XML 100 R20.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Post-Employment Benefits
 12 Months Ended
Dec. 31, 2019
Postemployment Benefits [Abstract]  
Post-Employment Benefits Post-Employment Benefits
 
AbbVie sponsors various pension and other post-employment benefit plans, including defined benefit, defined contribution and termination indemnity plans, which cover most employees worldwide. In addition, AbbVie provides medical benefits, primarily to eligible retirees in the United States and Puerto Rico, through other post-retirement benefit plans. Net obligations for these plans have been reflected on the consolidated balance sheets as of December 31, 2019 and 2018.
The following table summarizes benefit plan information for the global AbbVie-sponsored defined benefit and other post-employment plans:
 
Defined benefit plans
 
Other post-employment plans
as of and for the years ended December 31 (in millions)
2019
 
2018
 
2019
 
2018
Projected benefit obligations
 
 
 
 
 
 
 
Beginning of period
$
6,618

 
$
6,985

 
$
561

 
$
813

Service cost
269

 
285

 
25

 
26

Interest cost
259

 
227

 
29

 
25

Employee contributions
2

 
2

 
—

 
—

Actuarial (gain) loss
1,703

 
(614
)
 
451

 
(287
)
Benefits paid
(206
)
 
(191
)
 
(17
)
 
(16
)
Other, primarily foreign currency translation adjustments
1

 
(76
)
 
1

 
—

End of period
8,646

 
6,618

 
1,050

 
561

Fair value of plan assets
 
 
 
 
 
 
 
Beginning of period
5,637

 
5,399

 
—

 
—

Actual return on plan assets
946

 
(384
)
 
—

 
—

Company contributions
727

 
873

 
17

 
16

Employee contributions
2

 
2

 
—

 
—

Benefits paid
(206
)
 
(191
)
 
(17
)
 
(16
)
Other, primarily foreign currency translation adjustments
10

 
(62
)
 
—

 
—

End of period
7,116

 
5,637

 
—

 
—

Funded status, end of period
$
(1,530
)
 
$
(981
)
 
$
(1,050
)
 
$
(561
)
 
 
 
 
 
 
 
 
Amounts recognized on the consolidated balance sheets
 
 
 
 
 
 
 
Other assets
$
395

 
$
321

 
$
—

 
$
—

Accounts payable and accrued liabilities
(8
)
 
(8
)
 
(18
)
 
(15
)
Other long-term liabilities
(1,917
)
 
(1,294
)
 
(1,032
)
 
(546
)
Net obligation
$
(1,530
)
 
$
(981
)
 
$
(1,050
)
 
$
(561
)
Actuarial loss, net
$
3,633

 
$
2,516

 
$
469

 
$
25

Prior service cost (credit)
10

 
11

 
(16
)
 
(22
)
Accumulated other comprehensive loss
$
3,643

 
$
2,527

 
$
453

 
$
3


Actuarial losses for 2019 in the table above were primarily driven by lower discount rates.
The projected benefit obligations (PBO) in the table above included $2.3 billion at December 31, 2019 and $1.9 billion at December 31, 2018, related to international defined benefit plans.
For plans reflected in the table above, the accumulated benefit obligations (ABO) were $7.6 billion at December 31, 2019 and $6.0 billion at December 31, 2018. For those plans reflected in the table above in which the ABO exceeded plan assets at December 31, 2019, the ABO was $5.8 billion, the PBO was $6.7 billion and aggregate plan assets were $4.8 billion.
Amounts Recognized in Other Comprehensive Income (Loss)
The following table summarizes the pre-tax losses (gains) included in other comprehensive income (loss):
years ended December 31 (in millions)
2019
 
2018
 
2017
Defined benefit plans
 
 
 
 
 
Actuarial loss
$
1,231

 
$
209

 
$
412

Amortization of actuarial loss and prior service cost
(109
)
 
(140
)
 
(107
)
Foreign exchange loss (gain) and other
(6
)
 
(13
)
 
46

Total loss
$
1,116

 
$
56

 
$
351

Other post-employment plans
 
 
 
 
 
Actuarial loss (gain)
$
451

 
$
(287
)
 
$
149

Amortization of actuarial loss and prior service credit
(1
)
 
(1
)
 
—

Total loss (gain)
$
450

 
$
(288
)
 
$
149


The pre-tax amounts included in AOCI at December 31, 2019 expected to be recognized in net periodic benefit cost in 2020 consisted of $219 million of expense related to actuarial losses and prior service costs for defined benefit plans and $25 million of income related to actuarial losses and prior service credits for other post-employment plans.
Net Periodic Benefit Cost
years ended December 31 (in millions)
2019
 
2018
 
2017
Defined benefit plans
 
 
 
 
 
Service cost
$
269

 
$
285

 
$
236

Interest cost
259

 
227

 
204

Expected return on plan assets
(474
)
 
(439
)
 
(382
)
Amortization of actuarial loss and prior service cost
109

 
140

 
107

Net periodic benefit cost
$
163

 
$
213

 
$
165

Other post-employment plans
 
 
 
 
 
Service cost
$
25

 
$
26

 
$
26

Interest cost
29

 
25

 
24

Amortization of actuarial loss and prior service credit
1

 
1

 
—

Net periodic benefit cost
$
55

 
$
52

 
$
50


The components of net periodic benefit cost other than service cost are included in other expense, net in the consolidated statements of earnings.
Weighted-Average Assumptions Used in Determining Benefit Obligations at the Measurement Date
as of December 31
2019
 
2018
Defined benefit plans
 
 
 
Discount rate
3.0
%
 
4.0
%
Rate of compensation increases
4.6
%
 
4.6
%
Other post-employment plans
 
 
 
Discount rate
3.6
%
 
4.6
%

The assumptions used in calculating the December 31, 2019 measurement date benefit obligations will be used in the calculation of net periodic benefit cost in 2020.
Weighted-Average Assumptions Used in Determining Net Periodic Benefit Cost
years ended December 31
2019
 
2018
 
2017
Defined benefit plans
 
 
 
 
 
Discount rate for determining service cost
4.0
%
 
3.4
%
 
3.9
%
Discount rate for determining interest cost
4.0
%
 
3.1
%
 
3.7
%
Expected long-term rate of return on plan assets
7.6
%
 
7.7
%
 
7.8
%
Expected rate of change in compensation
4.6
%
 
4.4
%
 
4.4
%
Other post-employment plans
 
 
 
 
 
Discount rate for determining service cost
4.7
%
 
4.0
%
 
4.9
%
Discount rate for determining interest cost
4.3
%
 
3.7
%
 
4.1
%

For the December 31, 2019 post-retirement health care obligations remeasurement, the company assumed a 6.4% pre-65 (7.0% post-65) annual rate of increase in the per capita cost of covered health care benefits. The rate was assumed to decrease gradually to 4.5% in 2050 and remain at that level thereafter. For purposes of measuring the 2019 post-retirement health care costs, the company assumed a 6.6% pre-65 (7.3% post-65) annual rate of increase in the per capita cost of covered health care benefits. The rate was assumed to decrease gradually to 4.5% for 2050 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. As of December 31, 2019, a one percentage point change in assumed health care cost trend rates would have the following effects:
 
One percentage point
year ended December 31, 2019 (in millions) (brackets denote a reduction)
Increase
 
Decrease
Service cost and interest cost
$
13

 
$
(10
)
Projected benefit obligation
244

 
(186
)


Defined Benefit Pension Plan Assets
 
 
 
Basis of fair value measurement
as of December 31 (in millions)
2019
 
Quoted prices in active markets for
 identical assets
 (Level 1)
 
Significant other
 observable
 inputs
 (Level 2)
 
Significant
 unobservable
 inputs
 (Level 3)
Equities
 
 
 
 
 
 
 
U.S. large cap(a)
$
884

 
$
884

 
$
—

 
$
—

U.S. mid cap(b)
138

 
138

 
—

 
—

International(c)
349

 
349

 
—

 
—

Fixed income securities
 
 
 
 
 
 
 
U.S. government securities(d)
149

 
21

 
128

 
—

Corporate debt instruments(d)
372

 
112

 
260

 
—

Non-U.S. government securities(d)
202

 
84

 
118

 
—

Other(d)
320

 
318

 
2

 
—

Absolute return funds(e)
296

 
4

 
292

 
—

Real assets
9

 
9

 
—

 
—

Other(f)
132

 
132

 
—

 
—

Total
$
2,851

 
$
2,051

 
$
800

 
$
—

Total assets measured at NAV
4,265

 
 
 
 
 
 
Fair value of plan assets
$
7,116

 


 


 



 
 
 
Basis of fair value measurement
as of December 31 (in millions)
2018
 
Quoted prices in active markets for
 identical assets
 (Level 1)
 
Significant other
 observable
 inputs
 (Level 2)
 
Significant
 unobservable
 inputs
 (Level 3)
Equities
 
 
 
 
 
 
 
U.S. large cap(a)
$
719

 
$
719

 
$
—

 
$
—

U.S. mid cap(b)
67

 
67

 
—

 
—

International(c)
226

 
226

 
—

 
—

Fixed income securities
 
 
 
 
 
 
 
U.S. government securities(d)
140

 
21

 
119

 
—

Corporate debt instruments(d)
385

 
123

 
262

 
—

Non-U.S. government securities(d)
175

 
48

 
127

 
—

Other(d)
232

 
225

 
7

 
—

Absolute return funds(e)
261

 
3

 
258

 
—

Real assets
7

 
7

 
—

 
—

Other(f)
147

 
147

 
—

 
—

Total
$
2,359

 
$
1,586

 
$
773

 
$
—

Total assets measured at NAV
3,278

 
 
 
 
 
 
Fair value of plan assets
$
5,637

 


 


 


(a)
A mix of index funds and actively managed equity accounts that are benchmarked to various large cap indices.
(b)
A mix of index funds and actively managed equity accounts that are benchmarked to various mid cap indices.
(c)
A mix of index funds and actively managed equity accounts that are benchmarked to various non-U.S. equity indices in both developed and emerging markets.
(d)
Securities held by actively managed accounts, index funds and mutual funds.
(e)
Primarily funds having global mandates with the flexibility to allocate capital broadly across a wide range of asset classes and strategies, including but not limited to equities, fixed income, commodities, financial futures, currencies and other securities, with objectives to outperform agreed upon benchmarks of specific return and volatility targets.
(f)
Investments in cash and cash equivalents.
Equities and registered investment companies having quoted prices are valued at the published market prices. Fixed income securities that are valued using significant other observable inputs are quoted at prices obtained from independent financial service industry-recognized vendors. Investments held in pooled investment funds, common collective trusts or limited partnerships are valued at the net asset value (NAV) practical expedient to estimate fair value. The NAV is provided by the fund administrator and is based on the value of the underlying assets owned by the fund minus its liabilities.
The investment mix of equity securities, fixed income and other asset allocation strategies is based upon achieving a desired return, balancing higher return, more volatile equity securities and lower return, less volatile fixed income securities. Investment allocations are established for each plan and are generally made across a range of markets, industry sectors, capitalization sizes and in the case of fixed income securities, maturities and credit quality. The 2019 target investment allocation for the AbbVie Pension Plan was 35% in equity securities, 20% in fixed income securities and 45% in asset allocation strategies and other holdings. There are no known significant concentrations of risk in the plan assets of the AbbVie Pension Plan or of any other plans.
The expected return on plan assets assumption for each plan is based on management's expectations of long-term average rates of return to be achieved by the underlying investment portfolio. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plans are invested, as well as current economic and capital market conditions.
Expected Benefit Payments
The following table summarizes total benefit payments expected to be paid to plan participants including payments funded from both plan and company assets:
years ending December 31 (in millions)
Defined
 benefit plans
 
Other
 post-employment
 plans
2020
$
221

 
$
18

2021
235

 
21

2022
251

 
24

2023
268

 
26

2024
286

 
29

2025 to 2029
1,737

 
186


Defined Contribution Plan
AbbVie's principal defined contribution plan is the AbbVie Savings Plan. AbbVie recorded expense of $102 million in 2019, $89 million in 2018 and $82 million in 2017 related to this plan. AbbVie provides certain other post-employment benefits, primarily salary continuation arrangements, to qualifying employees and accrues for the related cost over the service lives of the employees.