Abbott Laboratories 2013 Annual Report Download - page 52

ABBOTT 2013 ANNUAL REPORT
50
Other comprehensive income (loss) for each respective year
includes the amortization of actuarial losses and prior service
costs (credits) as noted in the previous table. Other comprehensive
income (loss) for each respective year also includes: net actuarial
gains and prior service credits of $995 million for defined benefit
plans and $201 million for medical and dental plans in 2013; net
actuarial losses of $1.2 billion for defined benefit plans and net
actuarial losses of $134 million for medical and dental plans in
2012; and net actuarial losses of $1.1 billion for defined benefit
plans and net actuarial gains of $66 million for medical and dental
plans in 2011. The actuarial losses for 2012 and 2011 related to
the businesses transferred to AbbVie as part of the separation
were $167 million and $19 million, respectively; prior service costs
were not significant.
The pretax amount of actuarial losses and prior service cost
(credits) included in Accumulated other comprehensive income
(loss) at December 31, 2013 that is expected to be recognized in
the net periodic benefit cost in 2014 is $102 million and $2 million
of expense, respectively, for defined benefit pension plans and
$17 million of expense and $37 million of income, respectively,
for medical and dental plans.
The weighted average assumptions used to determine benefit
obligations for defined benefit plans and medical and dental plans
are as follows:
2013 2012 2011
Discount rate 4.9% 4.3% 5.0%
Expected aggregate average
long-term change in compensation 5.0% 5.3% 5.3%
The weighted average assumptions used to determine the net
cost for defined benefit plans and medical and dental plans are
as follows:
2013 2012 2011
Discount rate 4.2% 5.0% 5.4%
Expected return on plan assets 7.8% 8.0% 7.8%
Expected aggregate average
long-term change in compensation 5.0% 5.3% 5.1%
The assumed health care cost trend rates for medical and dental
plans at December 31 were as follows:
2013 2012 2011
Health care cost trend rate
assumed for the next year 7% 7% 7%
Rate that the cost trend rate
gradually declines to 5% 5% 5%
Year that rate reaches the
assumed ultimate rate 2019 2019 2019
The discount rates used to measure liabilities were determined
based on high-quality fixed income securities that match the
duration of the expected retiree benefits. The health care cost
trend rates represent Abbott’s expected annual rates of change
in the cost of health care benefits and is a forward projection of
health care costs as of the measurement date. A one-percentage
point increase/(decrease) in the assumed health care cost trend
rate would increase/(decrease) the accumulated post-employment
benefit obligations as of December 31, 2013, by $177 million /
$(146) million, and the total of the service and interest cost
components of net post-employment health care cost for the year
then ended by approximately $18 million/$(14) million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the net periodic benefit cost were as follows:
Defined Benefit Plans Medical and Dental Plans
(in millions) 2013 2012 2011 2013 2012 2011
Service cost — benefits earned during the year $ 303 $ 389 $ 332 $ 43 $ 61 $ 55
Interest cost on projected benefit obligations 276 460 446 59 81 88
Expected return on plans’ assets (396) (611) (608) (36) (33) (34)
Settlement — — 40 — — —
Amortization of actuarial losses 169 244 163 34 34 38
Amortization of prior service cost (credits) 3 2 4 (35) (42) (42)
Total cost 355 484 377 65 101 105
Less: Discontinued operations — (206) (176) — (48) (49)
Net cost ‑ continuing operations $ 355 $ 278 $ 201 $ 65 $ 53 $ 56