Benefit Plans

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Benefit Plans

Note 11. Benefit Plans

Pension Plans

Obligations and Funded Status:

The projected benefit obligations, plan assets and funded status of our pension plans were:

	U.S. Plans				Non-U.S. Plans
	2021		2020		2021		2020
	(in millions)
Projected benefit obligation at January 1	$	1,887	$	1,748	$	11,658	$	10,458
Service cost	6		6		137		121
Interest cost	42		49		130		149
Benefits paid	(31)		(35)		(533)		(473)
Settlements paid	(113)		(95)		—		—
Actuarial (gains)/losses	(63)		213		(269)		679
Currency	—		—		(308)		572
Other (1)	1		1		6		152
Projected benefit obligation at December 31	1,729		1,887		10,821		11,658
Fair value of plan assets at January 1	1,959		1,739		10,972		9,758
Actual return on plan assets	1		337		548		865
Contributions	10		13		292		208
Benefits paid	(31)		(35)		(533)		(473)
Settlements paid	(113)		(95)		—		—
Currency	—		—		(258)		489
Other (1)	—		—		—		125
Fair value of plan assets at December 31	1,826		1,959		11,021		10,972
Net pension (liabilities)/assets at December 31	$	97	$	72	$	200	$	(686)

(1)In 2020 we reviewed the impact of market changes on design features of certain historical defined contribution plans. The review resulted in additional plans being accounted for as defined benefit pension plans, which resulted in increases of $133 million in the projected benefit obligation and $125 million in plan assets in 2020.

The accumulated benefit obligation, which represents benefits earned to the measurement date, for U.S. pension plans was $1,723 million at December 31, 2021 and $1,882 million at December 31, 2020. The accumulated benefit obligation for non-U.S. pension plans was $10,650 million at December 31, 2021 and $11,404 million at December 31, 2020.

The actuarial (gain) loss for all pension plans in 2020 and 2021 was primarily related to a change in the discount rate used to measure the benefit obligations of those plans.

Salaried and non-union hourly employees hired after January 1, 2009 in the U.S. and after January 1, 2011 in Canada (or earlier for certain legacy Cadbury employees) are no longer eligible to participate in the defined benefit pension plans. Benefit accruals for salaried and non-union hourly employee participants in the U.S. and Canada defined benefit pension plans ceased on December 31, 2019. These employees instead receive Company contributions to the employee defined contribution plans.

The combined U.S. and non-U.S. pension plans resulted in a net pension asset of $297 million at December 31, 2021 and a net pension liability of $614 million at December 31, 2020. We recognized these amounts in our consolidated balance sheets as follows:

	As of December 31,
	2021		2020
	(in millions)
Prepaid pension assets	$	1,009	$	672
Other current liabilities	(31)		(29)
Accrued pension costs	(681)		(1,257)
	$	297	$	(614)

Certain of our U.S. and non-U.S. plans are underfunded with accumulated benefit obligations in excess of plan assets. For these plans, the projected benefit obligations, accumulated benefit obligations and the fair value of plan assets were:

	U.S. Plans				Non-U.S. Plans
	As of December 31,				As of December 31,
	2021		2020		2021		2020
	(in millions)
Projected benefit obligation	$	42	$	51	$	1,889	$	4,059
Accumulated benefit obligation	42		51		1,805		3,873
Fair value of plan assets	3		3		1,223		2,827

We used the following weighted-average assumptions to determine our benefit obligations under the pension plans:

	U.S. Plans				Non-U.S. Plans
	As of December 31,				As of December 31,
	2021		2020		2021		2020
Discount rate	3.01	%	2.73	%	1.73	%	1.33	%
Expected rate of return on plan assets	4.50	%	4.50	%	3.44	%	3.90	%
Rate of compensation increase	4.00	%	4.00	%	2.83	%	3.16	%

Year-end discount rates for our U.S., Canadian, Eurozone and U.K. plans were developed from a model portfolio of high quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit obligations. Year-end discount rates for our remaining non-U.S. plans were developed from local bond indices that match local benefit obligations as closely as possible. Changes in our discount rates were primarily the result of changes in bond yields year-over-year. We determine our expected rate of return on plan assets from the plan assets’ historical long-term investment performance, current asset allocation and estimates of future long-term returns by asset class.

For the periods presented, we measure service and interest costs by applying the specific spot rates along a yield curve used to measure plan obligations to the plans’ liability cash flows. We believe this approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve.

Components of Net Periodic Pension Cost:

Net periodic pension cost consisted of the following:

	U.S. Plans						Non-U.S. Plans
	For the Years Ended December 31,						For the Years Ended December 31,
	2021		2020		2019		2021		2020		2019
	(in millions)
Service cost	$	6	$	6	$	38	$	137	$	121	$	122
Interest cost	42		49		60		130		149		202
Expected return on plan assets	(72)		(77)		(88)		(419)		(400)		(404)
Amortization:
Net loss/(gain)	17		17		30		130		118		148
Prior service cost/(benefit)	1		1		1		(6)		(7)		(6)
Curtailment credit (1)	—		—		—		(17)		—		—
Settlement losses and other expenses	19		18		16		3		4		(3)
Net periodic pension cost	$	13	$	14	$	57	$	(42)	$	(15)	$	59

(1)During the third quarter of 2021, we terminated our Defined Benefit Pension Scheme in Nigeria. During the second quarter of 2021, we made a decision to freeze our Defined Benefit Pension Scheme in the United Kingdom. As a result, we recognized curtailment credits of ($17 million) in 2021 recorded within benefit plan non-service income. In connection with the United Kingdom plan freeze, we also incurred incentive payment charges and other expenses of $48 million in 2021 included in operating income.

For the U.S. plans, we determine the expected return on plan assets component of net periodic benefit cost using a calculated market return value that recognizes the cost over a four-year period. For our non-U.S. plans, we utilize a similar approach with varying cost recognition periods for some plans, and with others, we determine the expected return on plan assets based on asset fair values as of the measurement date.

We used the following weighted-average assumptions to determine our net periodic pension cost:

	U.S. Plans						Non-U.S. Plans
	For the Years Ended December 31,						For the Years Ended December 31,
	2021		2020		2019		2021		2020		2019
Discount rate	2.73	%	3.44	%	4.40	%	1.33	%	1.74	%	2.45	%
Expected rate of return on plan assets	4.50	%	5.00	%	5.75	%	3.90	%	4.20	%	4.80	%
Rate of compensation increase	4.00	%	4.00	%	4.00	%	3.16	%	3.17	%	3.31	%

Plan Assets:

The fair value of pension plan assets was determined using the following fair value measurements:

	As of December 31, 2021
Asset Category	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
U.S. equity securities	$	4	$	4	$	—	$	—
Non-U.S. equity securities	3		3		—		—
Pooled funds - equity securities	1,545		1,084		461		—
Total equity securities	1,552		1,091		461		—
Government bonds	3,777		56		3,721		—
Pooled funds - fixed-income securities	648		449		199		—
Corporate bonds and other    fixed-income securities	3,943		139		1,415		2,389
Total fixed-income securities	8,368		644		5,335		2,389
Real estate	251		179		—		72
Private equity	4		—		—		4
Cash	5		4		—		1
Other	162		157		5		—
Total assets in the fair value hierarchy	$	10,342	$	2,075	$	5,801	$	2,466
Investments measured at net asset value	2,382
Total investments at fair value	$	12,724

	As of December 31, 2020
Asset Category	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
U.S. equity securities	$	4	$	4	$	—	$	—
Non-U.S. equity securities	1		1		—		—
Pooled funds - equity securities	2,225		999		1,226		—
Total equity securities	2,230		1,004		1,226		—
Government bonds	4,340		60		4,280		—
Pooled funds - fixed-income securities	622		439		183		—
Corporate bonds and other    fixed-income securities	2,860		258		811		1,791
Total fixed-income securities	7,822		757		5,274		1,791
Real estate	212		142		—		70
Private equity	3		—		—		3
Cash	117		107		10		—
Other	5		4		—		1
Total assets in the fair value hierarchy	$	10,389	$	2,014	$	6,510	$	1,865
Investments measured at net asset value	2,413
Total investments at fair value	$	12,802

We excluded plan assets of $124 million at December 31, 2021 and $129 million at December 31, 2020 from the above tables related to certain insurance contracts as they are reported at contract value, in accordance with authoritative guidance.

Fair value measurements

•Level 1 – includes primarily U.S and non-U.S. equity securities and government bonds valued using quoted prices in active markets.

•Level 2 – includes primarily pooled funds, including assets in real estate pooled funds, valued using net asset values of participation units held in common collective trusts, as reported by the managers of the trusts and as supported by the unit prices of actual purchase and sale transactions. Level 2 plan assets also include corporate bonds and other fixed-income securities, valued using independent observable market inputs, such as matrix pricing, yield curves and indices.

•Level 3 – includes investments valued using unobservable inputs that reflect the plans’ assumptions that market participants would use in pricing the assets, based on the best information available.

•Fair value estimates for pooled funds are calculated by the investment advisor when reliable quotations or pricing services are not readily available for certain underlying securities. The estimated value is based on either cost or last sale price for most of the securities valued in this fashion.

•Fair value estimates for private equity investments are calculated by the general partners using the market approach to estimate the fair value of private investments. The market approach utilizes prices and other relevant information generated by market transactions, type of security, degree of liquidity, restrictions on the disposition, latest round of financing data, company financial statements, relevant valuation multiples and discounted cash flow analyses.

•Fair value estimates for private debt placements are calculated using standardized valuation methods, including but not limited to income-based techniques such as discounted cash flow projections or market-based techniques utilizing public and private transaction multiples as comparables.

•Fair value estimates for real estate investments are calculated by investment managers using the present value of future cash flows expected to be received from the investments, based on valuation methodologies such as appraisals, local market conditions, and current and projected operating performance.

•Fair value estimates for fixed-income securities that are buy-in annuity policies are calculated on a replacement policy value basis by discounting the projected cash flows of the plan members using a discount rate based on risk-free rates and adjustments for estimated levels of insurer pricing.

•Net asset value – primarily includes equity funds, fixed income funds, real estate funds, hedge funds and private equity investments for which net asset values are normally used.

Changes in our Level 3 plan assets, which are recorded in other comprehensive earnings/(losses), included:

Asset Category	January 1, 2021 Balance		Net Realized and Unrealized Gains/ (Losses)		Net Purchases, Issuances and Settlements		Net Transfers Into/(Out of) Level 3		Currency Impact		December 31, 2021 Balance
	(in millions)
Corporate bond and other    fixed-income securities	$	1,791	$	(178)	$	784	$	—	$	(10)	$	2,387
Real estate	70		7		1		—		(4)		74
Private equity and other	4		1		—		—		—		5
Total Level 3 investments	$	1,865	$	(170)	$	785	$	—	$	(14)	$	2,466
Asset Category	January 1, 2020 Balance		Net Realized and Unrealized Gains/ (Losses)		Net Purchases, Issuances and Settlements		Net Transfers Into/(Out of) Level 3		Currency Impact		December 31, 2020 Balance
	(in millions)
Corporate bond and other    fixed-income securities	$	1,836	$	16	$	(110)	$	—	$	49	$	1,791
Real estate	62		5		—		—		3		70
Private equity and other	4		—		—		—		—		4
Total Level 3 investments	$	1,902	$	21	$	(110)	$	—	$	52	$	1,865

The increase in Level 3 pension plan investments during 2021 was primarily due to purchases of corporate bond, annuity contracts and other fixed income securities. The decrease in Level 3 pension plan investments during 2020 was primarily due to maturities of corporate bond and other fixed income securities.

The percentage of fair value of pension plan assets was:

	U.S. Plans		Non-U.S. Plans
	As of December 31,		As of December 31,
Asset Category	2021	2020	2021	2020
Equity securities	15%	15%	17%	23%
Fixed-income securities	85%	85%	62%	58%
Real estate	—	—	3%	5%
Hedge funds	—	—	—%	2%
Buy-in annuity policies	—	—	17%	11%
Cash	—	—	1%	1%
Total	100%	100%	100%	100%

For our U.S. plans, our investment strategy is to reduce our funded status risk in part through appropriate asset allocation within our plan assets. We attempt to maintain our target asset allocation by rebalancing between asset classes as we make monthly benefit payments. The strategy involves using indexed U.S. equity and international equity securities and actively managed U.S. investment grade fixed-income securities (which constitute 95% or more of fixed-income securities) with smaller allocations to high yield fixed-income securities.

For our non-U.S. plans, the investment strategy is subject to local regulations and the asset/liability profiles of the plans in each individual country. In aggregate, the asset allocation targets of our non-U.S. plans are broadly characterized as a mix of approximately 15% equity securities, 58% fixed-income securities, 24% buy-in annuity policies and 3% real estate.

Employer Contributions:

In 2021, we contributed $10 million to our U.S. pension plans and $271 million to our non-U.S. pension plans. In addition, employees contributed $21 million to our non-U.S. plans. We make contributions to our pension plans in accordance with local funding arrangements and statutory minimum funding requirements. Discretionary contributions are made to the extent that they are tax deductible and do not generate an excise tax liability. In 2022, we estimate that our pension contributions will be $3 million to our U.S. plans and $185 million to our non-U.S. plans based on current tax laws. Our actual contributions may be different due to many factors, including changes in tax and other benefit laws, significant differences between expected and actual pension asset performance or interest rates.

Future Benefit Payments:

The estimated future benefit payments from our pension plans at December 31, 2021 were (in millions):

	2022	2023	2024	2025	2026	2027-2031
U.S. Plans	$154	$106	$101	$103	$102	$495
Non-U.S. Plans	422	414	425	430	443	2,266

Multiemployer Pension Plans:

In accordance with obligations we have under collective bargaining agreements, we made contributions to multiemployer pension plans for continuing participation of $4 million in 2021, $5 million in 2020 and $5 million in 2019. Our contributions are based on our contribution rates under our collective bargaining agreements, the number of our eligible employees and fund surcharges.

In 2018, we executed a complete withdrawal from the Bakery and Confectionery Union and Industry International Pension Fund and recorded a $429 million estimated withdrawal liability. On July 11, 2019, we received an undiscounted withdrawal liability assessment from the Fund totaling $526 million requiring pro-rata monthly payments over 19 years. We began making monthly payments during the third quarter of 2019. Within selling, general and administrative expenses, we recorded a $35 million ($26 million net of tax) adjustment related to the discounted withdrawal liability. Within interest and other expense, net, we recorded accreted interest of $11 million in 2021, $11 million in 2020 and $12 million in 2019. As of December 31, 2021, the remaining discounted withdrawal liability was $360 million, with $14 million recorded in other current liabilities and $346 million recorded in long-term other liabilities.

Other Costs:

We sponsor and contribute to employee defined contribution plans. These plans cover eligible salaried, non-union and union employees. Our contributions and costs are determined by the matching of employee contributions, as defined by the plans. Amounts charged to expense in continuing operations for defined contribution plans totaled $73 million in 2021, $83 million in 2020 and $72 million in 2019.

Postretirement Benefit Plans

Obligations:

Our postretirement health care plans are not funded. The changes in and the amount of the accrued benefit obligation were:

	As of December 31,
	2021		2020
	(in millions)
Accrued benefit obligation at January 1	$	361	$	403
Service cost	4		5
Interest cost	8		12
Benefits paid	(15)		(17)
Currency	(1)		(1)
Actuarial losses/(gains)	(39)		(41)
Accrued benefit obligation at December 31	$	317	$	361

The current portion of our accrued postretirement benefit obligation of $16 million at December 31, 2021 and $16 million at December 31, 2020 was included in other current liabilities.

The actuarial (gain) for all postretirement plans in 2020 and 2021 was driven by gains related to assumption changes partially offset by losses related to a change in the discount rate used to measure the benefit obligations of those plans.

We used the following weighted-average assumptions to determine our postretirement benefit obligations:

	U.S. Plans			Non-U.S. Plans
	As of December 31,			As of December 31,
	2021		2020	2021		2020
Discount rate	2.96	%	2.68 %	3.81	%	3.35 %
Health care cost trend rate assumed for next year	5.50	%	5.75 %	5.72	%	5.66 %
Ultimate trend rate	5.00	%	5.00 %	4.47	%	4.44	%
Year that the rate reaches the ultimate trend rate	2024		2024	2040		2040

Year-end discount rates for our U.S., Canadian and U.K. plans were developed from a model portfolio of high quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit obligations. Year-end discount rates for our remaining non-U.S. plans were developed from local bond indices that match local benefit obligations as closely as possible. Changes in our discount rates were primarily the result of changes in bond yields year-over-year. Our expected health care cost trend rate is based on historical costs.

For the periods presented, we measure service and interest costs for other postretirement benefits by applying the specific spot rates along a yield curve used to measure plan obligations to the plans’ liability cash flows. We believe this approach provides a good measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve.

Components of Net Periodic Postretirement Health Care Costs:

Net periodic postretirement health care costs consisted of the following:

	For the Years Ended December 31,
	2021		2020		2019
	(in millions)
Service cost	$	4	$	5	$	5
Interest cost	8		12		15
Amortization:
Net loss/(gain)	2		7		6
Prior service credit	—		(30)		(38)
Net periodic postretirement health care costs/(benefit)	$	14	$	(6)	$	(12)

We used the following weighted-average assumptions to determine our net periodic postretirement health care cost:

	U.S. Plans			Non-U.S. Plans
	For the Years Ended December 31,			For the Years Ended December 31,
	2021	2020	2019	2021	2020	2019
Discount rate	2.68%	3.41%	4.37%	3.35%	3.86%	4.40%
Health care cost trend rate	5.75%	6.00%	6.25%	5.66%	5.42%	5.44%

Future Benefit Payments:

Our estimated future benefit payments for our postretirement health care plans at December 31, 2021 were (in millions):

	2022	2023	2024	2025	2026	2027-2031
U.S. Plans	$11	$11	$11	$11	$11	$50
Non-U.S. Plans	5	5	5	5	5	28

Other Costs:

We made contributions to multiemployer medical plans totaling $19 million in 2021, $20 million in 2020 and $20 million in 2019. These plans provide medical benefits to active employees and retirees under certain collective bargaining agreements.

Postemployment Benefit Plans

Obligations:

Our postemployment plans are not funded. The changes in and the amount of the accrued benefit obligation at December 31, 2021 and 2020 were:

	As of December 31,
	2021		2020
	(in millions)
Accrued benefit obligation at January 1	$	65	$	66
Service cost	6		6
Interest cost	3		3
Benefits paid	(12)		(10)
Actuarial losses/(gains)	(6)		—
Accrued benefit obligation at December 31	$	56	$	65

The accrued benefit obligation was determined using a weighted-average discount rate of 4.3% in 2021 and 4.3% in 2020, an assumed weighted-average ultimate annual turnover rate of 0.4% in 2021 and 2020, assumed compensation cost increases of 4.0% in 2021 and 2020 and assumed benefits as defined in the respective plans.

Postemployment costs arising from actions that offer employees benefits in excess of those specified in the respective plans are charged to expense when incurred.

Components of Net Periodic Postemployment Costs:

Net periodic postemployment costs consisted of the following:

	For the Years Ended December 31,
	2021		2020		2019
	(in millions)
Service cost	$	6	$	6	$	6
Interest cost	3		3		5
Amortization of net gains	(4)		(2)		(4)
Net periodic postemployment costs	$	5	$	7	$	7

As of December 31, 2021, the estimated net gain for the postemployment benefit plans that we expect to amortize from accumulated other comprehensive earnings/(losses) into net periodic postemployment costs during 2022 is approximately $4 million.