Pension and Other Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2024

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefit Plans

Pension and Other Postretirement Benefit Plans

The Company has defined benefit pension plans covering eligible employees in the U.S. and in certain of its international subsidiaries. In addition, the Company provides medical benefits, principally to its eligible U.S. retirees and their dependents, through its other postretirement benefit plans. The Company uses December 31 as the year-end measurement date for all of its pension plans and other postretirement benefit plans.

Net Periodic Benefit Cost

The net periodic benefit cost (credit) for pension and other postretirement benefit plans consisted of the following components:

	Pension Benefits
	U.S.						International						Other Postretirement Benefits
Years Ended December 31	2024		2023		2022		2024		2023		2022		2024		2023		2022
Service cost	$	373	$	326	$	372	$	243	$	196	$	283	$	30	$	32	$	48
Interest cost	537		526		457		294		299		145		56		63		46
Expected return on plan assets	(826)		(735)		(753)		(554)		(517)		(383)		(80)		(64)		(86)
Amortization of unrecognized prior service (credit) cost	—		(1)		(32)		(13)		2		(14)		(43)		(49)		(57)
Net loss (gain) amortization	43		—		128		5		(3)		96		(51)		(42)		(43)
Termination benefits	5		3		2		1		—		1		4		—		—
Curtailments	—		8		12		—		(1)		—		—		(1)		(1)
Settlements	—		28		239		(1)		(5)		1		—		—		—
Net periodic benefit cost (credit)	$	132	$	155	$	425	$	(25)	$	(29)	$	129	$	(84)	$	(61)	$	(93)

In connection with restructuring actions (see Note 5), termination charges were recorded in 2024, 2023 and 2022 on pension and other postretirement benefit plans related to expanded eligibility for certain employees exiting Merck. Also, in connection with these restructuring activities, curtailments and settlements were recorded on certain pension plans. Lump sum payments to U.S. pension plan participants also contributed to the settlements recorded during 2023 and 2022.

The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 14), with the exception of certain amounts for termination benefits, curtailments and settlements, which are recorded in Restructuring costs if the event giving rise to the termination benefits, curtailment or settlement is related to restructuring actions.

Obligations and Funded Status

Summarized information about the changes in plan assets and benefit obligations, the funded status and the amounts recorded at December 31 is as follows:

	Pension Benefits								Other Postretirement Benefits
	U.S.				International
	2024		2023		2024		2023		2024		2023
Fair value of plan assets January 1	$	9,804	$	9,094	$	9,562	$	8,473	$	1,045	$	947
Actual return on plan assets	266		1,077		637		832		35		115
Company contributions	262		307		198		249		46		74
Effects of exchange rate changes	—		—		(522)		283		—		—
Benefits paid	(615)		(497)		(250)		(256)		(89)		(95)
Settlements	—		(177)		(14)		(53)		—		(2)
Other	—		—		36		34		3		6
Fair value of plan assets December 31	$	9,717	$	9,804	$	9,647	$	9,562	$	1,040	$	1,045
Benefit obligation January 1	$	10,446	$	9,854	$	9,042	$	7,755	$	1,104	$	1,157
Service cost	373		326		243		196		30		32
Interest cost	537		526		294		299		56		63
Actuarial (gains) losses (1)	(595)		403		(549)		766		32		(58)
Benefits paid	(615)		(497)		(250)		(256)		(89)		(95)
Effects of exchange rate changes	—		—		(473)		288		(4)		1
Plan amendments	—		—		(56)		14		—		—
Curtailments	—		8		—		(1)		—		—
Termination benefits	5		3		1		—		4		—
Settlements	—		(177)		(14)		(53)		—		(2)
Other	—		—		36		34		3		6
Benefit obligation December 31	$	10,151	$	10,446	$	8,274	$	9,042	$	1,136	$	1,104
Funded status December 31	$	(434)	$	(642)	$	1,373	$	520	$	(96)	$	(59)
Recognized as:
Other Assets	$	26	$	—	$	1,785	$	1,019	$	51	$	107
Accrued and other current liabilities	(55)		(49)		(18)		(19)		(7)		(8)
Other Noncurrent Liabilities	(405)		(593)		(394)		(480)		(140)		(158)

(1)    Actuarial (gains) losses primarily reflect changes in discount rates.

At December 31, 2024 and 2023, the accumulated benefit obligation was $18.1 billion and $19.1 billion, respectively, for all pension plans, of which $10.0 billion and $10.3 billion, respectively, related to U.S. pension plans.

Information related to the funded status of selected pension plans at December 31 is as follows:

	U.S.				International
	2024		2023		2024		2023
Pension plans with a projected benefit obligation in excess of plan assets
Projected benefit obligation	$	9,517	$	10,446	$	1,847	$	2,961
Fair value of plan assets	9,057		9,804		1,435		2,462
Pension plans with an accumulated benefit obligation in excess of plan assets
Accumulated benefit obligation	$	442	$	9,700	$	1,768	$	1,791
Fair value of plan assets	—		9,186		1,385		1,336

Plan Assets

Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value with Level 1 having the highest priority and Level 3 having the lowest:

Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity. The Level 3 assets are those whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques with significant unobservable inputs, as well as instruments for which the determination of fair value requires significant judgment or estimation. At December 31, 2024 and 2023, $700 million and $788 million, respectively, or approximately 4% of the Company’s pension investments were categorized as Level 3 assets.

If the inputs used to measure the financial assets fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The fair values of the Company’s pension plan assets at December 31 by asset category are as follows:

	Fair Value Measurements Using										Fair Value Measurements Using
	Level 1		Level 2		Level 3		NAV (1)		Total		Level 1		Level 2		Level 3		NAV (1)		Total
	2024										2023
U.S. Pension Plans
Cash and cash equivalents	$	43	$	—	$	—	$	121	$	164	$	34	$	—	$	—	$	124	$	158
Investment funds
Developed markets equities	170		—		—		2,385		2,555		224		—		—		2,573		2,797
Emerging markets equities	—		—		—		1,265		1,265		—		—		—		740		740
Real estate	—		—		—		174		174		—		—		—		113		113
Equity securities
Developed markets	2,171		—		—		—		2,171		2,071		—		—		—		2,071
Fixed income securities
Government and agency obligations	—		2,101		—		—		2,101		—		2,307		—		—		2,307
Corporate obligations	—		1,293		—		—		1,293		—		1,485		—		—		1,485
Mortgage and asset-backed securities	—		21		—		—		21		—		21		—		—		21
Other investments (liabilities)
Derivatives	(29)		—		—		—		(29)		109		—		—		—		109
Other	—		—		2		—		2		—		—		3		—		3
Plan assets at fair value	$	2,355	$	3,415	$	2	$	3,945	$	9,717	$	2,438	$	3,813	$	3	$	3,550	$	9,804
International Pension Plans
Cash and cash equivalents	$	112	$	—	$	—	$	11	$	123	$	98	$	—	$	—	$	20	$	118
Investment funds
Developed markets equities	599		3,537		—		96		4,232		507		3,257		—		106		3,870
Government and agency obligations	262		2,974		—		149		3,385		234		3,123		—		166		3,523
Corporate obligations	23		8		—		149		180		23		8		—		166		197
Emerging markets equities	54		—		—		91		145		44		—		—		66		110
Other fixed income obligations	8		7		—		4		19		9		8		—		3		20
Real estate	—		—		—		12		12		—		—		—		10		10
Equity securities
Developed markets	287		—		—		—		287		278		—		—		—		278
Fixed income securities
Government and agency obligations	—		368		—		—		368		—		423		—		—		423
Corporate obligations	—		141		—		—		141		—		160		—		—		160
Mortgage and asset-backed securities	—		54		—		—		54		—		61		—		—		61
Other investments
Insurance contracts (2)	—		1		698		2		701		—		1		785		2		788
Other	—		—		—		—		—		4		—		—		—		4
Plan assets at fair value	$	1,345	$	7,090	$	698	$	514	$	9,647	$	1,197	$	7,041	$	785	$	539	$	9,562

(1)    Certain investments that were measured at net asset value (NAV) per share or its equivalent have not been classified in the fair value hierarchy. The NAV amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets at December 31, 2024 and 2023.

(2)    The plans’ Level 3 investments in insurance contracts are generally valued using a crediting rate that approximates market returns and invest in underlying securities whose market values are unobservable and determined using pricing models, discounted cash flow methodologies, or similar techniques.

The table below provides a summary of the changes in fair value, including transfers in and/or out, of all financial assets measured at fair value using significant unobservable inputs (Level 3) for the Company’s pension plan assets:

	2024						2023
	Insurance Contracts		Other		Total		Insurance Contracts		Other		Total
U.S. Pension Plans
Balance January 1	$	—	$	3	$	3	$	—	$	4	$	4
Actual return on plan assets:
Relating to assets still held at December 31	—		(2)		(2)		—		(2)		(2)
Relating to assets sold during the year	—		2		2		—		2		2
Purchases and sales, net	—		(1)		(1)		—		(1)		(1)
Balance December 31	$	—	$	2	$	2	$	—	$	3	$	3
International Pension Plans
Balance January 1	$	785	$	—	$	785	$	761	$	—	$	761
Actual return on plan assets:
Relating to assets still held at December 31	(26)		—		(26)		77		—		77
Purchases and sales, net	(61)		—		(61)		(53)		—		(53)
Balance December 31	$	698	$	—	$	698	$	785	$	—	$	785

The fair values of the Company’s other postretirement benefit plan assets at December 31 by asset category are as follows:

	Fair Value Measurements Using										Fair Value Measurements Using
	Level 1		Level 2		Level 3		NAV (1)		Total		Level 1		Level 2		Level 3		NAV (1)		Total
	2024										2023
Cash and cash equivalents	$	—	$	—	$	—	$	5	$	5	$	—	$	—	$	—	$	13	$	13
Investment funds
Developed markets equities	3		—		—		46		49		24		—		—		277		301
Emerging markets equities	—		—		—		24		24		—		—		—		80		80
Real estate	—		—		—		3		3		—		—		—		12		12
Equity securities
Developed markets	41		—		—				41		223		—		—		—		223
Fixed income securities
Corporate obligations	—		598		—				598		—		157		—		—		157
Government and agency obligations	—		266		—				266		—		245		—		—		245
Mortgage and asset-backed securities	—		54		—		—		54		—		2		—		—		2
Other Investments (liabilities)
Derivatives	—		—		—		—		—		12		—		—		—		12
Plan assets at fair value	$	44	$	918	$	—	$	78	$	1,040	$	259	$	404	$	—	$	382	$	1,045

(1)    Certain investments that were measured at net asset value (NAV) per share or its equivalent have not been classified in the fair value hierarchy. The NAV amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets at December 31, 2024 and 2023.

The Company has established investment guidelines for its U.S. pension and other postretirement plans to create an asset allocation that is expected to deliver a rate of return sufficient to meet the long-term obligation of each plan, given an acceptable level of risk. The target investment portfolio of the Company’s U.S. pension and other postretirement benefit plans is allocated 25% to 40% in U.S. equities, 15% to 30% in international equities, 40% to 50% in fixed-income investments, and up to 8% in cash and other investments. The portfolio’s equity weighting is consistent with the long-term nature of the plans’ benefit obligations. The expected annual standard deviation of returns of the target portfolio, which approximates 12%, reflects both the equity allocation and the diversification benefits among the asset classes in which the portfolio invests. For international pension plans, the targeted investment portfolio varies based on the duration of pension liabilities and local government rules and regulations.

Although a significant percentage of plan assets are invested in U.S. equities, concentration risk is mitigated through the use of strategies that are diversified within management guidelines.

Expected Contributions

Contributions during 2025 are expected to be approximately $270 million for U.S. pension plans, approximately $180 million for international pension plans and approximately $70 million for other postretirement benefit plans.

Expected Benefit Payments

Expected benefit payments are as follows:

	U.S. Pension Benefits		International Pension Benefits		Other Postretirement Benefits
2025	$	771	$	291	$	86
2026	775		275		87
2027	789		286		89
2028	799		300		91
2029	822		314		96
2030 — 2034	4,386		1,792		515

Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service.

Amounts Recognized in Other Comprehensive Income (Loss)

Net gain/loss amounts reflect differences between expected and actual returns on plan assets as well as the effects of changes in actuarial assumptions. Net gain/loss amounts in excess of certain thresholds are amortized into net periodic benefit cost over the average remaining service life of employees. The following amounts were reflected as components of OCI:

	Pension Plans												Other Postretirement Benefit Plans
	U.S.						International
Years Ended December 31	2024		2023		2022		2024		2023		2022		2024		2023		2022
Net gain (loss) arising during the period	$	35	$	(69)	$	(42)	$	634	$	(438)	$	116	$	(78)	$	110	$	—
Prior service credit (cost) arising during the period	—		—		—		56		(16)		(4)		—		—		—
	$	35	$	(69)	$	(42)	$	690	$	(454)	$	112	$	(78)	$	110	$	—
Net loss (gain) amortization included in benefit cost	$	43	$	—	$	128	$	5	$	(3)	$	96	$	(51)	$	(42)	$	(43)
Prior service (credit) cost amortization included in benefit cost	—		(1)		(32)		(13)		2		(14)		(43)		(49)		(57)
Settlements and curtailments	—		36		251		(1)		(6)		1		—		(1)		(1)
	$	43	$	35	$	347	$	(9)	$	(7)	$	83	$	(94)	$	(92)	$	(101)

Actuarial Assumptions

The Company reassesses its benefit plan assumptions on a regular basis. The weighted average assumptions used in determining U.S. pension and other postretirement benefit plan and international pension plan information are as follows:

	U.S. Pension and Other Postretirement Benefit Plans						International Pension Plans
December 31	2024		2023		2022		2024		2023		2022
Net periodic benefit cost
Discount rate	5.30	%	5.50	%	3.00	%	3.40	%	3.90	%	1.50	%
Expected rate of return on plan assets	7.75	%	7.00	%	6.70	%	5.20	%	5.00	%	3.70	%
Salary growth rate	4.60	%	4.60	%	4.60	%	3.20	%	3.20	%	2.90	%
Interest crediting rate	5.30	%	5.30	%	5.00	%	3.40	%	3.30	%	3.00	%
Benefit obligation
Discount rate	5.70	%	5.30	%	5.50	%	3.70	%	3.40	%	3.90	%
Salary growth rate	4.80	%	4.60	%	4.60	%	3.10	%	3.20	%	3.20	%
Interest crediting rate	5.40	%	5.30	%	5.30	%	3.50	%	3.40	%	3.30	%

For both the pension and other postretirement benefit plans, the discount rate is evaluated on measurement dates and modified to reflect the prevailing market rate of a portfolio of high-quality fixed-income debt instruments that would provide the future cash flows needed to pay the benefits included in the benefit obligation as they come due. The expected rate of return for both the pension and other postretirement benefit plans represents the average rate of return to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid and is determined on a plan basis. The expected rate of return for each plan is developed considering long-term historical returns data, current market conditions, and actual returns on the plan assets. Using this reference information, the long-term return expectations for each asset category and a weighted-average expected return for each plan’s target portfolio is developed according to the allocation among those investment categories. The expected portfolio performance reflects the contribution of active management as appropriate. For 2025, the expected rate of return for the Company’s U.S. pension and other postretirement benefit plans will be 7.70%, as compared to 7.75% in 2024.

The health care cost trend rate assumptions for other postretirement benefit plans are as follows:

December 31	2024		2023
Health care cost trend rate assumed for next year	7.90	%	7.80	%
Rate to which the cost trend rate is assumed to decline	4.50	%	4.50	%
Year that the trend rate reaches the ultimate trend rate	2040		2038

Savings Plans

The Company also maintains defined contribution savings plans in the U.S. The Company matches a percentage of each employee’s contributions consistent with the provisions of the plan for which the employee is eligible. Total employer contributions to these plans in 2024, 2023 and 2022 were $215 million, $199 million and $175 million, respectively.