Effective October

2004

, the parent company amended its retirement plan to introduce a “point” based retirement benefit plan. Under the new plan, employees are entitled to

lump-sum

or pension payments determined based on accumulated “points” vested in each year of service.

There are three types of “points” that vest in each year of service consisting of “service period points” which are attributed to the length of service, “job title points” which are attributed to the job title of each employee, and “performance points” which are attributed to the annual performance evaluation of each employee. Under normal circumstances, the minimum payment prior to retirement age is an amount reflecting an adjustment rate applied to represent voluntary retirement. Employees receive additional benefits upon involuntary retirement, including retirement at the age limit.

Effective October 1, 2005, the parent company partly amended its retirement plan and introduced the quasi cash-balance plan under which benefits are determined based on the variable-interest crediting rate rather than the fixed-interest crediting rate as was in the

pre-amended

plan.

The parent company and most subsidiaries in Japan have contributory funded defined benefit pension plans, which are pursuant to the Corporate Defined Benefit Pension Plan Law (CDBPPL). The contributions to the plans are funded with several financial institutions in accordance with the applicable laws and regulations. These pension plan assets consist principally of common stocks, government bonds and insurance contracts.

Most foreign subsidiaries have pension plans or severance indemnity plans covering substantially all of their employees under which the cost of benefits are currently invested or accrued. The benefits for these plans are based primarily on lengths of service and current rates of pay.

Toyota uses a March 31 measurement date for its benefit plans.

Information regarding Toyota’s defined benefit plans is as follows:


	Yen in millions
	March 31,
	Japanese plans						Foreign plans
	2019			2020			2019			2020
Change in benefit obligation
Benefit obligation at beginning of year		2,019,310			2,100,073			1,097,981			1,186,897
Service cost		99,838			93,298			46,930			46,869
Interest cost		12,967			10,514			40,708			40,335
Plan participants’ contributions		974			1,014			1,045			2,018
Plan amendments		(1,067	)		(988	)		13			3,308
Net actuarial (gain) loss		67,391			(48,602	)		7,755			(2,865	)
Acquisition and other		(20,786	)		(55,070	)		21,634			(28,548	)
Benefits paid		(78,554	)		(48,796	)		(29,169	)		(40,200	)

Benefit obligation at end of year		2,100,073			2,051,443			1,186,897			1,207,814

Change in plan assets
Fair value of plan assets at beginning of year		1,612,879			1,600,491			815,483			882,784
Actual return on plan assets		3,208			(70,503	)		59,237			13,421
Acquisition and other		(13,705	)		(41,105	)		12,696			(28,068	)
Employer contributions		41,276			38,144			18,952			29,407
Plan participants’ contributions		974			1,014			1,045			2,018
Benefits paid		(44,141	)		(15,010	)		(24,629	)		(30,661	)

Fair value of plan assets at end of year		1,600,491			1,513,031			882,784			868,901

Funded status		499,582			538,412			304,113			338,913

Amounts recognized in the consolidated balance sheets as of March 31, 2019 and 2020 are comprised of the following:


	Yen in millions
	March 31,
	Japanese plans						Foreign plans
	2019			2020			2019			2020
Accrued expenses (Accrued pension and severance costs)		34,298			33,422			3,234			7,934
Accrued pension and severance costs		657,380			639,764			306,026			338,862
Investments and other assets - Other (Prepaid pension and severance costs)		(192,096	)		(134,774	)		(5,147	)		(7,883	)

Net amount recognized		499,582			538,412			304,113			338,913

Amounts recognized in accumulated other comprehensive income (loss) as of March 31, 2019 and 2020 are comprised of the following:


	Yen in millions
	March 31,
	Japanese plans						Foreign plans
	2019			2020			2019			2020
Net actuarial loss		(339,814	)		(383,485	)		(91,072	)		(116,171	)
Prior service costs		29,801			21,538			(1,612	)		(5,352	)
Net transition obligation		—			—			—			—

Net amount recognized		(310,013	)		(361,947	)		(92,684	)		(121,523	)

The accumulated benefit obligation for all defined benefit pension plans was ¥2,040,344 million and ¥1,993,624 million in Japanese plans, ¥1,120,453 million and ¥1,134,977 million in Foreign plans at March 31, 2019 and 2020, respectively.

The projected benefit obligation and fair value of plan assets for which the projected benefit obligations exceed plan assets are as follows:


	Yen in millions
	March 31,
	Japanese plans				Foreign plans
	2019		2020		2019		2020
Projected benefit obligation		878,009		846,068		681,025		1,025,234
Fair value of plan assets		203,277		188,241		357,583		678,522

The accumulated benefit obligation and fair value of plan assets for which the accumulated benefit obligations exceed plan assets are as follows:


	Yen in millions
	March 31,
	Japanese plans				Foreign plans
	2019		2020		2019		2020
Accumulated benefit obligation		847,017		783,561		515,918		403,810
Fair value of plan assets		198,315		155,345		215,006		93,717

Components of the net periodic pension cost are as follows:


	Yen in millions
	For the years ended March 31,
	Japanese plans									Foreign plans
	2018			2019			2020			2018			2019			2020
Service cost		88,964			99,838			93,298			35,887			46,930			46,869
Interest cost		13,252			12,967			10,514			37,817			40,708			40,335
Expected return on plan assets		(36,409	)		(38,551	)		(37,813	)		(41,048	)		(37,530	)		(43,003	)
Amortization of prior service costs		(4,226	)		(3,904	)		(4,346	)		313			219			142
Recognized net actuarial loss		7,462			6,927			8,356			5,452			7,102			4,255
Amortization of net transition obligation		—			—			—			—			—			—

Net periodic pension cost		69,043			77,277			70,009			38,421			57,429			48,598

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) are as follows:


	Yen in millions
	For the years ended March 31,
	Japanese plans									Foreign plans
	2018			2019			2020			2018			2019			2020
Net actuarial gain (loss)		39,852			(102,734	)		(59,714	)		(17,163	)		13,952			(26,717	)
Recognized net actuarial loss		7,462			6,927			8,356			5,452			7,102			4,255
Prior service costs		58			1,067			988			12			(13	)		(3,308	)
Amortization of prior service costs		(4,226	)		(3,904	)		(4,346	)		313			219			142
Amortization of net transition obligation		—			—			—			—			—			—
Other		(7,979	)		4,610			2,782			9,004			7,289			(3,211	)

Total recognized in other comprehensive income (loss)		35,167			(94,034	)		(51,934	)		(2,382	)		28,549			(28,839	)

“Other” includes the impact of consolidation and deconsolidation of certain entities due to changes in ownership interest and currency translation adjustments during the years ended March 31, 2018, 2019 and 2020.

The estimated prior service costs and net actuarial loss that will be amortized from accumulated other comprehensive income (loss) into net periodic pension cost during the year ending March 31, 2021 are ¥(3,400) million and ¥13,300 million in Japanese plans, ¥100 million and ¥6,000 million in Foreign plans, respectively.

Weighted-average assumptions used to determine benefit obligations as of March 31, 2019 and 2020 are as follows:


	March 31,
	Japanese plans						Foreign plans
	2019			2020			2019			2020
Discount rate		0.6	%		0.6	%		3.8	%		3.5	%
Rate of compensation increase		3.1	%		2.5	%		3.5	%		3.4	%

As of March 31, 2019 and 2020, the parent company and certain subsidiaries in Japan employ “point” based retirement benefit plans and do not use the rates of compensation increase to determine benefit obligations.

Weighted-average assumptions used to determine net periodic pension cost for the years ended March 31, 2018, 2019 and 2020 are as follows:


	For the years ended March 31,
	Japanese plans									Foreign plans
	2018			2019			2020			2018			2019			2020
Discount rate		0.7	%		0.7	%		0.6	%		4.0	%		3.9	%		3.8	%
Expected return on plan assets		2.4	%		2.4	%		2.4	%		6.0	%		5.6	%		5.2	%
Rate of compensation increase		2.9	%		3.3	%		3.1	%		3.8	%		3.6	%		3.5	%

During the years ended March 31, 2018, 2019 and 2020, the parent company and certain subsidiaries in Japan employ “point” based retirement benefit plans and do not use the rates of compensation increase to determine net periodic pension cost.

The expected rate of return on plan assets is determined after considering several applicable factors including, the composition of plan assets held, assumed risks of asset management, historical results of the returns on plan assets, Toyota’s principal policy for plan asset management, and forecasted market conditions.

Toyota’s policy and objective for plan asset management is to maximize returns on plan assets to meet future benefit payment requirements under risks which Toyota considers permissible. Asset allocations under the plan asset management are determined based on plan asset management policies of each plan which are established to achieve the optimized asset compositions in terms of the long-term overall plan asset management. In Japanese plans, excepting equity securities contributed by Toyota, approximately 40% of the plan assets is invested in equity securities, approximately 30% is invested in debt securities, and the rest of them is invested in insurance contracts and other products. In Foreign plans, excepting equity securities contributed by Toyota, approximately 40% of the plan assets is invested in equity securities, approximately 50% is invested in debt securities, and the rest of them is invested in other products. When actual allocations are not in line with target allocations, Toyota rebalances its investments in accordance with the policies. Prior to making individual investments, Toyota performs

in-depth

assessments of corresponding factors including category of products, industry type, currencies and liquidity of each potential investment under consideration to mitigate concentrations of risks such as market risk and foreign currency exchange rate risk. To assess performance of the investments, Toyota establishes bench mark return rates for each individual investment, combines these individual bench mark rates based on the asset composition ratios within each asset category, and compares the combined rates with the corresponding actual return rates on each asset category.

The following table summarizes the fair value of classes of plan assets as of March 31, 2019 and 2020. See note 28 to the consolidated financial statements for three levels of input which are used to measure fair value.

Japanese plans


	Yen in millions
	March 31, 2019
	Level 1		Level 2		Level 3		Total
Equity securities
Common stocks		531,159		—		—		531,159
Commingled funds		—		192,012		—		192,012

		531,159		192,012		—		723,171

Debt securities
Government bonds		98,578		—		—		98,578
Commingled funds		—		286,783		—		286,783
Other		—		54,652		—		54,652

		98,578		341,435		—		440,013

Insurance contracts		—		226,093		—		226,093
Other		84,208		38,439		4,242		126,889
Investments measured at net asset value		—		—		—		84,325

Total		713,945		797,979		4,242		1,600,491


	Yen in millions
	March 31, 2020
	Level 1		Level 2		Level 3		Total
Equity securities
Common stocks		467,885		—		—		467,885
Commingled funds		—		135,979		—		135,979

		467,885		135,979		—		603,864

Debt securities
Government bonds		86,212		—		—		86,212
Commingled funds		—		278,394		—		278,394
Other		—		75,644		—		75,644

		86,212		354,038		—		440,250

Insurance contracts		—		226,043		—		226,043
Other		89,986		59,780		6,199		155,965
Investments measured at net asset value		—		—		—		86,909

Total		644,083		775,840		6,199		1,513,031

Foreign plans


	Yen in millions
	March 31, 2019
	Level 1		Level 2		Level 3		Total
Equity securities
Common stocks		123,875		—		—		123,875
Commingled funds		—		215,386		—		215,386

		123,875		215,386		—		339,261

Debt securities
Government bonds		141,054		—		—		141,054
Commingled funds		—		—		—		—
Other		—		164,877		—		164,877

		141,054		164,877		—		305,931

Insurance contracts		—		—		—		—
Other		10,292		24,810		27,903		63,005
Investments measured at net asset value		—		—		—		174,587

Total		275,221		405,073		27,903		882,784


	Yen in millions
	March 31, 2020
	Level 1		Level 2		Level 3		Total
Equity securities
Common stocks		111,997		—		—		111,997
Commingled funds		—		186,918		—		186,918

		111,997		186,918		—		298,915

Debt securities
Government bonds		181,702		—		—		181,702
Commingled funds		—		—		—		—
Other		—		170,650		—		170,650

		181,702		170,650		—		352,352

Insurance contracts		—		—		—		—
Other		10,425		24,410		28,251		63,086
Investments measured at net asset value		—		—		—		154,548

Total		304,124		381,978		28,251		868,901

Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

The following is description of the assets, information about the valuation techniques used to measure fair value, key inputs and significant assumptions:

Quoted market prices for identical securities are used to measure fair value of common stocks. Japanese stocks and foreign stocks represent 73% and 27% (as of March 31, 2019) and 75% and 25% (as of March 31, 2020) of common stocks, respectively, in Japanese plans. Common stocks include mainly foreign stocks as of March 31, 2019 and 2020 in Foreign plans.

Quoted market prices for identical securities are used to measure fair value of government bonds. Japanese government bonds and foreign government bonds represent 33% and 67% (as of March 31, 2019) and 37% and 63% (as of March 31, 2020) of government bonds, respectively, in Japanese plans. Government bonds include mainly foreign government bonds as of March 31, 2019 and 2020 in Foreign plans.

Commingled funds are beneficial interests of collective trust. The fair values of commingled funds are measured using the net asset value (“NAV”) provided by the administrator of the fund, and are categorized by the ability to redeem investments by the NAV.

The fair values of insurance contracts are measured using contracted amount with accrued interest.

“Other” consists of cash equivalents, other private placement investment funds and other assets. The fair values of other private placement investment funds are measured using the NAV provided by the administrator of the fund, and are categorized by the ability to redeem investments by the NAV.

The following tables summarize the changes in Level 3 plan assets measured at fair value for the years ended March 31, 2018, 2019 and 2020:

Japanese plans


	Yen in millions
	For the years ended March 31,
	2018									2019									2020
	Debt securities			Other			Total			Debt securities			Other			Total			Debt securities		Other			Total
Balance at beginning of year		81			496			577			19			—			19			—		4,242			4,242
Actual return on plan assets		—			(4	)		(4	)		—			(164	)		(164	)		—		(43	)		(43	)
Purchases, sales and settlements		(62	)		(492	)		(554	)		(19	)		—			(19	)		—		—			—
Other		—			—			—			—			4,406			4,406			—		2,000			2,000

Balance at end of year		19			—			19			—			4,242			4,242			—		6,199			6,199

Foreign plans


	Yen in millions
	For the years ended March 31,
	2018			2019			2020
	Other			Other			Other
Balance at beginning of year		30,903			31,288			27,903
Actual return on plan assets		2,024			(4,784	)		891
Purchases, sales and settlements		—			—			—
Other		(1,639	)		1,399			(543	)

Balance at end of year		31,288			27,903			28,251

Toyota expects to contribute ¥38,667 million in Japanese plans and ¥17,749 million in Foreign plans to its pension plans in the year ending March 31, 2021.

The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


	Yen in millions
Years ending March 31,	Japanese plans		Foreign plans
2021		82,748		43,815
2022		86,207		45,841
2023		87,914		47,645
2024		90,887		49,795
2025		87,909		50,854
from 2026 to 2030		441,675		281,343

Total		877,340		519,293

Postretirement benefits other than pensions and postemployment benefits -

Toyota’s U.S. subsidiaries provide certain health care and life insurance benefits to eligible retired employees. In addition, Toyota provides benefits to certain former or inactive employees after employment, but before retirement. These benefits are provided through various insurance companies, health care providers and others. The costs of these benefits are recognized over the period the employee provides credited service to Toyota. Toyota’s obligations under these arrangements are not material.