Abbott Laboratories 2014 Annual Report Download - page 53

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ABBOTT 2014 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the net periodic benefit cost were as follows:
(inmillions)
Defined Benefit Plans Medical and Dental Plans
2014 2013 2012 2014 2013 2012
Service cost—benefits earned during the year $«269 $«303 $«389 $«33 $«43 $÷61
Interest cost on projected benefit obligations 317 276 460 63 59 81
Expected return on plans’ assets (458) (396) (611) (40) (36) (33)
Amortization of actuarial losses 103 169 244 16 34 34
Amortization of prior service cost (credits) 2 3 2 (39) (35) (42)
Total cost 233 355 484 33 65 101
Less: Discontinued operations (1) (3) (209) — — (48)
Net cost—continuing operations $«232 $«352 $«275 $«33 $«65 $÷53
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 $1.6billion for defined benefit
plans and $57million for medical and dental plans in 2014; net
actuarial gains and prior service credits of $995million for defined
benefit plans and $201million for medical and dental plans in
2013; and 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. The actuarial (loss) for 2012 related to the
businesses transferred to AbbVie as part of the separation was
$167million; 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, 2014 that is expected to be recognized in
the net periodic benefit cost in 2015 is $191million and nil of
expense, respectively, for defined benefit pension plans and
$33million of expense and $49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:
2014 2013 2012
Discount rate 3.9% 4.9% 4.3%
Expected aggregate average long-
term change in compensation 4.3% 5.0% 5.3%
The weighted average assumptions used to determine the net cost
for defined benefit plans and medical and dental plans are as follows:
2014 2013 2012
Discount rate 4.9% 4.2% 5.0%
Expected return on plan assets 7.5% 7.8% 8.0%
Expected aggregate average long-
term change in compensation 4.9% 5.0% 5.3%
The assumed health care cost trend rates for medical and dental
plans at December31 were as follows:
2014 2013 2012
Health care cost trend rate assumed
for the next year 8% 7% 7%
Rate that the cost trend rate
gradually declines to 5% 5% 5%
Year that rate reaches the assumed
ultimate rate 2025 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
rate 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, 2014, by $208million/$(168)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 $16million/$(12)million.