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Pension, Retiree Medical and Savings Plans
 12 Months Ended
Dec. 25, 2021
Retirement Benefits, Description [Abstract]  
Pension, Retiree Medical and Savings Plans Pension, Retiree Medical and Savings Plans
In connection with our Juice Transaction subsequent to December 25, 2021, we transferred pension and retiree medical obligations of approximately $150 million and related assets to the newly formed joint venture.
In 2021, we adopted a change to the Canadian defined benefit plans to freeze pension accruals for salaried participants, effective January 1, 2024, and to close the hourly plan to new non-union employees hired on or after January 1, 2022. After the effective date, all salaried participants will receive an employer contribution to the defined contribution plan based on age and years of service regardless of employee contribution and will have the opportunity to receive employer contributions to match employee contributions up to defined limits. We also adopted a change to the U.K. defined benefit plan to freeze pension accruals for all participants effective March 31, 2022. After the effective date, participants will have the opportunity to receive employer contributions to match employee contributions up to defined limits. Pre-tax pension benefits expense will decrease after the effective dates, partially offset by contributions to defined contribution plans.
In 2021, we adopted a change to the U.S. qualified defined benefit plans to transfer certain participants from PepsiCo Employees Retirement Plan A (Plan A) to PepsiCo Employees Retirement Plan I (Plan I), effective January 1, 2022. The benefits offered to the plans’ participants were unchanged. There is no material impact to pre-tax pension benefits expense from this transaction.
In 2020, lump sum distributions exceeded the total of annual service and interest cost and triggered a pre-tax settlement charge in Plan A of $205 million ($158 million after-tax or $0.11 per share).
In 2020, we adopted an amendment to the U.S. defined benefit pension plans to freeze benefit accruals for salaried participants, effective December 31, 2025. Since 2011, salaried new hires are not eligible to participate in the defined benefit plan. After the effective date, all salaried participants will receive an employer contribution to the 401(k) savings plan based on age and years of service regardless of employee contribution and will have the opportunity to receive employer contributions to match employee contributions up to defined limits. As a result of this amendment, pre-tax pension benefits expense decreased $70 million in 2021, primarily impacting corporate unallocated expenses.
In 2020, we approved an amendment to reorganize the U.S. qualified defined benefit pension plans that resulted in the transfer of certain participants from Plan A to Plan I and to a newly created plan, PepsiCo Employees Retirement Hourly Plan (Plan H), effective January 1, 2021. The benefits offered to the plans’ participants were unchanged. The reorganization facilitated a more targeted investment strategy and provided additional flexibility in evaluating opportunities to reduce risk and volatility. There was no material impact to pre-tax pension benefits expense as a result of this reorganization.
In 2020, we adopted an amendment, effective January 1, 2021, to enhance the pay credit benefits of certain participants in Plan H. As a result of this amendment, pre-tax pension benefits expense increased $45 million in 2021, primarily impacting service cost expense.
In 2019, Plan A purchased a group annuity contract whereby a third-party insurance company assumed the obligation to pay and administer future annuity payments for certain retirees. This transaction triggered a pre-tax settlement charge in 2019 of $220 million ($170 million after-tax or $0.12 per share).
Also in 2019, certain former employees who had vested benefits in our U.S. defined benefit pension plans were offered the option of receiving a one-time lump sum payment equal to the present value of the participant’s pension benefit. This transaction triggered a pre-tax settlement charge in 2019 of $53 million ($41 million after-tax or $0.03 per share). Collectively, the group annuity contract and one-time lump sum payments to certain former employees who had vested benefits resulted in settlement charges in 2019 of $273 million ($211 million after-tax or $0.15 per share).
Gains and losses resulting from actual experience differing from our assumptions, including the difference between the actual return on plan assets and the expected return on plan assets, as well as changes in our assumptions, are determined at each measurement date. These differences are recognized as a component of net gain or loss in accumulated other comprehensive loss. If this net accumulated gain or loss exceeds 10% of the greater of the market-related value of plan assets or plan obligations, a portion of the net gain or loss is included in other pension and retiree medical benefits (expense)/income for the following year based upon the average remaining service life for participants in Plan A (approximately 9 years), Plan H (approximately 11 years) and retiree medical (approximately 9 years), and the remaining life expectancy for participants in Plan I (approximately 27 years).
The cost or benefit of plan changes that increase or decrease benefits for prior employee service (prior service cost/(credit)) is included in other pension and retiree medical benefits (expense)/income on a straight-line basis over the average remaining service life for participants in both Plan A and Plan H, except that prior service cost/(credit) for salaried participants subject to the freeze is amortized on a straight-line basis over the period up to the effective date of the freeze, or the remaining life expectancy for participants in Plan I.
Selected financial information for our pension and retiree medical plans is as follows: 
 PensionRetiree Medical
 U.S.International  
 202120202021202020212020
Change in projected benefit obligation
Obligation at beginning of year$16,753 $15,230 $4,430 $3,753 $1,006 $988 
Service cost518 434 104 86 33 25 
Interest cost324 435 74 85 15 25 
Plan amendments23 (221)3 (17)— (25)
Participant contributions— — 3 2 — — 
Experience (gain)/loss(215)2,042 (178)467 (17)81 
Benefit payments(976)(378)(106)(92)(83)(89)
Settlement/curtailment (220)(808)(99)(24)— — 
Special termination benefits9 19 — — — — 
Other, including foreign currency adjustment— — (56)170 — 1 
Obligation at end of year$16,216 $16,753 $4,175 $4,430 $954 $1,006 
Change in fair value of plan assets
Fair value at beginning of year$15,465 $14,302 $4,303 $3,732 $315 $302 
Actual return on plan assets1,052 1,908 387 401 20 47 
Employer contributions/funding580 387 158 120 47 55 
Participant contributions— — 3 2 — — 
Benefit payments(976)(378)(106)(92)(83)(89)
Settlement(217)(754)(52)(29)— — 
Other, including foreign currency adjustment— — (69)169 — — 
Fair value at end of year$15,904 $15,465 $4,624 $4,303 $299 $315 
Funded status$(312)$(1,288)$449 $(127)$(655)$(691)
Amounts recognized
Other assets$692 $797 $564 $110 $— $— 
Other current liabilities(48)(53)(1)(1)(57)(51)
Other liabilities(956)(2,032)(114)(236)(598)(640)
Net amount recognized$(312)$(1,288)$449 $(127)$(655)$(691)
Amounts included in accumulated other comprehensive loss (pre-tax)
Net loss/(gain)$3,550 $4,116 $696 $1,149 $(220)$(212)
Prior service (credit)/cost(63)(119)(11)(19)(34)(45)
Total$3,487 $3,997 $685 $1,130 $(254)$(257)
Changes recognized in net (gain)/loss included in other comprehensive loss
Net (gain)/loss arising in current year$(301)$1,009 $(355)$268 $(22)$50 
Amortization and settlement recognition(265)(409)(95)(75)14 23 
Foreign currency translation (gain)/loss— — (3)42 — — 
Total$(566)$600 $(453)$235 $(8)$73 
Accumulated benefit obligation at end of year$15,489 $15,949 $4,021 $4,108 
The net gain arising in the current year is primarily attributable to the increase in discount rate offset by actual experience differing from demographic assumptions.
The amount we report in operating profit as pension and retiree medical cost is service cost, which is the value of benefits earned by employees for working during the year.
The amounts we report below operating profit as pension and retiree medical cost consist of the following components:
•Interest cost is the accrued interest on the projected benefit obligation due to the passage of time.
•Expected return on plan assets is the long-term return we expect to earn on plan investments for our funded plans that will be used to settle future benefit obligations.
•Amortization of prior service cost/(credit) represents the recognition in the income statement of benefit changes resulting from plan amendments.
•Amortization of net loss/(gain) represents the recognition in the income statement of changes in the amount of plan assets and the projected benefit obligation based on changes in assumptions and actual experience.
•Settlement/curtailment loss/(gain) represents the result of actions that effectively eliminate all or a portion of related projected benefit obligations. Settlements are triggered when payouts to settle the projected benefit obligation of a plan due to lump sums or other events exceed the annual service and interest cost. Settlements are recognized when actions are irrevocable and we are relieved of the primary responsibility and risk for projected benefit obligations. Lump sum payouts are generally higher when interest rates are lower. Curtailments are recognized when events such as plant closures, the sale of a business, or plan changes result in a significant reduction of future service or benefits. Curtailment losses are recognized when an event is probable and estimable, while curtailment gains are recognized when an event has occurred (when the related employees terminate or an amendment is adopted).
•Special termination benefits are the additional benefits offered to employees upon departure due to actions such as restructuring.
The components of total pension and retiree medical benefit costs are as follows:
 PensionRetiree Medical
 U.S.International   
 202120202019202120202019202120202019
Service cost$518 $434 $381 $104 $86 $73 $33 $25 $23 
Other pension and retiree medical benefits (income)/expense:
Interest cost$324 $435 $543 $74 $85 $97 $15 $25 $36 
Expected return on plan assets(970)(929)(892)(231)(202)(188)(15)(16)(18)
Amortization of prior service (credits)/cost(31)12 10 (2)— — (11)(12)(19)
Amortization of net losses/(gains)224 196 161 77 61 32 (14)(23)(27)
Settlement/curtailment losses/(gains) (a)
40 213 296 (11)19 12 — — — 
Special termination benefits9 19 1 — — — — — — 
Total other pension and retiree medical benefits (income)/expense$(404)$(54)$119 $(93)$(37)$(47)$(25)$(26)$(28)
Total$114 $380 $500 $11 $49 $26 $8 $(1)$(5)
(a)In 2020, U.S. includes a settlement charge of $205 million ($158 million after-tax or $0.11 per share) related to lump sum distributions exceeding the total of annual service and interest cost. In 2019, U.S. includes settlement charges related to the purchase of a group annuity contract of $220 million ($170 million after-tax or $0.12 per share) and a pension lump sum settlement charge of $53 million ($41 million after-tax or $0.03 per share).
The following table provides the weighted-average assumptions used to determine net periodic benefit cost and projected benefit obligation for our pension and retiree medical plans:
 PensionRetiree Medical
 U.S.International   
 202120202019202120202019202120202019
Net Periodic Benefit Cost
Service cost discount rate 2.6 %3.4 %4.4 %2.7 %3.2 %4.2 %2.3 %3.2 %4.3 %
Interest cost discount rate 2.0 %2.9 %4.1 %1.7 %2.4 %3.2 %1.6 %2.6 %3.8 %
Expected return on plan assets6.4 %6.8 %7.1 %5.3 %5.6 %5.8 %5.4 %5.8 %6.6 %
Rate of salary increases3.0 %3.1 %3.1 %3.3 %3.3 %3.7 %
Projected Benefit Obligation
Discount rate2.9 %2.5 %3.3 %2.4 %2.0 %2.5 %2.7 %2.3 %3.1 %
Rate of salary increases3.0 %3.0 %3.1 %3.3 %3.3 %3.3 %
The following table provides selected information about plans with accumulated benefit obligation and total projected benefit obligation in excess of plan assets:
 PensionRetiree Medical
 U.S.International  
 202120202021202020212020
Selected information for plans with accumulated benefit obligation in excess of plan assets (a)
Obligation for service to date$(1,499)$(5,537)$(127)$(172)
Fair value of plan assets$705 $4,156 $102 $123 
Selected information for plans with projected benefit obligation in excess of plan assets (a)
Benefit obligation$(1,709)$(9,172)$(286)$(2,933)$(954)$(1,006)
Fair value of plan assets$705 $7,088 $171 $2,696 $299 $315 
(a)The decrease in U.S. pension plans with obligations in excess of plan assets primarily reflects employer contributions to Plan H.
Of the total projected pension benefit obligation as of December 25, 2021, approximately $810 million relates to plans that we do not fund because the funding of such plans does not receive favorable tax treatment.
Future Benefit Payments    
Our estimated future benefit payments are as follows:
202220232024202520262027 - 2031
Pension$1,110 $960 $960 $995 $1,030 $5,385 
Retiree medical (a)
$95 $90 $90 $85 $80 $355 
(a)Expected future benefit payments for our retiree medical plans do not reflect any estimated subsidies expected to be received under the 2003 Medicare Act. Subsidies are expected to be approximately $1 million for each of the years from 2022 through 2026 and approximately $4 million in total for 2027 through 2031.
These future benefit payments to beneficiaries include payments from both funded and unfunded plans.
Funding
Contributions to our pension and retiree medical plans were as follows:
PensionRetiree Medical
202120202019202120202019
Discretionary (a)
$525 $339 $417 $— $— $— 
Non-discretionary213 168 255 47 55 44 
Total$738 $507 $672 $47 $55 $44 
(a)Includes $500 million contribution in 2021, $325 million contribution in 2020 and $400 million contribution in 2019 to fund our qualified defined benefit plans in the United States.
We made a discretionary contribution of $75 million to our U.S. qualified defined benefit plans in January 2022 and expect to make an additional $75 million contribution in the third quarter of 2022. In addition, in 2022, we expect to make non-discretionary contributions of approximately $135 million to our U.S. and international pension benefit plans and approximately $55 million for retiree medical benefits.
We continue to monitor the impact of the COVID-19 pandemic and related global economic conditions and uncertainty on the net unfunded status of our pension and retiree medical plans. We also regularly evaluate opportunities to reduce risk and volatility associated with our pension and retiree medical plans.
Plan Assets
Our pension plan investment strategy includes the use of actively managed accounts and is reviewed periodically in conjunction with plan obligations, an evaluation of market conditions, tolerance for risk and cash requirements for benefit payments. This strategy is also applicable to funds held for the retiree medical plans. Our investment objective includes ensuring that funds are available to meet the plans’ benefit obligations when they become due. Assets contributed to our pension plans are no longer controlled by us, but become the property of our individual pension plans. However, we are indirectly impacted by changes in these plan assets as compared to changes in our projected obligations. Our overall investment policy is to prudently invest plan assets in a well-diversified portfolio of equity and high-quality debt securities and real estate to achieve our long-term return expectations. Our investment policy also permits the use of derivative instruments, such as futures and forward contracts, to reduce interest rate and foreign currency risks. Futures contracts represent commitments to purchase or sell securities at a future date and at a specified price. Forward contracts consist of currency forwards.
For 2022 and 2021, our expected long-term rate of return on U.S. plan assets is 6.3% and 6.4%, respectively. Our target investment allocations for U.S. plan assets are as follows:
20222021
Fixed income56 %51 %
U.S. equity22 %24 %
International equity18 %21 %
Real estate4 %4 %
Actual investment allocations may vary from our target investment allocations due to prevailing market conditions. We regularly review our actual investment allocations and periodically rebalance our investments.
The expected return on plan assets is based on our investment strategy and our expectations for long-term rates of return by asset class, taking into account volatility and correlation among asset classes and our historical experience. We also review current levels of interest rates and inflation to assess the reasonableness of the long-term rates. We evaluate our expected return assumptions annually to ensure that they are reasonable. To calculate the expected return on plan assets, our market-related value of assets
for fixed income is the actual fair value. For all other asset categories, such as equity securities, we use a method that recognizes investment gains or losses (the difference between the expected and actual return based on the market-related value of assets) over a five-year period. This has the effect of reducing year-to-year volatility.
Plan assets measured at fair value as of year-end 2021 and 2020 are categorized consistently by Level 1 (quoted prices in active markets for identical assets), Level 2 (significant other observable inputs) and Level 3 (significant unobservable inputs) in both years and are as follows:
 Fair Value Hierarchy Level20212020
U.S. plan assets (a)
Equity securities, including preferred stock (b)
1$6,387 $7,179 
Government securities (c)
22,523 2,177 
Corporate bonds (c)
26,210 5,437 
Mortgage-backed securities (c)
2199 119 
Contracts with insurance companies (d)
39 9 
Cash and cash equivalents (e)
1, 2352 278 
Sub-total U.S. plan assets15,680 15,199 
Real estate commingled funds measured at net asset value (f)
478 517 
Dividends and interest receivable, net of payables
45 64 
Total U.S. plan assets$16,203 $15,780 
International plan assets
Equity securities (b)
1$2,232 $2,119 
Government securities (c)
21,053 937 
Corporate bonds (c)
2400 445 
Fixed income commingled funds (g)
1632 509 
Contracts with insurance companies (d)
343 50 
Cash and cash equivalents134 33 
Sub-total international plan assets4,394 4,093 
Real estate commingled funds measured at net asset value (f)
221 202 
Dividends and interest receivable9 8 
Total international plan assets$4,624 $4,303 
(a)Includes $299 million and $315 million in 2021 and 2020, respectively, of retiree medical plan assets that are restricted for purposes of providing health benefits for U.S. retirees and their beneficiaries.
(b)Invested in U.S. and international common stock and commingled funds, and the preferred stock portfolio was invested in domestic and international corporate preferred stock investments. The common and preferred stock investments are based on quoted prices in active markets. The commingled funds are based on the published price of the fund and include one large-cap fund that represents 11% and 13% of total U.S. plan assets for 2021 and 2020, respectively.
(c)These investments are based on quoted bid prices for comparable securities in the marketplace and broker/dealer quotes in active markets. Corporate bonds of U.S.-based companies represent 32% and 30% of total U.S. plan assets for 2021 and 2020, respectively.
(d)Based on the fair value of the contracts as determined by the insurance companies using inputs that are not observable. The changes in Level 3 amounts were not significant in the years ended December 25, 2021 and December 26, 2020.
(e)Includes Level 1 assets of $216 million and $178 million for 2021 and 2020, respectively, and Level 2 assets of $136 million and $100 million for 2021 and 2020, respectively.
(f)The real estate commingled funds include investments in limited partnerships. These funds are based on the net asset value of the appraised value of investments owned by these funds as determined by independent third parties using inputs that are not observable. The majority of the funds are redeemable quarterly subject to availability of cash and have notice periods ranging from 45 to 90 days.
(g)Based on the published price of the fund.
Retiree Medical Cost Trend Rates
20222021
Average increase assumed6 %6 %
Ultimate projected increase 4 %5 %
Year of ultimate projected increase
20462040
These assumed health care cost trend rates have an impact on the retiree medical plan expense and obligation, however the cap on our share of retiree medical costs limits the impact.
Savings Plan
Certain U.S. employees are eligible to participate in a 401(k) savings plan, which is a voluntary defined contribution plan. The plan is designed to help employees accumulate savings for retirement and we make Company matching contributions for certain employees on a portion of employee contributions based on years of service.
Certain U.S. salaried employees, who are not eligible to participate in a defined benefit pension plan, are also eligible to receive an employer contribution based on age and years of service regardless of employee contribution.
In 2021, 2020 and 2019, our total Company contributions were $246 million, $225 million and $197 million, respectively.