The amounts in Accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during 2017 are $52 million in the U.S. and $41 million outside the U.S.
Expected Return on Plan Assets
To determine the expected long-term rate of return on plan assets, the historical performance, investment community forecasts and current market conditions are analyzed to develop expected returns for each asset class used by the plans. The expected returns for each asset class are weighted by the target allocations of the plans. The expected return on plan assets in the U.S. of 7.81% reflects a portfolio that is seeking asset growth through a higher equity allocation while maintaining prudent risk levels. The portfolio contains certain assets that have historically resulted in higher returns and other financial instruments to minimize downside risk.
No plan assets are expected to be returned to the Company during 2017 .
79
Fair value of plan assets
The Company determined the fair value of plan assets through numerous procedures based on the asset class and available information. Refer to Note 13 “Fair Value Measurements and Financial Instruments” for a description of the procedures performed to determine the fair value of the plan assets.
The fair values of the Company’s U.S. pension plan assets at December 31, 2016 and December 31, 2015 , by asset category, are as follows (in millions):
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Fair Value Measurements Using
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Asset Category
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Balance at December 31, 2016
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|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
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|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
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Cash and cash equivalents (1)
|
$
|
100
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$
|
100
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$
|
—
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|
|
$
|
—
|
|
Equity investments:
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|
|
|
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Large cap domestic
|
268
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268
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|
|
—
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|
—
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Small cap domestic
|
15
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15
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|
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—
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|
|
—
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International
|
64
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64
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—
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|
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—
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Equity derivatives
|
81
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|
78
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3
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|
|
—
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Pooled funds:
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|
|
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International (2)
|
196
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|
|
—
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|
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—
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|
|
—
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Small cap domestic (2)
|
52
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|
|
—
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|
|
—
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|
|
—
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Fixed income investments: (3)
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Corporate bonds
|
105
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|
|
—
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105
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|
|
—
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Government and agency bonds
|
132
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|
|
76
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|
|
56
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|
|
—
|
|
Asset-backed securities
|
—
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|
|
—
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|
|
—
|
|
|
—
|
|
Fixed income derivatives
|
65
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|
65
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|
|
—
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|
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—
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|
Pooled funds:
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|
|
|
|
|
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Corporate bonds (2)
|
255
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|
|
—
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|
|
—
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|
|
—
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|
Other investments:
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|
|
|
|
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Commodity derivatives (4)
|
22
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|
|
—
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22
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|
|
—
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|
Real estate and REITS (5)
|
61
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|
61
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|
|
—
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|
|
—
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Alternative investments (2) (6)
|
267
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|
|
—
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—
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—
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Total
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$
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1,683
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|
|
$
|
727
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$
|
186
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$
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—
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(1)
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Consists of cash and institutional short-term investment funds.
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(2)
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Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the above table are intended to permit reconciliation of the fair values to the amounts presented in the plan assets contained in this Note.
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(4)
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Consists of long-dated options and swaps on a commodity index.
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(5)
|
Consists of exchange traded real estate investment trusts (“REITS”).
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
Asset Category
|
Balance at December 31, 2015
|
|
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 (1)
|
$
|
33
|
|
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity investments:
|
|
|
|
|
|
|
|
Large cap domestic
|
299
|
|
|
299
|
|
|
—
|
|
|
—
|
|
Small cap domestic
|
30
|
|
|
30
|
|
|
—
|
|
|
—
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|
International
|
52
|
|
|
52
|
|
|
—
|
|
|
—
|
|
Equity derivatives
|
203
|
|
|
170
|
|
|
33
|
|
|
—
|
|
Pooled funds:
|
|
|
|
|
|
|
|
International (2)
|
210
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Small cap domestic (2)
|
58
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|
|
—
|
|
|
—
|
|
|
—
|
|
Fixed income investments: (3)
|
|
|
|
|
|
|
|
Corporate bonds
|
148
|
|
|
—
|
|
|
148
|
|
|
—
|
|
Government and agency bonds
|
128
|
|
|
52
|
|
|
76
|
|
|
—
|
|
Asset-backed securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Fixed income derivatives
|
69
|
|
|
47
|
|
|
22
|
|
|
—
|
|
Pooled funds:
|
|
|
|
|
|
|
|
Corporate bonds (2)
|
336
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other investments:
|
|
|
|
|
|
|
|
Commodity derivatives (4)
|
13
|
|
|
—
|
|
|
13
|
|
|
—
|
|
Real estate and REITS (5)
|
67
|
|
|
67
|
|
|
—
|
|
|
—
|
|
Alternative investments (2) (6)
|
305
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
1,951
|
|
|
$
|
750
|
|
|
$
|
292
|
|
|
$
|
—
|
|
|
|
(1)
|
Consists of cash and institutional short-term investment funds.
|
|
|
(2)
|
Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the above table are intended to permit reconciliation of the fair values to the amounts presented in the plan assets contained in this Note.
|
|
|
(3)
|
Consists of corporate and government bonds, asset-backed securities, and fixed income derivatives.
|
|
|
(4)
|
Consists of long-dated options on a commodity index.
|
|
|
(5)
|
Consists of exchange traded REITS.
|
|
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(6)
|
Consists of limited partnerships, private equity and hedge funds.
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