Pension and Other Postretirement Benefits

Pensions. The Company sponsors various pension plans covering certain U.S. and non-U.S. employees, and participates in certain multi-employer pension plans. The benefits under the Company plans are based primarily on years of service and either the employees’ remuneration near retirement or a fixed dollar multiple.

A measurement date of December 31 was used for all plans presented below.

The components of pension expense were as follows:



U.S. Plans	2018			2017			2016
Service cost	$	17		$	14		$	14
Interest cost	47			50			50
Expected return on plan assets	(85		)	(83		)	(91		)
Settlements	—			—			14
Amortization of actuarial loss	51			52			50
Amortization of prior service cost	1			1			1
Net periodic cost	$	31		$	34		$	38



Non-U.S. Plans	2018			2017			2016
Service cost	$	26		$	22		$	21
Interest cost	75			75			101
Expected return on plan assets	(159		)	(146		)	(157		)
Settlements	38			—			—
Curtailments	—			(3		)	—
Amortization of actuarial loss	45			42			50
Amortization of prior service credit	(11		)	(11		)	(12		)
Net periodic cost / (benefit)	$	14		$	(21	)	$	3

The settlement charge in 2018 arose from the payment of lump sum buy-outs to settle certain pension obligations using plan assets.

Additional pension expense of $5 was recognized in each of 2018, 2017 and 2016 for multi-employer plans.

The projected benefit obligations, accumulated benefit obligations, plan assets and funded status of the Company's U.S. and non-U.S. plans were as follows:



	U.S. Plans						Non-U.S. Plans
	2018			2017			2018			2017
Projected Benefit Obligations
Benefit obligations at January 1	$	1,499		$	1,482		$	3,507		$	3,283
Service cost	17			14			26			22
Interest cost	47			50			75			75
Plan participants’ contributions	—			—			4			3
Amendments	—			4			—			—
Settlements	—			—			(121		)	(7		)
Actuarial loss	(83		)	51			(199		)	39
Acquisitions	—			—			148			—
Benefits paid	(109		)	(102		)	(150		)	(214		)
Foreign currency translation	—			—			(188		)	306
Benefit obligations at December 31	$	1,371		$	1,499		$	3,102		$	3,507
Plan Assets
Fair value of plan assets at January 1	$	1,220		$	1,156		$	3,665		$	3,152
Actual return on plan assets	(102		)	162			(39		)	134
Employer contributions	3			4			16			290
Plan participants’ contributions	—			—			4			3
Settlements	—			—			(121		)	(7		)
Acquisitions	—			—			90			—
Benefits paid	(109		)	(102		)	(150		)	(214		)
Foreign currency translation	—			—			(201		)	307
Fair value of plan assets at December 31	$	1,012		$	1,220		$	3,264		$	3,665

Funded status	$	(359	)	$	(279	)	$	162		$	158

Accumulated benefit obligations at December 31	$	1,327		$	1,445		$	3,009		$	3,418

Information for pension plans with accumulated benefit obligations in excess of plan assets was as follows:



U.S. Plans	2018		2017
Projected benefit obligations	$	1,371	$	1,499
Accumulated benefit obligations	1,327		1,445
Fair value of plan assets	1,012		1,220



Non-U.S. Plans	2018		2017
Projected benefit obligations	$	363	$	247
Accumulated benefit obligations	329		223
Fair value of plan assets	167		94

The Company’s investment strategy in its U.S. plan is designed to generate returns that are consistent with providing benefits to plan participants within the risk tolerance of the plan. Asset allocation is the primary determinant of return levels and investment risk exposure. The assets of the plan are broadly diversified in terms of securities and security types in order to limit the potential of large losses from any one security.

The strategic ranges for asset allocation in the U.S. plan are as follows:



U.S. equities	38	%	to	48	%
International equities	12	%	to	18	%
Fixed income	15	%	to	25	%
Balanced funds	12	%	to	18	%
Real estate	5	%	to	10	%

The Company’s investment strategy in its U.K. plan, the largest non-U.S. plan, is designed to achieve a funding level of 100% within the next 8 years by targeting an expected return of 2.0% annually in excess of the expected growth in the liabilities. The Company seeks to achieve this return with a risk level commensurate with a 5% chance of the funding level falling between 4% and 7% in any one year. The strategic ranges for asset allocation in the U.K. plan are as follows:



Investment grade credit	30	%	to	90	%
Equities	0	%	to	30	%
Hedge funds	0	%	to	10	%
Real estate	0	%	to	5	%
Alternative credit	0	%	to	20	%
Other	0	%	to	15	%

Pension assets are classified into three levels. Level 1 asset values are derived from quoted prices which are available in active markets as of the report date. Level 2 asset values are derived from other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the report date. Level 3 asset values are derived from unobservable pricing inputs that are not corroborated by market data or other objective sources.

Level 1 Investments

Equity securities are valued at the latest quoted prices taken from the primary exchange on which the security trades. Mutual funds are valued at the net asset value (NAV) of shares held at year-end.

Level 2 Investments

Fixed income securities, including government issued debt, corporate debt, asset-backed and structured debt securities are valued using the latest bid prices or valuations based on a matrix system (which considers such factors as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and other reference data including market research publications). Derivatives, which consist mainly of interest rate swaps, are valued using a discounted cash flow pricing model based on observable market data.

Level 3 Investments

Hedge funds and private equity funds are valued at the NAV at year-end. The values assigned to private equity funds are based upon assessments of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable transactions, and performance multiples among other factors. Real estate investments are based on third party appraisals.

Investments Measured Using NAV per Share Practical Expedient

The investment funds’ portfolio invested in the following: Global Equity, that invests in equity securities of various market sectors including industrial materials, consumer discretionary goods and services, financial infrastructure, technology, and health care; Emerging Markets that invest in equity markets within financial services, consumer goods and services, energy, and technology; and Fixed Income.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair value. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in different fair value measurements at the reporting date.

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and their placement within the fair value hierarchy. The levels assigned to the defined benefit plan assets as of December 31, 2018 and 2017 are summarized in the tables below:



	2018
	U.S. plan assets		Non-U.S. plan assets		Total
Level 1
Cash and cash equivalents	$	34	$	225	$	259
Global large cap equity	—		27		27
U.S. large cap equity	66		3		69
U.S. mid/small cap equity	182		16		198
Mutual funds – global equity	133		—		133
Mutual funds – U.S. equity	188		—		188
Mutual funds – fixed income	104		—		104
	707		271		978
Level 2
Government issued debt securities	—		341		341
Corporate debt securities	49		212		261
Asset backed securities	—		2		2
Structured debt	—		699		699
Insurance contracts	—		105		105
Derivatives	—		103		103
Investment funds – fixed income	—		411		411
Investment funds – global equity	—		268		268
	49		2,141		2,190
Level 3
Investment funds – real estate	94		196		290
Hedge funds	—		113		113
Private equity	9		94		103
Real estate – direct	20		7		27
	123		410		533

Total assets in fair value hierarchy	879		2,822		3,701

Investments measured at NAV Practical Expedient (a)
Investment funds – fixed income	98		112		210
Investment funds – global equity	14		43		57
Investment funds – emerging markets	20		—		20
Hedge funds	—		282		282
	132		437		569
Total investments at fair value	$	1,011	$	3,259	$	4,270



	2017
	U.S. plan assets		Non-U.S. plan assets		Total
Level 1
Cash and cash equivalents	$	13	$	304	$	317
Global large cap equity	—		34		34
U.S. large cap equity	82		32		114
Global mid/small cap equity	—		10		10
U.S. mid/small cap equity	247		32		279
Mutual funds – global equity	175		—		175
Mutual funds – U.S. equity	225		—		225
Mutual funds – fixed income	93		—		93
	835		412		1,247
Level 2
Government issued debt securities	50		556		606
Corporate debt securities	76		4		80
Asset backed securities	9		—		9
Structured debt	—		904		904
Insurance contracts	—		18		18
Derivatives	—		136		136
Investment funds – fixed income	3		482		485
Investment funds – global equity	—		132		132
	138		2,232		2,370
Level 3
Investment funds – real estate	94		64		158
Hedge funds	—		189		189
Private equity	15		132		147
Real estate – direct	18		6		24
	127		391		518

Total assets in fair value hierarchy	1,100		3,035		4,135

Investments measured at NAV Practical Expedient (a)
Investment funds – fixed income	76		123		199
Investment funds – global equity	19		183		202
Investment funds – emerging markets	24		—		24
Hedge funds	—		251		251
Investment funds – real estate	—		68		68
	119		625		744
Total investments at fair value	$	1,219	$	3,660	$	4,879

(a) In accordance with ASU No. 2015-07, certain investments that are measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy.

Accrued income excluded from the tables above was as follows:



	2018		2017
U.S. plan assets	$	1	$	1
Non-U.S. plan assets	5		5

Plan assets include $140 and $189 of the Company’s common stock at December 31, 2018 and 2017.

The following tables reconcile the beginning and ending balances of plan assets measured using significant unobservable inputs (Level 3).



	Hedge funds			Private equity			Real estate			Total
Balance at January 1, 2017	$	207		$	215		$	154		$	576
Foreign currency translation	20			19			5			44
Asset returns – assets held at reporting date	(38		)	(57		)	7			(88		)
Asset returns – assets sold during the period	32			53			—			85
Purchases, sales and settlements, net	(32		)	(83		)	16			(99		)
Balance at December 31, 2017	189			147			182			518
Foreign currency translation	(11		)	(8		)	(5		)	(24		)
Asset returns – assets held at reporting date	(18		)	(11		)	(9		)	(38		)
Asset returns – assets sold during the period	20			28			15			63
Purchases, sales and settlements, net	(67		)	(53		)	70			(50		)
Asset transfers during the period	—			—			64			64
Balance at December 31, 2018	$	113		$	103		$	317		$	533

The following table presents additional information about the pension plan assets valued using net asset value as a practical expedient:



	Fair Value		Redemption Frequency	Redemption Notice Period
Balance at December 31, 2018
Investment funds – fixed income	$	210	Semi-monthly	1 day
Investment funds – global equity	57		Monthly	1 - 15 days
Investment funds – emerging markets	20		Daily	30 days
Hedge funds	282		Monthly	1 - 45 days

Balance at December 31, 2017
Investment funds – fixed income	$	199	Daily	1 day
Investment funds – global equity	202		Monthly	1 - 30 days
Investment funds – emerging markets	24		Daily	30 days
Hedge funds	251		Monthly	3 - 45 days
Investment funds – real estate	68		Weekly	2 days

The pension plan assets valued using net asset value as a practical expedient do not have any unfunded commitments.

Pension assets and liabilities included in the Consolidated Balance Sheets were:



	2018		2017
Non-current assets	$	360	$	313
Current liabilities	14		6
Non-current liabilities	549		434

The Company’s current liability at December 31, 2018, represents the expected required payments to be made for unfunded plans over the next twelve months. Total estimated 2019 employer contributions are $17 for the Company’s pension plans.

Changes in the net loss and prior service credit for the Company’s pension plans were:



	2018						2017						2016
	Net loss			Prior service			Net loss			Prior service			Net loss			Prior service
Balance at January 1	$	2,057		$	(16	)	$	2,032		$	(32	)	$	2,320		$	(54	)
Reclassification to net periodic benefit cost	(134		)	10			(95		)	14			(114		)	11
Current year loss	103			—			21			—			13			—
Amendments	—			—			—			4			—			3
Foreign currency translation	(64		)	—			99			(2		)	(187		)	8
Balance at December 31	$	1,962		$	(6	)	$	2,057		$	(16	)	$	2,032		$	(32	)

The estimated portions of the net losses and net prior service that are expected to be recognized as components of net periodic benefit cost / (credit) in 2019 are $96 and $(9).

Expected future benefit payments as of December 31, 2018 are:



	U.S. plans		Non-U.S. plans
2019	$	108	$	159
2020	109		161
2021	99		161
2022	101		165
2023	95		164
2024 - 2028	482		820

The weighted average actuarial assumptions used to calculate the benefit obligations at December 31 were:



U.S. Plans	2018		2017		2016
Discount rate	4.3	%	3.7	%	4.2	%
Compensation increase	4.5	%	4.7	%	4.6	%



Non-U.S. Plans	2018		2017		2016
Discount rate	2.9	%	2.5	%	2.7	%
Compensation increase	3.2	%	3.2	%	3.3	%

The weighted average actuarial assumptions used to calculate pension expense for each year were:



U.S. Plans	2018		2017		2016
Discount rate - service cost	3.9	%	4.7	%	4.9	%
Discount rate - interest cost	3.2	%	3.4	%	3.5	%
Compensation increase	4.7	%	4.6	%	4.6	%
Long-term rate of return	7.25	%	7.5	%	8.0	%



Non-U.S. Plans	2018		2017		2016
Discount rate - service cost	2.6	%	2.8	%	3.9	%
Discount rate - interest cost	2.2	%	2.3	%	3.2	%
Compensation increase	3.2	%	3.3	%	2.9	%
Long-term rate of return	4.4	%	4.5	%	5.4	%

The expected long-term rate of return on plan assets is determined by taking into consideration expected long-term returns associated with each major asset class based on long-term historical ranges, inflation assumptions and the expected net value from active management of the assets based on actual results.

Other Postretirement Benefit Plans. The Company sponsors unfunded plans to provide health care and life insurance benefits to certain pensioners and survivors. Generally, the medical plans pay a stated percentage of medical expenses reduced by deductibles and other coverages. Life insurance benefits are generally provided by insurance contracts. The Company reserves the right, subject to existing agreements, to change, modify or discontinue the plans. A measurement date of December 31 was used for the plans presented below.

The components of net postretirement benefits cost were as follows:



Other Postretirement Benefits	2018			2017			2016
Service cost	$	4		$	—		$	—
Interest cost	6			6			6
Amortization of prior service credit	(37		)	(40		)	(41		)
Amortization of actuarial loss	4			4			5
Net periodic benefit credit	$	(23	)	$	(30	)	$	(30	)

Changes in the benefit obligations were:



	2018			2017
Benefit obligations at January 1	$	168		$	167
Service cost	4			—
Interest cost	6			6
Actuarial (gain) loss	(15		)	4
Benefits paid	(13		)	(13		)
Foreign currency translation	(3		)	4
Benefit obligations at December 31	$	147		$	168

Changes in the net loss and prior service credit for the Company’s postretirement benefit plans were:



	2018						2017						2016
	Net loss			Prior service			Net loss			Prior service			Net loss			Prior service
Balance at January 1	$	49		$	(142	)	$	49		$	(182	)	$	47		$	(225	)
Reclassification to net periodic benefit cost	(4		)	37			(4		)	40			(5		)	41
Current year (loss) / gain	(14		)	—			4			—			7			—
Foreign currency translation	—			—			—			—			—			2
Balance at December 31	$	31		$	(105	)	$	49		$	(142	)	$	49		$	(182	)

The estimated portions of the net losses and prior service credits that are expected to be recognized as components of net periodic benefit cost/(credit) in 2019 are $3 and $(34).

Expected future benefit payments are as follows:



	Benefit Payments
2019	$	14
2020	13
2021	13
2022	12
2023	12
2024 - 2028	52

The assumed health care cost trend rates at December 31, 2018 were as follows:



Health care cost trend rate assumed for 2019	5.3	%
Rate that the cost trend rate gradually declines to	3.8	%
Year that the rate reaches the rate it is assumed to remain	2035

A one-percentage-point change in assumed health care cost trend rates would have the following effects:



	One percentage point
	Increase		Decrease
Effect on total service and interest cost	$	1	$	1
Effect on postretirement benefit obligation	$	8	$	7

Weighted average discount rates used to calculate the benefit obligations at the end of each year and the cost for each year are presented below.



	2018		2017		2016
Benefit obligations	4.5	%	3.8	%	4.0	%
Service cost	4.9	%	5.0	%	4.9	%
Interest cost	4.1	%	3.5	%	3.6	%

Employee Savings Plan. The Company sponsors a Savings Investment Plan which covers substantially all U.S. salaried employees who are at least 21 years of age. The Company matches up to 50% of 3% of a participant’s compensation and the total Company contributions were $2 in each of the last three years.

Employee Stock Purchase Plan. The Company sponsors an Employee Stock Purchase Plan which covers all U.S. employees with one or more years of service who are non-officers and non-highly compensated as defined by the Internal Revenue Code. Eligible participants contribute 85% of the quarter-ending market price towards the purchase of each common share. The Company’s contribution is equivalent to 15% of the quarter-ending market price. Total shares purchased under the plan in 2018 and 2017 were 32,394 and 25,511 and the Company’s contributions were less than $1 in both years.