Abbott Laboratories 2015 Annual Report Download - page 53

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ABBOTT 2015 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average assumptions used to determine the net cost
for defined benefit plans and medical and dental plans are as follows:
2015 2014 2013
Discount rate 3.9% 4.9% 4.2%
Expected return on plan assets 7.4% 7.5% 7.8%
Expected aggregate average long-
term change in compensation 4.3% 4.9% 5.0%
The assumed health care cost trend rates for medical and dental
plans at December31 were as follows:
2015 2014 2013
Health care cost trend rate assumed
for the next year 8% 8% 7%
Rate that the cost trend rate
gradually declines to 5% 5% 5%
Year that rate reaches the assumed
ultimate rate 2028 2025 2019
The discount rates used to measure liabilities were determined
based on high-quality fixed income securities that match the dura-
tion 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 are forward projections 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, 2015, by $176million
/$(144)million, and the total of the service and interest cost com-
ponents of net post-employment health care cost for the year then
ended by approximately $16million/$(12)million.
The components of the net periodic benefit cost were as follows:
(inmillions)
Defined Benefit Plans Medical and Dental Plans
2015 2014 2013 2015 2014 2013
Service cost—benefits earned during the year $«307 $«269 $«303 $«33 $«33 $«43
Interest cost on projected benefit obligations 314 317 276 52 63 59
Expected return on plans’ assets (511) (458) (396) (39) (40) (36)
Amortization of actuarial losses 184 103 169 23 16 34
Amortization of prior service cost (credits) 1 2 3 (48) (39) (35)
Total cost 295 233 355 21 33 65
Less: Discontinued operations (3) (1) (3) — — —
Net cost—continuing operations $«292 $«232 $«352 $«21 $«33 $«65
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 $37million for defined benefit
plans and $116million for medical and dental plans in 2015; net
actuarial losses and prior service credits of $1.6billion for defined
benefit plans and $57million for medical and dental plans in 2014;
and net actuarial gains and prior service credits of $995million for
defined benefit plans and $201million for medical and dental
plans in 2013.
The pretax amount of actuarial losses and prior service cost
(credits) included in Accumulated other comprehensive income
(loss) at December31, 2015 that is expected to be recognized in
the net periodic benefit cost in 2016 is $131million and nil of
expense, respectively, for defined benefit pension plans and
$22million of expense and $45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:
2015 2014 2013
Discount rate 4.3% 3.9% 4.9%
Expected aggregate average long-
term change in compensation 4.4% 4.3% 5.0%