16. LONG-TERM EMPLOYEE BENEFIT LIABILITIES

Long-term employee benefit liabilities consist of:


	2014		2013		2012
Defined benefit pension plans and other [a]	$	203	$	149	$	212
Termination and long service arrangements [b]		330		343		304
Retirement medical benefits plans [c]		39		34		39
Other long-term employee benefits		8		6		5

Long-term employee benefit obligations	$	580	$	532	$	560

[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:


	2014			2013			2012
Projected benefit obligation
Discount rate		3.7	%		4.7	%		4.1	%
Rate of compensation increase		2.7	%		2.9	%		2.8	%
Net periodic benefit cost
Discount rate		4.7	%		4.1	%		4.7	%
Rate of compensation increase		2.8	%		2.8	%		2.8	%
Expected return on plan assets		6.0	%		6.5	%		7.0	%

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


	2014			2013			2012
Projected benefit obligation
Beginning of year	$	454		$	502		$	388
Current service cost		13			13			11
Interest cost		20			19			18
Actuarial losses (gains) and changes in actuarial assumptions		93			(56	)		50
Benefits paid		(16	)		(18	)		(18	)
Acquisition		—			—			47
Foreign exchange		(24	)		(6	)		6

End of year		540			454			502

Plan assets at fair value [i]
Beginning of year		328			288			259
Return on plan assets		25			38			26
Employer contributions		24			30			19
Benefits paid		(16	)		(18	)		(19	)
Foreign exchange		(14	)		(10	)		3

End of year		347			328			288

Ending funded status	$	193		$	126		$	214

Amounts recorded in the consolidated balance sheet
Non-current asset [note 12]	$	(13	)	$	(26	)	$	—
Current liability		3			3			2
Non-current liability		203			149			212

Net amount	$	193		$	126		$	214

Amounts recorded in accumulated other comprehensive income
Unrecognized actuarial losses	$	(147	)	$	(61	)	$	(141	)

Net periodic benefit cost
Current service cost	$	13		$	13		$	11
Interest cost		20			19			18
Return on plan assets		(19	)		(19	)		(19	)
Actuarial losses		1			5			3

Net periodic benefit cost	$	15		$	18		$	13

[i]

The asset allocation of the Company’s defined benefit pension plans at December 31, 2014 and 2013, and the target allocation for 2015 is as follows:


	2015			2014			2013
Equity securities		55-75	%		58	%		58	%
Fixed income securities		25-45	%		41	%		41	%
Cash and cash equivalents		0-15	%		1	%		1	%

		100	%		100	%		100	%

Substantially all of the plan assets’ fair value has been determined using significant observable inputs (level 2) from indirect market prices on regulated financial exchanges.

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.

[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:


	2014			2013			2012
Discount rate		3.0	%		3.9	%		4.2	%
Rate of compensation increase		2.7	%		3.9	%		3.9	%

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


	2014			2013			2012
Projected benefit obligation
Beginning of year	$	354		$	314		$	252
Current service cost		20			24			16
Interest cost		12			13			13
Actuarial losses and changes in actuarial assumptions		15			12			41
Benefits paid		(18	)		(21	)		(13	)
Acquisition		—			—			2
Curtailment		—			—			(4	)
Foreign exchange		(43	)		12			7

Ending funded status	$	340		$	354		$	314

Amounts recorded in the consolidated balance sheet
Current liability	$	10		$	11		$	10
Non-current liability		330			343			304

Net amount	$	340		$	354		$	314

Amounts recorded in accumulated other comprehensive income
Unrecognized actuarial losses	$	(81	)	$	(82	)	$	(74	)

Net periodic benefit cost
Current service cost	$	20		$	24		$	16
Interest cost		12			13			13
Actuarial losses		16			4			12

Net periodic benefit cost	$	48		$	41		$	41

[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:


	2014			2013			2012
Retirement medical benefit obligations		3.7	%		4.5	%		3.6	%
Net periodic benefit cost		4.5	%		3.6	%		4.2	%
Health care cost inflation		7.0	%		7.7	%		8.0	%

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


	2014			2013			2012
Projected benefit obligation
Beginning of year	$	36		$	41		$	39
Interest cost		2			2			2
Actuarial losses (gains) and changes in actuarial assumptions		5			(4	)		3
Benefits paid		(2	)		(2	)		(3	)
Foreign exchange		—			(1	)		—

Ending funded status	$	41		$	36		$	41

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

Net amount	$	41		$	36		$	41

Amounts recorded in accumulated other comprehensive income
Unrecognized past service costs	$	2		$	2		$	3
Unrecognized actuarial gains		4			10			8

Total accumulated other comprehensive income	$	6		$	12		$	11

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

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

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—2015	$	20	$	9	$	2	$	31

Expected benefit payments:
2015	$	16	$	9	$	2	$	27
2016		17		9		2		28
2017		17		10		2		29
2018		18		11		3		32
2019		19		14		2		35
Thereafter		113		96		12		221

	$	200	$	149	$	23	$	372