Huntsman Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2017

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

16. EMPLOYEE BENEFIT PLANS

Defined Benefit and Other Postretirement Benefit

We provide a trusteed, non contributory defined benefit pension plan (the “Plan”) that covers the majority of our U.S. employees. Effective July 1, 2004, the Plan formula for employees not covered by a collective bargaining agreement was converted to a cash balance design. For represented employees, participation in the cash balance design was subject to the terms of negotiated contracts. For participating employees, benefits accrued under the prior formula were converted to opening cash balance accounts. The cash balance benefit formula provides annual pay credits from 6% to 12% of eligible pay, depending on age and service, plus accrued interest. The conversion to the cash balance plan did not have a significant impact on the accrued benefit liability, the funded status or ongoing pension expense.

Beginning July 1, 2014, the Huntsman Defined Benefit Pension Plan was closed to new non-union entrants and as of April 1, 2015, it was closed to new union entrants. In addition, as of January 1, 2015, Rubicon LLC closed its defined benefit plan to new entrants. Following the closure of these plans, new hires have been provided with a defined contribution plan with a non-discretionary employer contribution of 6% of pay and a company match of up to 4% of pay, for a total company contribution of up to 10% of pay. We also sponsor unfunded postretirement benefit plans other than pensions, which provide medical and life insurance benefits. Effective August 1, 2015, the post retirement benefit plans were closed to new entrants.

Our postretirement benefit plans provide access to two fully insured Medicare Part D plans including prescription drug benefits affected by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”). We cannot determine whether the medical benefits provided by our postretirement benefit plans are actuarially equivalent to those provided by the Act. We do not collect a subsidy and our net periodic postretirement benefits cost, and related benefit obligation, do not reflect an amount associated with the subsidy. We do not subsidize the premium cost of these plans; the premiums are entirely paid by the retirees.

We sponsor defined benefit plans in a number of countries outside of the U.S. The availability of these plans, and their specific design provisions, are consistent with local competitive practices and regulations.

The following table sets forth the funded status of the plans for us and Huntsman International and the amounts recognized in our consolidated balance sheets at December 31, 2017 and 2016 (dollars in millions):


	Defined Benefit Plans								Other Postretirement Benefit Plans
	2017				2016				2017				2016
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
	Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans
Change in benefit obligation
Benefit obligation at beginning of year	$	1,049	$	2,064	$	953	$	1,986	$	93	$	—	$	87	$	—
Service cost		30		33		30		29		3		—		2		—
Interest cost		44		35		47		41		3		—		4		—
Participant contributions		—		5		—		5		2		—		3		—
Plan amendments		—		(1)		—		—		—		—		—		—
Foreign currency exchange rate changes		—		207		—		(165)		—		—		—		—
Special termination benefits		—		1		—		—		—		—		—		—
Settlements/transfers/divestitures		—		—		—		(2)		—		—		—		—
Curtailments		—		—		—		(1)		—		—		—		—
Actuarial (gain) loss		91		(10)		73		242		(12)		—		8		—
Benefits paid		(61)		(75)		(54)		(71)		(9)		—		(11)		—
Benefit obligation at end of year	$	1,153	$	2,259	$	1,049	$	2,064	$	80	$	—	$	93	$	—

Change in plan assets
Fair value of plan assets at beginning of year	$	721	$	1,639	$	716	$	1,637	$	—	$	—	$	—	$	—
Actual return on plan assets		104		109		53		175		—		—		—		—
Foreign currency exchange rate changes		—		166		—		(143)		—		—		—		—
Participant contributions		—		5		—		5		2		—		3		—
Acquisitions/divestitures		—		—		—		—		—		—		—		—
Company contributions		57		39		6		36		7		—		8		—
Benefits paid		(61)		(75)		(54)		(71)		(9)		—		(11)		—
Fair value of plan assets at end of year	$	821	$	1,883	$	721	$	1,639	$	—	$	—	$	—	$	—

Funded status
Fair value of plan assets	$	821	$	1,883	$	721	$	1,639	$	—	$	—	$	—	$	—
Benefit obligation		1,153		2,259		1,049		2,064		80		—		93		—
Accrued benefit cost	$	(332)	$	(376)	$	(328)	$	(425)	$	(80)	$	—	$	(93)	$	—

Amounts recognized in balance sheet:
Noncurrent asset	$	—	$	22	$	—	$	1	$	—	$	—	$	—	$	—
Current liability		(10)		(5)		(6)		(5)		(7)		—		(8)		—
Noncurrent liability		(322)		(393)		(322)		(421)		(73)		—		(85)		—
	$	(332)	$	(376)	$	(328)	$	(425)	$	(80)	$	—	$	(93)	$	—

Huntsman Corporation


	Defined Benefit Plans								Other Postretirement Benefit Plans
	2017				2016				2017				2016
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
	Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans
Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	419	$	1,000	$	407	$	1,100	$	30	$	—	$	45	$	1
Prior service credit		(15)		(29)		(17)		(31)		(45)		—		(51)		(2)
	$	404	$	971	$	390	$	1,069	$	(15)	$	—	$	(6)	$	(1)

Huntsman International


	Defined Benefit Plans								Other Postretirement Benefit Plans
	2017				2016				2017				2016
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
	Plans		Plans		Plans		Plans		Plans		Plans		Plans		Plans
Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	420	$	1,030	$	408	$	1,137	$	30	$	—	$	45	$	1
Prior service credit		(15)		(29)		(17)		(31)		(45)		—		(51)		(2)
	$	405	$	1,001	$	391	$	1,106	$	(15)	$	—	$	(6)	$	(1)

The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit cost of continuing operations during the next fiscal year are as follows (dollars in millions):

Huntsman Corporation


					Other Postretirement
	Defined Benefit Plans				Benefit Plans
			Non-U.S.				Non-U.S.
	U.S. Plans		Plans		U.S. Plans		Plans
Actuarial loss	$	33	$	38	$	2	$	—
Prior service credit		(2)		(5)		(6)		—
Total	$	31	$	33	$	(4)	$	—

Huntsman International


					Other Postretirement
	Defined Benefit Plans				Benefit Plans
			Non-U.S.				Non-U.S.
	U.S. Plans		Plans		U.S. Plans		Plans
Actuarial loss	$	33	$	41	$	2	$	—
Prior service credit		(2)		(5)		(6)		—
Total	$	31	$	36	$	(4)	$	—

Components of net periodic benefit costs of continuing operations for the years ended December 31, 2017, 2016 and 2015 were as follows (dollars in millions):

Huntsman Corporation


	Defined Benefit Plans
	U.S. plans						Non-U.S. plans
	2017		2016		2015		2017		2016		2015
Service cost	$	30	$	30	$	32	$	33	$	29	$	34
Interest cost		44		47		42		35		41		45
Expected return on plan assets		(55)		(54)		(56)		(100)		(93)		(93)
Amortization of prior service credit		(2)		(5)		(6)		(5)		(4)		(1)
Amortization of actuarial loss		30		25		32		45		31		34
Special termination benefits		—		—		—		1		—		1
Net periodic benefit cost	$	47	$	43	$	44	$	9	$	4	$	20


	Other Postretirement Benefit Plans
	U.S. plans						Non-U.S. plans
	2017		2016		2015		2017		2016		2015
Service cost	$	3	$	2	$	4	$	—	$	—	$	—
Interest cost		3		4		5		—		—		—
Amortization of prior service credit		(6)		(7)		(5)		—		—		—
Amortization of actuarial loss		3		2		3		—		—		—
Net periodic benefit cost	$	3	$	1	$	7	$	—	$	—	$	—

Huntsman International


	Defined Benefit Plans
	U.S. plans						Non-U.S. plans
	2017		2016		2015		2017		2016		2015
Service cost	$	30	$	30	$	32	$	33	$	29	$	34
Interest cost		44		47		42		35		41		45
Expected return on plan assets		(55)		(54)		(56)		(100)		(93)		(93)
Amortization of prior service credit		(2)		(5)		(6)		(5)		(4)		(1)
Amortization of actuarial loss		30		25		32		48		34		37
Special termination benefits		—		—		—		1		—		1
Net periodic benefit cost	$	47	$	43	$	44	$	12	$	7	$	23


	Other Postretirement Benefit Plans
	U.S. plans						Non-U.S. plans
	2017		2016		2015		2017		2016		2015
Service cost	$	3	$	2	$	4	$	—	$	—	$	—
Interest cost		3		4		5		—		—		—
Amortization of prior service credit		(6)		(7)		(5)		—		—		—
Amortization of actuarial loss		3		2		3		—		—		—
Net periodic benefit cost	$	3	$	1	$	7	$	—	$	—	$	—

The amounts recognized in net periodic benefit cost and other comprehensive income (loss) as of December 31, 2017, 2016 and 2015 were as follows (dollars in millions):

Huntsman Corporation


	Defined Benefit Plans
	U.S. plans						Non-U.S. plans
	2017		2016		2015		2017		2016		2015
Current year actuarial loss (gain)	$	42	$	74	$	2	$	(42)	$	235	$	33
Amortization of actuarial loss		(30)		(25)		(32)		(61)		(42)		(43)
Current year prior service (credits) cost		—		—		—		(2)		—		(32)
Amortization of prior service credit		2		5		6		4		4		—
Curtailment (gain)/loss		—		—		—		3		—		—
Total recognized in other comprehensive income (loss)		14		54		(24)		(98)		197		(42)
Amounts related to discontinued operations		3		—		1		37		(65)		(13)
Total recognized in other comprehensive income (loss) in continuing operations		17		54		(23)		(61)		132		(55)
Net periodic benefit cost		47		43		44		9		4		20
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	64	$	97	$	21	$	(52)	$	136	$	(35)


	Other Postretirement Benefit Plans
	U.S. plans						Non-U.S. plans
	2017		2016		2015		2017		2016		2015
Current year actuarial loss (gain)	$	(12)	$	9	$	(9)	$	—	$	—	$	—
Amortization of actuarial loss		(3)		(2)		(3)		(1)		—		—
Current year prior service credit		—		—		(40)		—		(2)		—
Amortization of prior service credit		6		7		5		2		—		—
Total recognized in other comprehensive income (loss)		(9)		14		(47)		1		(2)		—
Amounts related to discontinued operations		—		(1)		1		(1)		3		—
Total recognized in other comprehensive income (loss) in continuing operations		(9)		13		(46)		—		1		—
Net periodic benefit cost		3		1		7		—		—		—
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	(6)	$	14	$	(39)	$	—	$	1	$	—

Huntsman International


	Defined Benefit Plans
	U.S. plans						Non-U.S. plans
	2017		2016		2015		2017		2016		2015
Current year actuarial loss	$	42	$	74	$	2	$	(42)	$	235	$	33
Amortization of actuarial loss		(30)		(25)		(32)		(68)		(49)		(51)
Current year prior service credit		—		—		—		(2)		—		(32)
Amortization of prior service credit		2		5		6		4		4		—
Curtailment (gain)/loss		—		—		—		3		—		—
Total recognized in other comprehensive income (loss)		14		54		(24)		(105)		190		(50)
Amounts related to discontinued operations		3		—		1		42		(61)		(8)
Total recognized in other comprehensive income (loss) in continuing operations		17		54		(23)		(63)		129		(58)
Net periodic benefit cost		47		43		44		12		7		23
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	64	$	97	$	21	$	(51)	$	136	$	(35)


	Other Postretirement Benefit Plans
	U.S. plans						Non-U.S. plans
	2017		2016		2015		2017		2016		2015
Current year actuarial loss (gain)	$	(12)	$	9	$	(9)	$	—	$	—	$	—
Amortization of actuarial loss		(3)		(2)		(3)		(1)		—		—
Current year prior service credit		—		—		(40)		—		(2)		—
Amortization of prior service credit		6		7		5		2		—		—
Total recognized in other comprehensive income (loss)		(9)		14		(47)		1		(2)		—
Amounts related to discontinued operations		—		(1)		1		(1)		3		—
Total recognized in other comprehensive income (loss) in continuing operations		(9)		13		(46)		—		1		—
Net periodic benefit cost		3		1		7		—		—		—
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	(6)	$	14	$	(39)	$	—	$	1	$	—

The following weighted‑average assumptions were used to determine the projected benefit obligation at the measurement date and the net periodic pension cost for the year:


	Defined Benefit Plans
	U.S. plans						Non-U.S. plans
	2017		2016		2015		2017		2016		2015
Projected benefit obligation
Discount rate	3.74	%	4.24	%	4.90	%	1.65	%	1.61	%	2.15	%
Rate of compensation increase	4.13	%	4.17	%	4.17	%	3.38	%	3.37	%	3.28	%
Net periodic pension cost
Discount rate	4.24	%	4.90	%	4.25	%	1.61	%	2.15	%	2.15	%
Rate of compensation increase	4.17	%	4.17	%	4.19	%	3.37	%	3.28	%	3.35	%
Expected return on plan assets	7.55	%	7.54	%	7.75	%	5.68	%	5.91	%	5.69	%


	Other Postretirement Benefit Plans
	U.S. plans						Non-U.S. plans
	2017		2016		2015		2017		2016		2015
Projected benefit obligation
Discount rate	3.57	%	4.03	%	4.68	%	3.30	%	3.50	%	3.70	%
Net periodic pension cost
Discount rate	4.03	%	4.68	%	4.37	%	3.50	%	3.70	%	3.80	%

At both December 31, 2017 and 2016 the health care trend rate used to measure the expected increase in the cost of benefits was assumed to be 7.0%, decreasing to 5% after 2025. Assumed health care cost trend rates can have a significant effect on the amounts reported for the postretirement benefit plans. A one-percent point change in assumed health care cost trend rates would have the following effects (dollars in millions):


	Increase		Decrease
Asset category
Effect on total of service and interest cost	$	—	$	—
Effect on postretirement benefit obligation		—		—

The projected benefit obligation and fair value of plan assets for the defined benefit plans with projected benefit obligations in excess of plan assets as of December 31, 2017 and 2016 were as follows (dollars in millions):


	U.S. plans				Non-U.S. plans
	2017		2016		2017		2016
Projected benefit obligation in excess of plan assets
Projected benefit obligation	$	1,153	$	1,049	$	1,213	$	2,050
Fair value of plan assets		821		721		815		1,623

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the defined benefit plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2017 and 2016 were as follows (dollars in millions):


	U.S. plans				Non-U.S. plans
	2017		2016		2017		2016
Accumulated benefit obligation in excess of plan assets
Projected benefit obligation	$	1,153	$	1,049	$	1,026	$	1,121
Accumulated benefit obligation		1,127		1,022		957		1,043
Fair value of plan assets		821		721		638		721

Expected future contributions and benefit payments related to continuing operations are as follows (dollars in millions):


	U.S. Plans				Non-U.S. Plans
			Other				Other
	Defined		Postretirement		Defined		Postretirement
	Benefit		Benefit		Benefit		Benefit
	Plans		Plans		Plans		Plans
2018 expected employer contributions
To plan trusts	$	51	$	7	$	38	$	—
Expected benefit payments
2018		72		7		71		—
2019		61		7		71		—
2020		62		6		74		—
2021		62		6		78		—
2022		107		6		79		—
2023 - 2027		370		31		428		—

Our investment strategy with respect to pension assets is to pursue an investment plan that, over the long term, is expected to protect the funded status of the plan, enhance the real purchasing power of plan assets, and not threaten the plan’s ability to meet currently committed obligations. Additionally, our investment strategy is to achieve returns on plan assets, subject to a prudent level of portfolio risk. Plan assets are invested in a broad range of investments. These investments are diversified in terms of domestic and international equities, both growth and value funds, including small, mid and large capitalization equities; short‑term and long‑term debt securities; real estate; and cash and cash equivalents. The investments are further diversified within each asset category. The portfolio diversification provides protection against a single investment or asset category having a disproportionate impact on the aggregate performance of the plan assets.

Our pension plan assets are managed by outside investment managers. The investment managers value our plan assets using quoted market prices, other observable inputs or unobservable inputs. For certain assets, the investment managers obtain third‑party appraisals at least annually, which use valuation techniques and inputs specific to the applicable property, market, or geographic location. During 2017, there were no transfers into or out of Level 3 assets.

We have established target allocations for each asset category. Our pension plan assets are periodically rebalanced based upon our target allocations.

The fair value of plan assets for the pension plans was $2.7 billion and $2.4 billion at December 31, 2017 and 2016, respectively. The following plan assets are measured at fair value on a recurring basis (dollars in millions):


			Fair Value Amounts Using
			Quoted prices in active		Significant other		Significant
	December 31,		markets for identical		observable inputs		unobservable inputs
Asset category	2017		assets (Level 1)		(Level 2)		(Level 3)
U.S. pension plans:
Equities	$	440	$	318	$	122	$	—
Fixed income		311		239		72		—
Real estate/other		70		—		—		70
Cash		—		—		—		—
Total U.S. pension plan assets	$	821	$	557	$	194	$	70
Non-U.S. pension plans:
Equities	$	602	$	230	$	372	$	—
Fixed income		739		477		262		—
Real estate/other		508		104		349		55
Cash		34		33		1		—
Total Non-U.S. pension plan assets	$	1,883	$	844	$	984	$	55


			Fair Value Amounts Using
			Quoted prices in active		Significant other		Significant
	December 31,		Markets for identical		Observable inputs		Unobservable inputs
Asset category	2016		assets (Level 1)		(Level 2)		(Level 3)
U.S. pension plans:
Equities	$	383	$	272	$	111	$	—
Fixed income		274		210		64		—
Real estate/other		64		—		—		64
Cash		—		—		—		—
Total U.S. pension plan assets	$	721	$	482	$	175	$	64
Non-U.S. pension plans:
Equities	$	594	$	245	$	349	$	—
Fixed income		599		509		90		—
Real estate/other		430		66		322		42
Cash		16		16		—		—
Total Non-U.S. pension plan assets	$	1,639	$	836	$	761	$	42

The following table reconciles the beginning and ending balances of plan assets measured at fair value using unobservable inputs (Level 3) (dollars in millions):


	Real Estate/Other
	Year ended December 31,
	2017		2016
Fair Value Measurements of Plan Assets Using Significant Unobservable Inputs (Level 3)
Balance at beginning of period	$	106	$	104
Return on pension plan assets		14		4
Purchases, sales and settlements		5		(2)
Transfers into (out of) Level 3		—		—
Balance at end of period	$	125	$	106

Based upon historical returns, the expectations of our investment committee and outside advisors, the expected long‑term rate of return on the pension assets is estimated to be between 5.68% and 7.75%. The asset allocation for our pension plans at December 31, 2017 and 2016 and the target allocation for 2015, by asset category are as follows:


	Target
	Allocation		Allocation at December 31,
Asset category	2018		2017		2016
U.S. pension plans:
Equities	53	%	54	%	53	%
Fixed income	39	%	38	%	38	%
Real estate/other	8	%	8	%	9	%
Cash	—	%	—	%	—
Total U.S. pension plans	100	%	100	%	100	%
Non-U.S. pension plans:
Equities	38	%	32	%	36	%
Fixed income	37	%	39	%	37	%
Real estate/other	24	%	27	%	26	%
Cash	1	%	2	%	1	%
Total non-U.S. pension plans	100	%	100	%	100	%

Equity securities in our pension plans did not include any direct investments in equity securities of our Company or our affiliates at the end of 2017.

Defined Contribution Plans—U.S.

We had a money purchase pension plan that covered substantially all of our domestic employees who were hired prior to January 1, 2004. Employer contributions were made based on a percentage of employees’ earnings (ranging up to 8%). During 2014, we closed this plan to non-union participants, and in 2015, we closed this plan to union associates. We continue to provide equivalent benefits to those who were covered under this plan into their salary deferral account.

We have a salary deferral plan covering substantially all U.S. employees. Plan participants may elect to make voluntary contributions to this plan up to a specified amount of their compensation. We contribute an amount equal to the participant’s contribution, not to exceed 4 % of the participant’s compensation. For new hires who are not eligible for the cash balance plan, and associates who were covered by the money purchase pension plan prior to its closure, we contribute an additional amount into their salary deferral accounts, not to exceed 6% of the participant’s compensation.

Our total combined expense for the above defined contribution plans for each of the years ended December 31, 2017, 2016 and 2015 was $22 million, $20 million and $20 million, respectively.

Defined Contribution Plans—Non-U.S.

We have defined contribution plans in a variety of non-U.S. locations.

Our total combined expense for these defined contribution plans for the years ended December 31, 2017, 2016 and 2015 was $5 million, $4 million and $5 million, respectively, primarily related to the Huntsman UK Pension Plan.

All UK associates are eligible to participate in the Huntsman UK Pension Plan, a contract-based arrangement with a third party. Company contributions vary by business during a five year transition period. Plan participants elect to make voluntary contributions to this plan up to a specified amount of their compensation. We contribute a matching amount not to exceed 12% of the participant’s salary for new hires and 15% of the participant’s salary for all other participants.

Supplemental Salary Deferral Plan and Supplemental Executive Retirement Plan

The Huntsman Supplemental Savings Plan (the “SSP”) is a non-qualified plan covering key management employees and allows participants to defer amounts that would otherwise be paid as compensation. The participant can defer up to 75% of their salary and bonus each year. This plan also provides benefits that would be provided under the Huntsman Salary Deferral Plan if that plan were not subject to legal limits on the amount of contributions that can be allocated to an individual in a single year. The SSP was amended and restated effective as of January 1, 2005 to allow eligible executive employees to comply with Section 409A of the Internal Revenue Code of 1986.

The Huntsman Supplemental Executive Retirement Plan (the “SERP”) is an unfunded non-qualified pension plan established to provide certain executive employees with benefits that could not be provided, due to legal limitations, under the Huntsman Defined Benefit Pension Plan, a qualified defined benefit pension plan, and the Huntsman Money Purchase Pension Plan, a qualified money purchase pension plan.

Assets of these plans are included in other noncurrent assets and as of December 31, 2017 and 2016 were $33 million and $27 million, respectively. During each of the years ended December 31, 2017, 2016 and 2015, we expensed a total of $1 million as contributions to the SSP and the SERP.

Stock-Based Incentive Plan

On May 5, 2016, our stockholders approved a new Huntsman Corporation 2016 Stock Incentive Plan (the “2016 Stock Incentive Plan”), which reserved 8.2 million shares for issuance. The Huntsman Corporation Stock Incentive Plan, as amended and restated (the “Prior Plan”), remains in effect for outstanding awards granted pursuant to the Prior Plan, but no further awards may be granted under the Prior Plan. Under the 2016 Stock Incentive Plan, we may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, phantom stock, performance share units and other stock-based awards to our employees, directors and consultants and to employees and consultants of our subsidiaries, provided that incentive stock options may be granted solely to employees. The terms of the grants under both the 2016 Stock Incentive Plan and the Prior Plan are fixed at the grant date. As of December 31, 2017, we had approximately 8 million shares remaining under the 2017 Stock Incentive Plan available for grant. See “Note 21. Stock-Based Compensation Plan.”

International Plans

International employees are covered by various post‑employment arrangements consistent with local practices and regulations. Such obligations are included in other long‑term liabilities in our consolidated balance sheets.