17.

LONG-TERM EMPLOYEE BENEFIT LIABILITIES

Long-term employee benefit liabilities consist of:


	2017		2016
Defined benefit pension plans and other [a]	$	264	$	313
Termination and long service arrangements [b]		368		319
Retirement medical benefits plans [c]		31		29
Other long-term employee benefits		7		6

Long-term employee benefit obligations	$	670	$	667

[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:


	2017			2016
Projected benefit obligation
Discount rate		2.9	%		3.1	%
Rate of compensation increase		2.6	%		2.3	%
Net periodic benefit cost
Discount rate		3.1	%		3.2	%
Rate of compensation increase		2.5	%		2.4	%

Expected return on plan assets		5.8	%		5.8	%

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


	2017			2016
Projected benefit obligation
Beginning of year	$	624		$	493
Current service cost		13			14
Interest cost		18			21
Actuarial losses and changes in actuarial assumptions		8			28
Benefits paid		(23	)		(22	)
Benefits paid – settlements [ii]		—			(32	)
Acquisition		—			129
Gain on settlement		—			(5	)
Foreign exchange		47			(2	)

End of year		687			624

Plan assets at fair value [iii]
Beginning of year		330			326
Return on plan assets		33			22
Employer contributions [i]		82			19
Benefits paid		(18	)		(17	)
Benefits paid – settlements [ii]		—			(32	)
Acquisition		—			8
Foreign exchange		16			4

End of year		443			330

Ending funded status	$	244		$	294

Amounts recorded in the consolidated balance sheet
Non-current asset [note 13]	$	(23	)	$	(21	)
Current liability		3			2
Non-current liability		264			313

Net amount	$	244		$	294

Amounts recorded in accumulated other comprehensive income Unrecognized actuarial losses	$	(135	)	$	(144	)

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

Net periodic benefit cost	$	15		$	31

[i]	During the fourth quarter of 2017, the Company contributed $60 million to fund the Company’s U.S. defined benefit pension plans.

[ii]

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 3].

[iii]

The asset allocation of the Company’s defined benefit pension plans at December 31, 2017 and the target allocation for 2018 is as follows:


	2018			2017
Equity securities		55-75	%		50	%
Fixed income securities		25-45	%		35	%
Cash and cash equivalents		0-15	%		15	%

		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:


	2017			2016
Discount rate		2.6	%		2.9	%
Rate of compensation increase		2.6	%		2.7	%

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


	2017			2016
Projected benefit obligation
Beginning of year	$	327		$	295
Current service cost		20			20
Interest cost		7			8
Actuarial (gains) losses and changes in actuarial assumptions		(7	)		15
Benefits paid		(11	)		(11	)
Acquisition		—			16
Foreign exchange		42			(16	)

Ending funded status	$	378		$	327

Amounts recorded in the consolidated balance sheet
Current liability	$	10		$	8
Non-current liability		368			319

Net amount	$	378		$	327

Amounts recorded in accumulated other comprehensive income
Unrecognized actuarial losses	$	(73	)	$	(84	)

Net periodic benefit cost
Current service cost	$	20		$	20
Interest cost		7			8
Actuarial losses		3			1

Net periodic benefit cost	$	30		$	29

[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:


	2017			2016
Retirement medical benefit obligations		3.4	%		3.8	%
Net periodic benefit cost		3.8	%		3.9	%
Health care cost inflation		6.6	%		7.0	%

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


	2017			2016
Projected benefit obligation
Beginning of year	$	31		$	32
Interest cost		1			1
Actuarial losses (gains) and changes in actuarial assumptions		2			(1	)
Benefits paid		(2	)		(1	)
Foreign exchange		1			—

Ending funded status	$	33		$	31

Amounts recorded in the consolidated balance sheet
Current liability	$	2		$	2
Non-current liability		31			29

Net amount	$	33		$	31

Amounts recorded in accumulated other comprehensive income
Unrecognized past service costs	$	1		$	1
Unrecognized actuarial gains		8			11

Total accumulated other comprehensive income	$	9		$	12

Net periodic benefit cost
Interest cost	$	1		$	1
Actuarial gains		(1	)		(1	)

Net periodic benefit cost	$	—		$	—

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 net income.

[d]

Future benefit payments


	Defined benefit pension plans		Termination and long service arrangements		Retirement medical benefits plans		Total
Expected employer contributions - 2018	$	19	$	10	$	2	$	31

Expected benefit payments:
2018	$	23	$	10	$	2	$	35
2019		23		11		2		36
2020		24		14		2		40
2021		25		15		2		42
2022		26		18		2		46
Thereafter		143		99		9		251

	$	264	$	167	$	19	$	450