Johnson and Johnson 2011 Annual Report Download - page 51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 49
The net periodic benefit cost attributable to U.S. retirement plans
was $414 million, $294 million and $286 million in 2011, 2010 and
2009, respectively.
Amounts expected to be recognized in net periodic benefit cost
in the coming year for the Company’s defined benefit retirement
plans and other post-retirement plans:
(Dollars in Millions)
Amortization of net transition obligation $1
Amortization of net actuarial losses 553
Amortization of prior service cost 4
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 Company’s discount rates are determined by considering cur-
rent 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 2011 2010
Health care cost trend rate assumed for next year 7.50% 7.50
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 2018 2018
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 $42 $(33)
Post-retirement benefit obligation 422 (337)
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) 2011 2010 2009 2011 2010 2009
U.S. Benefit Plans
Discount rate 5.22% 5.98 6.50 5.22% 5.98 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 4.25 4.25 4.50 4.25 4.25 4.50
International Benefit Plans
Discount rate 4.94% 5.26 5.75 5.64% 6.32 6.75
Expected long-term rate of return on plan assets 7.87 8.00 8.00 ———
Rate of increase in compensation levels 4.05 4.00 4.00 4.70 4.75 4.75
Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans for 2011, 2010 and 2009 include
the following components:
Retirement Plans Other Benefit Plans
(Dollars in Millions) 2011 2010 2009 2011 2010 2009
Service cost $ 638 550 511 $149 134 137
Interest cost 853 791 746 188 202 174
Expected return on plan assets (1,108) (1,005) (934) (1) (1) (1)
Amortization of prior service cost 9 10 13 (3) (4) (5)
Amortization of net transition asset 111———
Recognized actuarial losses 388 236 155 45 48 55
Curtailments and settlements —1 (11) ——(1)
Net periodic benefit cost $ 781 584 481 $378 379 359