Johnson and Johnson 2014 Annual Report Download - page 49

Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans for 2014, 2013 and
2012 include the following components:
Retirement Plans Other Benefit Plans
(Dollars in Millions) 2014 2013 2012 2014 2013 2012
Service cost $882 906 722 211 196 175
Interest cost 1,018 908 878 197 151 165
Expected return on plan assets (1,607) (1,447) (1,236) (7) (6) (4)
Amortization of prior service cost (credit) 6 6 6 (34) (2) (3)
Amortization of net transition obligation 1 1 1 – – –
Recognized actuarial losses 460 681 494 136 111 76
Curtailments and settlements (17) – – – 2 –
Net periodic benefit cost $743 1,055 865 503 452 409
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 –
Amortization of net actuarial losses 944
Amortization of prior service credit 33
Unrecognized gains and losses for the U.S. pension plans are amortized 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 obligation. 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
2014 2013 2012 2014 2013 2012
Worldwide Benefit Plans
Discount rate 3.78% 4.78% 4.25% 4.31% 5.25% 4.55%
Expected long-term rate of return on plan assets 8.53% 8.46% 8.45%
Rate of increase in compensation levels 4.05% 4.08% 4.08% 4.11% 4.29% 4.28%
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 rates of return on plan asset assumptions represent the Company’s assessment of long-term returns on
diversified investment portfolios globally. The assessment is determined using projections from external financial sources,
long-term historical averages, actual returns by asset class and the various asset class allocations by market.
For measurement of U.S. retirement benefit obligations, the mortality assumption was updated to a newly established
2014 mortality table resulting in an increase to the projected benefit obligation.
The following table displays the assumed health care cost trend rates, for all individuals:
Health Care Plans 2014 2013
Health care cost trend rate assumed for next year 6.00% 6.50%
Rate to which the cost trend rate is assumed to decline (ultimate trend) 4.50% 4.50%
Year the rate reaches the ultimate trend rate 2032 2032
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