18.

LONG-TERM EMPLOYEE BENEFIT LIABILITIES

Long-term employee benefit liabilities consist of:


	2016		2015

Defined benefit pension plans and other [a]	$	313	$	181
Termination and long service arrangements [b]		319		287
Retirement medical benefits plans [c]		29		30
Other long-term employee benefits		6		6

Long-term employee benefit obligations	$	667	$	504

[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:


	2016			2015

Projected benefit obligation
Discount rate		3.1	%		3.8	%
Rate of compensation increase		2.3	%		2.5	%

Net periodic benefit cost
Discount rate		3.2	%		3.7	%
Rate of compensation increase		2.4	%		2.7	%
Expected return on plan assets		5.8	%		5.9	%

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


	2016			2015

Projected benefit obligation
Beginning of year	$	493		$	536
Current service cost		14			12
Interest cost		21			18
Actuarial losses (gains) and changes in actuarial assumptions		28			(18	)
Benefits paid		(22	)		(18	)
Benefits paid – settlements [i]		(32	)		—
Acquisition		129			1
Gain on settlement		(5	)		—
Foreign exchange		(2	)		(38	)

End of year		624			493


Plan assets at fair value [ii]
Beginning of year		326			347
Return on plan assets		22			7
Employer contributions		19			19
Benefits paid		(17	)		(18	)
Benefits paid – settlements [i]		(32	)		—
Acquisition		8			—
Foreign exchange		4			(29	)

End of year		330			326


Ending funded status	$	294		$	167


Amounts recorded in the consolidated balance sheet
Non-current asset [note 14]	$	(21	)	$	(17	)
Current liability		2			3
Non-current liability		313			181

Net amount	$	294		$	167

Amounts recorded in accumulated other comprehensive income
Unrecognized actuarial losses	$	(144	)	$	(138	)


Net periodic benefit cost
Current service cost	$	14		$	12
Interest cost		21			18
Return on plan assets		(20	)		(20	)
Benefits paid – settlements [i]		13			—
Actuarial losses		3			4

Net periodic benefit cost	$	31		$	14

[i]

During the fourth quarter of 2016, the Company offered a limited lump-sum payout to certain terminated vested plan participants on its U.S. defined benefit pension plan. Under this offer, certain participants were able to voluntarily elect an early payout of their pension benefits, in the form of a lump-sum payment. The lump-sum payment was equal to the present value of the participant’s pension benefits. In connection with the partial settlement, payments of $32 million were distributed from existing defined benefit pension plan assets, and the Company recognized a $13 million non-cash settlement charge [note 4].

[ii]

The asset allocation of the Company’s defined benefit pension plans at December 31, 2016 and the target allocation for 2017 is as follows:


	2017			2016

Equity securities		55-75	%		61	%
Fixed income securities		25-45	%		39	%
Cash and cash equivalents		0-15	%		0	%

		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:


	2016			2015

Discount rate		2.9	%		3.1	%
Rate of compensation increase		2.7	%		2.8	%

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


	2016			2015

Projected benefit obligation
Beginning of year	$	295		$	323
Current service cost		20			15
Interest cost		8			8
Actuarial losses and changes in actuarial assumptions		15			2
Benefits paid		(11	)		(12	)
Acquisition		16			—
Divestiture		—			(4	)
Foreign exchange		(16	)		(37	)

Ending funded status	$	327		$	295


Amounts recorded in the consolidated balance sheet
Current liability	$	8		$	8
Non-current liability		319			287

Net amount	$	327		$	295


Amounts recorded in accumulated other comprehensive income
Unrecognized actuarial losses	$	(84	)	$	(69	)


Net periodic benefit cost
Current service cost	$	20		$	15
Interest cost		8			8
Actuarial losses		1			18

Net periodic benefit cost	$	29		$	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:


	2016			2015

Retirement medical benefit obligations		3.8	%		3.9	%
Net periodic benefit cost		3.9	%		3.7	%
Health care cost inflation		7.0	%		6.5	%

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


	2016			2015

Projected benefit obligation
Beginning of year	$	32		$	41
Interest cost		1			1
Actuarial gains and changes in actuarial assumptions		(1	)		(7	)
Benefits paid		(1	)		(2	)
Foreign exchange		—			(1	)

Ending funded status	$	31		$	32


Amounts recorded in the consolidated balance sheet
Current liability	$	2		$	2
Non-current liability		29			30

Net amount	$	31		$	32


Amounts recorded in accumulated other comprehensive income
Unrecognized past service costs	$	1		$	1
Unrecognized actuarial gains		11			11

Total accumulated other comprehensive income	$	12		$	12


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

Net periodic benefit cost	$	—		$	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 - 2017	$	24	$	8	$	2	$	34


Expected benefit payments:
2017	$	21	$	8	$	2	$	31
2018		21		9		2		32
2019		21		11		2		34
2020		23		13		2		38
2021		23		15		2		40
Thereafter		133		91		9		233

	$	242	$	147	$	19	$	408