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Benefit Plans | 9 Months Ended
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Sep. 30, 2016
Benefit Plans | Note 9. Benefit Plans Pension Plans Components of Net Periodic Pension Cost: Net periodic pension cost consisted of the following:
|  | U.S. Plans |  |  | Non-U.S. Plans |
|  | For the Three Months Ended |  |  | For the Three Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
|  | (in millions) |
Service cost |  | $ | 15 |  |  | $ | 16 |  |  | $ | 37 |  |  | $ | 44 |
Interest cost |  |  | 15 |  |  |  | 16 |  |  |  | 57 |  |  |  | 77 |
Expected return on plan assets |  |  | (24 | ) |  |  | (23 | ) |  |  | (105 | ) |  |  | (120 | )
Amortization: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss from experience differences |  |  | 12 |  |  |  | 11 |  |  |  | 31 |  |  |  | 33 |
Prior service cost / (credit) |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |
Settlement losses and other expenses |  |  | 9 |  |  |  | 2 |  |  |  | – |  |  |  | – |
Net periodic pension cost |  | $ | 27 |  |  | $ | 22 |  |  | $ | 20 |  |  | $ | 34 |
|  | U.S. Plans |  |  | Non-U.S. Plans |
|  | For the Nine Months Ended |  |  | For the Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
|  | (in millions) |
Service cost |  | $ | 42 |  |  | $ | 48 |  |  | $ | 114 |  |  | $ | 145 |
Interest cost |  |  | 46 |  |  |  | 50 |  |  |  | 179 |  |  |  | 231 |
Expected return on plan assets |  |  | (72 | ) |  |  | (70 | ) |  |  | (326 | ) |  |  | (358 | )
Amortization: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss from experience differences |  |  | 30 |  |  |  | 33 |  |  |  | 93 |  |  |  | 110 |
Prior service cost / (credit) |  |  | 1 |  |  |  | 1 |  |  |  | (2 | ) |  |  | 16 |
Settlement losses / (gains) and other expenses |  |  | 25 |  |  |  | 15 |  |  |  | (1 | ) |  |  | – |
Net periodic pension cost |  | $ | 72 |  |  | $ | 77 |  |  | $ | 57 |  |  | $ | 144 |
Net periodic pension cost decreased in the nine months ended September 30, 2016 due to a combination of factors, including a decreased number of plan participants, changes in discount rates, company contributions to the plans and a change in our approach to measuring service and interest costs. For 2015, we measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For 2016, we have elected to measure service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. We believe 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. The impact of this change was a decrease in net periodic pension cost of approximately $16 million for the three months and $48 million for the nine months ended September 30, 2016. 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. Net pension costs of our non-U.S. plans in the three and nine months ended September 30, 2016 were also favorably impacted by the reduction in our pension plan obligations due to the JDE coffee business transactions. Prior to the July 2, 2015 closing of the JDE coffee business transactions, certain active employees who transitioned to JDE participated in our non-U.S. pension plans. Following the transactions, benefits began to be provided directly by JDE to participants continuing with JDE. JDE assumed certain pension plan obligations and received the related plan assets. In 2015, we reduced our net benefit plan liabilities by $131 million and the related deferred tax assets by $24 million. Prior to the transactions, for the nine months ended September 30, 2015, amortization of prior service cost includes $17 million of pension curtailment losses related to employees who subsequently transitioned to JDE. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information. For participants that elected not to transfer into the JDE plans, we retained the plan obligations and related plan assets. Settlement losses also include pension settlement losses for employees who elected lump-sum payments in connection with our 2014-2018 Restructuring Program. These settlement losses were $3 million for the three months and $12 million for the nine months ended September 30, 2016 and $1 million for the three months and $7 million for the nine months ended September 30, 2015. See Note 6, 2014-2018 Restructuring Program, for more information. We also recorded an additional $49 million of pension settlement losses in the nine months ended September 30, 2015 related to the JDE coffee business transactions within the gain on the JDE coffee business transactions. Employer Contributions: During the nine months ended September 30, 2016, we contributed $169 million (of which, $150 million was voluntarily contributed) to our U.S. plans and $329 million (of which, $100 million was a non-recurring contribution related to merging our and legacy Cadbury plans in the U.K.) to our non-U.S. plans. As of September 30, 2016, we plan to make further contributions of approximately $6 million to our U.S. plans and approximately $50 million to our non-U.S. plans during the remainder of 2016. However, our actual contributions may differ due to many factors, including changes in tax and other benefit laws or significant differences between expected and actual pension asset performance or interest rates. Postretirement Benefit Plans Net periodic postretirement health care costs consisted of the following:
|  | For the Three Months Ended |  |  | For the Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
|  | (in millions) |
Service cost |  | $ | 3 |  |  | $ | 4 |  |  | $ | 9 |  |  | $ | 11 |
Interest cost |  |  | 6 |  |  |  | 5 |  |  |  | 16 |  |  |  | 17 |
Amortization: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss from experience differences |  |  | 2 |  |  |  | 3 |  |  |  | 5 |  |  |  | 10 |
Prior service credit (1) |  |  | (11 | ) |  |  | (1 | ) |  |  | (14 | ) |  |  | (5 | )
Net periodic postretirement health care costs |  | $ | – |  |  | $ | 11 |  |  | $ | 16 |  |  | $ | 33 |
(1) For the three and nine months ended September 30, 2016, amortization of prior service credit includes $8 million of curtailment gain related to a change in the eligibility requirement. Net periodic postretirement health care costs decreased in the three and nine months ended September 30, 2016 due to a combination of factors, including a decreased number of plan participants, changes in discount rates, company contributions to the plans and a change in our approach to measuring service and interest costs. For 2015, we measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For 2016, we elected to measure service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. We believe 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. The impact of this change was a decrease in net periodic postretirement health care costs of approximately $1 million for the three months and $3 million for the nine months ended September 30, 2016. 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. Postemployment Benefit Plans Net periodic postemployment costs consisted of the following: |
|  | For the Three Months Ended |  |  | For the Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
|  | (in millions) |
Service cost |  | $ | 2 |  |  | $ | 2 |  |  | $ | 5 |  |  | $ | 5 |
Interest cost |  |  | 1 |  |  |  | 1 |  |  |  | 4 |  |  |  | 4 |
Net periodic postemployment costs |  | $ | 3 |  |  | $ | 3 |  |  | $ | 9 |  |  | $ | 9 |

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