PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

We have funded and unfunded defined benefit pension plans that cover certain employees in North America, Europe, Asia and Brazil. The United States plans are frozen for the majority of participants. The formula for United States salaried employees covered under the qualified defined benefit plan was based on years of service and final average salary, while the formula for United States hourly employees covered under the defined benefit plans was based on specific dollar amounts for each year of service. There were multiple formulas for employees covered under the qualified and nonqualified defined benefit plans sponsored by Maytag, including a cash balance formula. In addition, we sponsor an unfunded Supplemental Executive Retirement Plan. This plan is nonqualified and provides certain key employees defined pension benefits that supplement those provided by the company’s other retirement plans.

A defined contribution plan is being provided to all United States employees subsequent to the pension plan freezes and is not classified within the net periodic benefit cost. The company provides annual match and automatic company contributions, in cash or company stock, of up to 7% of employees’ eligible pay. Our contributions during 2013, 2012 and 2011 were $68 million, $64 million and $68 million, respectively.

We provide postretirement health care benefits for eligible retired employees in the United States, Canada and Brazil. For our United States plan, which comprises the majority of our obligation, eligible retirees include those who were full-time employees with 10 years of service who attained age 55 while in service with us and those union retirees who met the eligibility requirements of their collective bargaining agreements. In general, the postretirement health and welfare benefit plans include cost-sharing provisions that limit our exposure for recent and future retirees and are contributory, with participants’ contributions adjusted annually. The plans are unfunded. We reserve the right to modify these benefits in the future.

Defined Benefit - Pensions and Postretirement Benefit Plans

Obligations and Funded Status at End of Year



	United States Pension Benefits						Foreign Pension Benefits						Other Postretirement Benefits
Millions of dollars	2013			2012			2013			2012			2013			2012
Funded status
Fair value of plan assets	$	2,835		$	2,790		$	206		$	197		$	—		$	—
Benefit obligations	3,546			4,196			439			448			509			477
Funded status	$	(711	)	$	(1,406	)	$	(233	)	$	(251	)	$	(509	)	$	(477	)
Amounts recognized in the consolidated balance sheet
Noncurrent asset	$	—		$	—		$	7		$	5		$	—		$	—
Current liability	(7		)	(7		)	(14		)	(19		)	(51		)	(55		)
Noncurrent liability	(704		)	(1,399		)	(226		)	(237		)	(458		)	(422		)
Amount recognized	$	(711	)	$	(1,406	)	$	(233	)	$	(251	)	$	(509	)	$	(477	)
Amounts recognized in accumulated other comprehensive loss (pre-tax)
Net actuarial loss (gain)	$	1,215		$	1,761		$	98		$	119		$	42		$	27
Prior service (credit) cost	(17		)	(20		)	3			4			(169		)	(210		)
Transition (asset) obligation	—			—			—			(1		)	—			—
Amount recognized	$	1,198		$	1,741		$	101		$	122		$	(127	)	$	(183	)

Change in Benefit Obligation



	United States Pension Benefits						Foreign Pension Benefits						Other Postretirement Benefits
Millions of dollars	2013			2012			2013			2012			2013			2012
Benefit obligation, beginning of year	$	4,196		$	3,872		$	448		$	373		$	477		$	488
Service cost	2			2			6			6			4			5
Interest cost	162			178			17			20			18			21
Plan participants’ contributions	—			—			1			1			8			9
Actuarial loss (gain)	(420		)	425			(7		)	65			(31		)	25
Benefits paid, net of federal subsidy	(281		)	(270		)	(23		)	(21		)	(68		)	(64		)
Plan amendments	—			—			—			—			2			(2		)
Acquisitions / divestitures	—			—			—			(2		)	—			—
New plans	—			—			—			14			—			—
Transfer of benefits	(105		)	—			—			—			105			—
Settlements / curtailment (gain)	(8		)	(11		)	(6		)	(17		)	—			(2		)
Foreign currency exchange rates	—			—			3			9			(6		)	(3		)
Benefit obligation, end of year	$	3,546		$	4,196		$	439		$	448		$	509		$	477
Accumulated benefit obligation, end of year	$	3,536		$	4,181		$	424		$	428		$	—		$	—

During the fourth quarter 2013, we transferred $105 million of ancillary benefits, as allowed under ERISA, out of our United States qualified pension plans and into our United States retiree health and welfare benefit plan. The transfer had no impact on our Consolidated Financial Statements as of December 31, 2013.

During the second quarter 2011, we modified retiree medical benefits for certain retirees to be consistent with those benefits provided by the Whirlpool Corporation Group Benefit Plan. We accounted for these changes as a plan amendment in 2011, resulting in a reduction in the postretirement benefit obligation of $138 million with an offset to accumulated other comprehensive loss, net of tax. In response, a group of retirees has initiated legal proceedings against Whirlpool asserting the above benefits are vested. We believe the outcome of the legal proceedings against Whirlpool will not have a material adverse effect on our Consolidated Financial Statements.

Change in Plan Assets



	United States Pension Benefits						Foreign Pension Benefits						Other Postretirement Benefits
Millions of dollars	2013			2012			2013			2012			2013			2012
Fair value of plan assets, beginning of year	$	2,790		$	2,573		$	197		$	170		$	—		$	—
Actual return on plan assets	207			317			13			19			—			—
Employer contribution	127			181			24			27			60			55
Plan participants’ contributions	—			—			1			1			8			9
Gross benefits paid	(281		)	(270		)	(23		)	(21		)	(68		)	(64		)
New plans	—			—			2			14			—			—
Settlements	(8		)	(11		)	(6		)	(17		)	—			—
Foreign currency exchange rates	—			—			(2		)	4			—			—
Fair value of plan assets, end of year	$	2,835		$	2,790		$	206		$	197		$	—		$	—

Components of Net Periodic Benefit Cost



	United States Pension Benefits									Foreign Pension Benefits									Other Postretirement Benefits
Millions of dollars	2013			2012			2011			2013			2012			2011			2013			2012			2011
Service cost	$	2		$	2		$	2		$	6		$	6		$	7		$	4		$	5		$	8
Interest cost	162			178			192			17			20			20			18			21			31
Expected return on plan assets	(191		)	(194		)	(194		)	(10		)	(11		)	(10		)	—			—			—
Amortization:
Actuarial loss	62			46			31			6			4			4			1			1			1
Prior service cost (credit)	(3		)	(3		)	(3		)	1			1			1			(39		)	(42		)	(43		)
Curtailment gain	—			—			—			—			—			—			—			(52		)	(35		)
Settlement loss	3			5			—			1			3			2			—			—			—
Net periodic benefit cost	$	35		$	34		$	28		$	21		$	23		$	24		$	(16	)	$	(67	)	$	(38	)

On October 27, 2011 we announced the closure of our manufacturing facilities in Fort Smith, Arkansas and on August 28, 2009, we announced the closure of our manufacturing facility in Evansville, Indiana. Both closures triggered a curtailment in our United States retiree health and welfare benefit plan, resulting in curtailment gains of $52 million and $35 million in 2012 and 2011, respectively. The curtailment gains were recognized in our Consolidated Statements of Income as a component of cost of products sold with an offset to accumulated other comprehensive loss, net of tax.

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Loss (Pre-Tax) in 2013



Millions of dollars	United States Pension Benefits			Foreign Pension Benefits			Other Postretirement Benefits
Current year actuarial (gain) loss	$	(481	)	$	(10	)	$	16
Actuarial (loss) gain recognized during the year	(65		)	(10		)	(1		)
Current year prior service cost (credit)	—			—			2
Prior service credit (cost) recognized during the year	3			(1		)	39
Total recognized in other comprehensive loss (pre-tax)	$	(543	)	$	(21	)	$	56
Total recognized in net periodic benefit costs and other comprehensive loss (pre-tax)	$	(508	)	$	—		$	40

Estimated Pre-Tax Amounts that will be amortized from Accumulated Other Comprehensive Loss into Net Periodic Pension Cost in 2014



Millions of dollars	United States Pension Benefits			Foreign Pension Benefits		Other Postretirement Benefits
Actuarial loss	$	43		$	6	$	—
Prior service (credit) cost	(3		)	1		(39		)
Total	$	40		$	7	$	(39	)

Assumptions

Weighted-average assumptions used to determine benefit obligation at end of year



	United States Pension Benefits				Foreign Pension Benefits				Other Postretirement Benefits
	2013		2012		2013		2012		2013		2012
Discount rate	4.95	%	4.05	%	4.16	%	3.93	%	4.95	%	4.03	%
Rate of compensation increase	4.50	%	4.50	%	3.40	%	3.51	%	—		—

Weighted-average assumptions used to determine net periodic cost



	United States Pension Benefits						Foreign Pension Benefits						Other Postretirement Benefits
	2013		2012		2011		2013		2012		2011		2013		2012		2011
Discount rate	4.05	%	4.80	%	5.60	%	3.93	%	5.04	%	5.20	%	4.03	%	5.03	%	5.60	%
Expected long-term rate of return on plan assets	7.50	%	7.50	%	7.75	%	5.40	%	5.44	%	5.40	%	—		—		—
Rate of compensation increase	4.50	%	4.50	%	4.50	%	3.51	%	3.48	%	3.50	%	—		—		—
Health care cost trend rate
Initial rate	—		—		—		—		—		—		7.00	%	8.00	%	8.00	%
Ultimate rate	—		—		—		—		—		—		5.00	%	5.00	%	5.00	%
Year that ultimate rate will be reached	—		—		—		—		—		—		2017		2015		2015

Discount rate

For our United States pension and postretirement benefit plans, the discount rate was selected using a hypothetical portfolio of high quality bonds outstanding at December 31 that would provide the necessary cash flows to match our projected benefit payments. For our foreign pension and postretirement benefit plans, the discount rate was selected using high quality bond yields for the respective country or region covered by the plan.

Expected return on plan assets

In the United States, the expected rate of return on plan assets was determined by using the historical asset returns for publicly traded equity and fixed income securities tracked since 1926 and the historical returns for private equity. The historical equity returns were adjusted downward to reflect future expectations. The expected returns are weighted by the targeted asset allocations. The resulting weighted-average return was rounded to the nearest quarter of one percent.

For foreign pension plans, the expected rate of return on plan assets was primarily determined by observing historical returns in the local fixed income and equity markets and computing the weighted average returns with the weights being the asset allocation of each plan.

Estimated impact of one percentage-point change in assumed health care cost trend rate

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



Millions of dollars	One Percentage Point Increase		One Percentage Point Decrease
Effect on total of service and interest cost	$	1	$	(1	)
Effect on postretirement benefit obligations	5		(5		)

Cash Flows

Funding Policy

Our funding policy is to contribute to our United States pension plans amounts sufficient to meet the minimum funding requirement as defined by employee benefit and tax laws, plus additional amounts which we may determine to be appropriate. In certain countries other than the United States, the funding of pension plans is not common practice. Contributions to our United States pension plans may be made in the form of cash or company stock. We pay for retiree medical benefits as they are incurred.

Expected Employer Contributions to Funded Plans



Millions of dollars	United States Pension Benefits⁽¹⁾		Foreign Pension Benefits
2014	$	160	$	11



¹	Contributions include $160 million of minimum contributions required by law.

Expected Benefit Payments



Millions of dollars	United States Pension Benefits		Foreign Pension Benefits		Other Postretirement Benefits
2014	$	274	$	28	$	51
2015	245		32		52
2016	248		22		51
2017	246		26		49
2018	247		25		44
2019-2023	1,230		131		187

Plan Assets

Our overall investment strategy is to achieve an appropriate mix of investments for long-term growth and for near-term benefit payments with a wide diversification of asset types, fund strategies, and investment fund managers. The target allocation for plan assets is generally 42% equity and 58% fixed income, with exceptions for certain foreign pension plans. For our U.S. plan, the target allocation for equity securities is approximately 50% allocated to United States large-cap, 28% to international equity, 14% to United States mid and small-cap companies and 8% in venture capital. The target allocation for fixed income is allocated with 75% to corporate bonds and 25% to United States treasury and other government securities. The fixed income securities duration is intended to match that of our United States pension liabilities.

Plan assets are reported at fair value based on an exit price, representing the amount that would be received to sell an asset in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset. As a basis for considering such assumptions, a three-tiered fair value hierarchy is established, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets that are observable, either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. We manage the process and approve the results of a third party pricing service to value the majority of our securities and to determine the appropriate level in the fair value hierarchy.

The fair values of our pension plan assets at December 31, 2013 and 2012, by asset category were as follows:



	December 31,
Millions of dollars	Quoted prices (Level 1)				Other significant observable inputs (Level 2)				Significant unobservable inputs (Level 3)				Total
	2013		2012		2013		2012		2013		2012		2013		2012
Cash and equivalents	$	23	$	15	$	—	$	—	$	—	$	—	$	23	$	15
Government and government agency securities^(a)
U.S. securities	—		—		432		433		—		—		432		433
International securities	—		—		131		104		—		—		131		104
Corporate bonds and notes ^(a)
U.S. companies	—		—		850		751		—		—		850		751
International companies	—		—		193		176		—		—		193		176
Equity securities ^(b)
U.S. companies	12		217		—		—		—		—		12		217
International companies	223		233		—		—		—		—		223		233
Mutual funds ^(c)	77		100		—		—		—		—		77		100
Common and collective funds ^(d)
U.S. equity securities	—		—		718		589		—		—		718		589
International equity securities	—		—		79		106		—		—		79		106
Short-term investment fund	—		—		87		49		—		—		87		49
Limited partnerships ^(e)
U.S. private equity investments	—		—		—		—		145		143		145		143
Diversified fund of funds	—		—		—		—		35		38		35		38
Emerging growth	—		—		—		—		18		15		18		15
Real estate ^(f)	—		—		11		10		—		—		11		10
All other investments	—		—		7		8		—		—		7		8
	$	335	$	565	$	2,508	$	2,226	$	198	$	196	$	3,041	$	2,987


(a)	Valued using pricing vendors who use proprietary models to estimate the price a dealer would pay to buy a security using significant observable inputs, such as interest rates, yield curves, and credit risk.


(b)	Valued using the closing stock price on a national securities exchange, which reflects the last reported sales price on the last business day of the year.


(c)	Valued using the net asset value (NAV) of the fund, which is based on the fair value of underlying securities. The fund primarily invests in a diversified portfolio of equity securities issued by non-U.S. companies.


(d)	Valued using the NAV of the fund, which is based on the fair value of underlying securities.


(e)	Valued at estimated fair value based on the proportionate share of the limited partnerships fair value, as determined by the general partner.


(f)	Valued using the NAV of the fund, which is based on the fair value of underlying assets.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)



Millions of dollars	Limited Partnerships
Balance, December 31, 2012	$	196
Realized gains (net)	16
Unrealized gains (net)	10
Purchases	14
Settlements	(38		)
Balance, December 31, 2013	$	198

Additional Information

The projected benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets at December 31, 2013 and 2012 were as follows:



	United States Pension Benefits				Foreign Pension Benefits
Millions of dollars	2013		2012		2013		2012
Projected benefit obligation	$	3,546	$	4,196	$	397	$	374
Fair value of plan assets	2,835		2,790		157		117

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2013 and 2012 were as follows:



	United States Pension Benefits				Foreign Pension Benefits
Millions of dollars	2013		2012		2013		2012
Projected benefit obligation	$	3,546	$	4,196	$	347	$	359
Accumulated benefit obligation	3,536		4,181		340		346
Fair value of plan assets	2,835		2,790		110		105