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Pensions and other benefit plans | 12 Months Ended
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Dec. 31, 2023
Retirement Benefits [Abstract] |
Pensions and other benefit plans | Pensions and other benefit plans The Company sponsors various retirement and pension plans, including defined benefit, defined contribution and termination indemnity plans, which cover most employees worldwide. The Company also provides post-retirement benefits, primarily healthcare, to all eligible U.S. retired employees and their dependents. Many international employees are covered by government-sponsored programs and the cost to the Company is not significant. In the U.S, non-union pension benefits for employees hired before January 1, 2015 are primarily based on the employee’s compensation during the last five years before retirement and the number of years of service (the Final Average Pay formula). U.S. pension benefits for employees hired after 2014, are calculated using a different formula based on employee compensation over total years of service (the Retirement Value formula). In January 2021, the Company announced that, effective on January 1, 2026, all eligible U.S. non-union employees, regardless of hire date, will earn benefits under the Retirement Value formula. This amendment does not affect the benefits accrued under the Final Average Pay formula for service before January 1, 2026. International subsidiaries have plans under which funds are deposited with trustees, annuities are purchased under group contracts, or reserves are provided. The Company does not fund retiree healthcare benefits in advance and has the right to modify these plans in the future. In 2023 and 2022 the Company used December 31, 2023 and December 31, 2022, respectively, as the measurement date for all U.S. and international retirement and other benefit plans. Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans for 2023, 2022 and 2021 include the following components:
|  | Retirement Plans |  | Other Benefit Plans
(Dollars in Millions) |  | 2023 |  | 2022 |  | 2021 |  | 2023 |  | 2022 |  | 2021
Service cost |  | $893 |  | 1,319 |  | 1,412 |  | 264 |  | 320 |  | 309
Interest cost |  | 1,437 |  | 908 |  | 768 |  | 214 |  | 104 |  | 80
Expected return on plan assets |  | (2,716) |  | (2,756) |  | (2,644) |  | (7) |  | (8) |  | (7)
Amortization of prior service cost |  | (184) |  | (184) |  | (181) |  | (2) |  | (5) |  | (31)
Recognized actuarial losses (gains) |  | (199) |  | 650 |  | 1,251 |  | 23 |  | 122 |  | 151
Curtailments and settlements |  | 93 |  | 1 |  | 1 |  | (5) |  | — |  | —
Net periodic benefit cost (credit) |  | $(676) |  | (62) |  | 607 |  | 487 |  | 533 |  | 502
The service cost component of net periodic benefit cost is presented in the same line items on the Consolidated Statement of Earnings where other employee compensation costs are reported, including Cost of products sold, Research and development expense, Selling, marketing and administrative expenses, and Net earnings from discontinued operations, net of taxes if related to the separation of Kenvue. All other components of net periodic benefit cost are presented as part of Other (income) expense, net on the Consolidated Statement of Earnings, with the exception of certain amounts for curtailments and settlements, which are reported in Net earnings from discontinued operations, net of taxes if related to the separation of Kenvue (as noted above). Unrecognized gains and losses for the U.S. pension plans are amortized over the average remaining future service for each plan. For plans with no active employees, they are amortized over the average life expectancy. The amortization of gains and losses for the other U.S. benefit plans is determined by using a 10% corridor of the greater of the market value of assets or the accumulated postretirement benefit obligation. Total unamortized gains and losses in excess of the corridor are amortized over the average remaining future service. Prior service costs/benefits for the U.S. pension plans are amortized over the average remaining future service of plan participants at the time of the plan amendment. Prior service cost/benefit for the other U.S. benefit plans is amortized over the average remaining service to full eligibility age of plan participants at the time of the plan amendment. The following table represents the weighted-average actuarial assumptions:
|  | Retirement Plans |  | Other Benefit Plans
Worldwide Benefit Plans |  | 2023 |  | 2022 |  | 2021 |  | 2023 |  | 2022 |  | 2021
Net Periodic Benefit Cost |  |  |  |  |  |  |  |  |  |  |  |
Service cost discount rate |  | 4.85 | % |  | 2.46 |  |  | 2.14 |  |  | 5.40 |  |  | 2.59 |  |  | 2.09 |
Interest cost discount rate |  | 5.25 | % |  | 2.80 |  |  | 2.34 |  |  | 5.43 |  |  | 2.64 |  |  | 2.33 |
Rate of increase in compensation levels |  | 3.71 | % |  | 4.02 |  |  | 4.01 |  |  | 4.22 |  |  | 4.21 |  |  | 4.25 |
Expected long-term rate of return on plan assets |  | 7.21 | % |  | 7.25 |  |  | 7.71 |  |  |  |  |  |  |
Benefit Obligation |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  | 4.58 | % |  | 5.01 |  |  | 2.49 |  |  | 5.11 |  |  | 5.42 |  |  | 2.68 |
Rate of increase in compensation levels |  | 3.69 | % |  | 4.00 |  |  | 4.01 |  |  | 4.22 |  |  | 4.21 |  |  | 4.21 |
The Company’s discount rates are determined by considering current yield curves representing high quality, long-term fixed income instruments. The resulting discount rates are consistent with the duration of plan liabilities. The Company's methodology in determining service and interest cost uses duration specific spot rates along that yield curve to the plans' liability cash flows. The expected rates of return on plan asset assumptions represent the Company's assessment of long-term returns on diversified investment portfolios globally. The assessment is determined using projections from external financial sources, long-term historical averages, actual returns by asset class and the various asset class allocations by market. The following table displays the assumed healthcare cost trend rates, for all individuals:
Healthcare Plans |  | 2023 |  | 2022
Healthcare cost trend rate assumed for next year |  | 13.90 | % | * | 5.96 | %
Rate to which the cost trend rate is assumed to decline (ultimate trend) |  | 4.00 | % |  | 3.99 | %
Year the rate reaches the ultimate trend rate |  | 2048 |  |  | 2047 |
*excludes ongoing negotiations regarding healthcare cost with service providers The following table sets forth information related to the benefit obligation and the fair value of plan assets at fiscal year-end 2023 and 2022 for the Company’s defined benefit retirement plans and other post-retirement plans:
|  | Retirement Plans |  | Other Benefit Plans
(Dollars in Millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Change in Benefit Obligation |  |  |  |  |  |  |  |
Projected benefit obligation — beginning of year |  | $29,390 |  | 41,272 |  | 4,192 |  | 4,874
Service cost |  | 893 |  | 1,319 |  | 264 |  | 320
Interest cost |  | 1,437 |  | 908 |  | 214 |  | 104
Plan participant contributions |  | 73 |  | 67 |  | — |  | —
Amendments |  | (6) |  | 7 |  | — |  | —
Actuarial (gains) losses(1) |  | 2,068 |  | (12,159) |  | 469 |  | (704)
Divestitures & acquisitions(2) |  | (352) |  | — |  | 1 |  | —
Curtailments, settlements & restructuring |  | (238) |  | (7) |  | (332) |  | —
Benefits paid from plan(3) |  | (2,122) |  | (1,220) |  | (702) |  | (393)
Effect of exchange rates |  | 601 |  | (797) |  | 2 |  | (9)
Projected benefit obligation — end of year |  | $31,744 |  | 29,390 |  | 4,108 |  | 4,192
Change in Plan Assets |  |  |  |  |  |  |  |
Plan assets at fair value — beginning of year |  | $31,496 |  | 41,909 |  | 78 |  | 102
Actual return (loss) on plan assets |  | 3,951 |  | (8,663) |  | 16 |  | (17)
Company contributions |  | 268 |  | 261 |  | 694 |  | 386
Plan participant contributions |  | 73 |  | 67 |  | — |  | —
Settlements |  | (176) |  | (5) |  | — |  | —
Divestitures & acquisitions(2) |  | (509) |  | — |  | — |  | —
Benefits paid from plan assets(3) |  | (2,122) |  | (1,220) |  | (702) |  | (393)
Effect of exchange rates |  | 626 |  | (853) |  | — |  | —
Plan assets at fair value — end of year |  | $33,607 |  | 31,496 |  | 86 |  | 78
Funded status — end of year |  | $1,863 |  | 2,106 |  | (4,022) |  | (4,114)
Amounts Recognized in the Company’s Balance Sheet consist of the following: |  |  |  |  |  |  |  |
Non-current assets |  | $4,992 |  | 4,581 |  | — |  | —
Current liabilities |  | (119) |  | (127) |  | (416) |  | (461)
Non-current liabilities |  | (3,010) |  | (2,348) |  | (3,606) |  | (3,653)
Total recognized in the consolidated balance sheet — end of year |  | $1,863 |  | 2,106 |  | (4,022) |  | (4,114)
Amounts Recognized in Accumulated Other Comprehensive Income consist of the following: |  |  |  |  |  |  |  |
Net actuarial loss |  | $4,962 |  | 3,948 |  | 354 |  | 239
Prior service cost (credit) |  | (1,236) |  | (1,417) |  | (6) |  | (7)
Unrecognized net transition obligation |  | — |  | — |  | — |  |
Total before tax effects |  | $3,726 |  | 2,531 |  | 348 |  | 232
Accumulated Benefit Obligations — end of year |  | $30,139 |  | 27,797 |  |  |  |
(1)The actuarial (gains)/losses for retirement plans in 2023 and 2022 were primarily driven by changes in the discount rates. (2)Primarily driven by the Kenvue separation. (3)Includes approximately $800 million transferred to a group annuity contract issued by a third-party insurer for the U.S. Salaried Pension Plan.
|  | Retirement Plans |  | Other Benefit Plans
(Dollars in Millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Amounts Recognized in Net Periodic Benefit Cost and Other Comprehensive Income |  |  |  |  |  |  |  |
Net periodic benefit cost (credit) |  | $(676) |  | (62) |  | 487 |  | 533
Net actuarial (gain) loss |  | 711 |  | (793) |  | 136 |  | (751)
Amortization of net actuarial loss |  | 199 |  | (655) |  | (22) |  | (121)
Prior service cost (credit) |  | (2) |  | 7 |  | — |  | —
Amortization of prior service (cost) credit |  | 185 |  | 183 |  | 2 |  | 5
Effect of exchange rates |  | 103 |  | (140) |  | — |  | (1)
Total loss/(income) recognized in other comprehensive income, before tax |  | $1,195 |  | (1,398) |  | 116 |  | (868)
Total recognized in net periodic benefit cost and other comprehensive income |  | $519 |  | (1,460) |  | 603 |  | (335)
The Company plans to continue to fund its U.S. Qualified Plans to comply with the Pension Protection Act of 2006. International Plans are funded in accordance with local regulations. Additional discretionary contributions are made when deemed appropriate to meet the long-term obligations of the plans. For certain plans, funding is not a common practice, as funding provides no economic benefit. Consequently, the Company has several pension plans that are not funded. In 2023, the Company contributed $135 million and $133 million to its U.S. and international pension plans, respectively. The following table displays the funded status of the Company's U.S. Qualified & Non-Qualified pension plans and international funded and unfunded pension plans at December 31, 2023 and December 31, 2022, respectively:
| U.S. Plans |  | International Plans
| Qualified Plans |  | Non-Qualified Plans |  | Funded Plans |  | Unfunded Plans
(Dollars in Millions) | 2023 | 2022 |  | 2023 | 2022 |  | 2023 | 2022 |  | 2023 | 2022
Plan Assets | $22,298 | 20,937 |  | — | — |  | 11,309 | 10,559 |  | — | —
Projected Benefit Obligation | 19,152 | 18,394 |  | 2,037 | 1,937 |  | 10,431 | 8,982 |  | 124 | 77
Accumulated Benefit Obligation | 18,557 | 17,696 |  | 1,982 | 1,872 |  | 9,498 | 8,166 |  | 102 | 63
Over (Under) Funded Status |  |  |  |  |  |  |  |  |  |  |
Projected Benefit Obligation | $3,146 | 2,543 |  | (2,037) | (1,937) |  | 878 | 1,577 |  | (124) | (77)
Accumulated Benefit Obligation | 3,741 | 3,241 |  | (1,982) | (1,872) |  | 1,811 | 2,393 |  | (102) | (63)
Plans with accumulated benefit obligations in excess of plan assets have an accumulated benefit obligation, projected benefit obligation and plan assets of $5.8 billion, $6.1 billion and $3.1 billion, respectively, at the end of 2023, and $2.7 billion, $2.7 billion and $0.3 billion, respectively, at the end of 2022. The following table displays the projected future benefit payments from the Company’s retirement and other benefit plans:
(Dollars in Millions) |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  | 2029-2033
Projected future benefit payments |  |  |  |  |  |  |  |  |  |  |  |
Retirement plans |  | $1,481 |  | 1,473 |  | 1,549 |  | 1,647 |  | 1,745 |  | 10,133
Other benefit plans |  | $427 |  | 438 |  | 396 |  | 411 |  | 428 |  | 2,360
The following table displays the projected future minimum contributions to the unfunded retirement plans. These amounts do not include any discretionary contributions that the Company may elect to make in the future.
(Dollars in Millions) |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  | 2029-2033
Projected future contributions |  | $122 |  | 126 |  | 133 |  | 139 |  | 145 |  | 787
Each pension plan is overseen by a local committee or board that is responsible for the overall administration and investment of the pension plans. In determining investment policies, strategies and goals, each committee or board considers factors including, local pension rules and regulations; local tax regulations; availability of investment vehicles (separate accounts, commingled accounts, insurance funds, etc.); funded status of the plans; ratio of actives to retirees; duration of liabilities; and other relevant factors including: diversification, liquidity of local markets and liquidity of base currency. A majority of the Company’s pension funds are open to new entrants and are expected to be on-going plans. Permitted investments are primarily liquid and/or listed, with little reliance on illiquid and non-traditional investments such as hedge funds. The Company’s retirement plan asset allocation at the end of 2023 and 2022 and target allocations for 2024 are as follows:
|  | Percent of Plan Assets |  | Target Allocation
|  | 2023 |  | 2022 |  | 2024
Worldwide Retirement Plans |  |  |  |  |  |
Equity securities |  | 58 | % |  | 62 | % |  | 58 | %
Debt securities |  | 42 |  |  | 38 |  |  | 42 |
Total plan assets |  | 100 | % |  | 100 | % |  | 100 | %
Determination of fair value of plan assets The Plan has an established and well-documented process for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon models that primarily use, as inputs, market-based or independently sourced market parameters, including yield curves, interest rates, volatilities, equity or debt prices, foreign exchange rates and credit curves. While the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Valuation hierarchy The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described in the table below with Level 1 having the highest priority and Level 3 having the lowest. The Net Asset Value (NAV) is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for the investments measured at fair value. •Short-term investment funds — Cash and quoted short-term instruments are valued at the closing price or the amount held on deposit by the custodian bank. Other investments are through investment vehicles valued using the NAV provided by the administrator of the fund. The NAV is a quoted price in a market that is not active and classified as Level 2. •Government and agency securities — A limited number of these investments are valued at the closing price reported on the major market on which the individual securities are traded. Where quoted prices are available in an active market, the investments are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. When quoted market prices for a security are not available in an active market, they are classified as Level 2. •Debt instruments — A limited number of these investments are valued at the closing price reported on the major market on which the individual securities are traded. Where quoted prices are available in an active market, the investments are classified as Level 1. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are classified as Level 2. Level 3 debt instruments are priced based on unobservable inputs. •Equity securities — Equity securities are valued at the closing price reported on the major market on which the individual securities are traded. Substantially all equity securities are classified within Level 1 of the valuation hierarchy. •Commingled funds — These investment vehicles are valued using the NAV provided by the fund administrator. Assets in the Level 2 category have a quoted market price. •Other assets — Other assets are represented primarily by limited partnerships. These investment vehicles are valued using the NAV provided by the fund administrator. Other assets that are exchange listed and actively traded are classified as Level 1, while inactively traded assets are classified as Level 2. The following table sets forth the Retirement Plans' investments measured at fair value as of December 31, 2023 and December 31, 2022:
|  | Quoted Prices in Active Markets for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs(1) |  | Investments Measured at Net Asset Value |  |  |  |
|  | (Level 1) |  | (Level 2) |  | (Level 3) |  |  |  |  |  | Total Assets
(Dollars in Millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022
Short-term investment funds |  | $12 |  | 26 |  | 829 |  | 13 |  | — |  | — |  | — |  | — |  | 841 |  | 39
Government and agency securities |  | — |  | — |  | 5,985 |  | 5,863 |  | — |  | — |  | — |  | — |  | 5,985 |  | 5,863
Debt instruments |  | — |  | — |  | 3,899 |  | 3,681 |  | — |  | — |  | — |  | — |  | 3,899 |  | 3,681
Equity securities |  | 7,764 |  | 8,846 |  | — |  | 2 |  | — |  | — |  | — |  | — |  | 7,764 |  | 8,848
Commingled funds |  | — |  | — |  | 4,967 |  | 4,362 |  | 43 |  | 56 |  | 6,672 |  | 6,096 |  | 11,682 |  | 10,514
Other assets |  | — |  | — |  | 49 |  | 33 |  | 92 |  | 12 |  | 3,295 |  | 2,506 |  | 3,436 |  | 2,551
Investments at fair value |  | $7,776 |  | 8,872 |  | 15,729 |  | 13,954 |  | 135 |  | 68 |  | 9,967 |  | 8,602 |  | 33,607 |  | 31,496
(1) The activity for the Level 3 assets is not significant for all years presented. The Company's Other Benefit Plans are unfunded except for U.S. commingled funds (Level 2) of $86 million and $78 million at December 31, 2023 and December 31, 2022, respectively. The fair value of Johnson & Johnson Common Stock directly held in plan assets was $14 million (0.0% of total plan assets) at December 31, 2023 and $21 million (0.1% of total plan assets) at December 31, 2022.

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