Annual report pursuant to Section 13 and 15(d)

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Tables)

v3.20.4
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Tables)
 12 Months Ended
Dec. 31, 2020
Pension and Other Postretirement Benefit Plans [Abstract]  
Changes in benefit obligations and the fair value of plan assets for our benefit plans
The following table sets forth the changes in benefit obligations and the fair value of plan assets for our pension and other postretirement benefit plans (in millions):
Pension Plans Other Postretirement Benefit Plans
Year Ended December 31, 2020 2019 2020 2019
Benefit obligation at beginning of year1
$ 8,757  $ 8,015  $ 757  $ 719 
Service cost 112  104  11  9 
Interest cost 235  291  21  28 
Participant contributions 1  1  12  20 
Foreign currency exchange rate changes 67  (28) (1) (2)
Amendments 3  (1) —  — 
Net actuarial loss2
746  931  22  71 
Benefits paid (485) (537) (59) (86)
Settlements3
(81) (19) —  — 
Curtailments3
(15) (2) 6  (2)
Special termination benefits 2  1  —  — 
Other 72  1  —  — 
Benefit obligation at end of year1
$ 9,414  $ 8,757  $ 769  $ 757 
Fair value of plan assets at beginning of year $ 8,080  $ 7,429  $ 339  $ 289 
Actual return on plan assets 830  1,111  51  38 
Employer contributions 30  36  —  — 
Participant contributions 1  1  7  15 
Foreign currency exchange rate changes 97  (26) —  — 
Benefits paid (419) (453) (1) (3)
Settlements3
(53) (18) —  — 
Other 73  —  —  — 
Fair value of plan assets at end of year $ 8,639  $ 8,080  $ 396  $ 339 
Net liability recognized $ (775) $ (677) $ (373) $ (418)
1 For pension plans, the benefit obligation is the projected benefit obligation. For other postretirement benefit plans, the benefit obligation is the accumulated postretirement benefit obligation. The accumulated benefit obligation for our pension plans was $9,263 million and $8,607 million as of December 31, 2020 and 2019, respectively.
2 A decrease in the weighted-average discount rate was the primary driver of net actuarial loss during 2020 and 2019. For our primary U.S. pension plan, a decrease in the discount rate resulted in actuarial loss of $491 million and $611 million during 2020 and 2019, respectively. Other drivers of net actuarial loss included assumption updates, plan experience, our strategic realignment initiatives and our productivity and reinvestment program. Refer to Note 18.
3 Settlements and curtailments were primarily related to our strategic realignment initiatives and our productivity and reinvestment program. Refer to Note 18.
Pension and other benefit amounts recognized in consolidated balance sheets
Pension and other postretirement benefit plan amounts recognized in our consolidated balance sheets were as follows (in millions):
Pension Plans Other Postretirement Benefit Plans
December 31, 2020 2019 2020 2019
Other assets $ 1,151  $ 998  $ —  $ — 
Accounts payable and accrued expenses (116) (72) (19) (21)
Other liabilities (1,810) (1,603) (354) (397)
Net liability recognized $ (775) $ (677) $ (373) $ (418)
Schedule of pension plans with projected benefit obligation in excess of fair value of plan assets
Certain of our pension plans have a projected benefit obligation in excess of the fair value of plan assets. For these plans, the projected benefit obligation and the fair value of plan assets were as follows (in millions):
December 31, 2020 2019
Projected benefit obligation $ 7,722  $ 7,194 
Fair value of plan assets 5,796  5,515 
Accumulated benefit obligations in excess of fair value of plan assets
Certain of our pension plans have an accumulated benefit obligation in excess of the fair value of plan assets. For these plans, the accumulated benefit obligation and the fair value of plan assets were as follows (in millions):
December 31, 2020 2019
Accumulated benefit obligation $ 7,553  $ 7,052 
Fair value of plan assets 5,745  5,485 
Total pension assets for U.S. and non-U.S. plans
The following table presents total assets by asset class for our U.S. and non-U.S. pension plans (in millions):
U.S. Pension Plans Non-U.S. Pension Plans
December 31, 2020 2019 2020 2019
Cash and cash equivalents $ 279  $ 364  $ 399  $ 377 
Equity securities:
U.S.-based companies 1,382  1,231  757  673 
International-based companies 988  770  738  617 
Fixed-income securities:
Government bonds 220  263  417  273 
Corporate bonds and debt securities 926  899  116  65 
Mutual, pooled and commingled funds1
301  279  513  619 
Hedge funds/limited partnerships 588  652  34  37 
Real estate 326  337  6  5 
Derivative financial instruments (1) —  (14) — 
Other 364  354  300  265 
Total pension plan assets2
$ 5,373  $ 5,149  $ 3,266  $ 2,931 
1 Mutual, pooled and commingled funds include investments in equity securities, fixed-income securities and combinations of both. There are a significant number of mutual, pooled and commingled funds from which investors can choose. The selection of the type of fund is dictated by the specific investment objectives and needs of a given plan. These objectives and needs vary greatly between plans.
2 Fair value disclosures related to our pension plan assets are included in Note 16. Fair value disclosures include, but are not limited to, the levels within the fair value hierarchy in which the fair value measurements in their entirety fall; a reconciliation of the beginning and ending balances of Level 3 assets; and information about the valuation techniques and inputs used to measure the fair value of our pension plan assets.
Other postretirement benefit plan assets
The following table presents total assets by asset class for our other postretirement benefit plans (in millions):
December 31, 2020 2019
Cash and cash equivalents $ 30  $ 57 
Equity securities:
U.S.-based companies 170  124 
International-based companies 12  9 
Fixed-income securities:
Government bonds 3  3 
Corporate bonds and debt securities 80  47 
Mutual, pooled and commingled funds 86  84 
Hedge funds/limited partnerships 7  7 
Real estate 4  4 
Other 4  4 
Total other postretirement benefit plan assets1
$ 396  $ 339 
1Fair value disclosures related to our other postretirement benefit plan assets are included in Note 16. Fair value disclosures include, but are not limited to, the levels within the fair value hierarchy in which the fair value measurements in their entirety fall and information about the valuation techniques and inputs used to measure the fair value of our other postretirement benefit plan assets.
Net periodic benefit cost for pension and other postretirement benefit plans
Net periodic benefit cost (income) for our pension and other postretirement benefit plans consisted of the following (in millions):
Pension Plans Other Postretirement Benefit Plans
Year Ended December 31, 2020 2019 2018 2020 2019 2018
Service cost $ 112  $ 104  $ 124  $ 11  $ 9  $ 11 
Interest cost 235  291  296  21  28  25 
Expected return on plan assets1
(587) (552) (650) (16) (13) (13)
Amortization of prior service cost (credit) 3  (4) (3) (3) (2) (14)
Amortization of net actuarial loss2
171  151  128  5  2  3 
Net periodic benefit cost (income) (66) (10) (105) 18  24  12 
Settlement charges3
23  6  240  —  —  — 
Curtailment charges (credits)3
1  —  5  6  (2) (4)
Special termination benefits3
2  1  7  —  —  — 
Other (4) 1  —  —  —  (1)
Total cost (income) recognized in
consolidated statements of income		 $ (44) $ (2) $ 147  $ 24  $ 22  $ 7 
1The Company has elected to use the actual fair value of plan assets as the market-related value of assets in the determination of the expected return on plan assets.
2Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to 10 percent of the greater of the benefit obligation and the market-related value of assets. Gains and losses in excess of the corridor are generally amortized over the average future working lifetime of the plan participants.
3Settlements, curtailments and special termination benefits were primarily related to our strategic realignment initiatives, our productivity and reinvestment program and the refranchising of certain of our North America bottling operations. Refer to Note 2 and Note 18
Changes in AOCI for benefit plans
The following table sets forth the changes in AOCI for our pension and other postretirement benefit plans (in millions, pretax):
Pension Plans Other Postretirement Benefit Plans
Year Ended December 31, 2020 2019 2020 2019
Balance in AOCI at beginning of year $ (2,678) $ (2,482) $ (59) $ (15)
Recognized prior service cost (credit) 3  (4)

(3)

(4)
Recognized net actuarial loss 195 
1
 157  11  2 
Prior service credit (cost) occurring during the year (3) 1  —  — 
Net actuarial (loss) gain occurring during the year (488)
2
 (370) 7  (44)
Net foreign currency translation adjustments (41) 20  (3) 2 
Balance in AOCI at end of year $ (3,012) $ (2,678) $ (47) $ (59)
1    Includes $23 million of recognized net actuarial loss due to the impact of settlements.
2    Includes $15 million of net actuarial loss occurring during the year due to the impact of curtailments.
Amounts in AOCI for benefit plans (pretax)
The following table sets forth the amounts in AOCI for our pension and other postretirement benefit plans (in millions, pretax):
Pension Plans Other Postretirement Benefit Plans
December 31, 2020 2019 2020 2019
Prior service credit (cost) $ (10) $ (12) $ 17  $ 23 
Net actuarial loss (3,002) (2,666) (64) (82)
Balance in AOCI at end of year $ (3,012) $ (2,678) $ (47) $ (59)
Certain weighted average assumptions used in computing the benefit obligations and net periodic benefit cost
Certain weighted-average assumptions used in computing the benefit obligations for our pension and other postretirement benefit plans were as follows:
Pension Plans Other Postretirement Benefit Plans
December 31, 2020 2019 2020 2019
Discount rate 2.50  % 3.25  % 2.75  % 3.50  %
Interest crediting rate 3.00  % 3.50  % N/A N/A
Rate of increase in compensation levels 3.75  % 3.75  % N/A N/A
Certain weighted-average assumptions used in computing net periodic benefit cost (income) were as follows:
Pension Plans Other Postretirement Benefit Plans
Year Ended December 31, 2020 2019 2018 2020 2019 2018
Discount rate 3.25  % 4.00  % 3.50  % 3.50  % 4.25  % 3.50  %
Interest crediting rate 3.50  % 3.75  % 3.25  % N/A N/A N/A
Rate of increase in compensation levels 3.75  % 3.75  % 3.50  % N/A N/A N/A
Expected long-term rate of return on plan assets 7.50  % 7.75  % 8.00  % 4.50  % 4.50  % 4.50  %
Assumed health care cost trend rates
The weighted-average assumptions for health care cost trend rates were as follows:
December 31, 2020 2019
Health care cost trend rate assumed for next year 6.75  % 6.75  %
Rate to which the trend rate is assumed to decline (the ultimate trend rate) 5.25  % 5.25  %
Year that the trend rate reaches the ultimate trend rate 2025 2025
Estimated future benefit payments for funded and unfunded plans
The estimated future benefit payments for our pension and other postretirement benefit plans are as follows (in millions):
Year Ended December 31, 2021 2022 2023 2024 2025 2026–2030
Benefit payments for pension plans $ 657 
1
 $ 437  $ 472  $ 483  $ 491  $ 2,492 
Benefit payments for other postretirement
   benefit plans2
60  56  54  51  50  226 
Total estimated benefit payments $ 717  $ 493  $ 526  $ 534  $ 541  $ 2,718 
1The estimated benefit payments in 2021 are higher due to our strategic realignment initiatives. Refer to Note 18.
2The estimated benefit payments for our other postretirement benefit plans are net of estimated federal subsidies expected to be received under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Federal subsidies are estimated to be $2 million for the period 2021–2025 and $2 million for the period 2026–2030.