Employee Benefit Plans | Employee Benefit Plans Pension and Postretirement Benefit Plans The Company sponsors both funded and unfunded defined benefit pension plans. These plans provide benefits based on various criteria, including, but not limited to, years of service and salary. The Company also sponsors an unfunded postretirement benefit plan in the United States that provides health and prescription drug benefits to retirees who meet the eligibility requirements. The Company uses a December 31 measurement date for all pension and postretirement benefit plans. The following table summarizes changes in the benefit obligation, the plan assets and the funded status of the pension benefit plans: Pension Benefits United States Plans Non-United States Plans December 31, (in millions) 2020 2019 2020 2019 Obligation and funded status: Change in benefit obligation: Projected benefit obligation at beginning of year $ 401 $ 335 $ 591 $ 513 Service costs 13 12 29 25 Interest cost 12 14 8 9 Actuarial losses 65 50 60 55 Business combinations — — — — Benefits paid (10) (10) (18) (19) Contributions — — 2 2 Amendments — — (1) — Curtailments — — — (5) Settlements — — (7) (1) Foreign currency fluctuations and other — — 29 12 Projected benefit obligation at end of year 481 401 693 591 Change in plan assets: Fair value of plan assets at beginning of year 401 330 418 366 Actual return on plan assets 61 77 38 34 Contributions 3 4 27 26 Benefits paid (10) (10) (18) (19) Settlements — — (7) (1) Foreign currency fluctuations and other — — 17 12 Fair value of plan assets at end of year 455 401 475 418 Funded status $ (26) $ — $ (218) $ (173) The following table summarizes the amounts recognized in the consolidated balance sheets related to the pension benefit plans: Pension Benefits United States Plans Non-United States Plans December 31, (in millions) 2020 2019 2020 2019 Deposits and other assets $ 23 $ 45 $ 7 $ 11 Accrued expenses 2 2 15 13 Other long-term liabilities 47 42 210 171 AOCI (21) 13 (65) (30) At December 31, 2020, the benefit obligation for other postretirement benefits was $1 million, with less than $1 million recorded in accrued expenses and $1 million included within other long-term liabilities; and the amount recognized in AOCI was less than $1 million. The following table summarizes the accumulated benefit obligation for all pension benefit plans: Pension Benefits United States Plans Non-United States Plans December 31, (in millions) 2020 2019 2020 2019 Accumulated benefit obligation $ 474 $ 395 $ 654 $ 557 The following table provides the information for pension plans with an accumulated benefit obligation in excess of plan assets and projected benefit obligations in excess of plan assets: Pension Benefits United States Plans Non-United States Plans December 31 (in millions) 2020 2019 2020 2019 Plans with accumulated benefit obligation in excess of plan assets: Accumulated benefit obligation $ 52 $ 47 $ 572 $ 485 Fair value of plan assets 5 4 384 334 Plans with projected benefit obligation in excess of plan assets: Projected benefit obligation $ 53 $ 49 $ 610 $ 519 Fair value of plan assets 5 4 386 335 The components of net periodic benefit cost changes in plan assets and benefit obligations recognized in other comprehensive loss were as follows: Pension Benefits United States Plans Non-United States Plans Year Ended December 31, (in millions) 2020 2019 2018 2020 2019 2018 Service cost $ 13 $ 12 $ 13 $ 29 $ 25 $ 26 Interest cost 12 14 12 8 9 9 Expected return on plan assets (30) (25) (27) (18) (16) (15) Amortization of actuarial losses — — — 1 — 1 Curtailment gain — — — — (5) (3) Settlement gain — — — — — (1) Net periodic benefit cost (5) 1 (2) 20 13 17 Other changes in plan assets and benefit obligations recognized in other comprehensive loss: Actuarial loss (gain) – current years 34 (2) 22 35 32 (15) Prior service cost - current year — — — — — 2 Curtailment gain - current year — — — — 5 3 Settlement gain - current year — — — — — 1 Amortization of actuarial losses — — — — — (1) Total recognized in other comprehensive loss (income) 34 (2) 22 35 37 (10) Total recognized in net periodic benefit cost and other comprehensive loss (income) $ 29 $ (1) $ 20 $ 55 $ 50 $ 7 All components of net periodic benefit cost other than service cost are recorded in other expense (income), net on the accompanying consolidated statements of income. Gain (losses) affecting the benefit obligation for the period ending December 31, 2020 was primarily related to the change in discount rate . On October 26, 2018, the High Court of the United Kingdom issued a judgement relating to Guaranteed Minimum Pensions (“GMPs”) in the Lloyds case. The judgement concluded the schemes should be amended to equalize pension benefits for men and women in relation to guaranteed minimum pension benefits. A preliminary assessment by the Company’s actuarial advisors estimated an impact of approximately $1.7 million between the two United Kingdom pension schemes, which has been recognized in AOCI as a prior service cost in 2018. On November 20, 2020, the High Court ruled that the schemes should revisit individual transfer payments made since May 17, 1990 to review for any additional amount due as a result of the guaranteed minimum pension equalization. An assessment by the Company’s actuarial advisors determined that the impact of this ruling to be immaterial. Assumptions The weighted average assumptions used to determine net periodic benefit cost were as follows for the years ended December 31: Pension Benefits United States Plans Non-United States Plans 2020 2019 2018 2020 2019 2018 Discount rate 3.52 % 4.42 % 3.69 % 1.45 % 1.99 % 1.91 % Rate of compensation increases 3 % 3 % 3 % 2.78 % 4.54 % 4.54 % Expected return on plan assets 7.42 % 7.67 % 7.69 % 3.91 % 4.02 % 4.17 % The weighted average assumptions used to determine benefit obligations were as follows at December 31: Pension Benefits United States Plans Non-United States Plans 2020 2019 2020 2019 Discount rate 2.84 % 3.52 % 1.02 % 1.45 % Rate of compensation increases 3.00 % 3.00 % 2.55 % 2.78 % The discount rate represents the interest rate used to determine the present value of the future cash flows currently expected to be required to settle the Company’s defined benefit plan obligations. The discount rates are derived using weighted average yield curves on AA-rated corporate bonds. The cash flows from the Company’s expected benefit obligation payments are then matched to the yield curve to derive the discount rates. The Company’s assumption for the expected return on plan assets was determined by the weighted average of the long-term expected rate of return on each of the asset classes invested as of the balance sheet date. For plan assets invested in government bonds, the expected return was based on the yields on the relevant indices as of the balance sheet date. There is considerable uncertainty for the expected return on plan assets invested in equity and diversified growth funds. Under the Company’s United States qualified retirement plan, participants have a notional retirement account that increases with pay and investment credits. The rate used to determine the investment credit (cash balance crediting rate) varies monthly and is equal to 1/12th of the yield on 30-year U.S. Government Treasury Bonds, with a minimum of 0.25%. At retirement, the account is converted to a monthly retirement benefit. At December 31, 2020, the Company’s health care cost trend rate for the next seven years was assumed to be 5.5% and the assumed ultimate cost trend rate was 4.5%. The Company assumed that ultimate cost trend rate is reached in 2023. Assumed health care cost trend rates could have a significant effect on the amounts reported for the health care plans. A one-percentage- point change in assumed health care cost trend rates at December 31, 2020 would have a de minimis effect on the total of service and interest cost and on the accumulated postretirement benefit obligation. Plan Assets The Company’s pension plan weighted average asset allocations, by asset category, were as follows: Plan Assets at December 31, United States Plans Non-United States Plans Total Asset Category 2020 2019 2020 2019 2020 2019 Equity securities 71.15 % 70.82 % 42.69 % 42.88 % 56.62 % 56.56 % Debt securities 23.88 24.13 20.08 19.22 21.94 21.62 Real estate 4.97 5.05 — — 2.43 2.48 Other — — 37.23 37.00 19.02 19.33 Total 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % The target asset allocation for the Company’s pension plans were as follows: Asset Category Total Equity securities 45-65% Debt securities 10-30% Real estate 0-5% Other 10-30% The following table summarizes United States plan assets measured at fair value: December 31, 2020 December 31, 2019 Asset Category Level 1 Level 2 Total Level 1 Level 2 Total (in millions) Domestic equities $ 29 $ — $ 29 $ 30 $ — $ 30 International equities 9 — 9 16 — 16 Corporate bonds 65 — 65 58 — 58 Real estate 23 — 23 20 — 20 Total assets in the fair value hierarchy 126 — 126 124 — 124 Common/collective trusts measured at net asset value (“NAV”) (1) — — 329 — — 277 Total $ 126 $ — $ 455 $ 124 $ — $ 401 The following table summarizes non-United States plan assets measured at fair value: December 31, 2020 December 31, 2019 Asset Category Level 1 Level 2 Total Level 1 Level 2 Total (in millions) International equities $ 3 $ 66 $ 69 $ 2 $ 56 $ 58 Debt issued by national, state or local government 3 93 96 2 78 80 Diversified growth fund — — — — — — Investments funds — 10 10 — 9 9 Insurance contracts — 171 171 — 153 153 Other — 6 6 — 5 5 Total assets in the fair value hierarchy 6 346 352 4 301 305 Assets measured at NAV (1) — — 123 — — 113 Total $ 6 $ 346 $ 475 $ 4 $ 301 $ 418 (1) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the above plan asset tables are intended to permit reconciliation of the fair value of plan assets in the fair value hierarchy to the plan asset amounts presented in the above funded status table as of December 31, 2020 and 2019. Investments in mutual funds are valued at quoted market prices. Investments in common/collective trusts and pooled funds are valued at the NAV as reported by the trust. The NAV is based on the fair value of the underlying investments held by the fund less its liabilities. Insurance contracts are valued at the amount of the benefit liability. The Company has no Level 3 assets that rely on unobservable inputs to measure fair value. Investment Policies and Strategies The Company invests primarily in a diversified portfolio of equity securities that provide for long-term growth within reasonable and prudent levels of risk. The asset allocation targets established by the Company are strategic and applicable to the plan’s long-term investing horizon. The portfolio is constructed and maintained to provide adequate liquidity to meet associated liabilities and minimize long-term expense and provide prudent diversification among asset classes in accordance with the principles of modern portfolio theory. The plan employs a diversified mix of actively managed investments around a core of passively managed index exposures in each asset class. Within each asset class, rapid market shifts, changes in economic conditions or an individual fund manager’s outlook may cause the asset allocation to fall outside the prescribed targets. The majority of the Company’s plan assets are measured quarterly against benchmarks established by the Company’s investment advisors and the Company’s Asset Management Committee, who review actual plan performance and have the authority to recommend changes as deemed appropriate. Assets are rebalanced periodically to their strategic targets to maintain the plan’s strategic risk/reward characteristics. The Company periodically conducts asset liability modeling studies to ensure that the investment strategy is aligned with the obligations of the plans and that the assets will generate income and capital growth to meet the cost of current and future benefits that the plans provide. The pension plans do not have investments in Company stock at December 31, 2020 and 2019. The portfolio for the Company’s United Kingdom pension plans seek to invest in a range of suitable assets of appropriate liquidity that will generate in the most effective manner possible, income and capital growth to ensure that there are sufficient assets to meet benefit payments when they fall due, while controlling the long-term costs of the plans and avoiding short-term volatility of investment returns. The plans seek to achieve these objectives by investing in a mixture of real (equities) and monetary (fixed interest) assets. It recognizes that the returns on real assets, while expected to be greater over the long-term than those on monetary assets, are likely to be more volatile. A mixture across asset classes should nevertheless provide the level of returns required by the plans. The trustee periodically conducts asset liability modeling exercises to ensure the investments are aligned with the appropriate benchmark to better reflect the plans’ liabilities. The trustee also undertakes to review this benchmark on a regular basis. Cash Flows Contributions The Company expects to contribute approximately $32 million in required contributions to its pension and postretirement benefit plans during 2021. The Company may make additional contributions into its pension plans in 2021 depending on, among other factors, how the funded status of those plans change or in order to meet minimum funding requirements as set forth in employee benefit and tax laws, plus additional amounts the Company may deem to be appropriate. Estimated future benefit payments and subsidy receipts The following benefit payments (net of expected participant contributions) for pension benefits are expected to be paid as follows: (in millions) Pension Benefits 2021 $ 42 2022 42 2023 44 2024 47 2025 48 Years 2026 through 2030 274 $ 497 Benefit payments (net of expected participant contributions) for other postretirement benefits are expected to be de minimis over the periods presented. Defined Contribution Plans Defined contribution or profit sharing plans are offered in Australia, Austria, Belgium, Bulgaria, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Ireland, Israel, Japan, Malaysia, the Netherlands, New Zealand, Poland, Slovakia, South Africa, Sweden, Switzerland, Taiwan, Thailand, the United States and the United Kingdom. In some cases, these plans are required by local laws or regulations. In the United States, the Company has a 401(k) plan under which the Company matches employee deferrals at varying percentages and specified limits of the employee’s salary. In 2020, 2019, and 2018, the Company expensed $48 million, $56 million and $49 million, respectively, related to matching contributions. Certain key executives of the Company participate in an unfunded defined contribution executive retirement plan, assumed in the Merger, which was frozen to additional accruals for future service contributions in 2012. Participants continue to receive an annual investment credit based on the average of the annual yields at the end of each month on the AA-AAA rated 10 plus year maturity component of the Merrill Lynch United States Corporate Bond Master Index. Plans Accounted for as Postretirement Benefits The Company provides certain executives with postretirement medical, dental and life insurance benefits. These benefits are individually negotiated arrangements in accordance with their individual employment arrangements. The above tables do not include the Company’s expense or obligation associated with providing these benefits. The obligation related to these benefits was approximately $12 million as of December 31, 2020, and the Company’s expense for the year then ended was de minimis. Stock Incentive Plans Stock incentive plans provide incentives to eligible employees, officers and directors in the form of non-qualified stock options, incentive stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance awards, covered annual incentive awards, cash-based awards and other stock-based awards, in each case subject to the terms of the stock incentive plans. In April 2017, the Company’s 2017 Incentive and Stock Award Plan (the “2017 Plan”) was approved by the Company’s stockholders. The 2017 Plan consolidates the unused share pools under the Company’s 2014 Incentive and Stock Award Plan (the “2014 Plan”), the Company’s 2013 Stock Incentive Plan (the “2013 Plan”), the Company’s 2010 Equity Incentive Plan (the “2010 Plan”) and the Company’s 2008 Stock Incentive Plan (the “2008 Plan”), and together with the 2010 Plan, the 2013 Plan and the 2014 Plan (the “Prior Plans”), makes shares underlying outstanding awards granted under (but not ultimately delivered) the Prior Plans eligible for use in connection with new awards under the 2017 Plan. The 2017 Plan provides for the grant of stock options, SARs, restricted and deferred stock (including RSUs), performance awards, dividend equivalents, other stock-based awards and cash-based awards. The fair value of stock options and SARs is estimated using the Black-Scholes-Merton option-pricing model. The fair value of restricted stock and RSUs is based on the closing market price of the Company’s common stock on the date of grant. The fair value of the performance shares related to compound annual earnings per share (“EPS”) growth and/or other internal performance measures is equal to the closing market price of the Company’s common stock on the date of grant. The fair value of performance shares related to relative total shareholder return (“TSR”) is determined based on a Monte Carlo simulation model. The Company recognized stock-based compensation expense of $95 million, $146 million and $113 million in 2020, 2019, and 2018, respectively. Stock-based compensation expense is included in selling, general and administrative expenses on the accompanying consolidated statements of income. The associated future income tax benefit recognized was $14 million, $22 million and $19 million in 2020, 2019, and 2018, respectively. As of December 31, 2020, there was approximately $105 million of total unrecognized stock-based compensation expense related to outstanding non-vested stock-based compensation arrangements, which the Company expects to recognize over a weighted average period of 0.92 years. As of December 31, 2020, there were 10.7 million shares available for future grants under all of the Company’s stock incentive plans. The Company used the following assumptions when estimating the value of the stock-based compensation for stock options and SARs issued as follows: Year Ended December 31, 2020 2019 2018 Expected volatility 23 – 31% 23 – 24% 22 – 24% Weighted average expected volatility 23% 23% 22% Expected dividends 0.0% 0.0% 0.0% Expected term (in years) 3.2 – 6.2 3.7 – 6.7 1.0 – 6.7 Risk-free interest rate 0.17 – 1.41% 1.55 –2.56% 2.05 – 3.00% Stock Options The option price is determined by the Board at the date of grant and the options expire 10 years from the date of grant. The vesting schedule for options granted to employees is either (i) 25% per year beginning on the first anniversary of the date of grant; or (ii) 33% on the third anniversary of the date of grant and 67% on the fourth anniversary of the date of grant. The Company’s stock option activity in 2020 is as follows: (in millions, except number of options and exercise price) Number of Options Weighted Average Exercise Price Aggregate Intrinsic Value Outstanding at December 31, 2019 1,458,341 $ 34.90 $ 174 Exercised (924,839) 27.08 Canceled (875) 64.67 Outstanding at December 31, 2020 532,627 $ 48.42 $ 70 The total intrinsic value of options exercised was approximately $120 million, $124 million and $117 million in 2020, 2019, and 2018, respectively. The Company received cash of approximately $25 million, $36 million and $48 million in 2020, 2019, and 2018, respectively, from options exercised. Selected information regarding the Company’s stock options as of December 31, 2020 is as follows: Options Outstanding Options Exercisable Number of Options Exercise Price Range Weighted Average Exercise Price Weighted Average Remaining Life (in Years) Number of Options Weighted Average Exercise Price 135,468 11.46 — 28.39 23.72 1.79 135,468 23.72 111,011 29.17 — 47.87 42.26 2.6 111,011 42.26 86,601 50.79 — 64.52 57.25 3.84 86,601 57.25 113,272 64.67 — 64.67 64.67 5.17 113,272 64.67 86,275 64.86 — 64.93 64.92 4.18 86,275 64.92 The weighted average remaining contractual life of the options outstanding and exercisable as of December 31, 2020 is 3.4 years. The total aggregate intrinsic value of the exercisable stock options and the stock options expected to vest as of December 31, 2020 was approximately $70 million. Stock Appreciation Rights – Stock Settled The exercise price of the stock-settled SARs (“SSRs”) is equal to the closing market price of the Company’s common stock as of the grant date and expire on the tenth anniversary of the date of grant. The SSRs are eligible to vest either (i) in equal increments of 25% on each of the first four anniversaries of the date of grant or (ii) in three equal annual installments on each of the first three anniversaries of the date of grant. The Company’s SSR activity in 2020 is as follows: (in millions, except number of SSRs and exercise price) Number of SSRs Weighted Average Exercise Price Aggregate Intrinsic Value Outstanding at December 31, 2019 4,314,872 $ 94.37 $ 260 Granted 1,130,298 161.44 Exercised (1,012,501) 86.08 Canceled (191,327) 128.91 Outstanding at December 31, 2020 4,241,342 $ 112.66 $ 282 The total intrinsic value of SSRs exercised was approximately $73 million in 2020. The weighted average remaining contractual life of the SSRs outstanding and exercisable as of December 31, 2020 is 7.2 years and 6.1 years, respectively. The total aggregate intrinsic value of the exercisable SSRs and the SSRs expected to vest as of December 31, 2020 was approximately $280 million. Stock Appreciation Rights – Cash Settled The Company’s cash settled SARs (“CSRs”) require the Company to settle in cash an amount equal to the difference between the fair value of the Company’s common stock on the date of exercise and the grant price, multiplied by the number of CSRs being exercised. These awards vest either (i) 25% per year; (ii) 33% on the third anniversary of the date of grant and 67% on the fourth anniversary of the date of grant; or (iii) one- third per year beginning on the first anniversary of the date of grant. The Company’s CSR activity in 2020 is as follows: (in millions, except number of CSRs and grant price) Number of CSRs Weighted Average Grant Price Aggregate Intrinsic Value Outstanding at December 31, 2019 171,840 $ 62.15 $ 16 Granted 14,560 161.70 Exercised (37,884) 56.37 Canceled (1,800) 64.93 Outstanding at December 31, 2020 146,716 $ 73.49 $ 16 As of December 31, 2020, 2019, and 2018, the weighted average fair value per share of the CSRs granted was $112.10, $99.27 and $66.92, respectively. The Company paid approximately $4 million, $7 million and $5 million to settle exercised CSRs in 2020, 2019, and 2018, respectively. The weighted average remaining contractual life of the CSRs outstanding and exercisable as of December 31, 2020 is 4.6 years and 3.8 years, respectively. The total aggregate intrinsic value of the exercisable CSRs and the CSRs expected to vest as of December 31, 2020 was approximately $15 million. Restricted Stock Units – Stock Settled The Company’s RSUs will settle in shares of the Company’s common stock within 45 days of the applicable vesting date. In general, RSUs granted to employees vest either (i) 25% per year beginning on the first anniversary of the date of grant; (ii) one-third per year beginning on the first anniversary of the grant date; (iii) 50% on the second anniversary of the date of grant and 25% on the third and fourth anniversary of the date of grant or (iv) 100% at the end of the three-year period following the grant date. Members of the Company’s board of directors receive RSUs that are fully vested when granted. The Company’s RSU activity in 2020 is as follows: Weighted Average Grant-Date Outstanding at December 31, 2019 420,566 $ 115.90 Granted (1) 347,289 159.85 Vested (150,131) 109.84 Canceled (44,634) 127.34 Outstanding at December 31, 2020 573,090 $ 143.23 (1) Pursuant to the IQVIA Holdings Inc. Non-Employee Director Deferral Plan (the “Director Deferral Plan”), non-employee directors may elect to defer receipt of their cash retainers. If a director elects to defer his or her retainer, he or she will instead be credited with that value in deferred shares under the Director Deferral Plan. Deferred shares become payable in Company common stock following a termination of the director’s Board service or the director’s death, or upon a change in control of the Company. The Company granted 769 deferred RSUs in 2020. As of December 31, 2020, there are 573,090 RSUs outstanding with an intrinsic value of approximately $103 million. Restricted Stock Units – Cash Settled The Company’s cash settled RSUs (“Cash RSUs”) require the Company to settle in cash an amount equal to the fair value of the Company’s common stock on the vest date multiplied by the number of vested Cash RSUs. These awards vest either (i) 100% at the end of the three-year period following the date of grant, or (ii) one-third per year beginning on the first grant date anniversary. The Company’s Cash RSU activity in 2020 is as follows: Weighted Average Grant-Date Fair Value Outstanding at December 31, 2019 20,707 $ 117.71 Granted 10,597 160.97 Vested (9,751) 107.58 Canceled (2,198) 147.96 Outstanding at December 31, 2020 19,355 $ 143.06 As of December 31, 2020, there are 19,355 Cash RSUs outstanding with an intrinsic value of approximately $3.5 million. Restricted Stock Awards Restricted stock awards (“RSAs”) vest either (i) in equal increments of 50% on each of the second and fourth anniversaries of the grant date; (ii) one-third per year beginning on the first anniversary of the date of grant; or (iii) 25% on each of the second and third anniversaries of the grant date and 50% on the fourth anniversary of the date of grant. The Company’s RSA activity in 2020 is as follows: Number of RSAs Weighted Average Grant-Date Fair Value Outstanding at December 31, 2019 190,937 $ 78.21 Vested (63,645) 78.21 Outstanding at December 31, 2020 127,292 $ 78.21 As of December 31, 2020, there are 127,292 RSAs outstanding with an intrinsic value of approximately $23 million. Performance Awards The Company awarded performance awards that contain service, performance-based and/or market-based vesting criteria. Vesting occurs if the recipient remains employed and depends on the degree to which performance goals are achieved during the two-year or three-year performance period (as defined in the award agreements). The Company’s performance award activity in 2020 is as follows: Number of Performance Awards Weighted Average Grant-Date Fair Value Outstanding at December 31, 2019 1,055,807 $ 107.18 Granted 237,012 177.13 Additional goal achievement shares 336,264 85.82 Vested (757,285) 86.16 Canceled (85,633) 129.34 Outstanding at December 31, 2020 786,165 $ 136.96 As of December 31, 2020, there are 786,165 performance awards outstanding with an intrinsic value of approximately $141 million. Other The Company sponsors a supplemental non-qualified deferred compensation plan, covering certain management employees, and maintains other statutory indemnity plans as required by local laws or regulations. |