Honeywell 2014 Annual Report Download - page 81

Download and view the complete annual report

Please find page 81 of the 2014 Honeywell annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 101

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101

Our expected rate of return on U.S. plan assets of 7.75% is a long-term rate based on historical
plan asset returns over varying long-term periods combined with current market conditions and broad
asset mix considerations. We review the expected rate of return on an annual basis and revise it as
appropriate.
For non-U.S. benefit plans actuarial assumptions reflect economic and market factors relevant to
each country.
Pension Benefits
Included in the aggregate data in the tables above are the amounts applicable to our pension
plans with accumulated benefit obligations exceeding the fair value of plan assets. Amounts related to
such plans were as follows:
2014 2013 2014 2013
U.S. Plans Non-U.S. Plans
December 31,
Projected benefit obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . $626 $576 $1,686 $911
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . $618 $569 $1,584 $855
Fair value of plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $194 $174 $ 994 $307
Accumulated benefit obligation for our U.S. defined benefit pension plans were $17.2 billion and
$15.7 billion and for our Non-U.S. defined benefit plans were $5.5 billion and $5.3 billion at
December 31, 2014 and 2013, respectively.
Our asset investment strategy for our U.S. pension plans focuses on maintaining a diversified
portfolio using various asset classes in order to achieve our long-term investment objectives on a risk
adjusted basis. Our actual invested positions in various securities change over time based on short
and longer-term investment opportunities. To achieve our objectives, we have established long-term
target allocations as follows: 60%-70% equity securities, 10%-20% fixed income securities and cash,
5%-15% real estate investments, and 10%-20% other types of investments. Equity securities include
publicly-traded stock of companies located both inside and outside the United States. Fixed income
securities include corporate bonds of companies from diversified industries, mortgage-backed
securities, and U.S. Treasuries. Real estate investments include direct investments in commercial
properties and investments in real estate funds. Other types of investments include investments in
private equity and hedge funds that follow several different strategies. We review our assets on a
regular basis to ensure that we are within the targeted asset allocation ranges and, if necessary, asset
balances are adjusted back within target allocations.
Our non-U.S. pension assets are typically managed by decentralized fiduciary committees with the
Honeywell Corporate Investments group providing standard funding and investment guidance. Local
regulations, local funding rules, and local financial and tax considerations are part of the funding and
investment allocation process in each country. While our non-U.S. investment policies are different for
each country, the long-term investment objectives are generally the same as those for the U.S.
pension assets.
72
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)