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POSTRETIREMENT BENEFITS AND EMPLOYEE STOCK OWNERSHIP PLAN
 12 Months Ended
Jun. 30, 2020
Retirement Benefits [Abstract]  
Pension and Other Postretirement Benefits Disclosure [Text Block]
POSTRETIREMENT BENEFITS AND EMPLOYEE STOCK OWNERSHIP PLAN
We offer various postretirement benefits to our employees.
Defined Contribution Retirement Plans
We have defined contribution plans, which cover the majority of our U.S. employees, as well as employees in certain other countries. These plans are fully funded. We generally make contributions to participants' accounts based on individual base salaries and years of service. Total global defined contribution expense was $317, $272 and $292 in 2020, 2019 and 2018, respectively.
The primary U.S. defined contribution plan (the U.S. DC plan) comprises the majority of the expense for the Company's defined contribution plans. For the U.S. DC plan, the contribution rate is set annually. Total contributions for this plan approximated 14% of total participants' annual wages and salaries in 2020, 2019 and 2018.
We maintain The Procter & Gamble Profit Sharing Trust (Trust) and Employee Stock Ownership Plan (ESOP) to provide a portion of the funding for the U.S. DC plan and other retiree benefits (described below). Operating details of the ESOP are provided at the end of this Note. The fair value of the ESOP Series A shares allocated to participants reduces our cash contribution required to fund the U.S. DC plan.
Defined Benefit Retirement Plans and Other Retiree Benefits
We offer defined benefit retirement pension plans to certain employees. These benefits relate primarily to plans outside the U.S. and, to a lesser extent, plans assumed in previous acquisitions covering U.S. employees.
We also provide certain other retiree benefits, primarily health care, for the majority of our U.S. employees who become eligible for these benefits when they meet minimum age and service requirements. Generally, the health care plans require cost sharing with retirees and pay a stated percentage of expenses, reduced by deductibles and other coverages. These benefits are primarily funded by ESOP Series B shares and certain other assets contributed by the Company.
Obligation and Funded Status. The following provides a reconciliation of benefit obligations, plan assets and funded status of these defined benefit plans:
Pension Benefits (1)
Other Retiree Benefits (2)
Years ended June 302020201920202019
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year (3)
$17,037  $15,658  $4,964  $4,778  
Service cost247  259  100  101  
Interest cost276  339  160  187  
Participants' contributions11  12  74  76  
Amendments3  9  (136) —  
Net actuarial loss/(gain)951  1,587  (85) 37  
Acquisitions—  49  —  —  
Special termination benefits11  13  2  8  
Currency translation and other(218) (283) (64) 20  
Benefit payments(557) (606) (245) (243) 
BENEFIT OBLIGATION AT END OF YEAR (3)
$17,761  $17,037  $4,770  $4,964  
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year$11,382  $11,267  $5,096  $3,259  
Actual return on plan assets664  739  595  1,918  
Acquisitions—  4  —  —  
Employer contributions180  178  33  31  
Participants' contributions11  12  74  76  
Currency translation and other(196) (212) 2  (1) 
ESOP debt impacts (4)
—  —  63  56  
Benefit payments(557) (606) (245) (243) 
FAIR VALUE OF PLAN ASSETS AT END OF YEAR$11,484  $11,382  $5,618  $5,096  
FUNDED STATUS$(6,277) $(5,655) $848  $132  
(1)Primarily non-U.S.-based defined benefit retirement plans.
(2)Primarily U.S.-based other postretirement benefit plans.
(3)For the pension benefit plans, the benefit obligation is the projected benefit obligation. For other retiree benefit plans, the benefit obligation is the accumulated postretirement benefit obligation.
(4)Represents the net impact of ESOP debt service requirements, which is netted against plan assets for other retiree benefits.

The underfunding of pension benefits is primarily a function of the different funding incentives that exist outside of the U.S. In certain countries, there are no legal requirements or financial incentives provided to companies to pre-fund pension obligations prior to their due date. In these instances, benefit payments are typically paid directly from the Company's cash as they become due.
Pension BenefitsOther Retiree Benefits
As of June 302020201920202019
CLASSIFICATION OF NET AMOUNT RECOGNIZED
Noncurrent assets$12  $19  $1,843  $1,257  
Current liabilities(66) (52) (30) (27) 
Noncurrent liabilities(6,223) (5,622) (965) (1,098) 
NET AMOUNT RECOGNIZED$(6,277) $(5,655) $848  $132  
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)
Net actuarial loss$5,662  $5,062  $572  $874  
Prior service cost/(credit)198  214  (511) (424) 
NET AMOUNTS RECOGNIZED IN AOCI$5,860  $5,276  $61  $450  
The accumulated benefit obligation for all defined benefit pension plans was $16.5 billion and $15.8 billion as of June 30, 2020 and 2019, respectively. Pension plans with accumulated benefit obligations in excess of plan assets and plans with projected benefit obligations in excess of plan assets consisted of the following:
Accumulated Benefit Obligation 
Exceeds the Fair Value of Plan Assets		Projected Benefit Obligation
Exceeds the Fair Value of Plan Assets
As of June 302020201920202019
Projected benefit obligation$12,095  $11,604  $17,635  $16,304  
Accumulated benefit obligation11,196  10,711  16,377  15,096  
Fair value of plan assets5,994  6,026  11,347  10,630  

Net Periodic Benefit Cost. Components of the net periodic benefit cost were as follows:
Pension BenefitsOther Retiree Benefits
Years ended June 30202020192018202020192018
AMOUNTS RECOGNIZED IN NET PERIODIC BENEFIT COST
Service cost$247  $259  $280  $100  $101  $112  
Interest cost276  339  348  160  187  177  
Expected return on plan assets(740) (732) (751) (473) (447) (451) 
Amortization of net actuarial loss 340  225  295  68  66  69  
Amortization of prior service cost/(credit) 25  26  28  (48) (48) (41) 
Amortization of net actuarial loss/prior service cost due to settlements and curtailments7  9  —  —  —  —  
Special termination benefits11  13  8  2  8  7  
GROSS BENEFIT COST/(CREDIT)166  139  208  (191) (133) (127) 
Dividends on ESOP preferred stock—  —  —  (19) (28) (37) 
NET PERIODIC BENEFIT COST/(CREDIT)$166  $139  $208  $(210) $(161) $(164) 
CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN AOCI
Net actuarial loss/(gain) - current year$1,027  $1,580  $(207) $(1,434) 
Prior service cost/(credit) - current year3  9  (136) —  
Amortization of net actuarial loss(340) (225) (68) (66) 
Amortization of prior service (cost)/credit(25) (26) 48  48  
Amortization of net actuarial loss/prior service costs due to settlements and curtailments(7) (9) —  —  
Currency translation and other(74) (84) (26) 14  
TOTAL CHANGE IN AOCI584  1,245  (389) (1,438) 
NET AMOUNTS RECOGNIZED IN PERIODIC BENEFIT COST AND AOCI$750  $1,384  $(599) $(1,599) 

The service cost component of the net periodic benefit cost is included in the Consolidated Statements of Earnings in Cost of products sold and SG&A. All other components are included in the Consolidated Statements of Earnings in Other non-operating income/(expense), net, unless otherwise noted.
Amounts expected to be amortized from AOCI into net periodic benefit cost during the year ending June 30, 2021, are as follows:
Pension BenefitsOther Retiree Benefits
Net actuarial loss$401  $47  
Prior service cost/(credit)25  (59) 
Assumptions. We determine our actuarial assumptions on an annual basis. These assumptions are weighted to reflect each country that may have an impact on the cost of providing retirement benefits. The weighted average assumptions used to determine benefit obligations recorded on the Consolidated Balance Sheets as of June 30, were as follows: (1)
Pension BenefitsOther Retiree Benefits
As of June 302020201920202019
Discount rate1.5 % 1.9 % 3.1 % 3.7 %
Rate of compensation increase2.5 %2.6 %N/AN/A
Health care cost trend rates assumed for next yearN/AN/A6.6 %6.6 %
Rate to which the health care cost trend rate is assumed to decline (ultimate trend rate)N/AN/A4.9 %4.9 %
Year that the rate reaches the ultimate trend rateN/AN/A20262026
(1)Determined as of end of fiscal year.

The weighted average assumptions used to determine net benefit cost recorded on the Consolidated Statement of Earnings for the years ended June 30, were as follows: (1)
Pension BenefitsOther Retiree Benefits
Years ended June 30202020192018202020192018
Discount rate1.9 %2.5 %2.4 %3.7 %4.2 %3.9 %
Expected return on plan assets6.6 %6.6 %6.8 %8.4 %8.3 %8.3 %
Rate of compensation increase2.6 %2.6 %3.0 %N/AN/AN/A
(1) Determined as of beginning of fiscal year.
For plans that make up the majority of our obligation, the Company calculates the benefit obligation and the related impacts on service and interest costs using specific spot rates along the corporate bond yield curve. For the remaining plans, the Company determines these amounts utilizing a single weighted average discount rate derived from the corporate bond yield curve used to measure the plan obligations.
Several factors are considered in developing the estimate for the long-term expected rate of return on plan assets. For the defined benefit retirement plans, these factors include historical rates of return of broad equity and bond indices and projected long-term rates of return obtained from pension investment consultants. The expected long-term rates of return for plan assets are 8% - 9% for equities and 5% - 6% for bonds. For other retiree benefit plans, the expected long-term rate of return reflects that the assets are comprised primarily of Company stock. The expected rate of return on Company stock is based on the long-term projected return of 8.5% and reflects the historical pattern of returns.
Assumed health care cost trend rates could have a significant effect on the amounts reported for the other retiree benefit plans. A one percentage point change in assumed health care cost trend rates would have the following effects:
One-Percentage
Point Increase		One-Percentage
Point Decrease
Effect on the total service and interest cost components$56  $(43) 
Effect on the accumulated postretirement benefit obligation669  (543) 
Plan Assets. Our investment objective for defined benefit retirement plan assets is to meet the plans' benefit obligations and to improve plan self-sufficiency for future benefit obligations. The investment strategies focus on asset class diversification, liquidity to meet benefit payments and an appropriate balance of long-term investment return and risk. Target ranges for asset allocations are determined by assessing different investment risks and matching the actuarial projections of the plans' future liabilities and benefit payments with current as well as expected long-term rates of return on the assets, taking into account investment return volatility and correlations across asset classes. Plan assets are diversified across several investment managers and are generally invested in liquid funds that are selected to track broad market equity and bond indices. Investment risk is carefully controlled with plan assets rebalanced to target allocations on a periodic basis and with continual monitoring of investment managers' performance relative to the investment guidelines established with each investment manager.
Our target asset allocation for the year ended June 30, 2020, and actual asset allocation by asset category as of June 30, 2020 and 2019, were as follows:
Target Asset AllocationActual Asset Allocation at June 30
Pension BenefitsOther Retiree
Benefits		Pension BenefitsOther Retiree Benefits
Asset Category2020201920202019
Cash— %2 %1 %1 %3 %3 %
Debt securities67 %3 %66 %63 %2 %2 %
Equity securities33 %95 %33 %36 %95 %95 %
TOTAL100 %100 %100 %100 %100 %100 %
The following table sets forth the fair value of the Company's plan assets as of June 30, 2020 and 2019 segregated by level within the fair value hierarchy (refer to Note 9 for further discussion on the fair value hierarchy and fair value principles). Investments valued using net asset value as a practical expedient are not valued using the fair value hierarchy, but rather valued using the net asset value reported by the managers of the funds and as supported by the unit prices of actual purchase and sale transactions.
Pension BenefitsOther Retiree Benefits
As of June 30Fair Value Hierarchy Level20202019Fair Value Hierarchy Level20202019
ASSETS AT FAIR VALUE
Cash and cash equivalents1$61  $47  1$121  $111  
Company common stock—  —  1217  179  
Company preferred stock (1)
—  —  25,139  4,657  
Fixed income securities (2)
21,991  265  212  1  
Insurance contracts (3)
3115  113  —  —  
TOTAL ASSETS IN THE FAIR VALUE HIERARCHY2,167  425  5,489  4,948  
Investments valued at net asset value (4)
9,317  10,957  129  148  
TOTAL ASSETS AT FAIR VALUE$11,484  11,382  $5,618  5,096  
(1)Company preferred stock is valued based on the value of Company common stock and is presented net of ESOP debt discussed below.
(2)Fixed income securities, classified as Level 2, are estimated by using pricing models or quoted prices of securities with similar characteristics.
(3)Fair values of insurance contracts are valued based on either their cash equivalent value or models that project future cash flows and discount the future amounts to a present value using market-based observable inputs, including credit risk and interest rate curves. The activity for Level 3 assets is not significant for all years presented.
(4)Investments valued using net asset value as a practical expedient are primarily equity and fixed income collective funds.
Cash Flows. Management's best estimate of cash requirements and discretionary contributions for the defined benefit retirement plans and other retiree benefit plans for the year ending June 30, 2021, is $197 and $44, respectively. Expected contributions are dependent on many variables, including the variability of the market value of the plan assets as compared to the benefit obligation and other market or regulatory conditions. In addition, we take into consideration our business investment opportunities and resulting cash requirements. Accordingly, actual funding may differ significantly from current estimates.
Total benefit payments expected to be paid to participants, which include payments funded from the Company's assets and payments from the plans are as follows:
Years ending June 30Pension
Benefits		Other Retiree
Benefits
EXPECTED BENEFIT PAYMENTS
2021$559  $196  
2022534  205  
2023556  214  
2024573  221  
2025608  225  
2026 - 20303,258  1,199  


Employee Stock Ownership Plan
We maintain the ESOP to provide funding for certain employee benefits discussed in the preceding paragraphs.
The ESOP borrowed $1.0 billion in 1989 and the proceeds were used to purchase Series A ESOP Convertible Class A Preferred Stock to fund a portion of the U.S. DC plan. Principal and interest requirements of the borrowing were paid by the Trust from dividends on the preferred shares and from advances provided by the Company. The original borrowing of $1.0 billion has been repaid in full, and advances from the Company of $33 remain outstanding at June 30, 2020. Each share is convertible at the option of the holder into one share of the Company's common stock. The dividend for the current year was equal to the common stock dividend of $3.03 per share. The liquidation value is $6.82 per share.
In 1991, the ESOP borrowed an additional $1.0 billion. The proceeds were used to purchase Series B ESOP Convertible Class A Preferred Stock to fund a portion of retiree health care benefits. These shares, net of the ESOP's debt, are considered plan assets of the other retiree benefits plan discussed above. Debt service requirements are funded by preferred stock dividends, cash contributions and advances provided by the Company, of which $928 are outstanding at June 30, 2020. Each share is convertible at the option of the holder into one share of the Company's common stock. The dividend for the current year was equal to the common stock dividend of $3.03 per share. The liquidation value is $12.96 per share.
Our ESOP accounting practices are consistent with current ESOP accounting guidance, including the permissible continuation of certain provisions from prior accounting guidance. ESOP debt, which is guaranteed by the Company, is recorded as debt (see Note 10) with an offset to the Reserve for ESOP debt retirement, which is presented within Shareholders' equity. Advances to the ESOP by the Company are recorded as an increase in the Reserve for ESOP debt retirement. Interest incurred on the ESOP debt is recorded as Interest expense. Dividends on all preferred shares, net of related tax benefits, are charged to Retained earnings.
The series A and B preferred shares of the ESOP are allocated to employees based on debt service requirements. The number of preferred shares outstanding at June 30 was as follows:
Shares in thousands202020192018
Allocated29,591  31,600  34,233  
Unallocated2,479  3,259  4,117  
TOTAL SERIES A32,070  34,859  38,350  
Allocated27,894  26,790  25,895  
Unallocated24,418  26,471  28,512  
TOTAL SERIES B52,312  53,261  54,407  
For purposes of calculating diluted net earnings per common share, the preferred shares held by the ESOP are considered converted from inception.