- Part 8: For the preceding part double click ID:nRSJ6609Wg
After
2017 2018 2019 2020 2021 2021 Total
$ 800 $ 1,042 $ 623 $ 1,176 $ 1,246 $ 6,591 $ 11,478
Long-term debt payments due in 2017 and 2018 include floating rate notes totaling $150 million (classified as current
portion of long-term debt), and $71 million (included in other borrowings in the long-term debt table), respectively, as a
result of put provisions associated with these debt instruments.
Credit Facilities
In March 2016, 3M amended and restated its existing $2.25 billion five-year revolving credit facility expiring in August
2019 to a $3.75 billion five-year revolving credit facility expiring in March 2021. This credit agreement includes a
provision under which 3M may request an increase of up to $1.25 billion (at lender's discretion), bringing the total
facility up to $5.0 billion. This revolving credit facility was undrawn at December 31, 2016. Under the $3.75 billion
credit agreement, the Company is required to maintain its EBITDA to Interest Ratio as of the end of each fiscal quarter at
not less than 3.0 to 1. This is calculated (as defined in the agreement) as the ratio of consolidated total EBITDA for the
four consecutive quarters then ended to total interest expense on all funded debt for the same period. At December 31,
2016, this ratio was approximately 44 to 1. Debt covenants do not restrict the payment of dividends.
Other Credit Facilities
Apart from the committed revolving facility, an additional $291 million in stand-alone letters of credit and bank
guarantees were also issued and outstanding at December 31, 2016. These instruments are utilized in connection with normal
business activities.
Long-Term Debt Issuances
The principal amounts, interest rates and maturity dates of individual long-term debt issuances can be found in the
long-term debt table found at the beginning of this note.
In May 2016, 3M issued 1 billion Euros aggregate principal amount of medium-term notes. In September 2016, 3M issued $1.75
billion aggregate principal amount of medium-term notes.
In May 2015, 3M issued 1.750 billion Euros aggregate principal amount of medium-term notes. In August 2015, 3M issued
$1.500 billion aggregate principal amount of medium-term notes. Upon debt issuance, the Company entered into two interest
rate swaps as fair value hedges of a portion of the fixed interest rate medium-term note obligation. The first converted a
$450 million three-year fixed rate note, and the second converted $300 million of a five-year fixed rate note included in
this issuance to an interest rate based on a floating three-month LIBOR index.
In June 2014, 3M issued $950 million aggregate principal amount of medium-term notes. Upon debt issuance, the Company
entered into an interest rate swap to convert $600 million of a $625 million note included in this issuance to an interest
rate based on a floating three-month LIBOR index as a fair value hedge of a portion of the fixed interest rate medium-term
note obligation. In November 2014, the Company issued 1.250 billion Euros aggregate principal amount of medium-term notes.
Long-Term Debt Maturities
In September 2016, 3M repaid $1 billion aggregate principal amount of medium-term notes.
In July 2014, 3M retired at maturity 1.025 billion Euros of seven-year 5.0% fixed rate Eurobonds. In December 2012, 3M
entered into a three-year 66 million British Pound (approximately $106 million based on agreement date exchange rates)
committed credit facility agreement with JP Morgan Chase Bank, which was fully drawn as of December 31, 2012. 3M repaid the
balance in 2014.
Floating Rate Notes
At various times, 3M has issued floating rate notes containing put provisions. 3M would be required to repurchase these
securities at various prices ranging from 99 percent to 100 percent of par value according to the reduction schedules for
each security. In December 2004, 3M issued a forty-year $60 million floating rate note, with a rate based on a floating
LIBOR index. Under the terms of this floating rate note due in 2044, holders have an annual put feature at 100 percent of
par value from 2014 and every anniversary thereafter until final maturity. Under the terms of the floating rate notes due
in 2027, 2040 and 2041, holders have put options that commence ten years from the date of issuance and each third
anniversary thereafter until final maturity at prices ranging from 99 percent to 100 percent of par value. For the periods
presented, 3M was required to repurchase an immaterial amount of principal on the aforementioned floating rate notes.
NOTE 11. Pension and Postretirement Benefit Plans
3M has company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United
States. In total, 3M has over 80 defined benefit plans in 27 countries. Pension benefits associated with these plans
generally are based on each participant's years of service, compensation, and age at retirement or termination. The primary
U.S. defined-benefit pension plan was closed to new participants effective January 1, 2009. The Company also provides
certain postretirement health care and life insurance benefits for its U.S. employees who reach retirement age while
employed by the Company and were employed by the Company prior to January 1, 2016. Most international employees and
retirees are covered by government health care programs. The cost of company-provided postretirement health care plans for
international employees is not material and is combined with U.S. amounts in the tables that follow.
The Company has made deposits for its defined benefit plans with independent trustees. Trust funds and deposits with
insurance companies are maintained to provide pension benefits to plan participants and their beneficiaries. There are no
plan assets in the non-qualified plan due to its nature. For its U.S. postretirement health care and life insurance benefit
plans, the Company has set aside amounts at least equal to annual benefit payments with an independent trustee.
3M's primary U.S. qualified defined benefit plan does not have a mandatory cash contribution because the Company has a
significant credit balance from previous discretionary contributions that can be applied to any Pension Protection Act
funding requirements.
The Company also sponsors employee savings plans under Section 401(k) of the Internal Revenue Code. These plans are offered
to substantially all regular U.S. employees. Beginning on January 1, 2016, for U.S. employees, the Company reduced its
match on employee 401(k) contributions. For eligible employees hired prior to January 1, 2009, employee 401(k)
contributions of up to 5% (down from 6% prior to 2016) of eligible compensation matched in cash at rates of 45% or 60%,
depending on the plan in which the employee participates. Employees hired on or after January 1, 2009, receive a cash match
of 100% for employee 401(k) contributions of up to 5% (down from 6% prior to 2016) of eligible compensation and receive an
employer retirement income account cash contribution of 3% of the participant's total eligible compensation. All
contributions are invested in a number of investment funds pursuant to the employees' elections. Employer contributions to
the U.S. defined contribution plans were $139 million, $165 million and $153 million for 2016, 2015 and 2014, respectively.
3M subsidiaries in various international countries also participate in defined contribution plans. Employer contributions
to the international defined contribution plans were $87 million, $77 million and $75 million for 2016, 2015 and 2014,
respectively.
As a result of changes made to its U.S. postretirement health care benefit plans in 2010, the Company has transitioned all
current and future retirees to a savings account benefits-based plan. These changes became effective beginning January 1,
2013, for all Medicare eligible retirees and their Medicare eligible dependents and became effective beginning January 1,
2016, for all non-Medicare eligible retirees and their eligible dependents. In August 2015, 3M modified the 3M Retiree
Welfare Benefit Plan postretirement medical benefit reducing the future benefit for participants not retired as of January
1, 2016. For participants retiring after January 1, 2016, the Retiree Medical Savings Account (RMSA) is no longer credited
with interest and the indexation on both the RMSA and the Medicare Health Reimbursement Arrangement is reduced from 3
percent to 1.5 percent per year (for those employees who are eligible for these accounts). Also effective January 1, 2016,
3M no longer offers 3M Retiree Health Care Accounts to new hires. Due to these changes the plan was re-measured in the
third quarter of 2015, resulting in a decrease to the projected benefit obligation liability of approximately $233 million,
and a related increase to shareholders' equity, specifically accumulated other comprehensive income.
As of December 31, 2014, the Company converted to the "RP 2014 Mortality Tables" and updated the mortality improvement
scale it used for calculating the year-end 2014 U.S. defined benefit pension annuitant and postretirement obligations and
2015 expense. The impact of this change increased the year-end 2014 U.S. pension projected benefit obligation (PBO) by
approximately $820 million and the U.S. accumulated postretirement benefit obligation by approximately $100 million. As of
December 31, 2016, the Company updated the mortality improvement scale to Scale MP-2016, which was released by the Society
of Actuaries in October 2016. The impact of this change decreased the year-end 2016 U.S. pension PBO by approximately $440
million and the U.S. accumulated postretirement benefit obligation by approximately $60 million.
In March 2015, 3M Japan modified the Japan Limited Defined Benefit Corporate Pension Plan (DBCPP). Beginning July 1, 2015,
eligible employees receive a company provided contribution match of 6.12% of their eligible salary to their defined
contribution plan. Employees no longer earn additional service towards their defined benefit pension plans after July 1,
2015, except for eligible salaries above the statutory defined contribution limits. As a result of this plan modification,
the Company re-measured the DBCPP, which resulted in a $17 million pre-tax curtailment gain for the year ended December 31,
2015. In March 2015, 3M also received a favorable Internal Revenue Service tax determination letter to terminate a frozen
defined benefit pension plan of one of 3M's acquired subsidiaries. By the end of 2015, this plan made final distributions
of $16 million to participants. The Company also had other settlements, curtailments, special termination benefits and
other items in 2015 aggregating to the amounts indicated in these components in the applicable tables that follow.
3M was informed during the first quarter of 2009, that the general partners of WG Trading Company, in which 3M's benefit
plans hold limited partnership interests, are the subject of a criminal investigation as well as civil proceedings by the
SEC and CFTC (Commodity Futures Trading Commission). In March 2011, over the objections of 3M and six other limited
partners of WG Trading Company, the district court judge ruled in favor of the court appointed receiver's proposed
distribution plan (and in April 2013, the United States Court of Appeals for the Second Circuit affirmed the district
court's ruling). The benefit plan trustee holdings of WG Trading Company interests were adjusted to reflect the decreased
estimated fair market value, inclusive of estimated insurance proceeds, as of the annual measurement dates. The Company has
insurance that it believes, based on what is currently known, will result in the probable recovery of a portion of the
decrease in original asset value. In the first quarter of 2014, 3M and certain 3M benefit plans filed a lawsuit in the U.S.
District Court for the District of Minnesota against five insurers seeking insurance coverage for the WG Trading Company
claim. In September 2015, the court ruled in favor of the defendant insurance companies on a motion for summary judgment
and dismissed the lawsuit. In October 2015, 3M and the 3M benefit plans filed a notice of appeal to the United States Court
of Appeals for the Eighth Circuit. As of the 2016 measurement date, these holdings represented less than one half of one
percent of 3M's fair value of total plan assets. 3M currently believes that the resolution of these events will not have a
material adverse effect on the consolidated financial position of the Company.
The following tables include a reconciliation of the beginning and ending balances of the benefit obligation and the fair
value of plan assets as well as a summary of the related amounts recognized in the Company's consolidated balance sheet as
of December 31 of the respective years. 3M also has certain non-qualified unfunded pension and postretirement benefit
plans, inclusive of plans related to supplement/excess benefits for employees impacted by particular relocations and other
matters, that individually and in the aggregate are not significant and which are not included in the tables that follow.
The obligations for these plans are included within other liabilities in the Company's consolidated balance sheet and
aggregated less than $35 million as of December 31, 2016 and 2015.
Qualified and Non-qualified
Pension Benefits Postretirement
United States International Benefits
(Millions) 2016 2015 2016 2015 2016 2015
Change in benefit obligation
Benefit obligation at beginning of year $ 15,856 $ 16,452 $ 6,322 $ 6,979 $ 2,216 $ 2,462
Acquisitions/Transfers - - (5) 94 - -
Service cost 259 293 133 154 54 75
Interest cost 575 655 171 206 79 98
Participant contributions - - 8 9 - 14
Foreign exchange rate changes - - (472) (589) 7 (22)
Plan amendments 5 - (4) (6) - (211)
Actuarial (gain) loss 427 (657) 724 (274) 7 (80)
Medicare Part D Reimbursement - - - - - 1
Benefit payments (919) (874) (245) (232) (104) (122)
Settlements, curtailments, special termination benefits and other (1) (13) (7) (19) - 1
Benefit obligation at end of year $ 16,202 $ 15,856 $ 6,625 $ 6,322 $ 2,259 $ 2,216
Change in plan assets
Fair value of plan assets at beginning of year $ 13,966 $ 14,643 $ 5,669 $ 5,957 $ 1,367 $ 1,436
Acquisitions/Transfers - - - 8 - -
Actual return on plan assets 779 100 512 287 90 36
Company contributions 259 113 121 151 3 3
Participant contributions - - 8 9 - 14
Foreign exchange rate changes - - (444) (498) - -
Benefit payments (919) (874) (245) (232) (104) (122)
Settlements, curtailments, special termination benefits and other (4) (16) (4) (13) - -
Fair value of plan assets at end of year $ 14,081 $ 13,966 $ 5,617 $ 5,669 $ 1,356 $ 1,367
Funded status at end of year $ (2,121) $ (1,890) $ (1,008) $ (653) $ (903) $ (849)
Qualified and Non-qualified
Pension Benefits Postretirement
United States International Benefits
(Millions) 2016 2015 2016 2015 2016 2015
Amounts recognized in the Consolidated Balance Sheet as of Dec. 31,
Non-current assets $ 4 $ 3 $ 48 $ 185 $ - $ -
Accrued benefit cost
Current liabilities (52) (47) (10) (10) (4) (3)
Non-current liabilities (2,073) (1,846) (1,046) (828) (899) (846)
Ending balance $ (2,121) $ (1,890) $ (1,008) $ (653) $ (903) $ (849)
Qualified and Non-qualified
Pension Benefits Postretirement
United States International Benefits
(Millions) 2016 2015 2016 2015 2016 2015
Amounts recognized in accumulated other comprehensive income as of Dec. 31,
Net transition obligation (asset) $ - $ - $ - $ (2) $ - $ -
Net actuarial loss (gain) 5,704 5,366 1,933 1,610 761 815
Prior service cost (credit) (198) (227) (56) (68) (214) (270)
Ending balance $ 5,506 $ 5,139 $ 1,877 $ 1,540 $ 547 $ 545
The balance of amounts recognized for international plans in accumulated other comprehensive income as of December 31 in
the preceding table are presented based on the foreign currency exchange rate on that date.
The pension accumulated benefit obligation represents the actuarial present value of benefits based on employee service and
compensation as of the measurement date and does not include an assumption about future compensation levels. The
accumulated benefit obligation of the U.S. pension plans was $15.149 billion and $14.834 billion at December 31, 2016 and
2015, respectively. The accumulated benefit obligation of the international pension plans was $6.058 billion and $5.773
billion at December 31, 2016 and 2015, respectively.
The following amounts relate to pension plans with accumulated benefit obligations in excess of plan assets as of December
31:
Qualified and Non-qualified Pension Plans
United States International
(Millions) 2016 2015 2016 2015
Projected benefit obligation $ 16,202 $ 15,856 $ 2,590 $ 2,382
Accumulated benefit obligation 15,149 14,834 2,351 2,149
Fair value of plan assets 14,081 13,966 1,635 1,566
Components of net periodic cost and other amounts recognized in other comprehensive income
Net periodic benefit cost is recorded in cost of sales, selling, general and administrative expenses, and research,
development and related expenses. Components of net periodic benefit cost and other changes in plan assets and benefit
obligations recognized in other comprehensive income for the years ended December 31 follow:
Qualified and Non-qualified
Pension Benefits Postretirement
United States International Benefits
(Millions) 2016 2015 2014 2016 2015 2014 2016 2015 2014
Net periodic benefit cost (benefit)
Service cost $ 259 $ 293 $ 241 $ 133 $ 154 $ 141 $ 54 $ 75 $ 65
Interest cost 575 655 676 171 206 252 79 98 97
Expected return on plan assets (1,043) (1,069) (1,043) (308) (308) (312) (90) (91) (90)
Amortization of transition (asset) obligation - - - (1) (1) (1) - - -
Amortization of prior service cost (benefit) (24) (24) 4 (13) (13) (16) (55) (42) (47)
Amortization of net actuarial (gain) loss 354 409 243 91 144 121 61 73 56
Settlements, curtailments, special termination benefits and other 4 2 - 4 (6) 4 - 1 -
Net periodic benefit cost (benefit) after settlements, curtailments, special termination benefits and other $ 125 $ 266 $ 121 $ 77 $ 176 $ 189 $ 49 $ 114 $ 81
Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss
Amortization of transition (asset) obligation - - - 1 1 1 - - -
Prior service cost (benefit) 5 - (266) (5) 10 3 - (212) -
Amortization of prior service cost (benefit) 24 24 (4) 13 13 16 55 42 47
Net actuarial (gain) loss 692 312 2,167 512 (270) 592 8 (23) 358
Amortization of net actuarial (gain) loss (354) (409) (243) (91) (144) (121) (61) (73) (56)
Foreign currency - - - (93) (174) (215) - (1) (1)
Total recognized in other comprehensive (income) loss $ 367 $ (73) $ 1,654 $ 337 $ (564) $ 276 $ 2 $ (267) $ 348
Total recognized in net periodic benefit cost (benefit) and other comprehensive (income) loss $ 492 $ 193 $ 1,775 $ 414 $ (388) $ 465 $ 51 $ (153) $ 429
Amounts expected to be amortized from accumulated other comprehensive income into net periodic benefit costs over the next
fiscal year
Qualified and Non-qualified
Pension Benefits Postretirement
(Millions) United States International Benefits
Amortization of transition (asset) obligation $ - $ - $ -
Amortization of prior service cost (benefit) (23) (12) (53)
Amortization of net actuarial (gain) loss 387 119 56
Total amortization expected over the next fiscal year $ 364 $ 107 $ 3
The Company primarily amortizes amounts recognized as prior service cost (benefit) over the average future service period
of active employees at the date of the amendment.
Weighted-average assumptions used to determine benefit obligations as of December 31
Qualified and Non-qualified Pension Benefits Postretirement
United States International Benefits
2016 2015 2014 2016 2015 2014 2016 2015 2014
Discount rate 4.21 % 4.47 % 4.10 % 2.54 % 3.12 % 3.11 % 4.26 % 4.48 % 4.07 %
Compensation rate increase 4.10 % 4.10 % 4.10 % 2.90 % 2.90 % 3.33 % N/A N/A N/A
Weighted-average assumptions used to determine net cost for years ended December 31
Qualified and Non-qualified Pension Benefits Postretirement
United States International Benefits
2016 2015 2014 2016 2015 2014 2016 2015 2014
Discount rate - service cost 4.70 % 4.10 % 4.98 % 2.84 % 3.11 % 4.02 % 4.70 % 4.07 % 4.83 %
Discount rate - interest cost 3.73 % 4.10 % 4.98 % 2.72 % 3.11 % 4.02 % 3.80 % 4.07 % 4.83 %
Expected return on assets 7.50 % 7.75 % 7.75 % 5.77 % 5.90 % 5.83 % 6.91 % 6.91 % 7.11 %
Compensation rate increase 4.10 % 4.10 % 4.00 % 2.90 % 3.33 % 3.35 % N/A N/A N/A
The Company provides eligible retirees in the U.S. postretirement health care benefit plans to a savings account
benefits-based plan. The contributions provided by the Company to the health savings accounts increase 3 percent per year
for employees who retired prior to January 1, 2016 and increase 1.5 percent for employees who retire on or after January 1,
2016. Therefore, the Company no longer has material exposure to health care cost inflation.
The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the
pension and postretirement benefit plans, which is also the date used for the related annual measurement assumptions. The
discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the
year. The Company sets its rate to reflect the yield of a portfolio of high quality, fixed-income debt instruments that
would produce cash flows sufficient in timing and amount to settle projected future benefits. Using this methodology, the
Company determined a discount rate of 4.21% for pension and 4.26% for postretirement benefits to be appropriate for its
U.S. plans as of December 31, 2016, which is a decrease of 0.26 percentage points and 0.22 percentage points, respectively,
from the rates used as of December 31, 2015. For the international pension and postretirement plans the discount rates also
reflect the current rate at which the associated liabilities could be effectively settled at the end of the year. If the
country has a deep market in corporate bonds the Company matches the expected cash flows from the plan either to a
portfolio of bonds that generate sufficient cash flow or a notional yield curve generated from available bond information.
In countries that do not have a deep market in corporate bonds, government bonds are considered with a risk premium to
approximate corporate bond yields.
Beginning in 2016, 3M changed the method used to estimate the service and interest cost components of the net periodic
pension and other postretirement benefit costs. The new method measures service cost and interest cost separately using the
spot yield curve approach applied to each corresponding obligation. Service costs are determined based on duration-specific
spot rates applied to the service cost cash flows. The interest cost calculation is determined by applying
duration-specific spot rates to the year-by-year projected benefit payments. The spot yield curve approach does not affect
the measurement of the total benefit obligations as the change in service and interest costs offset in the actuarial gains
and losses recorded in other comprehensive income. The Company changed to the new method to provide a more precise measure
of service and interest costs by improving the correlation between the projected benefit cash flows and the discrete spot
yield curve rates. The Company accounted for this change as a change in estimate prospectively beginning in the first
quarter of 2016. As a result of the change to the spot yield curve approach, 2016 annual defined benefit pension and
postretirement net periodic benefit cost decreased approximately $180 million.
For the primary U.S. qualified pension plan, the Company's assumption for the expected return on plan assets was 7.50% in
2016. Projected returns are based primarily on broad, publicly traded equity and fixed-income indices and forward-looking
estimates of active portfolio and investment management. As of December 31, 2016, the Company's 2017 expected long-term
rate of return on U.S. plan assets is 7.25%, a decrease of 0.25 percentage points from 2016. The expected return assumption
is based on the strategic asset allocation of the plan, long term capital market return expectations and expected
performance from active investment management. The 2016 expected long-term rate of return is based on an asset allocation
assumption of 25% global equities, 18% private equities, 41% fixed-income securities, and 16% absolute return investments
independent of traditional performance benchmarks, along with positive returns from active investment management. The
actual net rate of return on plan assets in 2016 was 5.8%. In 2015 the plan earned a rate of return of 0.7% and in 2014
earned a return of 13.0%. The average annual actual return on the plan assets over the past 10 and 25 years has been 7.2%
and 9.2%, respectively. Return on assets assumptions for international pension and other post-retirement benefit plans are
calculated on a plan-by-plan basis using plan asset allocations and expected long-term rate of return assumptions.
During 2016, the Company contributed $380 million to its U.S. and international pension plans and $3 million to its
postretirement plans. During 2015, the Company contributed $264 million to its U.S. and international pension plans and $3
million to its postretirement plans. In 2017, the Company expects to contribute an amount in the range of $300 million to
$500 million of cash to its U.S. and international retirement plans. The Company does not have a required minimum cash
pension contribution obligation for its U.S. plans in 2017. Future contributions will depend on market conditions, interest
rates and other factors.
Future Pension and Postretirement Benefit Payments
The following table provides the estimated pension and postretirement benefit payments that are payable from the plans to
participants.
Qualified and Non-qualified
Pension Benefits Postretirement
(Millions) United States International Benefits
2017 Benefit Payments $ 1,020 $ 203 $ 129
2018 Benefit Payments 1,040 212 139
2019 Benefit Payments 1,057 228 147
2020 Benefit Payments 1,071 235 157
2021 Benefit Payments 1,088 256 166
Next five years 5,586 1,452 839
Plan Asset Management
3M's investment strategy for its pension and postretirement plans is to manage the funds on a going-concern basis. The
primary goal of the trust funds is to meet the obligations as required. The secondary goal is to earn the highest rate of
return possible, without jeopardizing its primary goal, and without subjecting the Company to an undue amount of
contribution risk. Fund returns are used to help finance present and future obligations to the extent possible within
actuarially determined funding limits and tax-determined asset limits, thus reducing the potential need for additional
contributions from 3M. The investment strategy has used long duration cash bonds and derivative instruments to offset a
significant portion of the interest rate sensitivity of U.S. pension liabilities.
Normally, 3M does not buy or sell any of its own securities as a direct investment for its pension and other postretirement
benefit funds. However, due to external investment management of the funds, the plans may indirectly buy, sell or hold 3M
securities. The aggregate amount of 3M securities are not considered to be material relative to the aggregate fund
percentages.
The discussion that follows references the fair value measurements of certain assets in terms of levels 1, 2 and 3. See
Note 13 for descriptions of these levels. While the company believes the 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 estimate of fair value at the reporting date.
U.S. Pension Plans and Postretirement Benefit Plan Assets
In order to achieve the investment objectives in the U.S. pension plans and U.S. postretirement benefit plans, the
investment policies include a target strategic asset allocation. The investment policies allow some tolerance around the
target in recognition that market fluctuations and illiquidity of some investments may cause the allocation to a specific
asset class to vary from the target allocation, potentially for long periods of time. Acceptable ranges have been designed
to allow for deviation from strategic targets and to allow for the opportunity for tactical over- and under-weights. The
portfolios will normally be rebalanced when the quarter-end asset allocation deviates from acceptable ranges. The
allocation is reviewed regularly by the named fiduciary of the plans. Approximately 42% of the postretirement benefit plan
assets are in a 401(h) account. The 401(h) account assets are in the same trust as the primary U.S. pension plan and
invested with the same investment objectives as the primary U.S. pension plan.
The fair values of the assets held by the U.S. pension plans by asset class are as follows:
Fair Value Measurements Using Inputs Considered as Fair Value at
(Millions) Level 1 Level 2 Level 3 Dec. 31,
Asset Class 2016 2015 2016 2015 2016 2015 2016 2015
Equities
U.S. equities $ 1,522 $ 1,897 $ - $ - $ - $ - $ 1,522 $ 1,897
Non-U.S. equities 1,179 1,149 - - - - 1,179 1,149
Index and long/short equity funds* 414 578
Total Equities $ 2,701 $ 3,046 $ - $ - $ - $ - $ 3,115 $ 3,624
Fixed Income
U.S. government securities $ 1,701 $ 1,095 $ 560 $ 456 $ - $ - $ 2,261 $ 1,551
Non-U.S. government securities - - 146 126 - - 146 126
Preferred and convertible securities 4 4 1 8 - - 5 12
U.S. corporate bonds 10 9 3,392 2,820 - - 3,402 2,829
Non-U.S. corporate bonds - - 672 616 - - 672 616
Derivative instruments (1) (1) (31) 40 - - (32) 39
Other* 7 11
Total Fixed Income $ 1,714 $ 1,107 $ 4,740 $ 4,066 $ - $ - $ 6,461 $ 5,184
Private Equity
Derivative instruments $ - $ - $ - $ - $ (83) $ (106) $ (83) $ (106)
Growth equity 19 24 - - - - 19 24
Partnership investments* 2,188 2,450
Total Private Equity $ 19 $ 24 $ - $ - $ (83) $ (106) $ 2,124 $ 2,368
Absolute Return
Derivative instruments $ - $ - $ (7) $ (5) $ - $ - $ (7) $ (5)
Fixed income and other 29 253 78 46 - - 107 299
Hedge fund/fund of funds* 1,793 1,409
Partnership investments* 296 355
Total Absolute Return $ 29 $ 253 $ 71 $ 41 $ - $ - $ 2,189 $ 2,058
Cash and Cash Equivalents
Cash and cash equivalents $ 55 $ 102 $ - $ 1 $ 2 $ - $ 57 $ 103
Repurchase agreements and derivative margin activity - - (545) 5 - - (545) 5
Cash and cash equivalents, valued at net asset value* 931 783
Total Cash and Cash Equivalents $ 55 $ 102 $ (545) $ 6 $ 2 $ - $ 443 $ 891
Total $ 4,518 $ 4,532 $ 4,266 $ 4,113 $ (81) $ (106) $ 14,332 $ 14,125
Other items to reconcile to fair value of plan assets $ (251) $ (159)
Fair value of plan assets $ 14,081 $ 13,966
* In accordance with ASC 820-10, certain investments that are measured at fair value using the net asset value (NAV) per
share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The NAV is based
on the fair value of the underlying assets owned by the fund, minus its liabilities then divided by the number of units
outstanding and is determined by the investment manager or custodian of the fund. The fair value amounts presented in this
table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the fair value of plan
assets.
The fair values of the assets held by the postretirement benefit plans by asset class are as follows:
Fair Value Measurements Using Inputs Considered as Fair Value at
(Millions) Level 1 Level 2 Level 3 Dec. 31,
Asset Class 2016 2015 2016 2015 2016 2015 2016 2015
Equities
U.S. equities $ 477 $ 508 $ - $ - $ - $ - $ 477 $ 508
Non-U.S. equities 62 59 - - - - 62 59
Index and long/short equity funds* 40 49
Total Equities $ 539 $ 567 $ - $ - $ - $ - $ 579 $ 616
Fixed Income
U.S. government securities $ 102 $ 71 $ 191 $ 192 $ - $ - $ 293 $ 263
Non-U.S. government securities - - 9 8 - - 9 8
U.S. corporate bonds - - 172 153 - - 172 153
Non-U.S. corporate bonds - - 36 35 - - 36 35
Derivative instruments - - (1) 2 - - (1) 2
Total Fixed Income $ 102 $ 71 $ 407 $ 390 $ - $ - $ 509 $ 461
Private Equity
Derivative instruments $ - $ - $ - $ - $ (3) $ (4) $ (3) $ (4)
Growth equity 1 1 - - - - 1 1
Partnership investments* 113 136
Total Private Equity $ 1 $ 1 $ - $ - $ (3) $ (4) $ 111 $ 133
Absolute Return
Fixed income and other $ 1 $ 10 $ 3 $ 2 $ - $ - $ 4 $ 12
Hedge fund/fund of funds* 72 54
Partnership investments* 12 14
Total Absolute Return
- More to follow, for following part double click ID:nRSJ6609Wi