RETIREMENT AND OTHER BENEFIT PROGRAMS

6 Months Ended

Jun. 30, 2015

9. RETIREMENT AND OTHER BENEFIT PROGRAMS

The following is a summary of net periodic benefit cost relating to the company’s pension and other postemployment benefit (OPEB) plans.


	Three months ended						Six months ended
	June 30,						June 30,
(in millions)	2015			2014			2015			2014
Pension benefits
Service cost		$38			$33			$ 75			$ 66
Interest cost		56			60			111			120
Expected return on plan assets		(71	)		(68	)		(138	)		(134	)
Amortization of net losses and other deferred amounts		51			36			102			72
Net periodic pension benefit cost		$74			$61			$150			$124

OPEB
Service cost		$ 1			$ 2			$ 2			$ 3
Interest cost		4			7			10			14
Amortization of net loss and prior service credit		(3	)		—			(4	)		—
Net periodic OPEB cost		$ 2			$ 9			$ 8			$ 17

In the second quarter of 2015, in connection with the transfer of liabilities and assets from a combined Baxter pension or OPEB plan to a newly created Baxalta pension or OPEB plan, the company remeasured pension and OPEB liabilities and assets for several of its plans. The remeasurement resulted in a reduction to pension and OPEB obligations of $203 million, with an offset to AOCI. The significant weighted-average assumptions used at the measurement date were as follows.


	Pension benefits		OPEB
Discount rate
U.S. plans		4.03%		3.78%
International plans		1.32%		n/a
Expected return on plan assets
U.S. plans		7.25%		n/a
International plans		5.74%		n/a
Rate of compensation increase
U.S. plans		3.80%		n/a
International plans		3.30%		n/a
Annual rate of increase in the per-capita cost		n/a		6.00%
Rate decreased to		n/a		5.00%
by the year ended		n/a		2019

The company also adjusted its assumptions for future company actions related to postemployment medical benefits for retirees who are age 65 and older and receive a subsidy to be utilized on a medical insurance exchange.

Baxter contributed a discretionary amount of $100 million in the second quarter of 2015 to its U.S. qualified pension plan.