25 BP Decrease in Discount Rate, Change in pension expense

  
The following weighted average assumptions were used to determine the postretirement benefit expense and obligation for the years ended December 31:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   | Expense |  | Liability |
|   | 2021 |  | 2020 |  |  |  | 2021 |  | 2020 |
| Discount rate | 2.60  | % |  | 3.30  | % |  |  |  | 2.90  | % |  | 2.60  | % |
| Current medical cost trend rate | 7.00  | % |  | 7.25  | % |  |  |  | 6.75  | % |  | 7.00  | % |
| Ultimate medical cost trend rate | 4.75  | % |  | 4.75  | % |  |  |  | 4.75  | % |  | 4.75  | % |
| Medical cost trend rate decreases to ultimate rate in year | 2030 |  | 2030 |  |  |  | 2030 |  | 2030 |

The following table presents the sensitivity of disclosures to changes in selected assumptions for the year ended December 31, 2021: 

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| (DOLLARS IN MILLIONS) | U.S. Pension Plans |  | Non-U.S. Pension Plans |  | Postretirement Benefit Plan |
| 25 Basis Point Decrease in Discount Rate |  |  |  |  |  |
| Change in PBO | $ | 19  |  |  | $ | 77  |  |  | N/A |
| Change in ABO | 19  |  |  | 73  |  |  | 2  |  |
| Change in pension expense | —  |  |  | 5  |  |  | —  |  |
| 25 Basis Point Decrease in Long-Term Rate of Return |  |  |  |  |  |
| Change in pension expense | 1  |  |  | 3  |  |  | N/A |

The Company contributed $32 million to its non-U.S. pension plans in 2021. No contributions were made to the Company's qualified U.S. pension plans in 2021. The Company made $5 million in benefit payments with respect to its non-qualified U.S. pension plan. In addition, $4 million of payments were made with respect to the Company's other postretirement plans.  
NOTE 16.    FINANCIAL INSTRUMENTSFair ValueAccounting guidance on fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy:•Level 1 — Quoted prices for identical instruments in active markets.•Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.•Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) using the London Interbank Offer Rate (“LIBOR”) swap curve and forward interest and exchange rates at period end. Such instruments are classified as Level 2 based on the observability of significant inputs to the model. The Company does not have any instruments classified as Level 3, other than those included in pension asset trusts included in Note 15. These valuations take into consideration the Company's credit risk and its counterparties’ credit risk. 97
