10. Pension Benefit Plans and Other Postretirement Benefits

Pension Benefit Plans

The Company has defined benefit pension plans covering a substantial number of employees located in the United States, the United Kingdom, the Netherlands, Canada and Australia, as well as many employees in Germany, France and Switzerland. Benefits generally are based on compensation for salaried employees and on length of service for hourly employees. The Company's policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements. The Company's defined benefit pension plans use a December 31 measurement date. The following tables relate to the Company's principal defined benefit pension plans.

The changes in the pension benefit obligations for the year are as follows:

	U.S.						Non-U.S.

	2013			2012			2013			2012
Obligations at beginning of year	$	2,647		$	2,547		$	1,911		$	1,553
Change in benefit obligations:
Service cost		27			27			33			26
Interest cost		106			114			72			77
Actuarial (gain) loss, including the effect of change in discount rates		(234	)		170			(1	)		293
Curtailment and plan amendment								(52	)
Special termination		8
Participant contributions								7			7
Benefit payments		(279	)		(220	)		(101	)		(101	)
Other					9			(4	)
Foreign currency translation								1			56


Net change in benefit obligations		(372	)		100			(45	)		358


Obligations at end of year	$	2,275		$	2,647		$	1,866		$	1,911

The changes in the fair value of the pension plans' assets for the year are as follows:

	U.S.						Non-U.S.

	2013			2012			2013			2012
Fair value at beginning of year	$	2,175		$	2,011		$	1,527		$	1,325
Change in fair value:
Actual gain on plan assets		365			275			61			118
Benefit payments		(279	)		(220	)		(101	)		(101	)
Employer contributions		12			109			92			110
Participant contributions								7			7
Foreign currency translation								(5	)		43
Other								(3	)		25


Net change in fair value of assets		98			164			51			202


Fair value at end of year	$	2,273		$	2,175		$	1,578		$	1,527

The employer contributions in the U.S. for 2013 include $8 million related to special termination benefits for a discontinued operation.

The funded status of the pension plans at year end is as follows:

	U.S.						Non-U.S.

	2013			2012			2013			2012
Plan assets at fair value	$	2,273		$	2,175		$	1,578		$	1,527
Projected benefit obligations		2,275			2,647			1,866			1,911


Plan assets less than projected benefit obligations		(2	)		(472	)		(288	)		(384	)
Items not yet recognized in pension expense:
Actuarial loss		935			1,461			488			534
Prior service cost (credit)		2			2			(25	)		(9	)


		937			1,463			463			525


Net amount recognized	$	935		$	991		$	175		$	141

The net amount recognized is included in the Consolidated Balance Sheets at December 31, 2013 and 2012 as follows:

	U.S.						Non-U.S.

	2013			2012			2013			2012
Pension assets	$	46		$	—		$	22		$	—
Current pension liability, included with Other accrued liabilities		(2	)		(3	)		(6	)		(7	)
Pension benefits		(46	)		(469	)		(304	)		(377	)
Accumulated other comprehensive loss		937			1,463			463			525


Net amount recognized	$	935		$	991		$	175		$	141

The following changes in plan assets and benefit obligations were recognized in accumulated other comprehensive income at December 31, 2013 and 2012 as follows (amounts are pretax):

	U.S.						Non-U.S.

	2013			2012			2013			2012
Current year actuarial (gain) loss	$	(416	)	$	79		$	28		$	239
Amortization of actuarial loss		(110	)		(96	)		(28	)		(22	)
Amortization of prior service credit								1
Curtailment and plan amendment								(52	)
Settlement								(6	)		(11	)


		(526	)		(17	)		(57	)		206
Translation								(5	)		17


	$	(526	)	$	(17	)	$	(62	)	$	223

The accumulated benefit obligation for all defined benefit pension plans was $4,015 million and $4,298 million at December 31, 2013 and 2012, respectively.

The components of the net pension expense for the year are as follows:

	U.S.									Non-U.S.

	2013			2012			2011			2013			2012			2011
Service cost	$	27		$	27		$	25		$	33		$	26		$	24
Interest cost		106			114			125			72			77			83
Expected asset return		(183	)		(183	)		(186	)		(91	)		(87	)		(86	)
Amortization:
Actuarial loss		110			96			83			28			22			24
Prior service credit											(1	)					(1	)


Net amortization		110			96			83			27			22			23


Net expense	$	60		$	54		$	47		$	41		$	38		$	44

The U.S. pension expense excludes $8 million of special termination benefits that were recorded in discontinued operations in 2013. The U.S. pension expense excludes $4 million of special termination benefits that were recorded in restructuring expense in 2012. The non-U.S. pension expense excludes $6 million and $11 million of pension settlement costs that were recorded in restructuring expense in 2013 and 2012, respectively.

Amounts that are expected to be amortized from accumulated other comprehensive income into net pension expense during 2014:

	U.S.		Non-U.S.

Amortization:
Actuarial loss	$	74	$	22
Prior service cost				(3	)


Net amortization	$	74	$	19

The following information is for plans with projected and accumulated benefit obligations in excess of the fair value of plan assets at year end:

	Projected Benefit Obligation Exceeds the Fair Value of Plan Assets								Accumulated Benefit Obligation Exceeds the Fair Value of Plan Assets

	U.S.				Non-U.S.				U.S.				Non-U.S.
	2013		2012		2013		2012		2013		2012		2013		2012
Projected benefit obligations	$	674	$	2,647	$	1,588	$	1,911	$	674	$	2,647	$	1,588	$	1,172
Accumulated benefit obligation		646		2,569		1,537		1,729		646		2,569		1,537		1,090
Fair value of plan assets		626		2,175		1,278		1,527		626		2,175		1,278		858

The weighted average assumptions used to determine benefit obligations are as follows:

	U.S.						Non-U.S.

	2013			2012			2013			2012
Discount rate		4.81	%		4.11	%		4.14	%		3.89	%
Rate of compensation increase		2.97	%		2.97	%		3.31	%		3.08	%

The weighted average assumptions used to determine net periodic pension costs are as follows:

	U.S.									Non-U.S.

	2013			2012			2011			2013			2012			2011
Discount rate		4.11	%		4.59	%		5.24	%		3.89	%		4.75	%		5.28	%
Rate of compensation increase		2.97	%		3.14	%		4.50	%		3.08	%		3.23	%		3.49	%
Expected long-term rate of return on assets		8.00	%		8.00	%		8.00	%		6.34	%		6.24	%		6.44	%

Future benefits are assumed to increase in a manner consistent with past experience of the plans, which, to the extent benefits are based on compensation, includes assumed salary increases as presented above. Amortization included in net pension expense is based on the average remaining service of employees.

For 2013, the Company's weighted average expected long-term rate of return on assets was 8.00% for the U.S. plans and 6.34% for the non-U.S. plans. In developing this assumption, the Company evaluated input from its third party pension plan asset managers, including their review of asset class return expectations and long-term inflation assumptions. The Company also considered its historical 10-year average return (through December 31, 2012), which was in line with the expected long-term rate of return assumption for 2013.

It is the Company's policy to invest pension plan assets in a diversified portfolio consisting of an array of asset classes within established target asset allocation ranges. The investment risk of the assets is limited by appropriate diversification both within and between asset classes. The assets for the U.S. plans are maintained in a group trust. The U.S. plans hold no individual assets other than the investment in the group trust. The assets of the group trust and the Company's non-U.S. plans are primarily invested in a broad mix of domestic and international equities, domestic and international bonds, and real estate, subject to the target asset allocation ranges. The assets are managed with a view to ensuring that sufficient liquidity will be available to meet expected cash flow requirements.

The investment valuation policy of the Company is to value investments at fair value. All investments are valued at their respective net asset values. Equity securities for which market quotations are readily available are valued at the last reported sales price on their principal exchange on valuation date or official close for certain markets. Fixed income investments are valued by an independent pricing service. Investments in registered investment companies or collective pooled funds are valued at their respective net asset values. Short-term investments are stated at amortized cost, which approximates fair value. The fair value of real estate is determined by periodic appraisals.

The Company's U.S. pension plan assets held in the group trust are classified as Level 2 assets in the fair value hierarchy. The total U.S. plan assets amounted to $2,273 million and $2,175 million as of December 31, 2013 and 2012, respectively, and consisted of approximately 72% equity securities and 28% debt securities. The following table sets forth by level, within the fair value hierarchy, the Company's non-U.S. pension plan assets at fair value as of December 31, 2013 and 2012:

	2013						2012

	2013						2012						Target Allocation
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Target Allocation
Cash and cash equivalents	$	39	$	6	$	—	$	36	$	20	$	—
Equity securities		387		210				367		173				45 - 55	%
Debt securities		752		116		2		714		113		3		40 - 50	%
Real estate						6						15		0 - 10	%
Other		13		47				18		68				0 - 10	%


Total assets at fair value	$	1,191	$	379	$	8	$	1,135	$	374	$	18

The following is a reconciliation of the Company's pension plan assets recorded at fair value using significant unobservable inputs (Level 3):

	2013			2012

Beginning balance	$	18		$	16
Net increase (decrease)		(10	)		2


Ending balance	$	8		$	18

The net increase (decrease) in the fair value of the Company's Level 3 pension plan assets is primarily due to purchases and sales of unlisted real estate funds. The change in the fair value of Level 3 pension plan assets due to actual return on those assets was immaterial in 2013.

In order to maintain minimum funding requirements, the Company is required to make contributions to its defined benefit pension plans of approximately $30 million in 2014.

The following estimated future benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years indicated:

Year(s)	U.S.		Non-U.S.

2014	$	181	$	82
2015		172		85
2016		174		86
2017		167		87
2018		164		90
2019 - 2023		794		487

The Company also sponsors several defined contribution plans for all salaried and hourly U.S. employees. Participation is voluntary and participants' contributions are based on their compensation. The Company matches contributions of participants, up to various limits, in substantially all plans. Company contributions to these plans amounted to $8 million in 2013, $7 million in 2012, and $8 million in 2011.

Postretirement Benefits Other Than Pensions

The Company provides certain retiree health care and life insurance benefits covering substantially all U.S. salaried and certain hourly employees, and substantially all employees in Canada. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. The Company uses a December 31 measurement date to measure its postretirement benefit obligations.

The changes in the postretirement benefit obligations for the year are as follows:

	U.S.						Non-U.S.

	2013			2012			2013			2012
Obligations at beginning of year	$	181		$	194		$	102		$	95
Change in benefit obligations:
Service cost		1			1			1			1
Interest cost		5			8			4			4
Actuarial (gain) loss, including the effect of changing discount rates		1			(6	)		(7	)		3
Benefit payments		(15	)		(16	)		(4	)		(3	)
Curtailment		(62	)
Foreign currency translation								(6	)		2


Net change in benefit obligations		(70	)		(13	)		(12	)		7


Obligations at end of year	$	111		$	181		$	90		$	102

The funded status of the postretirement benefit plans at year end is as follows:

	U.S.						Non-U.S.

	2013			2012			2013			2012
Postretirement benefit obligations	$	(111	)	$	(181	)	$	(90	)	$	(102	)
Items not yet recognized in net postretirement benefit cost:
Actuarial loss		30			36			(2	)		5
Prior service credit		(54	)		(8	)


		(24	)		28			(2	)		5


Net amount recognized	$	(135	)	$	(153	)	$	(92	)	$	(97	)

The net amount recognized is included in the Consolidated Balance Sheets at December 31, 2013 and 2012 as follows:

	U.S.						Non-U.S.

	2013			2012			2013			2012
Current nonpension postretirement benefit, included with Other accrued liabilities	$	(10	)	$	(15	)	$	(4	)	$	(4	)
Nonpension postretirement benefits		(101	)		(166	)		(86	)		(98	)
Accumulated other comprehensive loss		(24	)		28			(2	)		5


Net amount recognized	$	(135	)	$	(153	)	$	(92	)	$	(97	)

The following changes in benefit obligations were recognized in accumulated other comprehensive income at December 31, 2013 and 2012 as follows (amounts are pretax):

	U.S.						Non-U.S.

	2013			2012			2013			2012
Current year actuarial (gain) loss	$	1		$	(6	)	$	(7	)	$	3
Curtailment		(57	)
Amortization of actuarial loss		(3	)		(5	)
Amortization of prior service credit		7			3
Other adjustments					(2	)


	$	(52	)	$	(10	)	$	(7	)	$	3

The components of the net postretirement benefit cost for the year are as follows:

	U.S.									Non-U.S.

	2013			2012			2011			2013		2012		2011
Service cost	$	1		$	1		$	1		$	1	$	1	$	1
Interest cost		5			8			10			4		4		4
Curtailment gain		(5	)
Amortization:
Actuarial loss		3			5			5
Prior service credit		(7	)		(3	)		(3	)


Net amortization		(4	)		2			2			—		—		—


Net postretirement benefit (income) cost	$	(3	)	$	11		$	13		$	5	$	5	$	5

Amounts that are expected to be amortized from accumulated other comprehensive income into net postretirement benefit cost during 2014:

	U.S.			Non-U.S.

Amortization:
Actuarial loss	$	2		$	—
Prior service credit		(8	)


Net amortization	$	(6	)	$	—

The weighted average discount rates used to determine the accumulated postretirement benefit obligation and net postretirement benefit cost are as follows:

	U.S.									Non-U.S.

	2013			2012			2011			2013			2012			2011
Accumulated post retirement benefit obligation		4.63	%		4.04	%		4.47	%		4.47	%		3.89	%		4.13	%
Net postretirement benefit cost		4.04	%		4.47	%		5.09	%		3.89	%		4.13	%		5.02	%

The weighted average assumed health care cost trend rates at December 31 are as follows:

	U.S.						Non-U.S.

	2013			2012			2013			2012
Health care cost trend rate assumed for next year		7.00	%		8.00	%		5.00	%		6.00	%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)		5.00	%		5.00	%		5.00	%		5.00	%
Year that the rate reaches the ultimate trend rate		2024			2019			2014			2014

Assumed health care cost trend rates affect the amounts reported for the postretirement benefit plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	U.S.					Non-U.S.

	1-Percentage-Point					1-Percentage-Point
	Increase		Decrease			Increase		Decrease
Effect on total of service and interest cost	$	—	$	—		$	1	$	(1	)
Effect on accumulated postretirement benefit obligations		4		(4	)		15		(12	)

Amortization included in net postretirement benefit cost is based on the average remaining service of employees.

The following estimated future benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years indicated:

Year(s)	U.S.		Non-U.S.

2014	$	10	$	4
2015		10		4
2016		10		4
2017		9		5
2018		9		5
2019 - 2023		39		25

Benefits provided by the Company for certain hourly retirees are determined by collective bargaining. Most other domestic hourly retirees receive health and life insurance benefits from a multi-employer trust established by collective bargaining. Payments to the trust as required by the bargaining agreements are based upon specified amounts per hour worked and were $6 million in each of the years 2013, 2012 and 2011. Postretirement health and life benefits for retirees of foreign subsidiaries are generally provided through the national health care programs of the countries in which the subsidiaries are located.