RETIREMENT PLANS
Pension Benefits
The Company has non-contributory defined benefit pension plans covering certain U.S. and non-U.S. employees. The benefits provided are primarily based on years of service and average compensation or a monthly retirement benefit amount. Effective January 1, 2006, certain of the Company’s U.S. pension plans were amended to prohibit new participants from entering the plans. Effective September 30, 2009, active participants will continue to accrue benefits under the amended plans until December 31, 2014. Funding for U.S. pension plans equals or exceeds the minimum requirements of the Employee Retirement Income Security Act of 1974. Funding for non-U.S. plans observes the local legal and regulatory limits. Also, the Company makes contributions to union-trusteed pension funds for construction and service personnel.
For pension plans with accumulated benefit obligations (ABO) that exceed plan assets, the projected benefit obligation (PBO), ABO and fair value of plan assets of those plans were $3,069 million, $2,981 million and $2,392 million, respectively, as of September 30, 2013 and $4,450 million, $4,242 million and $3,279 million, respectively, as of September 30, 2012.
In fiscal 2013, total employer and employee contributions to the defined benefit pension plans were $95 million, of which $1 million were voluntary contributions made by the Company. The Company expects to contribute approximately $80 million in cash to its defined benefit pension plans in fiscal 2014. Projected benefit payments from the plans as of September 30, 2013 are estimated as follows (in millions):
|
| | | |
2014 | $ | 265 |
|
2015 | 262 |
|
2016 | 268 |
|
2017 | 269 |
|
2018 | 275 |
|
2019-2023 | 1,456 |
|
Postretirement Benefits
The Company provides certain health care and life insurance benefits for eligible retirees and their dependents primarily in the U.S. Most non-U.S. employees are covered by government sponsored programs, and the cost to the Company is not significant.
Eligibility for coverage is based on meeting certain years of service and retirement age qualifications. These benefits may be subject to deductibles, co-payment provisions and other limitations, and the Company has reserved the right to modify these benefits. Effective January 31, 1994, the Company modified certain salaried plans to place a limit on the Company’s cost of future annual retiree medical benefits at no more than 150% of the 1993 cost.
The September 30, 2013 postretirement PBO for both pre-65 and post-65 years of age employees was determined using assumed medical care cost trend rates of 7.5% for U.S. plans, decreasing one half percent to one quarter percent each year to an ultimate rate of 5% and 7.25% for non-U.S. plans, decreasing three twentieths of one percent each year to an ultimate rate of 4.5%. The prescription drug trend rates used were 7.5% for U.S. plans, decreasing one half percent to one quarter percent each year to an ultimate rate of 5% and 8.15% for non-U.S. plans, decreasing one fifth of one percent each year to an ultimate rate of 4.5%. The September 30, 2012 PBO for both pre-65 and post-65 years of age employees was determined using medical care cost trend rates of 7.5% for U.S. plans, decreasing one half percent each year to an ultimate rate of 5% and 7.5% for non-U.S. plans, decreasing three twentieths of one percent each year to an ultimate rate of 4.5%. The prescription drug trend rates used were 7.5% for U.S. plans, decreasing one half percent each year to an ultimate rate of 5% and 8.5% for the non-U.S. plans, decreasing one fifth of one percent each year to an ultimate rate of 4.5%. The health care cost trend assumption does not have a significant effect on the amounts reported.
In fiscal 2013, total employer and employee contributions to the postretirement plans were $13 million, of which $12 million were voluntary contributions made by the Company. The Company does not expect to make any significant contributions to its postretirement plans in fiscal year 2014. Projected benefit payments from the plans as of September 30, 2013 are estimated as follows (in millions):
|
| | | |
2014 | $ | 21 |
|
2015 | 21 |
|
2016 | 22 |
|
2017 | 23 |
|
2018 | 23 |
|
2019-2023 | 102 |
|
In December 2003, the U.S. Congress enacted the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Act) for employers sponsoring postretirement care plans that provide prescription drug benefits. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans providing a benefit that is at least actuarially equivalent to Medicare Part D.1. Under the Act, the Medicare subsidy amount is received directly by the plan sponsor and not the related plan. Further, the plan sponsor is not required to use the subsidy amount to fund postretirement benefits and may use the subsidy for any valid business purpose. Projected subsidy receipts are estimated to be approximately $3 million per year over the next ten years.
Savings and Investment Plans
The Company sponsors various defined contribution savings plans that allow employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan specified guidelines. Under specified conditions, the Company will contribute to certain savings plans based on the employees’ eligible pay and/or will match a percentage of the employee contributions up to certain limits. Matching contributions charged to expense amounted to $118 million, $105 million and $105 million for the fiscal years ended 2013, 2012 and 2011, respectively.
Multiemployer Benefit Plans
The Company contributes to multiemployer benefit plans based on obligations arising from collective bargaining agreements related to certain of its hourly employees in the U.S. These plans provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. The trustees typically are responsible for determining the level of benefits to be provided to participants as well as for such matters as the investment of the assets and the administration of the plans.
The risks of participating in these multiemployer benefit plans are different from single-employer benefit plans in the following aspects:
| |
• | Assets contributed to the multiemployer benefit plan by one employer may be used to provide benefits to employees of other participating employers. |
| |
• | If a participating employer stops contributing to the multiemployer benefit plan, the unfunded obligations of the plan may be borne by the remaining participating employers. |
| |
• | If the Company stops participating in some of its multiemployer benefit plans, the Company may be required to pay those plans an amount based on its allocable share of the underfunded status of the plan, referred to as a withdrawal liability. |
The Company participates in over 300 multiemployer benefit plans, primarily related to its Building Efficiency business in the U.S., none of which are individually significant to the Company. The number of employees covered by the Company’s multiemployer benefit plans has remained consistent over the past three years, and there have been no significant changes that affect the comparability of fiscal 2013, 2012 and 2011 contributions. The Company recognizes expense for the contractually-required contribution for each period. The Company contributed $44 million, $47 million and $51 million to multiemployer benefit plans in fiscal 2013, 2012 and 2011, respectively.
Based on the most recent information available, the Company believes that the present value of actuarial accrued liabilities in certain of these multiemployer benefit plans may exceed the value of the assets held in trust to pay benefits. Currently, the Company is not aware of any significant multiemployer benefits plans for which it is probable or reasonably possible that the Company will be obligated to make up any shortfall in funds. Moreover, if the Company were to exit certain markets or otherwise cease making contributions to these funds, the Company could trigger a withdrawal liability. Currently, the Company is not aware of any significant multiemployer benefit plans for which it is probable or reasonably possible that the Company will withdraw from the plan. Any accrual for a shortfall or withdrawal liability will be recorded when it is probable that a liability exists and it can be reasonably estimated.
Plan Assets
The Company’s investment policies employ an approach whereby a mix of equities, fixed income and alternative investments are used to maximize the long-term return of plan assets for a prudent level of risk. The investment portfolio primarily contains a diversified blend of equity and fixed income investments. Equity investments are diversified across domestic and non-domestic stocks, as well as growth, value and small to large capitalizations. Fixed income investments include corporate and government issues, with short-, mid- and long-term maturities, with a focus on investment grade when purchased and a target duration close to that of the plan liability. Investment and market risks are measured and monitored on an ongoing basis through regular investment portfolio reviews, annual liability measurements and periodic asset/liability studies. The majority of the real estate component of the portfolio is invested in a diversified portfolio of high-quality, operating properties with cash yields greater than the targeted appreciation. Investments in other alternative asset classes, including hedge funds and commodities to diversify the expected investment returns relative to the equity and fixed income investments. As a result of our diversification strategies, there are no significant concentrations of risk within the portfolio of investments.
The Company’s actual asset allocations are in line with target allocations. The Company rebalances asset allocations as appropriate, in order to stay within a range of allocation for each asset category.
The expected return on plan assets is based on the Company’s expectation of the long-term average rate of return of the capital markets in which the plans invest. The average market returns are adjusted, where appropriate, for active asset management returns. The expected return reflects the investment policy target asset mix and considers the historical returns earned for each asset category.
The Company’s plan assets at September 30, 2013 and 2012, by asset category, are as follows (in millions):
|
| | | | | | | | | | | | | | | |
| Fair Value Measurements Using: |
Asset Category | Total as of September 30, 2013 | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| | | | | | | |
U.S. Pension | | | | | | | |
| | | | | | | |
Cash | $ | 30 |
| | $ | 30 |
| | $ | — |
| | $ | — |
|
| | | | | | | |
Equity Securities | | | | | | | |
Large-Cap | 525 |
| | 525 |
| | — |
| | — |
|
Small-Cap | 261 |
| | 261 |
| | — |
| | — |
|
International - Developed | 523 |
| | 523 |
| | — |
| | — |
|
| | | | | | | |
Fixed Income Securities | | | | | | | |
Government | 173 |
| | 166 |
| | 7 |
| | — |
|
Corporate/Other | 842 |
| | 652 |
| | 190 |
| | — |
|
| | | | | | | |
Hedge Funds | 17 |
| | — |
| | — |
| | 17 |
|
| | | | | | | |
Real Estate | 285 |
| | — |
| | — |
| | 285 |
|
| | | | | | | |
Total | $ | 2,656 |
| | $ | 2,157 |
| | $ | 197 |
| | $ | 302 |
|
| | | | | | | |
Non-U.S. Pension | | | | | | | |
| | | | | | | |
Cash | $ | 30 |
| | $ | 30 |
| | $ | — |
| | $ | — |
|
| | | | | | | |
Equity Securities | | | | | | | |
Large-Cap | 132 |
| | 132 |
| | — |
| | — |
|
International - Developed | 371 |
| | 269 |
| | 102 |
| | — |
|
International - Emerging | 31 |
| | 31 |
| | — |
| | — |
|
| | | | | | | |
Fixed Income Securities | | | | | | | |
Government | 376 |
| | 376 |
| | — |
| | — |
|
Corporate/Other | 531 |
| | 531 |
| | — |
| | — |
|
| | | | | | | |
Commodities | 6 |
| | 6 |
| | — |
| | — |
|
| | | | | | | |
Hedge Fund | 89 |
| | — |
| | — |
| | 89 |
|
| | | | | | | |
Real Estate | 90 |
| | 81 |
| | — |
| | 9 |
|
| | | | | | | |
Total | $ | 1,656 |
| | $ | 1,456 |
| | $ | 102 |
| | $ | 98 |
|
| | | | | | | |
Postretirement | | | | | | | |
| | | | | | | |
Cash | $ | 10 |
| | $ | 10 |
| | $ | — |
| | $ | — |
|
| | | | | | | |
Equity Securities | | | | | | | |
Large-Cap | 36 |
| | 36 |
| | — |
| | — |
|
Small-Cap | 12 |
| | 12 |
| | — |
| | — |
|
International - Developed | 29 |
| | 29 |
| | — |
| | — |
|
International - Emerging | 14 |
| | 14 |
| | — |
| | — |
|
| | | | | | | |
Fixed Income Securities | | | | | | | |
Government | 24 |
| | 24 |
| | — |
| | — |
|
Corporate/Other | 71 |
| | 71 |
| | — |
| | — |
|
| | | | | | | |
Commodities | 17 |
| | 17 |
| | — |
| | — |
|
| | | | | | | |
Real Estate | 13 |
| | 13 |
| | — |
| | — |
|
| | | | | | | |
Total | $ | 226 |
| | $ | 226 |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | |
| Fair Value Measurements Using: |
Asset Category | Total as of September 30, 2012 | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| | | | | | | |
U.S. Pension | | | | | | | |
| | | | | | | |
Cash | $ | 25 |
| | $ | 25 |
| | $ | — |
| | $ | — |
|
| | | | | | | |
Equity Securities | | | | | | | |
Large-Cap | 781 |
| | 781 |
| | — |
| | — |
|
Small-Cap | 324 |
| | 324 |
| | — |
| | — |
|
International - Developed | 617 |
| | 617 |
| | — |
| | — |
|
| | | | | | | |
Fixed Income Securities | | | | | | | |
Government | 685 |
| | 685 |
| | — |
| | — |
|
Corporate/Other | 219 |
| | 219 |
| | — |
| | — |
|
| | | | | | | |
Hedge Funds | 94 |
| | — |
| | — |
| | 94 |
|
| | | | | | | |
Real Estate | 240 |
| | — |
| | — |
| | 240 |
|
| | | | | | | |
Total | $ | 2,985 |
| | $ | 2,651 |
| | $ | — |
| | $ | 334 |
|
| | | | | | | |
Non-U.S. Pension | | | | | | | |
| | | | | | | |
Cash | $ | 61 |
| | $ | 61 |
| | $ | — |
| | $ | — |
|
| | | | | | | |
Equity Securities | | | | | | | |
Large-Cap | 134 |
| | 134 |
| | — |
| | — |
|
International - Developed | 383 |
| | 383 |
| | — |
| | — |
|
International - Emerging | 46 |
| | 46 |
| | — |
| | — |
|
| | | | | | | |
Fixed Income Securities | | | | | | | |
Government | 334 |
| | 334 |
| | — |
| | — |
|
Corporate/Other | 540 |
| | 540 |
| | — |
| | — |
|
| | | | | | | |
Commodities | 12 |
| | 12 |
| | — |
| | — |
|
| | | | | | | |
Hedge Fund | 56 |
| | — |
| | — |
| | 56 |
|
| | | | | | | |
Real Estate | 91 |
| | 83 |
| | — |
| | 8 |
|
| | | | | | | |
Total | $ | 1,657 |
| | $ | 1,593 |
| | $ | — |
| | $ | 64 |
|
| | | | | | | |
Postretirement | | | | | | | |
| | | | | | | |
Cash | $ | 6 |
| | $ | 6 |
| | $ | — |
| | $ | — |
|
| | | | | | | |
Equity Securities | | | | | | | |
Large-Cap | 35 |
| | 35 |
| | — |
| | — |
|
Small-Cap | 11 |
| | 11 |
| | — |
| | — |
|
International - Developed | 25 |
| | 25 |
| | — |
| | — |
|
International - Emerging | 14 |
| | 14 |
| | — |
| | — |
|
| | | | | | | |
Fixed Income Securities | | | | | | | |
Government | 26 |
| | 26 |
| | — |
| | — |
|
Corporate/Other | 74 |
| | 74 |
| | — |
| | — |
|
| | | | | | | |
Commodities | 20 |
| | 20 |
| | — |
| | — |
|
| | | | | | | |
Real Estate | 12 |
| | 12 |
| | — |
| | — |
|
| | | | | | | |
Total | $ | 223 |
| | $ | 223 |
| | $ | — |
| | $ | — |
|
Following is a description of the valuation methodologies used for assets measured at fair value.
Cash: The fair value of cash is valued at cost.
Equity Securities: The fair value of equity securities is determined by direct or indirect quoted market prices. If indirect quoted market prices are utilized, the value of assets held in separate accounts is not published, but the investment managers report daily the underlying holdings. The underlying holdings are direct quoted market prices on regulated financial exchanges.
Fixed Income Securities: The fair value of fixed income securities is determined by direct or indirect quoted market prices. If indirect quoted market prices are utilized, the value of assets held in separate accounts is not published, but the investment managers report daily the underlying holdings. The underlying holdings are direct quoted market prices on regulated financial exchanges.
Commodities: The fair value of the commodities is determined by quoted market prices of the underlying holdings on regulated financial exchanges.
Hedge Funds: The fair value of hedge funds is accounted for by a custodian. The custodian obtains valuations from underlying managers based on market quotes for the most liquid assets and alternative methods for assets that do not have sufficient trading activity to derive prices. The Company and custodian review the methods used by the underlying managers to value the assets. The Company believes this is an appropriate methodology to obtain the fair value of these assets.
Real Estate: The fair value of Real Estate Investment Trusts (REITs) is recorded as Level 1 as these securities are traded on an open exchange. The fair value measurement of other investments in real estate is deemed Level 3 since the value of these investments is provided by fund managers. The fund managers value the real estate investments via independent third party appraisals on a periodic basis. Assumptions used to revalue the properties are updated every quarter. The Company believes this is an appropriate methodology to obtain the fair value of these assets. For the component of the real estate portfolio under development, the investments are carried at cost until they are completed and valued by a third party appraiser.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following sets forth a summary of changes in the fair value of assets measured using significant unobservable inputs (Level 3) (in millions):
|
| | | | | | | | | | | |
| Total | | Hedge Funds | | Real Estate |
U.S. Pension | | | | | |
| | | | | |
Asset value as of September 30, 2011 | $ | 298 |
| | $ | 94 |
| | $ | 204 |
|
| | | | | |
Additions net of redemptions | 11 |
| | — |
| | 11 |
|
Unrealized gain | 25 |
| | — |
| | 25 |
|
| | | | | |
Asset value as of September 30, 2012 | $ | 334 |
| | $ | 94 |
| | $ | 240 |
|
| | | | | |
Additions net of redemptions | (74 | ) | | (80 | ) | | 6 |
|
Realized gain | 32 |
| | 13 |
| | 19 |
|
Unrealized gain (loss) | 10 |
| | (10 | ) | | 20 |
|
| | | | | |
Asset value as of September 30, 2013 | $ | 302 |
| | $ | 17 |
| | $ | 285 |
|
| | | | | |
Non-U.S. Pension | | | | | |
| | | | | |
Asset value as of September 30, 2011 | $ | 7 |
| | $ | — |
| | $ | 7 |
|
| | | | | |
Additions net of redemptions | 48 |
| | 48 |
| | — |
|
Unrealized gain | 9 |
| | 8 |
| | 1 |
|
| | | | | |
Asset value as of September 30, 2012 | $ | 64 |
| | $ | 56 |
| | $ | 8 |
|
| | | | | |
Additions net of redemptions | 31 |
| | 31 |
| | — |
|
Unrealized gain | 3 |
| | 2 |
| | 1 |
|
| | | | | |
Asset value as of September 30, 2013 | $ | 98 |
| | $ | 89 |
| | $ | 9 |
|
Funded Status
The table that follows contains the ABO and reconciliations of the changes in the PBO, the changes in plan assets and the funded status (in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Postretirement Benefits |
| U.S. Plans | | Non-U.S. Plans | |
September 30, | 2013 | | 2012 | | 2013 | | 2012 | | 2013 | | 2012 |
| | | | | | | | | | | |
Accumulated Benefit Obligation | $ | 2,839 |
| | $ | 3,586 |
| | $ | 1,905 |
| | $ | 1,904 |
| | $ | — |
| | $ | — |
|
| | | | | | | | | | | |
Change in Projected Benefit Obligation | | | | | | | | | | | |
Projected benefit obligation at beginning of year | 3,736 |
| | 2,953 |
| | 2,025 |
| | 1,852 |
| | 266 |
| | 259 |
|
Service cost | 90 |
| | 69 |
| | 38 |
| | 41 |
| | 5 |
| | 5 |
|
Interest cost | 151 |
| | 150 |
| | 64 |
| | 73 |
| | 11 |
| | 13 |
|
Plan participant contributions | — |
| | — |
| | 5 |
| | 6 |
| | 6 |
| | 7 |
|
Acquisitions | — |
| | — |
| | 2 |
| | 6 |
| | — |
| | — |
|
Divestitures (1) | — |
| | — |
| | (20 | ) | | (2 | ) | | — |
| | — |
|
Actuarial (gain) loss | (452 | ) | | 722 |
| | 84 |
| | 109 |
| | (21 | ) | | 7 |
|
Amendments made during the year | (2 | ) | | — |
| | 1 |
| | (6 | ) | | — |
| | — |
|
Benefits and settlements paid | (621 | ) | | (158 | ) | | (176 | ) | | (93 | ) | | (22 | ) | | (31 | ) |
Estimated subsidy received | — |
| | — |
| | — |
| | — |
| | 1 |
| | 2 |
|
Curtailment | — |
| | — |
| | (15 | ) | | (2 | ) | | — |
| | — |
|
Other | — |
| | — |
| | 4 |
| | 41 |
| | — |
| | 2 |
|
Currency translation adjustment | — |
| | — |
| | (15 | ) | | — |
| | (1 | ) | | 2 |
|
| | | | | | | | | | | |
Projected benefit obligation at end of year | $ | 2,902 |
| | $ | 3,736 |
| | $ | 1,997 |
| | $ | 2,025 |
| | $ | 245 |
| | $ | 266 |
|
| | | | | | | | | | | |
Change in Plan Assets | | | | | | | | | | | |
Fair value of plan assets at beginning of year | $ | 2,985 |
| | $ | 2,372 |
| | $ | 1,657 |
| | $ | 1,471 |
| | $ | 223 |
| | $ | 156 |
|
Actual return on plan assets | 282 |
| | 504 |
| | 110 |
| | 155 |
| | 12 |
| | 35 |
|
Acquisitions | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
|
Divestitures | — |
| | — |
| | — |
| | (1 | ) | | — |
| | — |
|
Employer and employee contributions | 10 |
| | 267 |
| | 85 |
| | 97 |
| | 13 |
| | 63 |
|
Benefits paid | (136 | ) | | (158 | ) | | (64 | ) | | (74 | ) | | (22 | ) | | (31 | ) |
Settlement payments | (485 | ) | | — |
| | (112 | ) | | (19 | ) | | — |
| | — |
|
Other | — |
| | — |
| | 3 |
| | 16 |
| | — |
| | — |
|
Currency translation adjustment | — |
| | — |
| | (24 | ) | | 12 |
| | — |
| | — |
|
| | | | | | | | | | | |
Fair value of plan assets at end of year | $ | 2,656 |
| | $ | 2,985 |
| | $ | 1,656 |
| | $ | 1,657 |
| | $ | 226 |
| | $ | 223 |
|
| | | | | | | | | | | |
Funded status | $ | (246 | ) | | $ | (751 | ) | | $ | (341 | ) | | $ | (368 | ) | | $ | (19 | ) | | $ | (43 | ) |
| | | | | | | | | | | |
Amounts recognized in the statement of financial position consist of: |
Prepaid benefit cost | $ | 29 |
| | $ | 3 |
| | $ | 83 |
| | $ | 61 |
| | $ | 51 |
| | $ | 39 |
|
Accrued benefit liability | (275 | ) | | (754 | ) | | (424 | ) | | (429 | ) | | (70 | ) | | (82 | ) |
| | | | | | | | | | | |
Net amount recognized | $ | (246 | ) | | $ | (751 | ) | | $ | (341 | ) | | $ | (368 | ) | | $ | (19 | ) | | $ | (43 | ) |
| | | | | | | | | | | |
Weighted Average Assumptions (2) | | | | | | | | | | | |
Discount rate (3) | 4.90 | % | | 4.15 | % | | 3.60 | % | | 3.40 | % | | 4.90 | % | | 4.15 | % |
Rate of compensation increase | 3.30 | % | | 3.25 | % | | 2.60 | % | | 2.40 | % | | NA |
| | NA |
|
| |
(1) | Fiscal 2013 includes $14 million of projected benefit obligations transferred to liabilities held for sale on the consolidated statement of financial position for non-U.S. plans. Refer to Note 3, "Assets and Liabilities Held for Sale," of the notes to consolidated financial statements for further information regarding the Company's disposal groups classified as held for sale. |
| |
(2) | Plan assets and obligations are determined based on a September 30 measurement date at September 30, 2013 and 2012. |
| |
(3) | The Company considers the expected benefit payments on a plan-by-plan basis when setting assumed discount rates. As a result, the Company uses different discount rates for each plan depending on the plan jurisdiction, the demographics of participants and the expected timing of benefit payments. For the U.S. pension and postretirement plans, the Company uses a discount rate provided by an independent third party calculated based on an appropriate mix of high quality bonds. For the non-U.S. pension and postretirement plans, the Company consistently uses the relevant country specific benchmark indices for determining the various discount rates. |
Accumulated Other Comprehensive Income
The amounts in accumulated other comprehensive income on the consolidated statement of financial position, exclusive of tax impacts, that have not yet been recognized as components of net periodic benefit cost at September 30, 2013 are as follows (in millions):
|
| | | | | | | |
| Pension Benefits | | Postretirement Benefits |
Accumulated other comprehensive loss (income) | | | |
Net transition obligation | $ | 1 |
| | $ | — |
|
Net prior service credit | (10 | ) | | (9 | ) |
Total | $ | (9 | ) | | $ | (9 | ) |
The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year are shown below (in millions):
|
| | | | | | | |
| Pension Benefits | | Postretirement Benefits |
Amortization of: | | | |
Net transition obligation | $ | — |
| | $ | — |
|
Net prior service credit | — |
| | (7 | ) |
Total | $ | — |
| | $ | (7 | ) |
Net Periodic Benefit Cost
The table that follows contains the components of net periodic benefit cost (in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | Postretirement Benefits |
| U.S. Plans | | Non-U.S. Plans | |
Year ended September 30, | 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | 2011 |
Components of Net Periodic Benefit Cost (Credit): | | | | | | | | | | | | | | | | | |
Service cost | $ | 90 |
| | $ | 69 |
| | $ | 66 |
| | $ | 38 |
| | $ | 41 |
| | $ | 34 |
| | $ | 5 |
| | $ | 5 |
| | $ | 5 |
|
Interest cost | 151 |
| | 150 |
| | 145 |
| | 64 |
| | 73 |
| | 70 |
| | 11 |
| | 13 |
| | 13 |
|
Expected return on plan assets | (232 | ) | | (214 | ) | | (203 | ) | | (71 | ) | | (75 | ) | | (75 | ) | | (13 | ) | | (11 | ) | | — |
|
Net actuarial (gain) loss | (433 | ) | | 432 |
| | 336 |
| | 48 |
| | 30 |
| | 43 |
| | (20 | ) | | (15 | ) | | 5 |
|
Amortization of prior service cost (credit) | 1 |
| | 1 |
| | 1 |
| | (1 | ) | | (1 | ) | | 2 |
| | (17 | ) | | (17 | ) | | (17 | ) |
Curtailment gain | — |
| | — |
| | — |
| | (26 | ) | | (2 | ) | | (19 | ) | | — |
| | — |
| | — |
|
Settlement (gain) loss | (69 | ) | | — |
| | — |
| | (1 | ) | | — |
| | 4 |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | |
Net periodic benefit cost (credit) | $ | (492 | ) | | $ | 438 |
| | $ | 345 |
| | $ | 51 |
| | $ | 66 |
| | $ | 59 |
| | $ | (34 | ) | | $ | (25 | ) | | $ | 6 |
|
| | | | | | | | | | | | | | | | | |
Expense Assumptions: | | | | | | | | | | | | | | | | | |
Discount rate | 4.15 | % | | 5.25 | % | | 5.50 | % | | 3.40 | % | | 4.00 | % | | 4.00 | % | | 4.15 | % | | 5.25 | % | | 5.50 | % |
Expected return on plan assets | 8.00 | % | | 8.50 | % | | 8.50 | % | | 4.55 | % | | 5.15 | % | | 5.50 | % | | 5.80 | % | | 6.30 | % | | NA |
|
Rate of compensation increase | 3.25 | % | | 3.30 | % | | 3.20 | % | | 2.45 | % | | 2.45 | % | | 3.00 | % | | NA |
| | NA |
| | NA |
|
