Employee Retirement Plans (Notes)

12 Months Ended

Dec. 31, 2022

Compensation and Employee Benefit Plans [Text Block]

NOTE Q – EMPLOYEE RETIREMENT PLANS

Defined Benefit Pension Plans

Domestic Retirement Plans

Following our 2006 acquisition of Guidant, we assumed the Guidant Supplemental Retirement Plan, a frozen, non-qualified defined benefit plan for certain former officers and employees of Guidant. The Guidant Supplemental Retirement Plan was partially funded through a Rabbi Trust that contains segregated company assets within restricted cash used to pay the benefit obligations related to the plan.

We also maintain an Executive Retirement Plan, a defined benefit plan covering executive officers and other key contributors. Participants may retire with benefits once retirement conditions have been satisfied.

U.K. Plan

As a result of our 2019 acquisition of BTG plc. (BTG), we assumed a benefit obligation related to a defined benefit pension plan sponsored by BTG for eligible United Kingdom employees. During the second quarter of 2022, we transferred the benefit obligation and associated assets of the pension plan to third party insurers, and as a result, were relieved from primary responsibility of the benefit obligation and the related plan assets. The transaction did not have a material impact on our financial position or results of operations.

Other International Retirement Plans

In addition, we maintain retirement plans covering certain international employees.

We use a December 31 measurement date for these plans and record the net unfunded and underfunded portion as a liability within non-current liabilities, with the current portion within accrued expenses, on the consolidated balance sheets, recognizing changes primarily through OCI. As of December 31, 2022 and 2021, the funded status of our plans were unfunded or underfunded in aggregate. The outstanding obligation is as follows:


	As of December 31, 2022
(in millions)	Accumulated Benefit Obligation (ABO)		Projected Benefit Obligation (PBO)		Fair value of Plan Assets		Unfunded/Underfunded PBO Recognized
Domestic Retirement Plans	$	50	$	55	$	—	$	55


Other International Retirement Plans	140		152		101		51
	$	190	$	207	$	101	$	105


	As of December 31, 2021
(in millions)	Accumulated Benefit Obligation (ABO)		Projected Benefit Obligation (PBO)		Fair value of Plan Assets		Unfunded/Underfunded PBO Recognized
Domestic Retirement Plans	$	56	$	59	$	—	$	59
U.K. Plan	209		209		205		3
Other International Retirement Plans	214		234		130		103
	$	478	$	502	$	336	$	166

A rollforward of the changes in the PBO for our retirement plans is as follows:


	Year Ended December 31,
(in millions)	2022		2021
Beginning obligations	$	502	$	532
Acquired plans	—		4
Service costs	13		17
Interest costs	3		3
Actuarial (gain) loss	(54)		(7)
Plan curtailments/settlements	(191)		—

Plan amendments and assumption changes	(25)		(6)
Benefits paid	(6)		(22)
Impact of foreign currency fluctuations	(37)		(20)
Ending obligation	$	207	$	502

The critical assumptions associated with our employee retirement plans for 2022 are as follows:


	Weighted Average Discount Rate	Weighted Average Expected Return		Weighted Average Rate of Compensation Increase(1)

Domestic Retirement Plans	5.32%	n/a	2.00%

Other International Retirement Plans	2.62%		2.27%	3.00%

(1) Rates of compensation increase were not weighted by relative fair value. As such, the amount represents the median of the inputs and is not a weighted average.

The critical assumptions associated with our employee retirement plans for 2021 are as follows:


	Weighted Average Discount Rate	Weighted Average Expected Return	Weighted Average Rate of Compensation Increase(1)
Domestic Retirement Plans	2.40%	n/a	1.50%
U.K. Plan	0.70%	0.70%	n/a
Other International Retirement Plans	0.82%	2.16%	2.60%

(1) Rates of compensation increase were not weighted by relative fair value. As such, the amount represents the median of the inputs and is not a weighted average.

A rollforward of the changes in the fair value of plan assets for our funded retirement plans is as follows:


	Year Ended December 31,
(in millions)	2022		2021
Beginning fair value	$	336	$	355
Acquired plans	—		1
Actual return on plan assets	(2)		5
Employer contributions	16		12
Participant contributions	1		2
Plan curtailments/settlements	(185)		—
Actuarial gain (loss)	(25)		(4)
Benefits paid	(9)		(22)
Impact of foreign currency fluctuations	(32)		(13)
Ending fair value	$	101	$	336

For our defined benefit plans, excluding our U.K. Plan, we base our discount rate on the rates of return available on high-quality bonds with maturities approximating the expected period over which benefits will be paid. The rate of compensation increase is based on historical and expected rate increases. We base our rate of expected return on plan assets on historical experience, our investment guidelines and expectations for long-term rates of return. Our assets are invested in a variety of securities, primarily equity securities and government bonds. These securities are considered Level 1 and Level 2 investments.

Prior to the transfer, the U.K. Plan utilized the insurance buy-in methodology and based its discount rate on a yield curve reflective of the market pricing obtained in the most recent buy-in transaction, which occurred prior to the acquisition of BTG, and movements in market-observed buy-in pricing as of December 31, 2021. We believed this to be a reasonable proxy for an effective settlement rate of the buy-in assets. The discount rate was calculated as the single equivalent assumption that gives the same value of the liabilities as if the figures were calculated using the full yield curve. We assumed that all pension increases would continue to be linked to the Retail Price Inflation (RPI), both before and after retirement, for all members, with the exception of post-88 Guaranteed Minimum Pensions (GMP), which would be based on Consumer Price Inflation (CPI). We based our rate of expected return on plan assets as equal to the discount rate used to value the buy-in assets. The U.K. Plan assets' investment policy was to invest in fully matching assets. This was achieved through the purchase of two buy-in policies (Buy-in contracts), which provided payments designed to equal all future benefit payments due from the fund. As of December 31, 2021, the Buy-in contracts represented 100 percent of the total plan assets, as compared to the target percentage of 100 percent, and are considered Level 3 investments.

The following table presents the fair value hierarchy of the U.K. Plan assets measured at fair value:


	As of
	December 31, 2021
(in millions)	Level 1		Level 2		Level 3		Total
Buy-in contracts	$	—	$	—	$	205	$	205

Total assets	$	—	$	—	$	205	$	205

Changes in the fair value of the U.K. Plan Level 3 assets were as follows:


(in millions)	Buy-in Contracts
Balance as of December 31, 2021	$	205
Actual return on plan assets	0
Employer contributions	1
Plan curtailments/settlements	(160)
Actuarial gain (loss)	(24)
Benefits paid	(2)
Impact of foreign currency fluctuations	(22)
Balance as of December 31, 2022	$	—

Expected benefit payments are estimated based on the same assumptions used in determining our benefit obligation as of December 31, 2022. Actual benefit payments will depend on future employment and compensation, average years employed and average life spans, in addition to other factors. Changes in any of these factors could significantly impact these estimated future benefit payments. Benefit payments expected to be paid during the next ten years for our Domestic Retirement Plans and our Other International Retirement Plans are as follows:


(in millions)	Post Retirement Benefits
2023	$	15
2024	8
2025	13
2026	14
2027	14
2028 - 2032	70

Defined Contribution Plan

We also sponsor a voluntary 401(k) Retirement Savings Plan for eligible employees. We match 200 percent of employee elective deferrals for the first two percent of employee eligible compensation and 50 percent of employee elective deferrals greater than two percent, but not exceeding six percent, of employee eligible compensation. Total expense for our matching contributions to the plan was $123 million in 2022, $118 million in 2021 and $102 million in 2020.