. Fixed income funds include investments in high quality funds and, to a lesser extent, high yield funds. High quality fixed income funds invest in government securities, investment-grade corporate bonds and mortgage and asset-backed securities. High yield fixed income funds invest in high yield fixed income securities issued by corporations which are rated below investment grade. Other investment funds also included in this category primarily represent multi-strategy funds that invest in broadly diversified portfolios of equity, fixed income and derivative instruments.
Private equity and debt investments primarily consist of investments in private equity and debt funds. These investments provide exposure to and benefit from long-term equity investments in private companies, including leveraged buy-outs, venture capital and distressed debt strategies.

Real estate investments include funds that invest in entities which are primarily engaged in the ownership, acquisition, development, financing, sale and/or management of income-producing real estate properties, both commercial and residential. These funds typically seek long-term growth of capital and current income that is above average relative to public equity funds.

Significant Concentrations of Risk The assets of the pension plans include certain investment funds, private equity and debt investments and real estate investments. Investment managers may be unable to quickly sell or redeem some or all of these investments at an amount close or equal to fair value in order to meet a plan's liquidity requirements or to respond to specific events such as deterioration in the creditworthiness of any particular issuer or counterparty.

Illiquid investments held by the plans are generally long-term investments that complement the long-term nature of pension obligations and are not used to fund benefit payments when currently due. Plan management monitors liquidity risk on an ongoing basis and has procedures in place that are designed to maintain flexibility in addressing plan-specific, broader industry and market liquidity events.

The pension plans may invest in financial instruments denominated in foreign currencies and may be exposed to risks that the foreign currency exchange rates might change in a manner that has an adverse effect on the value of the foreign currency denominated assets or liabilities. Forward currency contracts may be used to manage and mitigate foreign currency risk.

The pension plans may invest in debt securities for which any change in the relevant interest rates for particular securities might result in an investment manager being unable to secure similar returns upon the maturity or the sale of securities. In addition, changes to prevailing interest rates or changes in expectations of future interest rates might result in an increase or decrease in the fair value of the securities held. Interest rate swaps and other financial derivative instruments may be used to manage interest rate risk.

Benefit Payments Benefits for most U.S. pension plans and certain non-U.S. pension plans are paid out of plan assets rather than our Cash and cash equivalents. The following table summarizes net benefit payments expected to be paid in the future, which include assumptions related to estimated future employee service:
Pension BenefitsGlobal OPEB Plans
U.S. PlansNon-U.S. Plans
2021$4,821 $1,172 $379 
2022$4,614 $1,070 $374 
2023$4,495 $1,038 $369 
2024$4,387 $1,015 $364 
2025$4,278 $1,000 $361 
2026 - 2030$19,469 $4,673 $1,761