Annual report pursuant to Section 13 and 15(d)

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Tables)

v3.8.0.1
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Tables)
12 Months Ended
Dec. 31, 2017
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 benefit plans (in millions):
 
Pension Benefits  
 
Other Benefits  
Year Ended December 31,
2017

 
2016

 
2017

 
2016

Benefit obligation at beginning of year1
$
9,428

 
$
9,159

 
$
962

 
$
940

Service cost
197

 
239

 
17

 
22

Interest cost
306

 
319

 
29

 
31

Foreign currency exchange rate changes
150

 
(38
)
 
4

 
(2
)
Amendments
1

 
17

 
(21
)
 
(4
)
Actuarial loss (gain)
420

 
441

 
(28
)
 
20

Benefits paid2
(341
)
 
(346
)
 
(71
)
 
(64
)
Divestitures3
(7
)
 
(16
)
 
(66
)
 
(2
)
Settlements4
(832
)
 
(384
)
 

 

Curtailments4
(10
)
 

 
(48
)
 
(17
)
Special termination benefits4
106

 
37

 

 
2

Other
37

 

 
4

 
36

Benefit obligation at end of year1
$
9,455

 
$
9,428

 
$
782

 
$
962

Fair value of plan assets at beginning of year
$
8,371

 
$
7,689

 
$
255

 
$
245

Actual return on plan assets
1,139

 
690

 
31

 
8

Employer contributions
181

 
718

 

 

Foreign currency exchange rate changes
196

 
(70
)
 

 

Benefits paid
(285
)
 
(270
)
 
(3
)
 
(3
)
Divestitures3

 
(16
)
 

 

Settlements4
(794
)
 
(374
)
 

 

Other
35

 
4

 
5

 
5

Fair value of plan assets at end of year
$
8,843

 
$
8,371

 
$
288

 
$
255

Net liability recognized
$
(612
)
 
$
(1,057
)
 
$
(494
)
 
$
(707
)
1 
For pension benefit plans, the benefit obligation is the projected benefit obligation. For other benefit plans, the benefit obligation is the accumulated postretirement benefit obligation. The accumulated benefit obligation for our pension plans was $9,175 million and $9,141 million as of December 31, 2017 and 2016, respectively.
2 
Benefits paid to pension plan participants during 2017 and 2016 included $56 million and $76 million, respectively, in payments related to unfunded pension plans that were paid from Company assets. Benefits paid to participants of other benefit plans during 2017 and 2016 included $68 million and $61 million, respectively, that were paid from Company assets.
3 
Divestitures were primarily related to the deconsolidation of the Company's German bottling operations in May 2016 and the Company's North America refranchising in 2017. Refer to Note 2.
4 
Settlements, curtailments and special termination benefits were primarily related to the Company's North America refranchising and productivity, restructuring and integration initiatives. Refer to Note 2 and Note 18.
Pension and other benefit amounts recognized in consolidated balance sheets
Pension and other benefit amounts recognized in our consolidated balance sheets are as follows (in millions):
 
Pension Benefits  
 
Other Benefits  
December 31,
2017

 
2016

 
2017

 
2016

Noncurrent asset
$
921

 
$
572

 
$

 
$

Current liability
(72
)
 
(71
)
 
(21
)
 
(23
)
Long-term liability
(1,461
)
 
(1,558
)
 
(473
)
 
(684
)
Net liability recognized
$
(612
)
 
$
(1,057
)
 
$
(494
)
 
$
(707
)
Schedule of pension plans with projected benefit obligation in excess of fair value of plan assets
Certain of our pension plans have projected benefit obligations in excess of the fair value of plan assets. For these plans, the projected benefit obligations and the fair value of plan assets were as follows (in millions):
December 31,
2017

 
2016

Projected benefit obligation
$
7,833

 
$
7,907

Fair value of plan assets
6,330

 
6,303

Accumulated benefit obligations in excess of fair value of plan assets
Certain of our pension plans have accumulated benefit obligations in excess of the fair value of plan assets. For these plans, the accumulated benefit obligations and the fair value of plan assets were as follows (in millions):
December 31,
2017

 
2016

Accumulated benefit obligation
$
7,614

 
$
7,668

Fair value of plan assets
6,305

 
6,257

Total pension assets for U.S. and non-U.S. plans
The following table presents total assets for our U.S. and non-U.S. pension plans (in millions):
 
U.S. Plans  
 
Non-U.S. Plans  
December 31,
2017

 
2016

 
2017

 
2016

Cash and cash equivalents
$
454

 
$
229

 
$
237

 
$
173

Equity securities:
 
 
 
 
 
 
 
U.S.-based companies
1,427

 
1,208

 
670

 
619

International-based companies
911

 
451

 
554

 
488

Fixed-income securities:
 
 
 
 
 
 
 
Government bonds
183

 
395

 
191

 
131

Corporate bonds and debt securities
785

 
854

 
42

 
142

Mutual, pooled and commingled funds1
215

 
693

 
766

 
440

Hedge funds/limited partnerships
939

 
1,172

 
44

 
41

Real estate
596

 
521

 
2

 
2

Other
518

 
538

 
309

 
274

Total pension plan assets2
$
6,028

 
$
6,061

 
$
2,815

 
$
2,310

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 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 assets.
Other postretirement benefit plan assets
The following table presents total assets for our other postretirement benefit plans (in millions):
December 31,
2017

 
2016

Cash and cash equivalents
$
78

 
$
2

Equity securities:
 
 
 
U.S.-based companies
96

 
116

International-based companies
8

 
8

Fixed-income securities:
 
 
 
Government bonds
2

 
3

Corporate bonds and debt securities
7

 
6

Mutual, pooled and commingled funds
80

 
103

Hedge funds/limited partnerships
8

 
9

Real estate
5

 
4

Other
4

 
4

Total other postretirement benefit plan assets1
$
288

 
$
255

1 
Fair 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 for our pension and other postretirement benefit plans consisted of the following (in millions):
 
Pension Benefits  
 
Other Benefits  
Year Ended December 31,
2017

 
2016

 
2015

 
2017

 
2016

 
2015

Service cost
$
197

 
$
239

 
$
265

 
$
17

 
$
22

 
$
27

Interest cost
306

 
319

 
379

 
29

 
31

 
37

Expected return on plan assets1
(650
)
 
(653
)
 
(705
)
 
(12
)
 
(11
)
 
(11
)
Amortization of prior service credit

 
(2
)
 
(2
)
 
(18
)
 
(19
)
 
(19
)
Amortization of actuarial loss2
175

 
183

 
199

 
8

 
7

 
10

Net periodic benefit cost
28

 
86

 
136

 
24

 
30

 
44

Settlement charges3
228

 
118

 
149

 

 

 

Curtailment charge (credit)3
4

 

 

 
(79
)
 

 

Special termination benefits3
106

 
37

 
20

 

 
1

 
2

Other
2

 
(3
)
 

 

 
23

 

Total cost (income) recognized in consolidated statements of income
$
368

 
$
238

 
$
305

 
$
(55
)
 
$
54

 
$
46

1 
The 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.
2 
Actuarial 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.
3 
The settlement charges, curtailment charge (credit) and special termination benefits were primarily related to the Company's North America refranchising and productivity, restructuring and integration initiatives. Refer to Note 2 and Note 18.
Changes in AOCI for benefit plans
The following table sets forth the changes in AOCI for our benefit plans (in millions, pretax):
 
Pension Benefits  
 
Other Benefits  
 
Year Ended December 31,
2017

 
2016

 
2017

 
2016

 
Balance in AOCI at beginning of year
$
(2,932
)
 
$
(2,907
)
 
$
(48
)
 
$
(26
)
 
Recognized prior service cost (credit)
4

 
(2
)
 
(54
)
4 
(28
)
5 
Recognized net actuarial loss (gain)
403

2 
301

3 
(36
)
4 
7

 
Prior service credit (cost) arising in current year
(1
)
 
(17
)
 
21

 
4

 
Net actuarial (loss) gain arising in current year
75

 
(404
)
 
92

4 
(6
)
5 
Impact of divestitures1

 
64

 

 

 
Foreign currency translation gain (loss)
(42
)
 
33

 
(1
)
 
1

 
Balance in AOCI at end of year
$
(2,493
)
 
$
(2,932
)
 
$
(26
)
 
$
(48
)
 

1 
Related to the deconsolidation of our German bottling operations. Refer to Note 2.
2 
Amounts in AOCI for benefit plans (pretax)
The following table sets forth amounts in AOCI for our benefit plans (in millions, pretax):
 
Pension Benefits  
 
Other Benefits  
December 31,
2017

 
2016

 
2017

 
2016

Prior service credit (cost)
$
(10
)
 
$
(14
)
 
$
36

 
$
69

Net actuarial loss
(2,483
)
 
(2,918
)
 
(62
)
 
(117
)
Balance in AOCI at end of year
$
(2,493
)
 
$
(2,932
)
 
$
(26
)
 
$
(48
)
Amounts in AOCI expected to be recognized as components of net periodic pension cost in next fiscal year

Amounts in AOCI expected to be recognized as components of net periodic benefit cost in 2018 are as follows (in millions, pretax):
 
Pension Benefits
 
Other Benefits
Amortization of prior service cost (credit)
$
(3
)
 
$
(14
)
Amortization of actuarial loss
147

 
4

Total
$
144

 
$
(10
)
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 are as follows:
 
Pension Benefits  
 
Other Benefits  
December 31,
2017

 
2016

 
2017

 
2016

Discount rate
3.50
%
 
4.00
%
 
3.50
%
 
4.00
%
Rate of increase in compensation levels
3.50
%
 
3.75
%
 
N/A

 
N/A

Certain weighted-average assumptions used in computing net periodic benefit cost are as follows:
 
Pension Benefits  
 
Other Benefits  
Year Ended December 31,
2017

 
2016

 
2015

 
2017

 
2016

 
2015

Discount rate
4.00
%
 
4.25
%
 
3.75
%
 
4.00
%
 
4.25
%
 
3.75
%
Rate of increase in compensation levels
3.75
%
 
3.50
%
 
3.50
%
 
N/A

 
N/A

 
N/A

Expected long-term rate of return on plan assets
8.00
%
 
8.25
%
 
8.25
%
 
4.75
%
 
4.75
%
 
4.75
%
Assumed health care cost trend rates
The assumed health care cost trend rates are as follows:
December 31,
2017

 
2016

Health care cost trend rate assumed for next year
7.00
%
 
7.00
%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
5.00
%
 
5.00
%
Year that the rate reaches the ultimate trend rate
2022

 
2021

Estimated future benefit payments for funded and unfunded plans
Our estimated future benefit payments for funded and unfunded plans are as follows (in millions):
Year Ended December 31,
2018

 
2019

 
2020

 
2021

 
2022

 
2023–2027

Pension benefit payments
$
713

 
$
461

 
$
482

 
$
489

 
$
500

 
$
2,642

Other benefit payments1
64

 
62

 
61

 
59

 
57

 
258

Total estimated benefit payments
$
777

 
$
523

 
$
543

 
$
548

 
$
557

 
$
2,900

1 
The expected 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 $4 million for the period 2018–2022, and $3 million for the period 2023–2027.