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Pensions, Other Post-employment Benefits and Employee Benefit Plans
 12 Months Ended
Dec. 31, 2014
Compensation and Retirement Disclosure [Abstract]  
Pensions,Other Post-employment Benefits and Employee Benefit Plans
Pension, Other Post-employment Benefits and Employee Benefit Plans.
Federal-Mogul, ARI and Viskase each sponsor several defined benefit pension plans (the ''Pension Benefits''). Additionally, Federal-Mogul and Viskase each sponsors health care and life insurance benefits (''Other Post-Employment Benefits'') for certain employees and retirees around the world. ARI also previously sponsored a post-employment medical benefit plan that provided access to healthcare for certain retired employees; this plan was terminated effective December 31, 2013. The Pension Benefits are funded based on the funding requirements of federal and international laws and regulations, as applicable, in advance of benefit payments and the Other Benefits as benefits are provided to participating employees. As prescribed by applicable U.S. GAAP, Federal-Mogul, ARI and Viskase each uses, as applicable, appropriate actuarial methods and assumptions in accounting for its defined benefit pension plans, non-pension post-employment benefits, and disability, early retirement and other post-employment benefits. The measurement date for all defined benefit plans is December 31 of each year.
Components of net periodic benefit cost (credit) for the years ended December 31, 2014, 2013 and 2012 are as follows:
 
Pension Benefits
 
Other Post-Employment Benefits
 
Year Ended December 31,
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
2014
 
2013
 
2012
 
(in millions)
Service cost
$
16

 
$
16

 
$
30

 
$
—

 
$
—

 
$
1

Interest cost
76

 
69

 
77

 
15

 
11

 
14

Expected return on plan assets
(74
)
 
(70
)
 
(62
)
 
—

 
—

 
—

Amortization of actuarial losses
10

 
27

 
39

 
3

 
6

 
2

Amortization of prior service credit
—

 
—

 
1

 
(5
)
 
(9
)
 
(14
)
Settlement loss (gain)
(2
)
 
1

 
(1
)
 
—

 
—

 
—

Curtailment gain
—

 
—

 
(1
)
 
—

 
(40
)
 
(51
)
 
$
26

 
$
43

 
$
83

 
$
13

 
$
(32
)

$
(48
)


Automotive
The following provides disclosures for our Automotive segment's benefit obligations, plan assets, funded status, recognition in the consolidated balance sheets and inputs and valuation assumptions:
 
Pension Benefits
 
Other
Post-Employment Benefits
 
United States Plans
 
Non-U.S. Plans
 
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
(in millions)
Change in benefit obligation:
 
 
 
 
 
 
 
 
 
 
 
Benefit obligation, beginning of year
$
1,184

 
$
1,298

 
$
450

 
$
474

 
$
335

 
$
395

Service cost
3

 
4

 
12

 
12

 
—

 
—

Interest cost
52

 
47

 
16

 
14

 
15

 
11

Employee contributions
—

 
—

 
—

 
—

 
—

 
1

Benefits paid
(96
)
 
(64
)
 
(28
)
 
(28
)
 
(26
)
 
(28
)
Medicare subsidies received
—

 
—

 
—

 
—

 
1

 
3

Plan amendments
—

 
—

 
—

 
—

 
8

 
—

Curtailments
—

 
—

 
(1
)
 
(1
)
 
—

 
(1
)
Settlements
(3
)
 
—

 
—

 
—

 
—

 
—

Actuarial losses (gains) and changes in actuarial assumptions
151

 
(101
)
 
112

 
(25
)
 
36

 
(43
)
Net transfers in (out)
—

 
—

 
73

 
(11
)
 
—

 
(1
)
Currency translation
—

 
—

 
(59
)
 
15

 
(1
)
 
(2
)
Benefit obligation, end of year
1,291

 
1,184

 
575

 
450

 
368

 
335

 
 
 
 
 
 
 
 
 
 
 
 
Change in plan assets:
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets, beginning of year
909

 
778

 
55

 
55

 
—

 
—

Actual return on plan assets
43

 
138

 
3

 
2

 
—

 
—

Employee contributions
—

 
—

 
—

 
—

 
—

 
1

Company contributions
56

 
60

 
30

 
24

 
25

 
24

Benefits paid
(96
)
 
(64
)
 
(28
)
 
(28
)
 
(26
)
 
(28
)
Expenses
—

 
(3
)
 
—

 
—

 
—

 
—

Medicare subsidies received
—

 
—

 
—

 
—

 
1

 
3

Currency translation
—

 
—

 
(6
)
 
2

 
—

 
—

Fair value of plan assets, end of year
912

 
909

 
54

 
55

 
—

 
—

Funded status of the plan
$
(379
)
 
$
(275
)
 
$
(521
)
 
$
(395
)
 
$
(368
)
 
$
(335
)
 
 
 
 
 
 
 
 
 
 
 
 
Amounts recognized in the consolidated balance sheets:
 
 
 
 
 
 
 
 
 
 
 
Net liability recognized
$
(379
)
 
$
(275
)
 
$
(521
)
 
$
(395
)
 
$
(368
)
 
$
(335
)
 
 
 
 
 
 
 
 
 
 
 
 
Amounts recognized in accumulated other comprehensive loss, inclusive of tax impacts:
 
 
 
 
 
 
 
 
 
 
 
Net actuarial loss
$
409

 
$
242

 
$
151

 
$
81

 
$
95

 
$
63

Prior service cost (credit)
—

 
—

 
2

 
3

 
(14
)
 
(28
)
Total
$
409

 
$
242

 
$
153

 
$
84

 
$
81

 
$
35



Weighted-average assumptions used to determine the benefit obligation as of December 31, 2014 and 2013:
 
Pension Benefits
 
Other
Post-Employment Benefits
 
United States Plans
 
Non-U.S. Plans
 
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
(in millions)
Discount rate
3.85
%
 
4.55
%
 
1.77
%
 
3.49
%
 
3.84
%
 
4.45
%
Rate of compensation increase
—
%
 
—
%
 
3.16
%
 
3.17
%
 
—
%
 
—
%

Weighted-average assumptions used to determine net periodic benefit cost (credit) for the years ended December 31, 2014 and 2013:
 
Pension Benefits
 
Other
Post-Employment Benefits
 
United States Plans
 
Non-U.S. Plans
 
 
Year Ended December 31,
 
Year Ended
December 31,
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
(in millions)
Discount rate
4.55
%
 
3.70
%
 
3.49
%
 
2.99
%
 
4.45
%
 
3.60
%
Expected return on plan assets
6.95
%
 
7.45
%
 
4.18
%
 
4.62
%
 
—
%
 
N/A

Rate of compensation increase
—
%
 
—
%
 
3.17
%
 
3.13
%
 
—
%
 
N/A


Federal-Mogul evaluates its discount rate assumption annually as of December 31 for each of its retirement-related benefit plans based upon the yield of high quality, fixed-income debt instruments, the maturities of which correspond to expected benefit payment dates.
Federal-Mogul's expected return on assets is established annually through analysis of anticipated future long-term investment performance for the plan based upon the asset allocation strategy. While the study gives appropriate consideration to recent fund performance and historical returns, the assumption is primarily a long-term prospective rate.
The U.S. investment strategy mitigates risk by incorporating diversification across appropriate asset classes to meet the plan's objectives. It is intended to reduce risk, provide long-term financial stability for the plan and maintain funded levels that meet long-term plan obligations while preserving sufficient liquidity for near-term benefit payments. Risk assumed is considered appropriate for the return anticipated and consistent with the total diversification of plan assets.
Federal-Mogul's investment strategy, which includes a target asset allocation of 50% equity investments, 25% fixed income investments and 25% in other investment types including hedge funds. Approximately 76% of the U.S. plan assets were invested in actively managed investment funds.
The majority of the assets of the non-U.S. plans are invested through insurance contracts. The insurance contracts guarantee a minimum rate of return. Federal-Mogul has no input into the investment strategy of the assets underlying the contracts, but they are typically heavily invested in active bond markets and are highly regulated by local law. The target asset allocation for the non-U.S. pension plans is 80% insurance contracts, 15% debt investments and 5% equity investments.
Refer to Note 6, “Fair Value Measurements,” for discussion of the fair value of each major category of plan assets, including the inputs and valuation techniques used to develop the fair value measurements of the plans' assets, at December 31, 2014 and 2013.
Information for defined benefit plans with projected benefit obligations in excess of plan assets:
 
Pension Benefits
 
Other
Post-Employment Benefits
 
United States Plans
 
Non-U.S. Plans
 
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
(in millions)
Projected benefit obligation
$
1,291

 
$
1,184

 
$
574

 
$
448

 
$
368

 
$
335

Fair value of plan assets
912

 
909

 
53

 
52

 
—

 
—



Information for pension plans with accumulated benefit obligations in excess of plan assets:
 
Pension Benefits
 
United States Plans
 
Non-U.S. Plans
 
December 31,
 
2014
 
2013
 
2014
 
2013
 
(in millions)
Projected benefit obligation
$
1,291

 
$
1,184

 
$
555

 
$
444

Accumulated benefit obligation
1,291

 
1,184

 
514

 
409

Fair value of plan assets
912

 
909

 
42

 
49



The accumulated benefit obligation for all pension plans was $1,809 million and $1,598 million as of December 31, 2014 and 2013, respectively.
U.S. Welfare Benefit Plan
In May 2013, Federal-Mogul ceased operations at one of its U.S. manufacturing locations. The resulting reduction in the average remaining future service period to the full eligibility date of the remaining active plan participants in Federal-Mogul's U.S. Welfare Benefit Plan triggered the recognition of an OPEB curtailment gain of $19 million, which is included as a reduction to selling, general and administrative in the consolidated statements of operations, for the year ended December 31, 2013. Additionally, in the third quarter of 2013, Federal-Mogul completed the sale of its fuel manufacturing facility and research and development center located in the U.S., resulting in the termination of certain employees that participated in Federal-Mogul's U.S. Welfare Benefit Plan. The resulting reduction in the average remaining future service period to the full eligibility date of the remaining active plan participants in Federal-Mogul's U.S. Welfare Benefit Plan triggered the recognition of an additional OPEB curtailment gain of $19 million, which is included in the determination of net loss on disposition of assets within other income, net in the consolidated statements of operations for the year ended December 31, 2013. Our Automotive segment recorded aggregate OPEB curtailment gains of $38 million for the year ended December 31, 2013.
Amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost in 2015:
 
Pension Benefits
 
Other Post-Employment Benefits
 
United States
 
Non-U.S.
 
 
(in millions)
Amortization of actuarial losses
$
10

 
$
12

 
$
5

Amortization of prior service credit
—

 
—

 
(4
)
 
$
10

 
$
12

 
$
1



The assumed health care and drug cost trend rates used to measure next year's post-employment healthcare benefits are as follows:
 
Other Post-Employment Benefits
 
2014
 
2013
Health care cost trend rate
7.25%
 
6.88%
Ultimate health care cost trend rate
5.00%
 
5.00%
Year ultimate health care cost trend rate reached
2022
 
2018
 
 
 
 
Drug cost trend rate
7.25%
 
7.81%
Ultimate drug cost trend rate
5.00%
 
5.00%
Year ultimate drug cost trend rate reached
2022
 
2018


The assumed health care cost trend rate has a significant impact on the amounts reported for OPEB plans. The following table illustrates the sensitivity to a change in the assumed health care cost trend rate:
 
Total Service and
Interest Cost
 
APBO
 
(in millions)
100 basis point (“bp”) increase in health care cost trend rate
$
1

 
$
32

100 bp decrease in health care cost trend rate
(1
)
 
(28
)


The following table illustrates the sensitivity to a change in certain assumptions for projected benefit obligations (“PBO”), associated expense and other comprehensive loss (“OCL”). The changes in these assumptions have no impact on Federal-Mogul's 2015 funding requirements.
 
Pension Benefits
 
Other Post-Employment Benefits
 
United States Plans
 
Non-U.S. Plans
 
 
Change in 2015 expense
 

Change
in
PBO
 
Change
in
accumulated
OCL
 
Change in 2015 expense
 

Change
in
PBO
 
Change
 in accumulated
OCL
 
Change in 2015 expense
 

Change
 in
PBO
 
(in millions)
25 bp decrease in discount rate
$
(1
)
 
$
36

 
$
(36
)
 
$
1

 
$
20

 
$
(20
)
 
—

 
$
9

25 bp increase in discount rate
—

 
(34
)
 
34

 
(1
)
 
(20
)
 
20

 
—

 
(9
)
25 bp decrease in return on assets rate
2

 
—

 
—

 
—

 
—

 
—

 
—

 
—

25 bp increase in return on assets rate
(2
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—



Federal-Mogul's projected benefit payments from the plans are estimated as follows:
 
 
Pension Benefits
 
Other Post-Employment Benefits
Years
 
United States Plans
 
Non-U.S. Plans
 
 
 
(in millions)
2015
 
$
94

 
$
26

 
$
27

2016
 
84

 
25

 
26

2017
 
83

 
25

 
27

2018
 
81

 
26

 
26

2019
 
82

 
27

 
26

2020-2023
 
392

 
139

 
121



Federal-Mogul expects to contribute approximately $108 million to its pension plans in fiscal 2015.
Federal-Mogul also maintains certain defined contribution pension plans for eligible employees. Effective January 1, 2013, Federal-Mogul amended its U.S. defined contribution plan to allow for an enhanced company match and company provided age-based contributions for eligible U.S. salaried and non-union hourly employees. The total expenses attributable to Federal-Mogul's defined contribution savings plan were $45 million, $42 million and $23 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Other Benefits
Federal-Mogul accounts for benefits to former or inactive employees paid after employment but before retirement pursuant to FASB ASC Topic 712, Compensation - Nonretirement Post-employment Benefits. The liabilities for such U.S. and European post-employment benefits were $25 million and $29 million at December 31, 2014 and 2013, respectively.
Railcar and Food Packaging
ARI is the sponsor of three defined benefit pension plans, two of which cover certain employees at designated repair facilities. All three of ARI's defined benefit pension plans are frozen and no additional benefits are accruing thereunder. Viskase and its subsidiaries have defined contribution and defined benefit plans varying by country and subsidiary. Viskase's operations in the United States, France, Germany and Canada have historically offered defined benefit retirement plans and post-retirement health care and life insurance benefits to their employees. Most of these benefits have been terminated, resulting in reductions in various liabilities.
The following provides disclosures for ARI's and Viskase's benefit obligations, plan assets, funded status, and recognition in the consolidated balance sheets. As pension costs for ARI and Viskase are not material to our consolidated financial position and results of operations, we do not provide information regarding their inputs and valuation assumptions.
 
Pension Benefits
 
Other
Post-Employment Benefits
 
2014
 
2013
 
2014
 
2013
 
(in millions)
Change in benefit obligation:
 
 
 
 
 
 
 
Benefit obligation, beginning of year
$
176

 
$
198

 
$
—

 
$
—

Service cost
1

 
1

 
—

 
—

Interest cost
8

 
8

 
—

 
—

Benefits paid
(10
)
 
(10
)
 
—

 
—

Actuarial gain (loss)
29

 
(21
)
 
—

 
—

Currency translation
(1
)
 
—

 
—

 
—

Benefit obligation, end of year
203

 
176

 
—

 
—

Change in plan assets:
 
 
 
 
 
 
 
Fair value of plan assets, beginning of year
140

 
125

 
—

 
—

Actual return on plan assets
9

 
20

 
—

 
—

Company contributions
6

 
5

 
—

 
—

Currency translation
(1
)
 
—

 
—

 
—

Benefits paid
(10
)
 
(10
)
 
—

 
—

Fair value of plan assets, end of year
144

 
140

 
—

 
—

Funded status of the plan
$
(59
)
 
$
(36
)
 
$
—

 
$
—

Amounts recognized in the consolidated balance sheets:
 
 
 
 
 
 
 
Net liability recognized
$
(59
)
 
$
(36
)
 
$
—

 
$
—

Amounts recognized in accumulated other comprehensive loss, inclusive of tax impacts:
 
 
 
 
 
 
 
Net actuarial (loss) gain
$
(59
)
 
$
(28
)
 
$
1

 
$
1

Total
$
(59
)
 
$
(28
)
 
$
1

 
$
1