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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
17. Pension Benefits
We maintain a number of qualified and nonqualified defined benefit pension plans and defined contribution
plans for eligible employees.
Defined Benefit Pension Plans
Eligible U.S. employees who were employed by the Company as of December 31, 1995 are covered under
the Company-sponsored defined benefit retirement plan. In 1997, the plan was amended to freeze all plan
benefits as of December 31, 1996. Benefits for the defined benefit retirement plan are based primarily on age of
employees at date of retirement, years of creditable service and the average of the highest 60 months of pay
during the 15 years prior to the plan freeze date. We also have defined benefit pension plans for eligible
employees outside of the U.S., as well as an unfunded nonqualified supplemental defined benefit plan for certain
U.S. executives.
Our non-U.S. defined benefit pension plans cover eligible employees located predominantly in Norway,
United Kingdom and Germany. Benefits for these plans are based primarily on each employee’s final salary, with
annual adjustments for inflation. The obligations in Norway are largely related to the state-regulated pension plan
which is managed by the Norwegian Public Service Pension Fund (“SPK”). According to the terms of the SPK,
the plan assets of state regulated plans in Norway must correspond very closely to the pension obligation
calculated using the principles codified in Norwegian law. The shortfall may not exceed 1% of the obligation. If
the shortfall exceeds this threshold, it must be remedied within two years. In the United Kingdom, we have
subsidiaries that participate in a joint pension plan. This plan is largely funded by contractual trust arrangements
that hold Company assets that may only be used to pay pension obligations. The Trustee Board decides on the
minimum contribution to the plan in association with selected employees of the entity. A valuation is performed
at regular intervals in order to determine the amount of the contribution and to ensure that the minimum
contribution is made. The pension obligation in Germany is unfunded with the exception of the contractual trust
arrangement used to fund pensions of Celesio’s Management Board.
Defined benefit plan assets and obligations are measured as of the Company’s fiscal year-end.
The net periodic expense for our pension plans, which includes net pension expense of Celesio beginning
February 2014, is as follows:
U.S. Plans Non-U.S. Plans
Years Ended March 31, Years Ended March 31,
(In millions) 2015 2014 2013 2015 2014 2013
Service cost—benefits earned during the year $ 1 $ 4 $ 4 $ 16 $ 6 $ 3
Interest cost on projected benefit obligation 19 19 21 34 11 7
Expected return on assets (21) (20) (20) (30) (12) (8)
Amortization of unrecognized actuarial loss, prior service
costs and net transitional obligation 19 32 28344
Curtailment/settlement loss (gain) — — — 6 (1) —
Net periodic pension expense $ 18 $ 35 $ 33 $ 29 $ 8 $ 6
The projected unit credit method is utilized in measuring net periodic pension expense over the employees’
service life for the pension plans. Unrecognized actuarial losses exceeding 10% of the greater of the projected
benefit obligation or the market value of assets are amortized straight-line over the average remaining future
service periods.
97