In addition to the legally required social security schemes, Alcon has sponsored numerous independent pension and other post-employment benefit plans. In most cases, these plans are externally funded in entities that are legally separate from Alcon. For certain subsidiaries, however, no independent plan assets exist for the pension and other post-employment benefit obligations of associates. In these cases the related unfunded liability is included in the Consolidated Balance Sheet. The value of the post-employment benefits promised under the pension and other post-employment benefit plans is represented by the defined benefit obligation ("DBO"), which is measured based on the projected unit credit method ("PUC"). Independent actuaries reappraise the DBOs of all major pension and other post-employment benefit plans annually. Plan assets are recognized at fair value.

The major pension and other post-employment benefit plans are based in Switzerland, the United States, Germany, and the United Kingdom. As of December 31, 2022, these plans represent 88% of Alcon's total DBO and are independently sponsored by Alcon. Details of the plans in those significant countries are provided below.

The pension plans in Switzerland represent the most significant portion of Alcon's total pension DBO and the largest component of Alcon's total plan assets. The principal plan in Switzerland is funded and open for new joiners. For the Swiss pension plan, active insured members' benefits are partially linked to the contributions paid into the plan. Certain features of the Swiss pension plan required by law preclude the plan from being categorized as a defined contribution plan. These factors include a minimum interest guarantee on retirement savings accounts, a pre-determined factor for converting the accumulated savings account balance into a pension and embedded death and disability benefits. All benefits granted under a Swiss-based principal pension plan are vested, and Swiss legislation prescribes that the employer has to contribute a fixed percentage of an associate's pay to an external pension foundation. Additional employer contributions may be required whenever the foundation's statutory funding ratio falls below a certain level. The associate also contributes to the plan.

Alcon's Swiss pension obligation is set-up under an Alcon-sponsored arrangement affiliated with Copré La Collective de Prévoyance ("Copré") – a Swiss collective foundation. As a collective foundation, Copré is governed by its own board of trustees which is responsible for the foundation regulations and asset investment strategy for multiple entities participating in the collective foundation. Alcon maintains its own pension committee, consisting of representatives nominated by Alcon and the active insured associates. During the fourth quarter of 2021, Copré announced the rates to be used to convert participant balances to pension annuities for 2024 to 2026. This announcement resulted in a plan amendment with a benefit of $15 million recognized in Other income and a corresponding decrease in the DBO. During the third quarter of 2020, the selection of Copré resulted in a plan amendment with past service costs of $12 million recognized in Other expense and a corresponding increase in the DBO.

The United States pension plans represent the second largest component of Alcon's total pension DBO and the third largest component of Alcon's total plan assets. The principal plan (Qualified Plan) is funded, whereas the plans providing additional benefits for executives (Defined Benefit Restoration Plan and Grandfathered Supplemental Executive Plan) are

unfunded. Benefits in the Qualified Plan and Restoration Plan are frozen for all participants. Employer contributions are required for the Qualified Plan whenever the statutory funding ratio falls below a certain level. Furthermore, the United States other post-employment benefit plans (US OPEB plans) represent 99% of the total DBO for other post-employment benefit plans. These benefits in the US primarily consist of post-employment healthcare which has been closed to new members since 2015. Effective January 1, 2021, the Alcon sponsored group health plan for current and future eligible retired participants age 65 and over was changed to a private Medicare marketplace while providing an annual notional contribution to a Health Reimbursement Account for each covered member and spouse. The impact of the plan amendment in the fourth quarter of 2020 was a benefit of $164 million recognized in Other income and a corresponding decrease in the DBO in Provisions and other non-current liabilities. There is no statutory funding requirement for the US OPEB plans.

The major pension arrangements in Germany are governed by the Occupational Pensions Act ("BetrAVG") and represent the third largest component of Alcon's total pension DBO and the fifth largest component of Alcon's total plan assets. The plans are partly funded by a Contractual Trust arrangement or direct insurances. The employer is responsible for contributing the premiums to the insurances and paying certain benefits when they fall due. All plans are closed for new entrants and the benefits are fully vested for all participants. For some participants the benefits are based on final salary and length of employment, and for others the benefit is earned each year based on the current salary in the year of service. Associates do not contribute towards the cost of the benefits.

The pension plan in the United Kingdom represents the fourth largest component of Alcon's total pension DBO and the second largest component of Alcon's total plan assets. The plan is closed with only former Alcon associates entitled to current or future benefits. The Alcon United Kingdom Pension Scheme is governed and administered by a board of trustees in accordance with its Trust Deed. United Kingdom legislation requires that pension schemes are funded prudently (i.e., to a level in excess of the "best estimate" expected cost of providing benefits). Funding is assessed on a triennial basis using (prudent) assumptions agreed by the board of trustees and Alcon. The board of trustees is responsible for jointly agreeing with Alcon the level of contributions needed to eliminate any shortfall over a reasonable period of time, typically not exceeding 10 years. Under the governing documentation, if a surplus remains once liabilities have been settled it would be refunded to Alcon.


	Pension plans		Other post-employment benefit plans
($ millions)	2022	2021	2022	2021
Benefit obligation at January 1	791	817	300	332
Current service cost	20	24	8	10
Interest cost	12	9	8	7
Past service costs and settlements	(3)	(38)	—	—
Administrative expenses	2	1	—	—
Remeasurement (gains) arising from changes in financial assumptions	(185)	(22)	(62)	(12)
Remeasurement (gains)/losses arising from changes in demographic assumptions	(15)	—	—	1
Remeasurement losses/(gains) arising from experience-related changes	3	67	(19)	(25)
Currency translation effects	(31)	(35)	—	—
Benefit payments	(36)	(37)	(18)	(17)
Contributions of associates	5	5	4	4

Benefit obligation at December 31	563	791	221	300
Fair value of plan assets at January 1	541	519	—	—
Interest income	8	6	—	—
Return on plan assets excluding interest income	(93)	49	—	—
Currency translation effects	(27)	(18)	—	—
Employer contributions	19	23	14	13
Contributions of associates	5	5	4	4
Settlements	—	(20)	—	—
Benefit payments	(36)	(37)	(18)	(17)
Effect of acquisitions, divestments or transfers	—	14	—	—
Fair value of plan assets at December 31	417	541	—	—
Funded status	(146)	(250)	(221)	(300)
Limitation on recognition of fund surplus at January 1	(20)	(17)
Change in limitation on recognition of fund surplus (including exchange rate differences)	(1)	(3)
Limitation on recognition of fund surplus at December 31	(21)	(20)
Net liability in the balance sheet at December 31	(167)	(270)	(221)	(300)


	Pension plans		Other post-employment benefit plans
($ millions)	2022	2021	2022	2021
Net liability at January 1	(270)	(315)	(300)	(332)
Current service cost	(20)	(24)	(8)	(10)
Net interest expense	(4)	(3)	(8)	(7)
Administrative expenses	(2)	(1)	—	—
Past service costs and settlements	3	18	—	—
Remeasurements	104	4	81	36
Currency translation effects	4	17	—	—
Employer contributions	19	23	14	13
Effect of acquisitions, divestments or transfers	—	14	—	—
Change in limitation on recognition of fund surplus	(1)	(3)	—	—
Net liability at December 31	(167)	(270)	(221)	(300)

Amounts recognized in the balance sheet
Prepaid benefit cost	8	25	—	—
Accrued benefit liability	(175)	(295)	(221)	(300)


	2022
($ millions)	Switzerland	United States	Germany	United Kingdom	Rest of the world	Total
By type of member
Active	(207)	(32)	(38)	—	(79)	(356)
Deferred pensioners	(6)	(28)	(18)	(33)	(9)	(94)
Pensioners	(23)	(35)	(21)	(25)	(9)	(113)
Benefit obligation at December 31	(236)	(95)	(77)	(58)	(97)	(563)
Thereof: unfunded plans	35	24	—	—	19	78
Thereof: unfunded portion of funded plans	26	7	60	—	4	97
Prepaid benefit costs and assets subject to limitation on recognition of fund surplus	—	—	—	(6)	(23)	(29)
Fair value of plan assets at December 31	175	64	17	64	97	417
Funded status	(61)	(31)	(60)	6	—	(146)


	2021
($ millions)	Switzerland	United States	Germany	United Kingdom	Rest of the world	Total
By type of member
Active	(295)	(43)	(64)	—	(99)	(501)
Deferred pensioners	(11)	(41)	(28)	(57)	(14)	(151)
Pensioners	(23)	(42)	(23)	(40)	(11)	(139)
Benefit obligation at December 31	(329)	(126)	(115)	(97)	(124)	(791)
Thereof: unfunded plans	47	29	—	—	23	99
Thereof: unfunded portion of funded plans	87	6	94	—	9	196
Prepaid benefit costs and assets subject to limitation on recognition of fund surplus	—	—	—	(24)	(21)	(45)
Fair value of plan assets at December 31	195	91	21	121	113	541
Funded status	(134)	(35)	(94)	24	(11)	(250)


	Pension plans				Other post-employment benefit plans
	2022		2021		2022		2021
Discount rate	3.6	%	1.4	%	5.3	%	2.7	%
Expected rate of pension increase	1.1	%	1.1	%
Expected rate of salary increase	2.5	%	2.2	%
Interest on savings account	2.9	%	1.3	%
Current average life expectancy for a 65-year-old male (in years)	20		20		21		21
Current average life expectancy for a 65-year-old female (in years)	22		22		23		23

Changes in the aforementioned actuarial assumptions can result in significant volatility in the accounting for pension plans and other post-employment benefit plans in the Consolidated Financial Statements. This can result in substantial changes in Alcon's other comprehensive income, non-current liabilities and prepaid pension assets.

The DBO is significantly impacted by assumptions related to the rate used to discount the actuarially determined post-employment benefit liability. This rate is based on yields of high-quality corporate bonds in the country of the plan. Increasing corporate bond yields increase the discount rate. An increase in the discount rate results in a decrease in the DBO and an increase in the funded status.

The impact of increasing interest rates on a plan's assets is more difficult to predict. A significant part of plan assets is invested in bonds. Bond values typically are inversely correlated to interest rates. Bond values usually decrease when interest rates rise and may therefore partially offset the increase in the funded status. Furthermore, pension assets also

include significant holdings of equity instruments. Share prices tend to fall when interest rates increase and therefore often offset the positive impact of the decreasing DBO on the funded status (although the correlation of interest rates with returns on equities is not as strong as with bonds, especially in the short term).

The assumption for the expected rate for pension increases significantly affects the DBO of most plans in Switzerland, Germany and the United Kingdom. While the average rate remained flat in the current year at 1.1%, such pension increases generally decrease the funded status, although there is no strong correlation between the value of the plan assets and pension/inflation increases.

Assumptions regarding life expectancy significantly impact the DBO. While the life expectancy assumption remained flat in the current year, generally an increase in longevity increases the DBO. There is no offsetting impact from the plan assets, as no longevity bonds or swaps are held by the pension funds. Generational mortality tables are used where this data is available.


($ millions)			(Decrease)/increase in 2022 year-end liability
25 basis point increase in discount rate			(22)
25 basis point decrease in discount rate			23
1 year increase in life expectancy			14
25 basis point increase in rate of pension increase			6
25 basis point decrease in rate of pension increase (1)			(3)
25 basis point increase of interest on savings account			2
25 basis point decrease of interest on savings account			(3)
25 basis point increase in rate of salary increase			3
25 basis point decrease in rate of salary increase			(3)

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes of the assumptions may be correlated. When calculating the sensitivity of the DBO to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the PUC method at the end of the reporting period) has been applied as when calculating the net liability recognized in the Consolidated Balance Sheet.

The strategic allocation of assets of the different pension plans is determined with the objective of achieving an investment return that, together with employer contributions and contributions of associates (where applicable), is sufficient to manage the various funding risks of the plans. Based upon the market and economic environments, actual asset allocations may temporarily be permitted to deviate from policy targets.