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Retirement Plans
 12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
Retirement Plans RETIREMENT PLANS
Defined Contribution Plans
We provide certain employees with defined contribution plans and other types of retirement plans. A portion of our retirement plan expense under the defined contribution plans is funded with Stryker common stock. The use of Stryker common stock represents a non-cash operating activity that is not reflected in our Consolidated Statements of Cash Flows.
 
2019
 
2018
 
2017
Plan expense
$
205

 
$
180

 
$
181

Expense funded with Stryker common stock
31

 
29

 
25

Stryker common stock held by plan:
 
 
 
 
 
Dollar amount
470

 
358

 
353

Shares (in millions)
2.2

 
2.3

 
2.3

Value as a percentage of total plan assets
12
%
 
12
%
 
11
%

Defined Benefit Plans
Certain of our subsidiaries have both funded and unfunded defined benefit pension plans covering some or all of their employees. Substantially all of the defined benefit pension plans have projected benefit obligations in excess of plan assets.
Discount Rate
The discount rates were selected using a hypothetical portfolio of high quality bonds on December 31 that would provide the necessary cash flows to match our projected benefit payments. Effective January 1, 2017, in countries where it was possible, we elected to change the method to calculate the service cost and interest cost components of net periodic benefit costs for our defined benefit plans and will measure these costs by applying the specific spot rates along the yield curve of the projected cash flows for the respective plans. Our defined benefit plans previously utilized the yield curve approach to establish discount rates and we believe the new approach provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and the corresponding spot yield curve rates. The change does not affect the measurement of our total benefit obligations for those plans and is accounted for as a change in accounting estimate inseparable from a change in accounting principle, which is applied prospectively. The reductions in service and interest costs for 2017 associated with this change in estimate are nominal.
Expected Return on Plan Assets
The expected return on plan assets is determined by applying the target allocation in each asset category of plan investments to the anticipated return for each asset category based on historical and projected returns.
Components of Net Periodic Pension Cost
Net periodic benefit cost:
2019
 
2018
 
2017
Service cost
$
(41
)
 
$
(44
)
 
$
(42
)
Interest cost
(12
)
 
(11
)
 
(10
)
Expected return on plan assets
12

 
12

 
11

Amortization of prior service credit
1

 
1

 
1

Recognized actuarial loss
(9
)
 
(11
)
 
(9
)
Net periodic benefit cost
$
(49
)
 
$
(53
)
 
$
(49
)
Changes in assets and benefit obligations recognized in OCI:
Net actuarial gain (loss)
$
(74
)
 
$
11

 
$
(25
)
Recognized net actuarial loss
9

 
10

 
9

Prior service (credit) cost and transition amount
(1
)
 
(1
)
 
(1
)
Total recognized in other comprehensive income (loss)
$
(66
)
 
$
20

 
$
(17
)
Total recognized in net periodic benefit cost and OCI
$
(115
)
 
$
(33
)
 
$
(66
)
 
 
 
 
 
 
Weighted-average rates used to determine net periodic benefit cost:
Discount rate
1.9
%
 
1.8
%
 
1.8
%
Expected return on plan assets
3.5
%
 
3.3
%
 
3.3
%
Rate of compensation increase
2.9
%
 
2.8
%
 
2.8
%
Weighted-average discount rate used to determine projected benefit obligations
1.0
%
 
1.9
%
 
1.8
%

Investment Strategy
The investment strategy for our defined benefit pension plans is to meet the liabilities of the plans as they fall due and to maximize the return on invested assets within appropriate risk tolerances.
 
2019
 
2018
Fair value of plan assets
$
428

 
$
376

Benefit obligations
(869
)
 
(735
)
Funded status
$
(441
)
 
$
(359
)
Reported as:
 
 
 
Current liabilities—accrued compensation
$
(2
)
 
$
(2
)
Noncurrent liabilities—other liabilities
(439
)
 
(357
)
Pre-tax amounts recognized in AOCI:
 
 
 
Unrecognized net actuarial loss
(250
)
 
(168
)
Unrecognized prior service credit
9

 
11

Total
$
(241
)
 
$
(157
)

The estimated net actuarial loss for the defined benefit pension plans to be reclassified from AOCI into net periodic benefit cost is $12 in 2020. The total estimated amortization of prior service credit and transition asset for the defined benefit pension plans to be reclassified from AOCI into net periodic benefit credit is $1 in 2020.
Change in Benefit Obligations
 
 
 
 
2019
 
2018
Beginning projected benefit obligations
$
735

 
$
708

Service cost
41

 
44

Interest cost
12

 
11

Foreign exchange impact
(12
)
 
(16
)
Employee contributions
6

 
6

Actuarial (gains) losses
116

 
(1
)
Acquisition
—

 
—

Benefits paid
(29
)
 
(17
)
Ending projected benefit obligations
$
869

 
$
735

Ending accumulated benefit obligations
$
830

 
$
702


Change in Plan Assets
 
 
 
 
2019
 
2018
Beginning fair value of plan assets
$
376

 
$
370

Actual return
52

 
(2
)
Employer contributions
25

 
22

Employee contributions
6

 
6

Foreign exchange impact
(5
)
 
(6
)
Acquisition
—

 
—

Benefits paid
(26
)
 
(14
)
Ending fair value of plan assets
$
428

 
$
376


Allocation of Plan Assets
 
2020 Target
 
2019 Actual
 
2018 Actual
Equity securities
23
%
 
22
%
 
26
%
Debt securities
44

 
44

 
46

Other
33

 
34

 
28

Total
100
%
 
100
%
 
100
%

Valuation of Plan Assets
2019
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
$
7

$
—

$
—

$
7

Equity securities
23

86

—

109

Corporate debt securities
3

173

—

176

Other
4

52

80

136

Total
$
37

$
311

$
80

$
428

2018
 
 
 
 
Cash and cash equivalents
$
10

$
—

$
—

$
10

Equity securities
20

85

—

105

Corporate debt securities
2

153

—

155

Other
7

43

56

106

Total
$
39

$
281

$
56

$
376


Our Level 3 pension plan assets consist primarily of guaranteed investment contracts with insurance companies. The insurance contracts guarantee us principal repayment and a fixed rate of return. The $24 increase in Level 3 pension plan assets is primarily
related to actual returns and acquired assets. We expect to contribute $24 to our defined benefit pension plans in 2020.
Estimated Future Benefit Payments
2020
2021
2022
2023
2024
2025-2029
$
19

$
18

$
18

$
19

$
19

$
115