XML 38 R24.htm IDEA: XBRL DOCUMENT v3.20.4
Post-Employment and Other Long-Term Employees Benefits
 12 Months Ended
Dec. 31, 2020
Compensation And Retirement Disclosure [Abstract]  
Post-Employment and Other Long-Term Employees Benefits

 

16.

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.