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Post-Employment and Other Long-Term Employees Benefits | 12 Months Ended
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Dec. 31, 2020
Compensation And Retirement Disclosure [Abstract] |
Post-Employment and Other Long-Term Employees Benefits |
| 1 6. | POST-EMPLOYMENT AND OTHER LONG-TERM EMPLOYEES BENEFITS
The Company and its subsidiaries have a number of defined benefit pension plans, mainly unfunded, and other long-term employees’ benefits covering employees in various countries. The defined benefit plans provide pension benefits based on years of service and employee compensation levels. The other long-term employees’ plans provide benefits due during the employees’ period of service after certain seniority levels. The Company uses December 31 as measurement date for its plans. Eligibility is generally determined in accordance with local statutory requirements. For Italian termination indemnity plan (“TFR”), generated before July 1, 2007, the Company measures the vested benefits to which Italian employees are entitled as if the amounts were immediately due as at December 31, 2020, in compliance with U.S. GAAP guidance on determining vested benefit obligations for defined benefit pension plans. The changes in benefit obligation and plan assets were as follows:
|  | Pension Benefits |  |  | Other Long-Term Benefits |
|  | December 31, 2020 |  |  | December 31, 2019 |  |  | December 31, 2020 |  |  | December 31, 2019 |
Change in benefit obligation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of year |  |  | 1,036 |  |  |  | 911 |  |  |  | 88 |  |  |  | 81 |
Service cost |  |  | 31 |  |  |  | 27 |  |  |  | 11 |  |  |  | 5 |
Interest cost |  |  | 21 |  |  |  | 24 |  |  |  | 1 |  |  |  | 1 |
Employee contributions |  |  | 4 |  |  |  | 3 |  |  |  | — |  |  |  | — |
Plan amendments |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Benefits paid |  |  | (13 | ) |  |  | (15 | ) |  |  | (11 | ) |  |  | (4 | )
Effect of curtailment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Effect of settlement |  |  | (2 | ) |  |  | (36 | ) |  |  | — |  |  |  | — |
Actuarial (gain) loss |  |  | 83 |  |  |  | 117 |  |  |  | 3 |  |  |  | 6 |
Foreign currency translation adjustment |  |  | 55 |  |  |  | 4 |  |  |  | 9 |  |  |  | (1 | )
Benefit obligation at end of year |  |  | 1,216 |  |  |  | 1,036 |  |  |  | 101 |  |  |  | 88 |
Change in plan assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Plan assets at fair value at beginning of year |  |  | 597 |  |  |  | 527 |  |  |  | — |  |  |  | — |
Actual return on plan assets |  |  | 84 |  |  |  | 81 |  |  |  | — |  |  |  | — |
Employer contributions |  |  | 17 |  |  |  | 21 |  |  |  | — |  |  |  | — |
Employee contributions |  |  | 4 |  |  |  | 3 |  |  |  | — |  |  |  | — |
Benefits paid |  |  | (3 | ) |  |  | (5 | ) |  |  | — |  |  |  | — |
Effect of settlement |  |  | — |  |  |  | (36 | ) |  |  | — |  |  |  | — |
Foreign currency translation adjustments |  |  | 19 |  |  |  | 6 |  |  |  | — |  |  |  | — |
Plan assets at fair value at end of year |  |  | 718 |  |  |  | 597 |  |  |  | — |  |  |  | — |
Funded status |  |  | (498 | ) |  |  | (439 | ) |  |  | (101 | ) |  |  | (88 | )
The actuarial losses incurred during 2020 were primarily due to a decrease in discount rates applied against future expected benefit payments and resulted in an increase of the benefit obligation mainly for the plans located in the United Kingdom and in the United States. Net amount recognized in the consolidated balance sheets consisted of the following:
|  | Pension Benefits |  |  | Other Long-Term Benefits |
|  | December 31, 2020 |  |  | December 31, 2019 |  |  | December 31, 2020 |  |  | December 31, 2019 |
Non-current assets |  |  | 4 |  |  |  | 4 |  |  |  | — |  |  |  | — |
Current liabilities |  |  | (9 | ) |  |  | (10 | ) |  |  | (4 | ) |  |  | (7 | )
Long-term liabilities |  |  | (493 | ) |  |  | (433 | ) |  |  | (97 | ) |  |  | (81 | )
Net amount recognized |  |  | (498 | ) |  |  | (439 | ) |  |  | (101 | ) |  |  | (88 | )
The components of accumulated other comprehensive loss (income) before tax effects were as follows:
|  | Actuarial (gains)/losses |  |  | Prior service cost |  |  | Total |
Accumulated other comprehensive loss as at December 31, 2018 |  |  | 152 |  |  |  | 3 |  |  |  | 155 |
Net amount generated/arising in current year |  |  | 57 |  |  |  | 1 |  |  |  | 58 |
Amortization |  |  | (13 | ) |  |  | (1 | ) |  |  | (14 | )
Foreign currency translation adjustment |  |  | 1 |  |  |  | — |  |  |  | 1 |
Accumulated other comprehensive loss as at December 31, 2019 |  |  | 197 |  |  |  | 3 |  |  |  | 200 |
Net amount generated/arising in current year |  |  | 21 |  |  |  | 1 |  |  |  | 22 |
Amortization |  |  | (13 | ) |  |  | (1 | ) |  |  | (14 | )
Foreign currency translation adjustment |  |  | 11 |  |  |  | — |  |  |  | 11 |
Accumulated other comprehensive loss as at December 31, 2020 |  |  | 216 |  |  |  | 3 |  |  |  | 219 |
The accumulated benefit obligations were as follows:
|  | Pension Benefits |  |  | Other Long-Term Benefits |
|  | December 31, 2020 |  |  | December 31, 2019 |  |  | December 31, 2020 |  |  | December 31, 2019 |
Accumulated benefit obligations |  |  | 1,053 |  |  |  | 896 |  |  |  | 83 |  |  |  | 74 |
For pension plans and other long-term benefits with accumulated benefit obligations in excess of plan assets, the accumulated benefit obligation and fair value of plan assets were $773 million and $327 million, respectively, as at December 31, 2020 and $952 million and $562 million, respectively, as at December 31, 2019. For pension plans with projected benefit obligations in excess of plan assets, the benefit obligation and fair value of plan assets were $1,177 million and $675 million, respectively, as at December 31, 2020 and $1,005 million and $562 million, respectively, as at December 31, 2019. The components of the net periodic benefit cost included the following:
|  | Pension Benefits |  |  | Other Long-term Benefits |
|  | Year ended December 31, 2020 |  |  | Year ended December 31, 2019 |  |  | Year ended December 31, 2018 |  |  | Year ended December 31, 2020 |  |  | Year ended December 31, 2019 |  |  | Year ended December 31, 2018 |
Service cost |  |  | 31 |  |  |  | 27 |  |  |  | 27 |  |  |  | 11 |  |  |  | 5 |  |  |  | 6 |
Interest cost |  |  | 21 |  |  |  | 24 |  |  |  | 24 |  |  |  | 1 |  |  |  | 1 |  |  |  | 1 |
Expected return on plan assets |  |  | (23 | ) |  |  | (22 | ) |  |  | (23 | ) |  |  | — |  |  |  | — |  |  |  | — |
Amortization of actuarial net loss (gain) |  |  | 12 |  |  |  | 10 |  |  |  | 8 |  |  |  | 3 |  |  |  | 7 |  |  |  | 1 |
Amortization of prior service cost |  |  | 1 |  |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | — |
Effect of settlement |  |  | 1 |  |  |  | 3 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Effect of curtailment |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | — |
Net periodic benefit cost |  |  | 43 |  |  |  | 43 |  |  |  | 38 |  |  |  | 15 |  |  |  | 13 |  |  |  | 8 |
Pension benefits components other than service cost, recognized outside of Operating income in “Other components of pension benefit costs” in the Company’s consolidated statements of income, were $12 million, $16 million and $11 million in the years ended December 31, 2020, 2019 and 2018, respectively. The weighted average assumptions used in the determination of the benefit obligation and the plan assets for the pension plans and the other long-term benefits were as follows:
Assumptions |  | 2020 |  |  | 2019 |
Discount rate |  |  | 1.45 | % |  |  | 1.95 | %
Salary increase rate |  |  | 2.43 | % |  |  | 2.48 | %
Expected long-term rate of return on funds for the pension expense of the following year |  |  | 3.44 | % |  |  | 4.04 | %
The weighted average assumptions used in the determination of the net periodic benefit cost for the pension plans and the other long-term benefits were as follows:
Assumptions |  | 2020 |  |  | 2019 |  |  | 2018 |
Discount rate |  |  | 1.95 | % |  |  | 2.75 | % |  |  | 2.54 | %
Salary increase rate |  |  | 2.48 | % |  |  | 2.32 | % |  |  | 2.37 | %
Expected long-term rate of return on funds for the pension expense of the year |  |  | 4.04 | % |  |  | 4.16 | % |  |  | 4.23 | %
The discount rate was determined by reference to market yields on high quality long-term corporate bonds applicable to the respective country of each plan, with terms consistent with the terms of the benefit obligations concerned. In developing the expected long-term rate of return on assets, the Company modelled the expected long-term rates of return for broad categories of investments held by the plan against a number of various potential economic scenarios. The Company’s pension plan asset allocation at December 31, 2020 and at December 31, 2019 is as follows:
|  | Percentage of Plan Assets at December |
Asset Category |  | 2020 |  |  | 2019 |
Cash and cash equivalents |  |  | 1 | % |  |  | 1 | %
Equity securities |  |  | 23 | % |  |  | 24 | %
Government debt securities |  |  | 12 | % |  |  | 12 | %
Corporate debt securities |  |  | 15 | % |  |  | 16 | %
Investments in funds(a) |  |  | 21 | % |  |  | 21 | %
Real estate |  |  | 2 | % |  |  | 2 | %
Other (mainly insurance assets – contracts and reserves) |  |  | 26 | % |  |  | 24 | %
Total |  |  | 100 | % |  |  | 100 | %
(a) | As at December 31, 2020, investments in funds were composed of commingled and multi-strategy funds invested in diversified portfolios of fixed income (72%) - mainly corporate bonds, equity (13%), other instruments (15%). As at December 31, 2019, investments in funds were composed of commingled and multi-strategy funds invested in diversified portfolios of corporate bonds (37%), government bonds (32%), equity (15%) and other instruments (16%).
As at December 31, 2020, the Company’s plan asset allocation was in line with the targets set for each plan. The Company’s detailed pension plan asset allocation including the fair-value measurements of those plan assets as at December 31, 2020 is as follows:
|  | Total |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Cash and cash equivalents |  |  | 4 |  |  |  | 4 |  |  |  | — |  |  |  | — |
Equity securities |  |  | 167 |  |  |  | 2 |  |  |  | 165 |  |  |  | — |
Government debt securities |  |  | 86 |  |  |  | — |  |  |  | 86 |  |  |  | — |
Corporate debt securities |  |  | 105 |  |  |  | — |  |  |  | 81 |  |  |  | 24 |
Investment funds |  |  | 153 |  |  |  | 3 |  |  |  | 150 |  |  |  | — |
Real estate |  |  | 11 |  |  |  | — |  |  |  | 11 |  |  |  | — |
Other (mainly insurance assets – contracts and reserves) |  |  | 192 |  |  |  | — |  |  |  | 54 |  |  |  | 138 |
TOTAL |  |  | 718 |  |  |  | 9 |  |  |  | 547 |  |  |  | 162 |
The Company’s detailed pension plan asset allocation including the fair-value measurements of those plan assets as at December 31, 2019 is as follows:
|  | Total |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Cash and cash equivalents |  |  | 5 |  |  |  | 5 |  |  |  | — |  |  |  | — |
Equity securities |  |  | 144 |  |  |  | 1 |  |  |  | 143 |  |  |  | — |
Government debt securities |  |  | 74 |  |  |  | — |  |  |  | 74 |  |  |  | — |
Corporate debt securities |  |  | 95 |  |  |  | — |  |  |  | 83 |  |  |  | 12 |
Investment funds |  |  | 127 |  |  |  | 1 |  |  |  | 126 |  |  |  | — |
Real estate |  |  | 10 |  |  |  | — |  |  |  | 10 |  |  |  | — |
Other (mainly insurance assets – contracts and reserves) |  |  | 142 |  |  |  | — |  |  |  | 41 |  |  |  | 101 |
TOTAL |  |  | 597 |  |  |  | 7 |  |  |  | 477 |  |  |  | 113 |
The fair value of insurance contracts is based on the value of the assets held by the provider. The approach is consistent with prior years. For plan assets measured at fair value using significant unobservable inputs (Level 3), the reconciliation between January 1, 2020 and December 31, 2020 is presented as follows:
|  | Fair Value Measurements using Significant Unobservable Inputs (Level 3) |
January 1, 2020 |  |  | 113 |
Contributions (employer and employee) |  |  | 14 |
Actual return on plan assets |  |  | 2 |
Net benefit payments (a) |  |  | 11 |
Settlements |  |  | — |
Transfer in Level 3 |  |  | 10 |
Foreign currency translation adjustment |  |  | 12 |
December 31, 2020 |  |  | 162 |
(a) | Net cash flows between benefits paid from the insurance contracts and benefits transferred into the insurance contracts by employees.
For plan assets measured at fair value using significant unobservable inputs (Level 3), the reconciliation between January 1, 2019 and December 31, 2019 is presented as follows:
|  | Fair Value Measurements using Significant Unobservable Inputs (Level 3) |
January 1, 2019 |  |  | 117 |
Contributions (employer and employee) |  |  | 11 |
Actual return on plan assets |  |  | (1 | )
Net benefit payments (a) |  |  | 9 |
Settlements |  |  | (34 | )
Transfer in Level 3 |  |  | 11 |
December 31, 2019 |  |  | 113 |
(a) | Net cash flows between benefits paid from the insurance contracts and benefits transferred into the insurance contracts by employees.
The Company’s investment strategy for its pension plans is to optimize the long-term investment return on plan assets in relation to the liability structure to maintain an acceptable level of risk while minimizing the cost of providing pension benefits and maintaining adequate funding levels in accordance with applicable rules in each jurisdiction. The Company’s practice is to periodically conduct a review of its asset allocation strategy, in such a way that the asset allocation is in line with the targeted asset allocation within reasonable boundaries. The Company’s asset portfolios are managed in such a way as to achieve adapted diversity. The Company does not manage any assets internally. After considering the funded status of the Company’s defined benefit plans, movements in the discount rate, investment performance and related tax consequences, the Company may choose to make contributions to its pension plans in any given year in excess of required amounts. The Company’s contributions to plan assets were $17 million in 2020 and $21 million in 2019 and the Company expects to contribute $22 million to plan assets in 2021. The Company’s estimated future benefit payments as at December 31, 2020 are as follows:
Years |  | Pension Benefits |  |  | Other Long-term Benefits |
2021 |  |  | 38 |  |  |  | 5 |
2022 |  |  | 30 |  |  |  | 5 |
2023 |  |  | 40 |  |  |  | 6 |
2024 |  |  | 51 |  |  |  | 9 |
2025 |  |  | 56 |  |  |  | 9 |
From 2026 to 2030 |  |  | 298 |  |  |  | 49 |
The Company has certain defined contribution plans, which accrue benefits for employees on a pro-rata basis during their employment period based on their individual salaries. The Company’s accrued benefits related to defined contribution pension plans for $23 million as at December 31, 2020 and $20 million as at December 31, 2019. The annual cost of these plans amounted to approximately $91 million in 2020, $86 million in 2019 and $84 million in 2018.

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