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RETIREMENT BENEFITS
 12 Months Ended
Dec. 31, 2021
Retirement Benefits [Abstract]  
Retirement Benefits RETIREMENT BENEFITSBMS sponsors defined benefit pension plans, defined contribution plans and termination indemnity plans for regular full-time employees. The principal defined benefit pension plan was the Bristol Myers Squibb Retirement Income Plan (the “Plan”), which covered most U.S. employees. Future benefits related to service for the Plan were eliminated in 2009. BMS contributed at least the minimum amount required by ERISA. Plan benefits were based primarily on the participant’s years of credited service and final average compensation.
In 2018, BMS announced plans to fully terminate the Plan. Pension obligations related to the Plan were to be distributed through a combination of lump sum payments to eligible Plan participants who elected such payments and through the purchase of group annuity contracts from wholly owned insurance subsidiaries of Athene Holding Ltd. (“Athene”). In 2019, $1.3 billion was distributed to Plan participants who elected lump sum payments during the election window, and group annuity contracts were purchased from Athene for $2.6 billion for the remaining Plan participants for whom Athene irrevocably assumed the pension obligations. These transactions fully terminated the Plan and resulted in a $1.5 billion non-cash pre-tax pension settlement charge in 2019.

The net periodic benefit cost of defined benefit pension plans includes:
Year Ended December 31,
Dollars in Millions202120202019
Service cost — benefits earned during the year$51 $48 $26 
Interest cost on projected benefit obligation35 42 115 
Expected return on plan assets(99)(98)(200)
Amortization of prior service credits(4)(4)(4)
Amortization of net actuarial loss50 44 59 
Settlements and Curtailments(5)10 1,640 
Net periodic pension benefit cost$28 $42 $1,636 

Pension settlement charges were recognized after determining the annual lump sum payments will exceed the annual interest and service costs for certain pension plans, including the primary U.S. pension plan in 2019.

Changes in defined benefit pension plan obligations, assets, funded status and amounts recognized in the consolidated balance sheets were as follows:
Year Ended December 31,
Dollars in Millions20212020
Benefit obligations at beginning of year$3,242 $2,940 
Service cost—benefits earned during the year51 48 
Interest cost35 42 
Settlements and Curtailments(101)(145)
Actuarial (gains)/losses(153)233 
Benefits paid(46)(58)
Foreign currency and other(93)182 
Benefit obligations at end of year$2,935 $3,242 
Fair value of plan assets at beginning of year$2,807 $2,536 
Actual return on plan assets125 196 
Employer contributions87 96 
Settlements(83)(126)
Benefits paid(46)(58)
Foreign currency and other(75)163 
Fair value of plan assets at end of year$2,815 $2,807 
Funded status$(120)$(435)
Assets/(Liabilities) recognized:
Other non-current assets$317 $208 
Other current liabilities(24)(26)
Other non-current liabilities(413)(617)
Funded status$(120)$(435)
Recognized in Accumulated other comprehensive loss:
Net actuarial losses$1,015 $1,255 
Prior service credit(29)(22)
Total$986 $1,233 
The accumulated benefit obligation for defined benefit pension plans was $2.9 billion and $3.2 billion at December 31, 2021 and 2020, respectively.

Additional information related to pension plans was as follows:
December 31,
Dollars in Millions20212020
Pension plans with projected benefit obligations in excess of plan assets:
Projected benefit obligation$1,274 $1,805 
Fair value of plan assets836 1,162 
Pension plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation1,245 1,579 
Fair value of plan assets832 952 

Actuarial Assumptions

Weighted-average assumptions used to determine defined benefit pension plan obligations were as follows:
December 31,
 20212020
Discount rate1.6 %1.2 %
Rate of compensation increase1.0 %1.3 %
Interest crediting rate2.1 %2.2 %

Weighted-average actuarial assumptions used to determine defined benefit pension plan net periodic benefit cost were as follows:
Year Ended December 31,
 202120202019
Discount rate1.2 %1.6 %3.2 %
Expected long-term return on plan assets3.6 %4.1 %4.5 %
Rate of compensation increase1.3 %1.3 %0.5 %
Interest crediting rate2.2 %2.2 %2.7 %

The yield on high quality corporate bonds matching the duration of the benefit obligations is used in determining the discount rate. The FTSE Pension Discount Curve is used in developing the discount rate for the U.S. plans.

The expected return on plan assets assumption for each plan is based on management’s expectations of long-term average rates of return to be achieved by the underlying investment portfolio. Several factors are considered in developing the expected return on plan assets, including long-term historical returns and input from external advisors. Individual asset class return forecasts were developed based upon market conditions, for example, price-earnings levels and yields and long-term growth expectations. The expected long-term rate of return is the weighted-average of the target asset allocation of each individual asset class.
Actuarial gains and losses resulted from changes in actuarial assumptions (such as changes in the discount rate and revised mortality rates) and from differences between assumed and actual experience (such as differences between actual and expected return on plan assets). Actuarial gains and losses related to plan benefit obligations primarily resulted from changes in discount rates.

Postretirement Benefit Plans

Comprehensive medical and group life benefits are provided for substantially all BMS U.S. retirees electing to participate in comprehensive medical and group life plans and to a lesser extent certain benefits for non-U.S. employees. The medical plan is contributory. Contributions are adjusted periodically and vary by date of retirement. The life insurance plan is noncontributory. Postretirement benefit plan obligations were $237 million and $267 million at December 31, 2021 and 2020, respectively. The weighted-average discount rate used to determine benefit obligations was 2.5% and 2.0% at December 31, 2021 and 2020, respectively. The net periodic benefit credits were not material.

As a result of the Bristol Myers Squibb Retirement Income Plan's termination in 2019, $381 million of assets held in a separate account within the Pension Trust used to fund retiree medical plan payments was reverted back to the Company in 2020, resulting in an excise tax of $76 million.
Plan Assets

The fair value of pension and postretirement plan assets by asset category at December 31, 2021 and 2020 was as follows:
 December 31, 2021December 31, 2020
Dollars in MillionsLevel 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Plan Assets
Equity securities$44 $— $— $44 $101 $— $— $101 
Equity funds— 625 — 625 — 601 — 601 
Fixed income funds— 815 — 815 — 783 — 783 
Corporate debt securities— 485 — 485 — 533 — 533 
U.S. Treasury and agency securities— 67 — 67 — 70 — 70 
Insurance contracts— — 130 130 — — 149 149 
Cash and cash equivalents47 — — 47 96 — — 96 
Other— 224 42 266 — 112 40 152 
Plan assets subject to leveling$91 $2,216 $172 $2,479 $197 $2,099 $189 $2,485 
Plan assets measured at NAV as a practical expedient336 322 
Net plan assets$2,815 $2,807 

The investment valuation policies per investment class are as follows:

Level 1 inputs utilize unadjusted quoted prices in active markets accessible at the measurement date for identical assets or liabilities. The fair value hierarchy provides the highest priority to Level 1 inputs. These instruments include equity securities, equity funds and fixed income funds publicly traded on a national securities exchange, and cash and cash equivalents. Cash and cash equivalents are highly liquid investments with original maturities of three months or less at the time of purchase and are recognized at cost, which approximates fair value. Pending trade sales and purchases are included in cash and cash equivalents until final settlement.

Level 2 inputs utilize observable prices for similar instruments, quoted prices for identical or similar instruments in non-active markets, and other observable inputs that can be corroborated by market data for substantially the full term of the assets or liabilities. Equity funds and fixed income funds classified as Level 2 within the fair value hierarchy are valued at the NAV of their shares held at year end, which represents fair value. Corporate debt securities and U.S. Treasury and agency securities classified as Level 2 within the fair value hierarchy are valued utilizing observable prices for similar instruments and quoted prices for identical or similar instruments in markets that are not active.

Level 3 unobservable inputs are used when little or no market data is available. Insurance contracts are held by certain foreign pension plans and are carried at contract value, which approximates the estimated fair value and is based on the fair value of the underlying investment of the insurance company.

Investments using the practical expedient consist primarily of multi-asset funds which are redeemable on either a daily, weekly, or monthly basis.

The investment strategy is to maximize return while maintaining an appropriate level of risk to provide sufficient liquidity for benefit obligations and plan expenses. Individual plan investment allocations are determined by local fiduciary committees and the composition of total assets for all pension plans at December 31, 2021 was broadly characterized as an allocation between equity securities (30%), debt securities (55%) and other investments (15%).

Contributions and Estimated Future Benefit Payments

Contributions to pension plans were $87 million in 2021, $96 million in 2020, and $63 million in 2019, and are not expected to be material in 2022. Estimated annual future benefit payments (including lump sum payments) will be approximately $137 million in 2022 and approximately $130 million in each of the next five years and in the subsequent five year period.

Savings Plans

The principal defined contribution plan is the Bristol-Myers Squibb Savings and Investment Program. The contributions are based on employee contributions and the level of Company match. The U.S. defined contribution plan expense was approximately $350 million in 2021, $290 million in 2020 and $200 million in 2019.