16. LONG-TERM EMPLOYEE BENEFIT LIABILITIES

Long-term employee benefit liabilities consist of:


	2013		2012		2011

Defined benefit pension plans and other [a]	$	149	$	212	$	128
Termination and long service arrangements [b]		343		304		244
Retirement medical benefits plans [c]		34		39		37
Other long-term employee benefits		6		5		10

Long-term employee benefit obligations	$	532	$	560	$	419

[a]

Defined benefit pension plans

The Company sponsors a number of defined benefit pension plans and similar arrangements for its employees. All pension plans are funded to at least the minimum legal funding requirements, while European defined benefit pension plans are unfunded.

The weighted average significant actuarial assumptions adopted in measuring the Company’s obligations and costs are as follows:


	2013			2012			2011

Projected benefit obligation
Discount rate		4.7	%		4.1	%		4.7	%
Rate of compensation increase		2.9	%		2.8	%		2.8	%

Net periodic benefit cost
Discount rate		4.1	%		4.7	%		5.2	%
Rate of compensation increase		2.8	%		2.8	%		2.7	%
Expected return on plan assets		6.5	%		7.0	%		7.1	%

Information about the Company’s defined benefit pension plans is as follows:


	2013			2012			2011

Projected benefit obligation
Beginning of year	$	502		$	388		$	337
Current service cost		13			11			10
Interest cost		19			18			19
Actuarial (gains) losses and changes in actuarial assumptions		(56	)		50			42
Benefits paid		(18	)		(18	)		(13	)
Special termination benefit		0			0			1
Acquisition		0			47			0
Divestitures		0			0			(3	)
Foreign exchange		(6	)		6			(5	)

End of year		454			502			388


Plan assets at fair value
Beginning of year		288			259			253
Return on plan assets		38			26			0
Employer contributions		30			19			24
Benefits paid		(18	)		(19	)		(14	)
Foreign exchange		(10	)		3			(4	)

End of year		328			288			259


Ending funded status	$	126		$	214		$	129


Amounts recorded in the consolidated balance sheet
Non-current asset [note 12]	$	(26	)	$	0		$	(1	)
Current liability		3			2			2
Non-current liability		149			212			128

Net amount	$	126		$	214		$	129


Amounts recorded in accumulated other comprehensive income
Unrecognized actuarial losses	$	(61	)	$	(141	)	$	(101	)


Net periodic benefit cost
Current service cost	$	13		$	11		$	10
Interest cost		19			18			19
Return on plan assets		(19	)		(19	)		(19	)
Actuarial losses		5			3			1
Special termination benefit		0			0			1

Net periodic benefit cost	$	18		$	13		$	12

[b]

Termination and long service arrangements

Pursuant to labour laws and national labour agreements in certain European countries and Mexico, the Company is obligated to provide lump sum termination payments to employees on retirement or involuntary termination, and long service payments contingent upon persons reaching a predefined number of years of service.

The weighted average significant actuarial assumptions adopted in measuring the Company’s projected termination and long service benefit obligations and net periodic benefit cost are as follows:


	2013			2012			2011

Discount rate		3.9	%		4.2	%		5.4	%
Rate of compensation increase		3.9	%		3.9	%		4.0	%

Information about the Company’s termination and long service arrangements is as follows:


	2013			2012			2011

Projected benefit obligation
Beginning of year	$	314		$	252		$	235
Current service cost		24			16			15
Interest cost		13			13			10
Actuarial losses and changes in actuarial assumptions		12			41			14
Benefits paid		(21	)		(13	)		(12	)
Acquisition		0			2			0
Curtailment		0			(4	)		0
Foreign exchange		12			7			(10	)

Ending funded status	$	354		$	314		$	252


Amounts recorded in the consolidated balance sheet
Current liability	$	11		$	10		$	8
Non-current liability		343			304			244

Net amount	$	354		$	314		$	252


Amounts recorded in accumulated other comprehensive income
Unrecognized actuarial losses	$	(82	)	$	(74	)	$	(45	)


Net periodic benefit cost
Current service cost	$	24		$	16		$	15
Interest cost		13			13			10
Actuarial losses		4			12			6

Net periodic benefit cost	$	41		$	41		$	31

[c]

Retirement medical benefits plans

The Company sponsors a number of retirement medical plans which were assumed on certain acquisitions in prior years. These plans are frozen to new employees and incur no current service costs.

In addition, the Company sponsors a retirement medical benefits plan that was amended during 2009 such that substantially all employees retiring on or after August 1, 2009 no longer participate in the plan.

The weighted average discount rates used in measuring the Company’s projected retirement medical benefit obligations and net periodic benefit cost are as follows:


	2013			2012			2011

Retirement medical benefit obligations		4.5	%		3.6	%		4.2	%
Net periodic benefit cost		3.6	%		4.2	%		5.4	%
Health care cost inflation		7.7	%		8.0	%		9.2	%

Information about the Company’s retirement medical benefits plans are as follows:


	2013			2012			2011

Projected benefit obligation
Beginning of year	$	41		$	39		$	36
Interest cost		2			2			2
Actuarial (gains) losses and changes in actuarial assumptions		(4	)		3			4
Benefits paid		(2	)		(3	)		(3	)
Foreign exchange		(1	)		0			0

Ending funded status	$	36		$	41		$	39


Amounts recorded in the consolidated balance sheet
Current liability	$	2		$	2		$	2
Non-current liability		34			39			37

Net amount	$	36		$	41		$	39


Amounts recorded in accumulated other comprehensive income
Unrecognized past service costs	$	2		$	3		$	3
Unrecognized actuarial gains		10			8			12

Total accumulated other comprehensive income	$	12		$	11		$	15


Net periodic benefit cost
Interest cost	$	2		$	2		$	2
Actuarial gains		(2	)		(1	)		(1	)
Past service cost amortization		(1	)		0			(1	)

Net periodic benefit cost	$	(1	)	$	1		$	0

The effect of a one-percentage point increase or decrease in health care trend rates would not have a significant impact on the Company’s income.

[d]

Future benefit payments


	Defined benefit pension plans		Termination and long service arrangements		Retirement medical benefits plans		Total

Expected employer contributions – 2014	$	33	$	11	$	2	$	46


Expected benefit payments:
2014	$	17	$	11	$	2	$	30
2015		17		10		2		29
2016		17		10		2		29
2017		18		11		3		32
2018		18		14		2		34
Thereafter		104		104		12		220

	$	191	$	160	$	23	$	374

[e]

Plan assets

The asset allocation of the Company’s defined benefit pension plans at December 31, 2013 and 2012, and the target allocation for 2014 is as follows:


	2014	2013			2012

Equity securities	55-75%		58	%		57	%
Fixed income securities	25-45%		41	%		42	%
Cash and cash equivalents	0-15%		1	%		1	%

	100%		100	%		100	%

The expected rate of return on plan assets was determined by considering the Company’s current investment mix, the historic performance of these investment categories and expected future performance of these investment categories.