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Pension and Other Postretirement Benefit Plans
 12 Months Ended
Dec. 31, 2020
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 United States 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.InternationalOther Postretirement Benefits
Years Ended December 31202020192018202020192018202020192018
Service cost$360 $293 $326 $301 $238 $238 $52 $48 $57 
Interest cost431 458 432 137 177 178 57 69 69 
Expected return on plan assets
(774)(817)(851)(415)(426)(431)(75)(72)(83)
Amortization of unrecognized prior service cost
(49)(49)(50)(18)(12)(13)(73)(78)(84)
Net loss (gain) amortization303 151 232 127 64 84 (18)(10)1 
Termination benefits10 31 19 3 8 2 2 5 3 
Curtailments10 14 10 — 6 1 (4)(11)(8)
Settlements13 — 5 15 1 13 — — — 
Net periodic benefit cost (credit)$304 $81 $123 $150 $56 $72 $(59)$(49)$(45)
The changes in net periodic benefit cost year over year for pension plans are largely attributable to changes in the discount rate affecting net loss amortization.
In connection with restructuring actions (see Note 5), termination charges were recorded in 2020, 2019 and 2018 on pension and other postretirement benefit plans related to expanded eligibility for certain employees exiting Merck. Also, in connection with these restructuring activities, curtailments were recorded on pension and other postretirement benefit plans and settlements were recorded on certain U.S. and international pension plans as reflected in the table above.
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 as noted above.
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 BenefitsOther
Postretirement
Benefits
U.S.International
  202020192020201920202019
Fair value of plan assets January 1$11,361 $9,648 $10,163 $8,580 $1,102 $968 
Actual return on plan assets1,908 2,165 1,026 1,505 175 203 
Company contributions199 130 387 262 19 14 
Effects of exchange rate changes— — 746 31 — — 
Benefits paid(751)(582)(215)(230)(93)(104)
Settlements(45)— (117)(12)— — 
Other— — 59 27 18 21 
Fair value of plan assets December 31$12,672 $11,361 $12,049 $10,163 $1,221 $1,102 
Benefit obligation January 1$13,003 $10,620 $10,612 $9,083 $1,673 $1,615 
Service cost360 293 301 238 52 48 
Interest cost431 458 137 177 57 69 
Actuarial losses (gains) (1)
1,594 2,165 1,036 1,313 (98)21 
Benefits paid(751)(582)(215)(230)(93)(104)
Effects of exchange rate changes— — 794 4 (3)1 
Plan amendments— — (64)1 — — 
Curtailments11 18 (8)3 (1)— 
Termination benefits10 31 3 8 2 5 
Settlements(45)— (117)(12)— — 
Other— — 55 27 18 18 
Benefit obligation December 31$14,613 $13,003 $12,534 $10,612 $1,607 $1,673 
Funded status December 31$(1,941)$(1,642)$(485)$(449)$(386)$(571)
Recognized as:
Other Assets$— $— $941 $837 $— $— 
Accrued and other current liabilities(82)(92)(13)(18)(9)(10)
Other Noncurrent Liabilities(1,859)(1,550)(1,413)(1,268)(377)(561)
(1) Actuarial losses (gains) primarily reflect changes in discount rates.
At December 31, 2020 and 2019, the accumulated benefit obligation was $26.4 billion and $22.8 billion, respectively, for all pension plans, of which $14.4 billion and $12.8 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
2020201920202019
Pension plans with a projected benefit obligation in excess of plan assets
Projected benefit obligation$14,613 $13,003 $8,951 $7,421 
Fair value of plan assets12,672 11,361 7,526 6,135 
Pension plans with an accumulated benefit obligation in excess of plan assets
Accumulated benefit obligation$13,489 $12,009 $4,288 $2,476 
Fair value of plan assets11,685 10,484 3,033 1,501 

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, 2020 and 2019, $942 million and $860 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 UsingFair Value Measurements Using
  Level 1Level 2Level 3
NAV (1)
TotalLevel 1Level 2Level 3
NAV (1)
Total
20202019
U.S. Pension Plans
Cash and cash equivalents$5 $— $— $303 $308 $3 $— $— $236 $239 
Investment funds
Developed markets equities
206 — — 3,884 4,090 205 — — 3,542 3,747 
Emerging markets equities
169 — — 927 1,096 165 — — 723 888 
Mortgage and asset-backed securities— 89 — — 89 — — — — — 
Government and agency obligations
— — — — — — — — 173 173 
Equity securities
Developed markets
2,819 — — — 2,819 2,451 — — — 2,451 
Fixed income securities— 
Government and agency obligations
— 2,236 — — 2,236 — 2,094 — — 2,094 
Corporate obligations
— 1,994 — — 1,994 — 1,582 — — 1,582 
Mortgage and asset-backed securities
— 33 — — 33 — 178 — — 178 
Other investments— — 7 — 7 — — 9 — 9 
Plan assets at fair value$3,199 $4,352 $7 $5,114 $12,672 $2,824 $3,854 $9 $4,674 $11,361 
International Pension Plans
Cash and cash equivalents$110 $1 $— $20 $131 $70 $1 $— $15 $86 
Investment funds
Developed markets equities
475 4,286 — 118 4,879 546 3,761 — 96 4,403 
Government and agency obligations
1,516 2,614 — 172 4,302 462 2,534 — 207 3,203 
Emerging markets equities
154 — — 92 246 66 96 — 90 252 
Corporate obligations
5 12 — 172 189 5 11 — 109 125 
Other fixed income obligations9 11 — 4 24 9 6 — — 15 
Real estate
— 1 — 15 16 — 1 — — 1 
Equity securities
Developed markets
505 — — — 505 565 — — — 565 
Fixed income securities
Government and agency obligations
3 486 — 3 492 3 376 — — 379 
Corporate obligations
1 174 — 2 177 1 135 — — 136 
Mortgage and asset-backed securities
— 70 — — 70 — 61 — — 61 
Other investments
Insurance contracts (2)
— 76 935 1 1,012 — 65 851 — 916 
Other
1 5 — — 6 — 5 — 16 21 
Plan assets at fair value
$2,779 $7,736 $935 $599 $12,049 $1,727 $7,052 $851 $533 $10,163 
(1)    Certain investments that were measured at net asset value (NAV) per share or its equivalent have not been classified in the fair value hierarchy. The NAV amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets at December 31, 2020 and 2019.
(2)    The plans’ Level 3 investments in insurance contracts are generally valued using a crediting rate that approximates market returns and invest in underlying securities whose market values are unobservable and determined using pricing models, discounted cash flow methodologies, or similar techniques.
The table below provides a summary of the changes in fair value, including transfers in and/or out, of all financial assets measured at fair value using significant unobservable inputs (Level 3) for the Company’s pension plan assets:
 20202019
  Insurance
Contracts		Real
Estate		OtherTotalInsurance
Contracts		Real
Estate		OtherTotal
U.S. Pension Plans
Balance January 1$— $— $9 $9 $— $— $13 $13 
Actual return on plan assets:
Relating to assets still held at December 31
— — (5)(5)— — (8)(8)
Relating to assets sold during the year
— — 5 5 — — 8 8 
Purchases and sales, net— — (2)(2)— — (4)(4)
Balance December 31$— $— $7 $7 $— $— $9 $9 
International Pension Plans
Balance January 1$851 $— $— $851 $811 $1 $1 $813 
Actual return on plan assets:
Relating to assets still held at December 31
103 — — 103 54 — — 54 
Purchases and sales, net(17)— — (17)(14)(1)(1)(16)
Transfers out of Level 3(2)— — (2)— — — — 
Balance December 31$935 $— $— $935 $851 $— $— $851 
The fair values of the Company’s other postretirement benefit plan assets at December 31 by asset category are as follows:
 Fair Value Measurements UsingFair Value Measurements Using
  Level 1Level 2Level 3
NAV (1)
TotalLevel 1Level 2Level 3
NAV (1)
Total
  2020  2019  
Cash and cash equivalents$31 $— $— $28 $59 $52 $— $— $22 $74 
Investment funds
Developed markets equities
19 — — 355 374 19 — — 324 343 
Emerging markets equities
16 — — 85 101 15 — — 66 81 
Government and agency obligations
1 — — — 1 1 — — 16 17 
Mortgage and asset-backed securities— 8 — — 8 — — — — — 
Equity securities— 
Developed markets
258 — — — 258 225 — — — 225 
Fixed income securities
Government and agency obligations
— 221 — — 221 — 196 — — 196 
Corporate obligations
— 196 — — 196 — 149 — — 149 
Mortgage and asset-backed securities
— 3 — — 3 — 17 — — 17 
Plan assets at fair value$325 $428 $— $468 $1,221 $312 $362 $— $428 $1,102 
(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, 2020 and 2019.
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 30% to 45% in U.S. equities, 15% to 30% in international equities, 35% to 45% in fixed-income investments, and up to 5% 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 11%, 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
Expected contributions during 2021 are approximately $300 million for U.S. pension plans, approximately $170 million for international pension plans and approximately $35 million for other postretirement benefit plans.

Expected Benefit Payments
Expected benefit payments are as follows:
U.S. Pension BenefitsInternational Pension
Benefits		Other
Postretirement
Benefits
2021$816 $274 $85 
2022786 277 86 
2023781 284 87 
2024772 285 89 
2025782 287 91 
2026 — 20304,271 1,688 474 
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
Net loss amounts reflect differences between expected and actual returns on plan assets as well as the effects of changes in actuarial assumptions. Net 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 PlansOther Postretirement
Benefit Plans
U.S.International
Years Ended December 31202020192018202020192018202020192018
Net (loss) gain arising during the period$(448)$(816)$(397)$(407)$(227)$(505)$198 $112 $186 
Prior service (cost) credit arising during the period
(1)(4)(4)62 (1)(10)(3)(11)2 
 $(449)$(820)$(401)$(345)$(228)$(515)$195 $101 $188 
Net loss (gain) amortization included in benefit cost$303 $151 $232 $127 $64 $84 $(18)$(10)$1 
Prior service credit amortization included in benefit cost
(49)(49)(50)(18)(12)(13)(73)(78)(84)
 $254 $102 $182 $109 $52 $71 $(91)$(88)$(83)
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 31202020192018202020192018
Net periodic benefit cost      
Discount rate3.40 %4.40 %3.70 %1.50 %2.20 %2.10 %
Expected rate of return on plan assets7.30 %8.10 %8.20 %4.40 %4.90 %5.10 %
Salary growth rate4.20 %4.30 %4.30 %2.80 %2.80 %2.90 %
Interest crediting rate4.90 %3.40 %3.30 %2.80 %2.90 %2.80 %
Benefit obligation      
Discount rate2.70 %3.40 %4.40 %1.10 %1.50 %2.20 %
Salary growth rate4.60 %4.20 %4.30 %2.80 %2.80 %2.80 %
Interest crediting rate4.70 %4.90 %3.40 %3.00 %2.80 %2.90 %
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 2021, the expected rate of return for the Company’s U.S. pension and other postretirement benefit plans will range from 6.50% to 6.70%, as compared to a range of 7.00% to 7.30% in 2020.
The health care cost trend rate assumptions for other postretirement benefit plans are as follows:
December 3120202019
Health care cost trend rate assumed for next year6.6 %6.8 %
Rate to which the cost trend rate is assumed to decline4.5 %4.5 %
Year that the trend rate reaches the ultimate trend rate20322032

Savings Plans
The Company also maintains defined contribution savings plans in the United States. 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 2020, 2019 and 2018 were $166 million, $149 million and $136 million, respectively.