Johnson and Johnson 2009 Annual Report Download - page 52

The following table displays the projected future benefit payments from the Company’s retirement and other benefit plans:
(Dollars in Millions) 2010 2011 2012 2013 2014 2015-2019
Projected future benefit payments
Retirement plans $558 553 582 604 636 3,925
Other benefit plans — gross $209 198 196 198 197 995
Medicare rebates (9) —————
Other benefit plans — net $200 198 196 198 197 995
50 J O H N S O N & J O H N S O N 2 0 0 9 A N N U A L R E P O R T
In 2009, the Company contributed $839 million and $515 million
to its U.S. and international pension plans, respectively. In addition,
the Company funded $500 million to its U.S. plans in the first month
of 2010.
In 2006, Congress passed the Pension Protection Act of 2006.
The Act amended the Employee Retirement Income Security Act
(ERISA) for plan years beginning after 2007 and established new
minimum funding standards for U.S. employer defined benefit plans.
The Company plans to continue to fund its U.S. defined benefit
plans to comply with the Act.
International plans are funded in accordance with local
regulations. Additional discretionary contributions are made when
deemed appropriate to meet the long-term obligations of the plans.
For certain plans, funding is not a common practice, as funding
provides no economic benefit. Consequently the Company has
several pension plans that are not funded.
The following table displays the projected future minimum contributions to the Company’s U.S. and international unfunded retirement
plans. These amounts do not include any discretionary contributions that the Company may elect to make in the future.
(Dollars in Millions) 2010 2011 2012 2013 2014 2015-2019
Projected future contributions
Unfunded U.S. retirement plans $34 36 38 40 44 288
Unfunded International retirement plans $32 29 31 33 32 186
Each pension plan is overseen by a local committee or board that is responsible for the overall administration and investment of the pension
plans. In determining investment policies, strategies and goals, each committee or board considers factors including local pension rules and
regulations; local tax regulations; availability of investment vehicles (separate accounts, commingled accounts, insurance funds, etc.);
funded status of the plans; ratio of actives to retirees; duration of liabilities; and other relevant factors including diversification, liquidity of
local markets and liquidity of base currency. A majority of the Company’s pension funds are open to new entrants and are expected to be
on-going plans. Permitted investments are primarily liquid and/or listed, with little reliance on illiquid and non-traditional investments such
as hedge funds. An asset allocation of 75% equities and 25% fixed income is generally pursued unless local regulations and illiquidity
require otherwise.
The Company’s retirement plan asset allocation at the end of 2009 and 2008 and target allocations for 2010 are as follows:
Percent of Target
Plan Assets Allocation
_______________________
2009 2008 2010
U.S. Retirement Plans
Equity securities 76% 70% 75%
Debt securities 24 30 25
Total plan assets 100% 100% 100%
International Retirement Plans
Equity securities 65% 61% 65%
Debt securities 34 38 34
Real estate and other 11 1
Total plan assets 100% 100% 100%
The Company’s other benefit plans are unfunded except for U.S. life
insurance contract assets of $16 million and $17 million at January 3,
2010 and December 28, 2008, respectively.
The fair value of Johnson & Johnson common stock directly
held in plan assets was $469 million (4.3% of total plan assets) at
January 3, 2010 and $416 million (5.4% of total plan assets) at
December 28, 2008.
DETERMINATION OF FAIR VALUE
The Plan has an established and well-documented process for
determining fair values. Fair value is based upon quoted market
prices, where available. If listed prices or quotes are not available,
fair value is based upon models that primarily use, as inputs,
market-based or independently sourced market parameters,
including yield curves, interest rates, volatilities, equity or debt
prices, foreign exchange rates and credit curves.
While the Plan believes its 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.