Note 13 — Post-Employment Benefits

Retirement plans consist of defined benefit, defined contribution and medical and dental plans. Information for Abbott's major defined benefit plans and post-employment medical and dental benefit plans is as follows:

	Defined Benefit Plans						Medical and Dental Plans
(in millions)	2014			2013			2014			2013
Projected benefit obligations, January 1	$	6,432		$	11,322		$	1,297		$	1,889
Service cost — benefits earned during the year		269			303			33			43
Interest cost on projected benefit obligations		317			276			63			59
(Gains) losses, primarily changes in discount rates, plan design changes, law changes and differences between actual and estimated health care costs		1,554			(650	)		187			(156	)
Benefits paid		(222	)		(185	)		(57	)		(60	)
Separation of AbbVie Inc.		—			(4,654	)		—			(450	)
Other, including foreign currency translation		(5	)		20			(112	)		(28	)

Projected benefit obligations, December 31	$	8,345		$	6,432		$	1,411		$	1,297


Plan assets at fair value, January 1	$	6,123		$	7,949		$	462		$	417
Actual return on plans' assets		529			727			32			61
Company contributions		393			724			41			40
Benefits paid		(222	)		(185	)		(50	)		(56	)
Separation of AbbVie Inc.		—			(3,107	)		—			—
Other, including foreign currency translation		(69	)		15			—			—

Plan assets at fair value, December 31	$	6,754		$	6,123		$	485		$	462


Projected benefit obligations greater than plan assets, December 31	$	(1,591	)	$	(309	)	$	(926	)	$	(835	)


Long-term assets	$	374		$	685		$	—		$	—
Short-term liabilities		(15	)		(11	)		(1	)		—
Long-term liabilities		(1,950	)		(983	)		(925	)		(835	)

Net liability	$	(1,591	)	$	(309	)	$	(926	)	$	(835	)


Amounts Recognized in Accumulated Other Comprehensive Income (loss):
Actuarial losses, net	$	3,187		$	1,791		$	509		$	334
Prior service cost (credits)		1			20			(348	)		(252	)

Total	$	3,188		$	1,811		$	161		$	82

In connection with separation of AbbVie on January 1, 2013, Abbott transferred to AbbVie Accumulated other comprehensive income (loss), net of income taxes, of approximately $1.4 billion. The projected benefit obligations for non-U.S. defined benefit plans was $2.5 billion and $2.0 billion at December 31, 2014 and 2013, respectively. The accumulated benefit obligations for all defined benefit plans were $7.3 billion and $5.5 billion at December 31, 2014 and 2013, respectively.

For plans where the accumulated benefit obligations exceeded plan assets at December 31, 2014 and 2013, the aggregate accumulated benefit obligations, the projected benefit obligations and the aggregate plan assets were as follows:

(in millions)	2014		2013
Accumulated benefit obligation	$	4,315	$	408
Projected benefit obligation		5,133		505
Fair value of plan assets		3,170		—

The components of the net periodic benefit cost were as follows:

	Defined Benefit Plans									Medical and Dental Plans
	2014			2013			2012			2014			2013			2012
	(in millions)
Service cost — benefits earned during the year	$	269		$	303		$	389		$	33		$	43		$	61
Interest cost on projected benefit obligations		317			276			460			63			59			81
Expected return on plans' assets		(458	)		(396	)		(611	)		(40	)		(36	)		(33	)
Amortization of actuarial losses		103			169			244			16			34			34
Amortization of prior service cost (credits)		2			3			2			(39	)		(35	)		(42	)

Total cost		233			355			484			33			65			101
Less: Discontinued operations		(1	)		(3	)		(209	)		—			—			(48	)

Net cost — continuing operations	$	232		$	352		$	275		$	33		$	65		$	53

Other comprehensive income (loss) for each respective year includes the amortization of actuarial losses and prior service costs (credits) as noted in the previous table. Other comprehensive income (loss) for each respective year also includes: net actuarial gains and prior service credits of $1.6 billion for defined benefit plans and $57 million for medical and dental plans in 2014; net actuarial gains and prior service credits of $995 million for defined benefit plans and $201 million for medical and dental plans in 2013; and net actuarial losses of $1.2 billion for defined benefit plans and net actuarial losses of $134 million for medical and dental plans in 2012. The actuarial (loss) for 2012 related to the businesses transferred to AbbVie as part of the separation was $167 million; prior service costs were not significant.

The pretax amount of actuarial losses and prior service cost (credits) included in Accumulated other comprehensive income (loss) at December 31, 2014 that is expected to be recognized in the net periodic benefit cost in 2015 is $191 million and nil of expense, respectively, for defined benefit pension plans and $33 million of expense and $49 million of income, respectively, for medical and dental plans.

The weighted average assumptions used to determine benefit obligations for defined benefit plans and medical and dental plans are as follows:

	2014			2013			2012
Discount rate		3.9	%		4.9	%		4.3	%
Expected aggregate average long-term change in compensation		4.3	%		5.0	%		5.3	%

The weighted average assumptions used to determine the net cost for defined benefit plans and medical and dental plans are as follows:

	2014			2013			2012
Discount rate		4.9	%		4.2	%		5.0	%
Expected return on plan assets		7.5	%		7.8	%		8.0	%
Expected aggregate average long-term change in compensation		4.9	%		5.0	%		5.3	%

The assumed health care cost trend rates for medical and dental plans at December 31 were as follows:

	2014			2013			2012
Health care cost trend rate assumed for the next year		8	%		7	%		7	%
Rate that the cost trend rate gradually declines to		5	%		5	%		5	%
Year that rate reaches the assumed ultimate rate		2025			2019			2019

The discount rates used to measure liabilities were determined based on high-quality fixed income securities that match the duration of the expected retiree benefits. The health care cost trend rate represent Abbott's expected annual rates of change in the cost of health care benefits and is a forward projection of health care costs as of the measurement date. A one-percentage point increase/(decrease) in the assumed health care cost trend rate would increase/(decrease) the accumulated post-employment benefit obligations as of December 31, 2014, by $208 million/$(168) million, and the total of the service and interest cost components of net post-employment health care cost for the year then ended by approximately $16 million/$(12) million.

The following table summarizes the bases used to measure the defined benefit and medical and dental plan assets at fair value:

			Basis of Fair Value Measurement
	Outstanding Balances		Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(in millions)
December 31, 2014:
Equities:
U.S. large cap (a)	$	1,615	$	757	$	858	$	—
U.S. mid cap (b)		433		142		291		—
International (c)		1,353		445		908		—
Fixed income securities:
U.S. government securities (d)		449		10		439		—
Corporate debt instruments (e)		573		130		443		—
Non-U.S. government securities (f)		697		286		411		—
Other (g)		130		35		95		—
Absolute return funds (h)		1,631		203		895		533
Commodities (i)		165		10		69		86
Other (j)		193		115		29		49

	$	7,239	$	2,133	$	4,438	$	668


December 31, 2013:
Equities:
U.S. large cap (a)	$	1,618	$	741	$	877	$	—
U.S. mid cap (b)		409		134		275		—
International (c)		1,319		608		711		—
Fixed income securities:
U.S. government securities (d)		453		61		392		—
Corporate debt instruments (e)		378		108		270		—
Non-U.S. government securities (f)		536		305		231		—
Other (g)		77		69		8		—
Absolute return funds (h)		1,474		197		791		486
Commodities (i)		170		6		97		67
Other (j)		151		149		—		2

	$	6,585	$	2,378	$	3,652	$	555

(a)	A mix of index funds that track the S&P 500 (50 percent in 2014 and 60 percent in 2013) and separate actively managed equity accounts that are benchmarked to the Russell 1000 (50 percent in 2014 and 40 percent in 2013).
(b)	A mix of index funds (70 percent in 2014 and 2013) and separate actively managed equity accounts (30 percent in 2014 and 2013) that track or are benchmarked to the S&P 400 midcap index.

(c)	A mix of index funds (20 percent in 2014 and 0 percent in 2013) and separate actively managed pooled investment funds (80 percent in 2014 and 100 percent in 2013) that track or are benchmarked to the MSCI EAFE and MSCI emerging market indices.
(d)	A mix of index funds that track the Barclays U.S. Gov't Aggregate (65 percent in 2014 and 50 percent in 2013) and separate actively managed accounts (35 percent in 2014 and 50 percent in 2013) that are benchmarked to Barclays U.S. Long Gov't/Corp Index or the Barclays Global Aggregate.
(e)	A mix of index funds that track the Barclays U.S. Gov't Aggregate (15 percent in 2014 and 40 percent in 2013) and separate actively managed accounts (85 percent in 2014 and 60 percent in 2013) that are benchmarked to Barclays U.S. Long Gov't/Corp Index or the Barclays Global Aggregate.
(f)	Primarily United Kingdom, Japan, Netherlands and Irish government-issued bonds.
(g)	Primarily mortgage backed securities (40 percent in 2014 and 100 percent in 2013) and an actively managed, diversified fixed income vehicle benchmarked to the one-month Libor / Euribor (60 percent in 2014 and 0 percent in 2013).
(h)	Primarily funds invested by managers that have a global mandate 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, interest rate futures, currencies and other securities to outperform an agreed upon benchmark with specific return and volatility targets.
(i)	Primarily investments in liquid commodity future contracts and private energy funds.
(j)	Primarily cash and cash equivalents (75 percent in 2014 and 100 percent in 2013) and investment in real estate funds (25 percent in 2014 and 0 percent in 2013).

Equities that are valued using quoted prices are valued at the published market prices. Equities in a common collective trust or a registered investment company that are valued using significant other observable inputs are valued at the net asset value (NAV) provided by the fund administrator. The NAV is based on the value of the underlying assets owned by the fund minus its liabilities. Fixed income securities that are valued using significant other observable inputs are valued at prices obtained from independent financial service industry-recognized vendors. Absolute return funds and commodities are valued at the NAV provided by the fund administrator. Private energy funds are valued at the NAV provided by the partnership on a one-quarter lag adjusted for known cash flows and significant events through the reporting date.

The following table summarizes the change in the value of assets that are measured using significant unobservable inputs:

	2014		2013
	(in millions)
January 1	$	555	$	783
Transfers in (out of) from other categories		—		6
Separation of AbbVie Inc.		—		(165	)
Actual return on plan assets:
Assets on hand at year end		25		29
Assets sold during the year		21		51
Purchases, sales and settlements, net		67		(149	)

December 31	$	668	$	555

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 made across a range of markets, industry sectors, capitalization sizes, and in the case of fixed income securities, maturities and credit quality. The plans do not directly hold any securities of Abbott. There are no known significant concentrations of risk in the plans' assets. Abbott's medical and dental plans' assets are invested in a similar mix as the pension plan assets. The actual asset allocation percentages at year end are consistent with the company's targeted asset allocation percentages.

The plans' expected return on assets, as shown above is based on management's expectations of long-term average rates of return to be achieved by the underlying investment portfolios. 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.

Abbott funds its domestic pension plans according to IRS funding limitations. International pension plans are funded according to similar regulations. Abbott funded $393 million in 2014 and $724 million in 2013 to defined pension plans. Abbott expects to contribute approximately $585 million to its pension plans in 2015, of which approximately $470 million relates to its main domestic pension plan.

Total benefit payments expected to be paid to participants, which includes payments funded from company assets, as well as paid from the plans, are as follows:

(in millions)	Defined Benefit Plans		Medical and Dental Plans
2015	$	212	$	70
2016		225		71
2017		240		72
2018		259		73
2019		278		74
2020 to 2024		1,735		407

The Abbott Stock Retirement Plan is the principal defined contribution plan. Abbott's contributions to this plan were $85 million in 2014, $86 million in 2013 and $150 million in 2012. The contribution amount in 2012 included amounts associated with the businesses transferred to AbbVie.