Pfizer 2008 Annual Report Download - page 73

Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
13. Pension and Postretirement Benefit Plans and Defined Contribution Plans
We provide defined benefit pension plans and defined contribution plans for the majority of our employees worldwide. In the U.S., we have
both qualified and supplemental (non-qualified) defined benefit plans. A qualified plan meets the requirements of certain sections of the
Internal Revenue Code and, generally, contributions to qualified plans are tax deductible. A qualified plan typically provides benefits to a broad
group of employees and may not discriminate in favor of highly compensated employees in its coverage, benefits or contributions. We also
provide benefits through supplemental (non-qualified) retirement plans to certain employees. In addition, we provide medical and life insurance
benefits to certain retirees and their eligible dependents through our postretirement plans.
We use a measurement date that coincides with our fiscal year-ends; December 31 for our U.S. pension and postretirement plans and
November 30 for our international plans. During 2006, pursuant to the divestiture of our Consumer Healthcare business, certain defined
benefit obligations and related plan assets, if applicable, were transferred to the purchaser of that business.
A. Adoption of New Accounting Standard
As of December 31, 2006, we adopted the provisions of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106 and 132R), which requires us to recognize on our balance sheet
the difference between our benefit obligations and any plan assets of our defined benefit plans. In addition, we are required to recognize as
part of other comprehensive income/(expense), net of taxes, gains and losses due to differences between our actuarial assumptions and
actual experience (actuarial gains and losses) and any effects on prior service due to plan amendments (prior service costs or credits) that
arise during the period and are not being recognized as net periodic benefit costs. Upon adoption, SFAS 158 requires the recognition of
previously unrecognized actuarial gains and losses, prior service costs and credits and net transition amounts within Accumulated other
comprehensive income/(expense), net of tax. The incremental impact of applying SFAS 158 to our balance sheet as of December 31, 2006,
was to reduce our total shareholders’ equity by $2.1 billion, primarily due to the recognition of previously unrecognized actuarial losses.
B. Components of Net Periodic Benefit Costs and Other Amounts Recognized in Other Comprehensive (Income)/
Expense
The annual cost and other amounts recognized in other comprehensive (income)/expense of the U.S. qualified, U.S. supplemental (non-
qualified) and international pension plans and postretirement plans for the years ended December 31, 2008, 2007 and 2006, follow:
PENSION PLANS
U.S. QUALIFIED
U.S. SUPPLEMENTAL
(NON-QUALIFIED) INTERNATIONAL
POSTRETIREMENT
PLANS
(MILLIONS OF DOLLARS) 2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007 2006
Service cost $ 236 $ 282 $ 368 $23 $27 $43 $ 249 $ 292 $ 303 $39 $42 $47
Interest cost 459 447 444 38 55 60 388 349 307 141 137 127
Expected return on plan
assets (646) (693) (628) ———(437) (381) (311) (35) (36) (28)
Amortization of:
Actuarial losses 32 65 119 29 45 45 43 96 106 28 42 36
Prior service costs/
(credits) 389(2) (2) (3) 1—2 111
Curtailments and
settlements—net 32 58 117 120 5 (8) 3(155) (17) 10 56
Special termination benefits 30 16 17 ——— 25 29 14 17 17 12
Less: amounts included in
discontinued operations —(27) (81) ——4 ——15 ——9
Net periodic benefit costs 146 156 365 208 130 141 272 230 419 201 208 210
Other changes recognized
in other comprehensive
(income)/expense(a) 2,273 (582) — (52) (134) 12 415 (808) 4 (140) (311) —
Total recognized in net
periodic benefit costs and
other comprehensive
(income)/expense $2,419 $(426) $ 365 $156 $ (4) $153 $ 687 $(578) $ 423 $61 $(103) $210
(a) For details, see Note 8. Other Comprehensive Income/(Expense).
The decrease in the 2008 U.S. qualified pension plans’ net periodic benefit cost compared to 2007 was largely driven by the increase in the
discount rate and the impact of our cost-reduction initiatives. The decrease in the 2007 U.S. qualified pension plans’ net periodic benefit cost
compared to 2006 was largely driven by a higher 2006 actual investment return, the increase in the discount rate and the impact of our cost-
reduction initiatives.
The increase in the 2008 U.S. supplemental (non-qualified) plans’ net periodic benefit costs compared to 2007 was largely driven by
settlement charges required to be recognized due to lump sum benefit payments made to certain of our former executive officers and other
former executives in 2008.
2008 Financial Report 71