Johnson and Johnson 2009 Annual Report Download - page 50

Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans for 2009, 2008 and 2007
include the following components:
Retirement Plans Other Benefit Plans
____________________________________ ____________________________________
(Dollars in Millions) 2009 2008 2007 2009 2008 2007
Service cost $ 511 545 597 $137 142 140
Interest cost 746 701 656 174 166 149
Expected return on plan assets (934) (876) (809) (1) (2) (2)
Amortization of prior service cost 13 10 10 (5) (4) (7)
Amortization of net transition asset 121———
Recognized actuarial losses 155 62 186 55 64 66
Curtailments and settlements (11) 75(1) ——
Net periodic benefit cost $ 481 451 646 $359 366 346
The net periodic benefit cost attributable to U.S. retirement plans was $286 million, $220 million and $379 million in 2009, 2008 and
2007, respectively.
48 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
Amounts expected to be recognized in net periodic benefit cost
in the coming year for the Company’s defined benefit retirement
plans and other postretirement plans:
(Dollars in Millions)
Amortization of net transition obligation $ 1
Amortization of net actuarial losses 296
Amortization of prior service cost 5
Unrecognized gains and losses for the U.S. pension plans are amor-
tized over the average remaining future service for each plan. For
plans with no active employees, they are amortized over the average
life expectancy. The amortization of gains and losses for the other
U.S. benefit plans is determined by using a 10% corridor of the
greater of the market value of assets or the projected benefit obliga-
tion. Total unamortized gains and losses in excess of the corridor are
amortized over the average remaining future service.
Prior service costs/benefits for the U.S. pension plans are
amortized over the remaining future service of plan participants at
the time of the plan amendment. Prior service cost/benefit for the
other U.S. benefit plans is amortized over the average remaining
service to full eligibility age of plan participants at the time of the
plan amendment.
The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of projected
benefit obligation for the year listed and also the net periodic benefit cost for the following year.
Retirement Plans Other Benefit Plans
____________________________________ ____________________________________
(Dollars in Millions) 2009 2008 2007 2009 2008 2007
U.S. Benefit Plans
Discount rate 6.50% 6.50 6.50 6.50% 6.50 6.50
Expected long-term rate of return on plan assets 9.00 9.00 9.00 9.00 9.00 9.00
Rate of increase in compensation levels 4.50 4.50 4.50 4.50 4.50 4.50
International Benefit Plans
Discount rate 5.75% 6.00 5.50 6.75% 7.25 6.50
Expected long-term rate of return on plan assets 8.00 8.00 8.25 ———
Rate of increase in compensation levels 4.00 4.00 4.00 4.75 4.50 4.50
The Company’s discount rates are determined by considering
current yield curves representing high quality, long-term fixed
income instruments. The resulting discount rates are consistent
with the duration of plan liabilities.
The expected long-term rate of return on plan assets assump-
tion is determined using a building block approach, considering
historical averages and real returns of each asset class. In certain
countries, where historical returns are not meaningful, considera-
tion is given to local market expectations of long-term returns.
The following table displays the assumed health care cost trend
rates, for all individuals:
Health Care Plans 2009 2008
Health care cost trend rate assumed for next year 8.00% 9.00
Rate to which the cost trend rate is assumed
to decline (ultimate trend) 5.00% 5.00
Year the rate reaches the ultimate trend rate 2017 2015
A one-percentage-point change in assumed health care cost trend
rates would have the following effect:
One-Percentage- One-Percentage-
(Dollars in Millions) Point Increase Point Decrease
Health Care Plans
Total interest and service cost $ 34 $ (28)
Postretirement benefit obligation 315 (254)