RETIREMENT BENEFIT PLANS

12 Months Ended

Dec. 31, 2025

The Company sponsors various defined contribution savings plans, primarily in the U.S., that allow employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan specified guidelines. Under specified conditions, the Company will make contributions to the plans and/or match a percentage of the employee contributions up to certain limits. Total expense related to the defined contribution plans was $44 million, $46 million and $45 million in the years ended December 31, 2025, 2024 and 2023, respectively.

The Company has a number of defined benefit pension plans and other postemployment benefit plans covering eligible salaried and hourly employees and their dependents. The defined pension benefits provided are primarily based on (i) years of service and (ii) average compensation or a monthly retirement benefit amount. The Company provides defined benefit pension plans in Germany, India, Italy, Japan, Mexico, Poland, South Korea, Sweden, Switzerland, Thailand, Turkey, U.K. and the U.S. The other postemployment benefit plans, which provide medical benefits, are unfunded plans. The Company’s U.S. and U.K. defined benefit plans are frozen, and no additional service cost is being accrued. All pension and other postemployment benefit plans in the U.S. have been closed to new employees. The measurement date for all plans is December 31.

In August 2025, the Company executed an amendment to the plan document of one of the Company’s U.S. defined benefit pension plans (“U.S. Pension Plan”) to terminate the plan effective October 31, 2025. The termination of the U.S. Pension Plan is expected to take up to eighteen months to complete. As part of the termination process, the Company expects to settle benefit obligations under the U.S. Pension Plan through a combination of lump sum payments to eligible plan participants and the purchase of a group annuity contract, under which future benefit obligations and administration will be transferred to a third-party insurance company. Such settlements will be funded primarily from plan assets. At December 31, 2025, the projected benefit obligation of the U.S. Pension Plan’s exceeded fair value of plan assets by $4 million under U.S. GAAP.

In December 2024, the Company entered into a second buy-in contract (the first buy-in contract was entered into in 2019) with an insurance company related to its U.K. pension plan. Pursuant to this agreement, the Company liquidated approximately $50 million of pension plan assets to invest in an insurance annuity. At December 31, 2025, the U.K. pension plan had plan assets of $131 million, all held by the insurance company. The projected benefit obligation of the U.K. pension plan at December 31, 2025 was $104 million under U.S. GAAP. The U.K. pension plan was overfunded by $27 million as of December 31, 2025, under U.S. GAAP.

The PHINIA-related benefits (costs) are included in the table below for periods prior to the Spin-Off, as they are not reported as discontinued operations in accordance with ASC Topic 205-20, “Discontinued Operations”.

The following table summarizes the expenses for the Company’s defined contribution and defined benefit pension plans and the other postemployment benefit plans:


	Year Ended December 31,
(in millions)	2025		2024		2023
Defined contribution expense	$	44	$	46	$	45
Defined benefit pension expense	26		26		26

Total	$	70	$	72	$	71

The following provides a roll forward of the plans’ benefit obligations, plan assets, funded status and recognition in the Consolidated Balance Sheets:


	Pension benefits								Other postemployment benefits
	Year Ended December 31,
	2025				2024				Year Ended December 31,
(in millions)	U.S.		Non-U.S.		U.S.		Non-U.S.		2025		2024
Change in projected benefit obligation:
Projected benefit obligation, January 1	$	121	$	451	$	131	$	478	$	29	$	33
Service cost	—		15		—		13		—		—
Interest cost	6		19		6		19		1		1

Plan amendments	—		—		—		(1)		—		—
Settlement and curtailment	—		(11)		—		(6)		(1)		—
Actuarial loss (gain)	14		(38)		(3)		—		2		(1)
Currency translation	—		52		—		(32)		—		—


Benefits paid	(12)		(21)		(13)		(20)		(4)		(4)
Projected benefit obligation, December 311	$	129	$	467	$	121	$	451	$	27	$	29
Change in plan assets:
Fair value of plan assets, January 1	$	126	$	380	$	123	$	392
Actual return on plan assets	10		13		—		14
Employer contribution	1		22		16		23
Plan participants’ contribution	—		—		—		1
Settlements	—		(4)		—		(9)
Currency translation	—		43		—		(21)
Other	—		(1)		—		—

Benefits paid	(12)		(21)		(13)		(20)
Fair value of plan assets, December 31	$	125	$	432	$	126	$	380
Funded status	$	(4)	$	(35)	$	5	$	(71)	$	(27)	$	(29)
Amounts in the Consolidated Balance Sheets consist of:
Non-current assets	$	—	$	76	$	8	$	44	$	—	$	—
Current liabilities	(3)		(7)		(1)		(5)		(4)		(4)
Non-current liabilities	(1)		(104)		(2)		(110)		(23)		(25)
Net amount	$	(4)	$	(35)	$	5	$	(71)	$	(27)	$	(29)
Amounts in accumulated other comprehensive loss consist of:
Net actuarial loss	$	86	$	72	$	78	$	103	$	(2)	$	(4)
Net prior service cost (credit)	—		1		(1)		1		(6)		(7)
Net amount	$	86	$	73	$	77	$	104	$	(8)	$	(11)

Total accumulated benefit obligation for all plans	$	129	$	432	$	121	$	423

_____________________________

1 The increase in the projected benefit obligation was primarily due to the impact of foreign currency exchange and net periodic pension cost, offset by actuarial gains and benefits paid during the period. The main driver of the actuarial gains was an increase in the weighted average discount rate for the Non-U.S. plans.

The funded status of pension plans with accumulated benefit obligations in excess of plan assets is as follows:


	December 31,
(in millions)	2025		2024
Accumulated benefit obligation	$	(284)	$	(180)
Plan assets	196		85
Deficiency	$	(88)	$	(95)
Pension deficiency by country:
United States	$	(4)	$	(2)

Germany	(17)		(32)
Other	(67)		(61)
Total pension deficiency	$	(88)	$	(95)

The funded status of pension plans with projected benefit obligations in excess of plan assets is as follows:


	December 31,
(in millions)	2025		2024
Projected benefit obligation	$	(322)	$	(214)
Plan assets	210		97
Deficiency	$	(112)	$	(117)
Pension deficiency by country:
United States	$	(4)	$	(2)
United Kingdom	—		—
Germany	(17)		(32)
Other	(91)		(83)
Total pension deficiency	$	(112)	$	(117)

The weighted average asset allocations of the Company’s funded pension plans and target allocations by asset category are as follows:


	December 31,				Target Allocation
	2025		2024
U.S. Plans:
Alternative credit, real estate, cash and other	35	%	26	%	30% - 40%
Fixed income securities	61	%	61	%	57% - 67%
Equity securities	4	%	13	%	—% - 9%
	100	%	100	%
Non-U.S. Plans:
Insurance contract, real estate, cash and other	46	%	44	%	41% - 51%
Fixed income securities	33	%	37	%	29% - 39%
Equity securities	21	%	19	%	16% - 26%
	100	%	100	%

The Company’s investment strategy is to maintain actual asset weightings within a preset range of target allocations. The Company believes these ranges represent an appropriate risk profile for the planned benefit payments of the plans based on the timing of the estimated benefit payments. In each asset category, separate portfolios are maintained for additional diversification. Investment managers are retained in each asset category to manage each portfolio against its benchmark. Each investment manager has appropriate investment guidelines. In addition, the entire portfolio is evaluated against a

relevant peer group. The defined benefit pension plans did not hold any Company securities as investments as of December 31, 2025 and 2024. A portion of pension assets is invested in common and commingled trusts.

The Company expects to contribute approximately $25 million into its defined benefit pension plans during 2026. Of the $25 million in projected 2026 contributions, $8 million are contractually obligated, while any remaining payments would be discretionary.

Refer to Note 16, “Fair Value Measurements,” to the Consolidated Financial Statements for more detail surrounding the fair value of each major category of plan assets, as well as the inputs and valuation techniques used to develop the fair value measurements of the plans’ assets at December 31, 2025 and 2024.

The PHINIA-related net periodic costs (income) are included in the table below for period prior to the Spin-Off, as they are not reported as discontinued operations in accordance with ASC Topic 205-20, “Discontinued Operations”.

See the table below for a breakout of net periodic benefit cost between U.S. and non-U.S. pension plans:


	Pension benefits												Other postemployment benefits
	Year Ended December 31,
	2025				2024				2023				Year Ended December 31,
(in millions)	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.		2025		2024		2023
Service cost	$	—	$	15	$	—	$	13	$	—	$	11	$	—	$	—	$	—
Interest cost	6		19		6		19		7		42		1		1		2
Expected return on plan assets	(6)		(16)		(6)		(15)		(6)		(37)		—		—		—
Settlements, curtailments and other	—		—		—		1		—		4		—		—		—
Amortization of unrecognized prior service credit	(1)		—		(1)		—		(1)		—		(1)		(1)		(2)
Amortization of unrecognized loss	4		5		4		5		3		3		—		—		—
Net periodic cost	$	3	$	23	$	3	$	23	$	3	$	23	$	—	$	—	$	—

The components of net periodic benefit cost other than the service cost component are included in Other postretirement expense in the Consolidated Statements of Operations.

The Company’s weighted average assumptions used to determine the benefit obligations for its defined benefit pension and other postemployment benefit plans were as follows:


	December 31,
(percent)	2025	2024
U.S. pension plans:
Discount rate	4.14	5.54
Rate of compensation increase	N/A	N/A
U.S. other postemployment benefit plans:
Discount rate	4.87	5.39
Rate of compensation increase	N/A	N/A
Non-U.S. pension plans:
Discount rate1	4.64	4.26
Rate of compensation increase	3.26	3.43

________________

1 Includes 5.46% and 5.57% for the U.K. pension plans for December 31, 2025 and 2024, respectively.

The Company’s weighted average assumptions used to determine the net periodic benefit cost/(income) for its defined benefit pension and other postemployment benefit plans were as follows:


	Year Ended December 31,
(percent)	2025	2024	2023
U.S. pension plans:
Discount rate	5.54	5.14	5.47
Effective interest rate on benefit obligation	5.24	5.08	5.34
Expected long-term rate of return on assets	4.75	5.00	5.00
Average rate of increase in compensation	N/A	N/A	N/A
U.S. other postemployment plans:
Discount rate	5.39	5.10	5.41
Effective interest rate on benefit obligation	5.11	5.06	5.29
Expected long-term rate of return on assets	N/A	N/A	N/A
Average rate of increase in compensation	N/A	N/A	N/A
Non-U.S. pension plans:
Discount rate1	4.26	4.23	4.85
Effective interest rate on benefit obligation	4.13	4.24	4.88
Expected long-term rate of return on assets2	4.33	4.10	4.90
Average rate of increase in compensation	3.43	3.32	3.58

________________

1 Includes 5.57%, 4.61% and 4.94% for the U.K. pension plans for December 31, 2025, 2024 and 2023, respectively.

2 Includes 4.75%, 4.00% and 5.30% for the U.K. pension plans for December 31, 2025, 2024 and 2023, respectively.

The Company's approach to establishing the discount rate is based upon the market yields of high-quality corporate bonds, with appropriate consideration of each plan's defined benefit payment terms and duration of the liabilities. In determining the discount rate, the Company utilizes a full-yield approach in the estimation of service and interest components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

The Company determines its expected return on plan assets assumptions by evaluating estimates of future market returns and each plans’ asset allocation. The Company also considers the impact of active management of the plans’ invested assets.

The estimated future benefit payments for the pension and other postemployment benefits are as follows:


	Pension benefits				Other postemployment benefits
(in millions)
Year	U.S.		Non-U.S.
2026	$	127	$	29	$	4
2027	1		29		4
2028	—		29		3
2029	—		30		3
2030	—		31		3
2031-2035	—		167		9

The weighted average rate of increase in the per capita cost of covered health care benefits is projected to range from 6.75% in 2026 down to an ultimate trend rate of 4.75%.

- Definition

The entire disclosure for retirement benefits.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 715
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-Section 50
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+ Details

BORGWARNER INC 10-K