

The following table provides the components of net periodic benefit cost:
	Three Months Ended
	Pension Plans
	U.S. Qualified^(a)						U.S. Supplemental (Non-Qualified)^(b)						International^(c)						Postretirement Plans^(d)
(MILLIONS OF DOLLARS)	Oct 2, 2016			Sep 27, 2015			Oct 2, 2016			Sep 27, 2015			Oct 2, 2016			Sep 27, 2015			Oct 2, 2016			Sep 27, 2015
Net periodic benefit cost/(credit):
Service cost^(e)	$	69		$	71		$	5		$	5		$	41		$	46		$	11		$	14
Interest cost^(e)	218			169			18			13			58			77			33			26
Expected return on plan assets	(239		)	(272		)	—			—			(95		)	(105		)	(8		)	(13		)
Amortization of:
Actuarial losses	99			89			9			11			23			31			9			9
Prior service costs (credits)	1			(2		)	—			—			(1		)	(2		)	(45		)	(43		)
Curtailments	2			1			1			—			—			—			(8		)	(4		)
Settlements	21			32			7			4			1			1			—			—
Special termination benefits	—			—			—			—			—			1			—			—
	$	170		$	88		$	39		$	33		$	27		$	49		$	(9	)	$	(11	)

	Nine Months Ended
	Pension Plans
	U.S. Qualified^(a)						U.S. Supplemental (Non-Qualified)^(b)						International^(c)						Postretirement Plans^(d)
(MILLIONS OF DOLLARS)	Oct 2, 2016			Sep 27, 2015			Oct 2, 2016			Sep 27, 2015			Oct 2, 2016			Sep 27, 2015			Oct 2, 2016			Sep 27, 2015
Net periodic benefit cost/(credit):
Service cost^(e)	$	193		$	216		$	14		$	17		$	126		$	140		$	31		$	41
Interest cost^(e)	486			505			40			41			178			232			77			91
Expected return on plan assets	(721		)	(813		)	—			—			(291		)	(314		)	(25		)	(39		)
Amortization of:
Actuarial losses	297			253			27			34			70			94			23			28
Prior service costs (credits)	4			(5		)	(1		)	(1		)	(2		)	(5		)	(127		)	(104		)
Curtailments	5			2			1			—			(1		)	—			(14		)	(20		)
Settlements	52			76			23			21			2			1			—			—
Special termination benefits	—			—			—			—			—			1			—			—
	$	316		$	235		$	105		$	110		$	81		$	150		$	(36	)	$	(5	)

^(a)

The increase in net periodic benefit costs for the three months ended October 2, 2016, compared to the three months ended September 27, 2015, for our U.S. qualified pension plans was primarily due to (i) higher interest costs resulting from a change in our approach in the third quarter of 2016 for measuring service and interest costs (the adjustment increased interest costs by $57 million related to prior periods in 2016 (see (e) below)), (ii) a lower expected return on plan assets resulting from a lower expected rate of return, as well as a net decrease of approximately $1.1 billion in the asset base, due in part to lump-sum payments made in 2015 to certain terminated vested colleagues to settle Pfizer’s pension obligation, partially offset by a voluntary contribution of $1.0 billion made at the beginning of January 2016, and (iii) an increase in the amounts amortized for actuarial losses, primarily as a result of the addition of Hospira qualified plans. The aforementioned increases were partially offset by lower settlement activity in 2016. The increase in net periodic benefit costs for the nine months ended October 2, 2016, compared to the nine months ended September 27, 2015, for our U.S. qualified pension plans was primarily driven by (i) a lower expected return on plan assets resulting from a lower expected rate of return, as well as a net decrease of approximately $1.1 billion in the asset base, due in part to lump-sum payments made in 2015 to certain terminated vested colleagues to settle Pfizer’s pension obligation, partially offset by a voluntary contribution of $1.0 billion made at the beginning of January 2016, and (ii) an increase in the amounts amortized for actuarial losses, primarily as a result of the addition of Hospira qualified plans. The aforementioned increases were partially offset by (i) lower service costs resulting from a higher discount rate, (ii) lower settlement activity, and (iii) lower interest costs resulting from a lower beginning benefit obligation.

^(b)

The increase in net periodic benefit costs for the three months ended October 2, 2016, compared to the three months ended September 27, 2015, for our U.S. non-qualified pension plans was primarily due to (i) higher interest costs resulting from a change in our approach in the third quarter for measuring service and interest costs (the adjustment increased interest costs by $4 million related to prior periods in 2016 (see (e) below)), and (ii) higher settlement activity. The aforementioned increases were partially offset by a decrease in the amounts amortized for actuarial losses resulting from the increase in 2015 in the discount rate used to determine the benefit obligation. The decrease in net periodic benefit costs for the nine months ended October 2, 2016, compared to the nine months ended September 27, 2015, for our U.S. non-qualified pension plans was primarily driven by (i) a decrease in the amounts amortized for actuarial losses resulting from the increase in 2015 in the discount rate used to determine the benefit obligation, and (ii) lower service costs resulting from a higher discount rate. The aforementioned decreases were partially offset by an increase in settlement activity.

^(c)

The decrease in net periodic benefit costs for the three and nine months ended October 2, 2016, compared to the three and nine months ended September 27, 2015, for our international pension plans was primarily driven by (i) lower service and interest costs, resulting from a change in our approach for measuring service and interest costs (see (e) below), and (ii) a decrease in the amounts amortized for actuarial losses resulting from large gains in 2015, which decreased the plan net loss position. The aforementioned decreases to our net periodic benefit costs were partially offset by a decrease in the expected return on plan assets due to a lower expected rate of return on plan assets.

^(d)

The decrease in net periodic benefit credit for the three months ended October 2, 2016, compared to the three months ended September 27, 2015, for our postretirement plans was primarily driven by (i) higher interest costs resulting from a change in our approach in the third quarter of 2016 for measuring service and interest costs (the adjustment increased interest costs by $8 million related to prior periods in 2016 (see (e) below)), and (ii) a decrease in expected return on plan assets, resulting from a decrease in plan assets, reflecting payments by the plan for IRC 401(h) reimbursements to Pfizer for eligible 2014 and 2015 prescription drug expenses for certain retirees. The aforementioned changes were partially offset by (i) higher curtailment gains and (ii) lower service costs resulting from a higher discount rate. The increase in net periodic benefit credit for the nine months ended October 2, 2016, compared to the nine months ended September 27, 2015, for our postretirement plans was primarily driven by (i) an increase in prior service credits due to the postretirement medical plan cap changes during 2016 and 2015, (ii) lower interest costs resulting from a lower benefit obligation, and (iii) lower service costs resulting from a higher discount rate. The aforementioned changes were partially offset by (i) a decrease in expected return on plan assets, primarily resulting from a decrease in plan assets, reflecting payments by the plan for IRC 401(h) reimbursements to Pfizer for eligible 2014 and 2015 prescription drug expenses for certain retirees, (ii) lower curtailment gains, and (iii) a decrease in the amounts amortized for actuarial losses resulting from the increase in 2015 in the discount rate used to determine the benefit obligation.

^(e)

Effective January 1, 2016, the Company changed the approach used to measure service and interest costs for certain international pension and other postretirement benefit plans. For fiscal 2015, the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the respective plan obligations. For fiscal 2016, we elected to measure service and interest costs by applying the spot rates along the yield curve for certain international plans to the plans' liability cash flows. The Company believes the new 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. This change does not affect the measurement of our plan obligations. We have accounted for this change as a change in accounting estimate and, accordingly, have accounted for it on a prospective basis. The expected reduction in expense for 2016 associated with this change in estimate is $42 million, which is recognized evenly over each quarter of the year. Effective January 1, 2016, the Company made a similar change for its U.S. pension and other postretirement benefit plans, but in the third quarter of 2016, we determined that our use of the bond model required the measurement of such costs to be conceptually aligned with the measurement of the pension benefit obligation. As such, 2016 service and interest costs for the U.S. plans were measured utilizing a single weighted-average discount rate derived from the bond model consistent with the approach used in 2015, resulting in an adjustment to increase net periodic pension cost by $112 million in the third quarter of 2016.