Benefit Plans

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Benefit Plans

Benefit Plans:

Pension coverage for employees of PMI’s subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements. In addition, PMI provides health care and other benefits to substantially all U.S. retired employees and certain non-U.S. retired employees. In general, health care benefits for non-U.S. retired employees are covered through local government plans.

Pension and other employee benefit costs per the consolidated statements of earnings consisted of the following for December 31, 2021, 2020 and 2019:

(in millions)	2021		2020		2019
Net pension costs (income)	$	(1)	$	(14)	$	(18)
Net postemployment costs	108		103		100
Net postretirement costs	8		8		7
Total pension and other employee benefit costs	$	115	$	97	$	89

Pension and Postretirement Benefit Plans

Obligations and Funded Status

The postretirement health care plans are not funded. The projected benefit obligations, plan assets and funded status of PMI’s pension plans, and the accumulated benefit obligation and net amount accrued for PMI's postretirement health care plans, at December 31, 2021 and 2020, were as follows:

	Pension(1)				Postretirement
(in millions)	2021		2020		2021		2020
Benefit obligation at January 1	$	12,243	$	10,612	$	198	$	190
Service cost	291		268		2		2
Interest cost	50		68		5		6
Benefits paid	(417)		(356)		(8)		(7)
Employee contributions	145		130		—		—
Settlement, curtailment and plan amendment	(194)		(117)
Actuarial losses (gains)	(559)		653		5		5
Currency	(587)		992		(4)		3
Other	26		(7)		—		(1)
Benefit obligation at December 31,	10,998		12,243		198		198
Fair value of plan assets at January 1,	8,746		7,928
Actual return on plan assets	1,054		206
Employer contributions	269		102
Employee contributions	145		130
Benefits paid	(417)		(356)
Settlement	(37)		(16)
Currency	(444)		752
Other	21		—
Fair value of plan assets at December 31,	9,337		8,746
Net pension and postretirement liability recognized at December 31,	$	(1,661)	$	(3,497)	$	(198)	$	(198)

(1) Primarily non-U.S. based defined benefit retirement plans.

At December 31, 2021, actuarial losses (gains) consisted primarily of gains for assumption changes related to higher discount rates year-over-year for Swiss, German and Dutch plans. At December 31, 2020, actuarial losses (gains) consisted primarily of losses for assumption changes related to lower discount rates year-over-year for Swiss, German and Dutch plans.

At December 31, 2021 and 2020, the Swiss pension plan represented 65% and 63% of the benefit obligation, respectively, and approximately 60% and 59% of the fair value of plan assets at December 31, 2021 and 2020, respectively. At December 31, 2021 and 2020, the U.S. pension plan represented 4% and 4% of the benefit obligation, respectively, and approximately 3% and 4% of the fair value of plan assets at December 31, 2021 and 2020, respectively.

At December 31, 2021 and 2020, the amounts recognized on PMI's consolidated balance sheets for the pension and postretirement plans were as follows:

	Pension				Postretirement
(in millions)	2021		2020		2021		2020
Other assets	$	323	$	43
Accrued liabilities — employment costs	(24)		(26)		$	(9)	$	(8)
Long-term employment costs	(1,960)		(3,514)		(189)		(190)
	$	(1,661)	$	(3,497)	$	(198)	$	(198)

The accumulated benefit obligation, which represents benefits earned to date, for the pension plans was $10.4 billion and $11.5 billion at December 31, 2021 and 2020, respectively.

For pension plans with accumulated benefit obligations in excess of plan assets, the accumulated benefit obligation and fair value of plan assets were $7.5 billion and $5.9 billion, respectively, as of December 31, 2021. The accumulated benefit obligation and fair value of plan assets were $10.5 billion and $7.7 billion, respectively, as of December 31, 2020.

For pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation and fair value of plan assets were $8.6 billion and $6.7 billion, respectively, as of December 31, 2021. The projected benefit obligation and fair value of plan assets were $12.1 billion and $8.6 billion, respectively, as of December 31, 2020.

The following weighted-average assumptions were used to determine PMI’s pension and postretirement benefit obligations at December 31:

	Pension				Postretirement
	2021		2020		2021		2020
Discount rate	0.86	%	0.56	%	3.08	%	2.84	%
Rate of compensation increase	1.77		1.79
Interest crediting rate	3.15		3.20
Health care cost trend rate assumed for next year					6.27		6.21
Ultimate trend rate					4.80		4.73
Year that rate reaches the ultimate trend rate					2029		2029

The discount rate for the largest pension plans is based on a yield curve constructed from a portfolio of high quality corporate bonds that produces a cash flow pattern equivalent to each plan’s expected benefit payments.  The discount rate for the remaining plans is developed from local bond indices that match local benefit obligations as closely as possible.

Components of Net Periodic Benefit Cost

Net periodic pension and postretirement health care costs consisted of the following for the years ended December 31, 2021, 2020 and 2019:

	Pension						Postretirement
(in millions)	2021		2020		2019		2021		2020		2019
Service cost	$	291	$	268	$	214	$	2	$	2	$	2
Interest cost	50		68		118		5		6		7
Expected return on plan assets	(371)		(353)		(328)		—		—		—
Amortization:
Net losses	314		265		189		3		2		—
Prior service cost	1		1		(1)		—		—		—
Net transition obligation	—		1		—		—		—		—
Settlement and curtailment	5		4		4		—		—		—
Net periodic pension and postretirement costs	$	290	$	254	$	196	$	10	$	10	$	9

Settlement and curtailment charges were due primarily to employee severance and early retirement programs.

The following weighted-average assumptions were used to determine PMI’s net pension and postretirement health care costs:

	Pension						Postretirement
	2021		2020		2019		2021		2020		2019
Discount rate - service cost	0.72	%	1.25	%	2.14	%	2.84	%	3.28	%	3.97	%
Discount rate - interest cost	0.44		0.67		1.35		2.84		3.28		3.97
Expected rate of return on plan assets	4.43		4.59		4.70
Rate of compensation increase	1.79		1.82		1.86
Interest crediting rate	3.20		3.20		3.40
Health care cost trend rate							6.21		6.21		6.17

PMI’s expected rate of return on pension plan assets is determined by the plan assets’ historical long-term investment performance, current asset allocation and estimates of future long-term returns by asset class.

PMI and certain of its subsidiaries sponsor defined contribution plans. Amounts charged to expense for defined contribution plans totaled $71 million, $66 million and $63 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Plan Assets

PMI’s investment strategy for pension plans is based on an expectation that equity securities will outperform debt securities over the long term. Accordingly, the target allocation of PMI’s plan assets is broadly characterized as approximately 55% in equity securities and approximately 45% in debt securities and other assets. The strategy primarily utilizes indexed U.S. equity securities, international equity securities and investment-grade debt securities. PMI’s plans have no investments in hedge funds, private equity or derivatives. PMI attempts to mitigate investment risk by rebalancing between equity and debt asset classes once a year or as PMI’s contributions and benefit payments are made.

The fair value of PMI’s pension plan assets at December 31, 2021 and 2020, by asset category was as follows:

Asset Category (in millions)	At December 31, 2021		Quoted Prices In Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	355	$	355
Equity securities:
U.S. securities	193		193
International securities	658		658
Investment funds(a)	7,317		5,592		$	1,725
International government bonds	210		139		71
Corporate bonds	278		278
Other	4		3		1
Total assets in the fair value hierarchy	$	9,015	$	7,218	$	1,797	$	—
Investment funds measured at net asset value(b)	322
Total assets	$	9,337

(a) Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan; Russell 3000; S&P 500 for equities, and Citigroup EMU and JP Morgan EMBI for bonds), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 59% are invested in U.S. and international equities; 15% are invested in U.S. and international government bonds; 14% are invested in corporate bonds and 12% are invested in real estate.

(b) In accordance with FASB ASC Subtopic 820-10, certain investments measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

Asset Category (in millions)	At December 31, 2020		Quoted Prices In Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	324	$	324
Equity securities:
U.S. securities	175		175
International securities	605		605
Investment funds(a)	6,811		5,206		$	1,605
International government bonds	225		149		76
Corporate bonds	292		292
Other	7		7
Total assets in the fair value hierarchy	$	8,439	$	6,758	$	1,681	$	—
Investment funds measured at net asset value(b)	307
Total assets	$	8,746

(a) Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan; Russell 3000; S&P 500 for equities, and Citigroup EMU and JP Morgan EMBI for bonds), primarily consist of mutual funds, common trust funds and commingled funds. Of these funds, 63% were invested in U.S. and international equities; 16% were invested in U.S. and international government bonds; 12% were invested in real estate, and 9% were invested in corporate bonds.

(b) In accordance with FASB ASC Subtopic 820-10, certain investments measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

For a description of the fair value hierarchy and the three levels of inputs used to measure fair values, see Note 2. Summary of Significant Accounting Policies.

PMI makes, and plans to make, contributions to the extent that they are tax deductible and to meet specific funding requirements of its funded pension plans. Currently, PMI anticipates making contributions of approximately $108 million in 2022 to its pension plans, based on current tax and benefit laws. However, this estimate is subject to change as a result of changes in tax and other benefit laws, as well as asset performance significantly above or below the assumed long-term rate of return on pension assets, or changes in interest and currency rates.

The estimated future benefit payments from PMI pension plans at December 31, 2021, are as follows:

(in millions)
2022	$	407
2023	421
2024	386
2025	382
2026	400
2027 - 2031	2,193

PMI's expected future annual benefit payments for its postretirement health care plans are estimated to be not material through 2031.

Postemployment Benefit Plans

PMI and certain of its subsidiaries sponsor postemployment benefit plans covering substantially all salaried and certain hourly employees. The cost of these plans is charged to expense over the working life of the covered employees. Net postemployment costs were $228 million, $208 million and $171 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The amounts recognized in accrued postemployment costs net of plan assets on PMI's consolidated balance sheets at December 31, 2021 and 2020, were $925 million and $923 million, respectively.

The accrued postemployment costs were determined using a weighted-average discount rate of 3.1% and 3.0% in 2021 and 2020, respectively; an assumed ultimate annual weighted-average turnover rate of 2.9% and 3.0% in 2021 and 2020, respectively; assumed compensation cost increases of 2.1% in 2021 and 2.1% in 2020, and assumed benefits as defined in the respective plans. In accordance with local regulations, certain postemployment plans are funded. As a result, the accrued postemployment costs disclosed above are presented net of the related assets of $46 million and $46 million at December 31, 2021 and 2020, respectively. Postemployment costs arising from actions that offer employees benefits in excess of those specified in the respective plans are charged to expense when incurred.

Comprehensive Earnings (Losses)

The amounts recorded in accumulated other comprehensive losses at December 31, 2021, consisted of the following:

(in millions)	Pension		Post- retirement		Post- employment		Total
Net losses	$	(2,495)	$	(64)	$	(884)	$	(3,443)
Prior service cost	71		1		(22)		50
Net transition obligation	(3)		—		—		(3)
Deferred income taxes	278		24		214		516
Losses to be amortized	$	(2,149)	$	(39)	$	(692)	$	(2,880)

The amounts recorded in accumulated other comprehensive losses at December 31, 2020, consisted of the following:

(in millions)	Pension		Post- retirement		Post- employment		Total
Net losses	$	(4,147)	$	(64)	$	(839)	$	(5,050)
Prior service cost	22		2		(22)		2
Net transition obligation	(3)		—		—		(3)
Deferred income taxes	570		24		204		798
Losses to be amortized	$	(3,558)	$	(38)	$	(657)	$	(4,253)

The amounts recorded in accumulated other comprehensive losses at December 31, 2019, consisted of the following:

(in millions)	Pension		Post- retirement		Post- employment		Total
Net losses	$	(3,718)	$	(63)	$	(775)	$	(4,556)
Prior service cost	3		2		—		5
Net transition obligation	(4)		—		—		(4)
Deferred income taxes	520		24		182		726
Losses to be amortized	$	(3,199)	$	(37)	$	(593)	$	(3,829)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2021, were as follows:

(in millions)	Pension		Post- retirement		Post- employment		Total
Amounts transferred to earnings:
Amortization:
Net losses	$	294	$	4	$	85	$	383
Prior service cost	7		(1)		—		6
Net transition obligation	—		—		—		—
Other income/expense:
Net losses	5		1		—		6
Prior service cost	—		—		—		—
Deferred income taxes	(51)		(1)		(20)		(72)
	255		3		65		323
Other movements during the year:
Net losses	1,353		(5)		(130)		1,218
Prior service cost	42		—		—		42
Deferred income taxes	(241)		1		30		(210)
	1,154		(4)		(100)		1,050
Total movements in other comprehensive earnings (losses)	$	1,409	$	(1)	$	(35)	$	1,373

The movements in other comprehensive earnings (losses) during the year ended December 31, 2020, were as follows:

(in millions)	Pension		Post- retirement		Post- employment		Total
Amounts transferred to earnings:
Amortization:
Net losses	$	250	$	3	$	78	$	331
Prior service cost	29		—		—		29
Net transition obligation	1		—		—		1
Other income/expense:
Net losses	3		—		—		3
Prior service cost	2		—		—		2
Deferred income taxes	(49)		(1)		(17)		(67)
	236		2		61		299
Other movements during the year:
Net losses	(682)		(4)		(142)		(828)
Prior service cost	(12)		—		(22)		(34)
Deferred income taxes	99		1		39		139
	(595)		(3)		(125)		(723)
Total movements in other comprehensive earnings (losses)	$	(359)	$	(1)	$	(64)	$	(424)

The movements in other comprehensive earnings (losses) during the year ended December 31, 2019, were as follows:

(in millions)	Pension		Post- retirement		Post- employment		Total
Amounts transferred to earnings:
Amortization:
Net losses	$	198	$	3	$	77	$	278
Prior service cost	32		(1)		—		31
Other income/expense:
Net losses	3		—		—		3
Deferred income taxes	(51)		(1)		(17)		(69)
	182		1		60		243
Other movements during the year:
Net losses	(521)		(27)		(150)		(698)
Prior service cost	(2)		—		—		(2)
Deconsolidation of RBH (net of deferred income taxes)	26		1		—		27
Deferred income taxes	206		6		35		247
	(291)		(20)		(115)		(426)
Total movements in other comprehensive earnings (losses)	$	(109)	$	(19)	$	(55)	$	(183)