Pepsi 2014 Annual Report Download - page 121

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101
The changes in Level 3 plan assets are as follows:
Balance,
Beginning
2013
Return on
Assets
Held at
Year-End
Purchases
and Sales,
Net
Balance,
End of
2013
Return on
Assets
Held at
Year-End
Purchases
and Sales,
Net
Balance,
End of
2014
Real estate commingled funds $ 391 $ 56 $ 188 $ 635 $ 68 $ 18 $ 721
Contracts with insurance companies 62 (1) (21) 40 2 — 42
Total $ 453 $ 55 $ 167 $ 675 $ 70 $ 18 $ 763
Retiree Medical Cost Trend Rates
An average increase of 6% in the cost of covered retiree medical benefits is assumed for 2015. This average
increase is then projected to decline gradually to 5% in 2025 and thereafter. These assumed health care cost
trend rates have an impact on the retiree medical plan expense and liability, however the cap on our share of
retiree medical costs limits the impact. A 1-percentage-point change in the assumed health care trend rate
would have the following effects:
1%
Increase
1%
Decrease
2014 service and interest cost components $ 4 $ (3)
2014 benefit liability $ 46 $ (40)
Savings Plan
Certain U.S. employees are eligible to participate in 401(k) savings plans, which are voluntary defined
contribution plans. The plans are designed to help employees accumulate additional savings for retirement,
and we make Company matching contributions for certain employees on a portion of eligible pay based on
years of service.
As of February 2012, certain U.S. employees earning a benefit under one of our defined benefit pension
plans were no longer eligible for Company matching contributions on their 401(k) contributions.
Certain U.S. salaried employees, who are not eligible to participate in a defined benefit pension plan, are
also eligible to receive an employer contribution to the 401(k) savings plan based on age and years of service
regardless of employee contribution.
In 2014, 2013 and 2012, our total Company contributions were $130 million, $122 million and $109 million,
respectively.
For additional unaudited information on our pension and retiree medical plans and related accounting policies
and assumptions, see “Our Critical Accounting Policies” in Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
Note 8 — Related Party Transactions
Our related party transactions in 2014, 2013 and 2012 are not material.
We coordinate, on an aggregate basis, the contract negotiations of sweeteners and other raw material
requirements, including aluminum cans and plastic bottles and closures for us and certain of our independent
bottlers. Once we have negotiated the contracts, the bottlers order and take delivery directly from the supplier
and pay the suppliers directly. Consequently, these transactions are not reflected in our consolidated financial
statements. As the contracting party, we could be liable to these suppliers in the event of any nonpayment
by our bottlers, but we consider this exposure to be remote.