Pepsi 2015 Annual Report Download - page 118
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Table of Contents
101
Note 7 — Pension, Retiree Medical and Savings Plans
In the fourth quarter of 2014, the Company offered certain former employees who had vested benefits in our
U.S. defined benefit pension plans the option of receiving a one-time lump sum payment equal to the present
value of the participant’s pension benefit (payable in cash or rolled over into a qualified retirement plan or
IRA). In the fourth quarter of 2014, we made a discretionary contribution of $388 million to fund substantially
all of these payments. The Company recorded a pre-tax non-cash settlement charge of $141 million ($88
million after-tax or $0.06 per share) in 2014 as a result of this transaction. See additional unaudited information
in “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
During 2014, we revised our mortality assumptions to include the impact of the new set of mortality tables
issued by the Society of Actuaries, adjusted to reflect our experience and future expectations. This resulted
in an increase in the projected benefit obligation of our U.S. pension and retiree medical programs. We also
reviewed and revised other demographic assumptions to reflect recent experience. The net effect of these
changes and certain plan design changes resulted in an increase of approximately $150 million in the projected
benefit obligation at December 27, 2014.
The provisions of both the Patient Protection and Affordable Care Act and the Health Care and Education
Reconciliation Act are reflected in our retiree medical expenses and liabilities and were not material to our
financial statements.
Gains and losses resulting from actual experience differing from our assumptions, including the difference
between the actual return on plan assets and the expected return on plan assets, and from changes in our
assumptions are determined at each measurement date. If this net accumulated gain or loss exceeds 10% of
the greater of the market-related value of plan assets or plan liabilities, a portion of the net gain or loss is
included in expense for the following year based upon the average remaining service period of active plan
participants, which is approximately 11 years for pension expense and approximately 8 years for retiree
medical expense. The cost or benefit of plan changes that increase or decrease benefits for prior employee
service (prior service cost/(credit)) is included in earnings on a straight-line basis over the average remaining
service period of active plan participants.