v3.22.4
Pension and Other Postemployment Benefits
 12 Months Ended
Dec. 31, 2022
Pension and Other Postemployment Benefits [Abstract]  
Pension and Other Postemployment Benefits Pension and Other Postemployment Benefits
Defined Contribution Plans
Our domestic and international subsidiaries provide retirement benefits for their employees primarily through defined contribution profit sharing and savings plans. Contributions to the plans vary by subsidiary and have generally been in amounts up to the maximum percentage of total eligible compensation of participating employees that is deductible for income tax purposes. Contribution expense was $123.2 million, $115.5 million and $108.1 million in 2022, 2021 and 2020, respectively.
Defined Benefit Pension Plans
Two of our U.S. businesses and several of our non-U.S. businesses sponsor noncontributory defined benefit pension plans. These plans provide benefits to employees based on formulas recognizing length of service and earnings. The U.S. plans are subject to ERISA and cover approximately 700 participants. These plans are closed to new participants and do not accrue future benefit credits. The non-U.S. plans, which include statutory plans, are not subject to ERISA and cover approximately 7,300 participants.
We have a Senior Executive Restrictive Covenant and Retention Plan, or Retention Plan, for certain executive officers selected by the Compensation Committee. The Retention Plan is a non-qualified deferred compensation severance plan that is not subject to ERISA and was adopted to secure non-competition, non-solicitation, non-disparagement and ongoing consulting services from such executive officers and to strengthen the retention aspect of executive officer compensation. The Retention Plan provides annual payments upon termination following at least seven years of service with Omnicom or its subsidiaries to the participants or to their beneficiaries. A participant’s annual benefit is payable for 15 consecutive calendar years following termination, but in no event prior to age 55. The annual benefit is equal to the lesser of (i) the participant’s final average pay times an applicable percentage, which is based upon the executive’s years of service as an executive officer, not to exceed 35% or (ii) $1.5 million adjusted for cost-of-living, beginning with the second annual payment, not to exceed 2.5% per year. The Retention Plan is not funded and benefits are paid when due.
The components of net periodic benefit expense were (in millions):
Year Ended December 31,
202220212020
Service cost$2.8 $5.2 $7.5 
Interest cost5.6 4.2 7.7 
Expected return on plan assets(1.4)(1.5)(2.6)
Amortization of prior service cost0.4 0.8 0.8 
Amortization of actuarial loss4.0 9.3 6.7 
 $11.4 $18.0 $20.1 
Included in accumulated other comprehensive income at December 31, 2022 and 2021 were unrecognized costs for actuarial losses and prior service cost of $23.4 million ($15.9 million net of income taxes) and $67.2 million ($46.8 million net of income taxes), respectively, that have not yet been recognized in net periodic benefit cost. The unrecognized costs for actuarial gains and losses and prior service cost included in accumulated other comprehensive income and expected to be recognized in net periodic benefit cost in 2023 is $1.3 million.
The weighted average assumptions used to determine net periodic benefit expense were:
Year Ended December 31,
202220212020
Discount rate2.1 %1.4 %2.4 %
Compensation increases2.6 %2.7 %2.5 %
Expected return on plan assets1.6 %5.0 %5.1 %
The expected long-term rate of return for plan assets for the U.S. plans is based on several factors, including current and expected asset allocations, historical and expected returns on various asset classes and current and future market conditions. A total return investment approach using a mix of equities and fixed income investments maximizes the long-term return. This strategy is intended to minimize plan expense by achieving long-term returns in excess of the growth in plan liabilities over time. The discount rate used to compute net periodic benefit cost is based on yields of available high-quality bonds and reflects the expected cash flow as of the measurement date. The expected returns on plan assets and discount rates for the non-U.S. plans are based on local factors, including each plan’s investment approach, local interest rates and plan participant profiles.
Experience gains and losses and the effects of changes in actuarial assumptions are generally amortized over a period no longer than the expected average future service of active employees.
Our funding policy is to contribute amounts sufficient to meet minimum funding requirements in accordance with the applicable employee benefit and tax laws that the plans are subject to, plus such additional amounts as we may determine to be appropriate. In 2022 and 2021, we contributed $8.2 million and $6.4 million, respectively, to the defined benefit pension plans. We do not expect the contributions for 2023 to differ materially from the 2022 contributions.
The change in benefit obligation and fair value of plan assets of the defined benefit pension plans were (in millions):
December 31,
20222021
Benefit Obligation:  
January 1$289.4 $309.3 
Service cost2.8 5.2 
Interest cost5.6 4.2 
Amendments, curtailments and settlements(0.1)(0.4)
Actuarial (gain) loss(52.2)(13.9)
Benefits paid(10.9)(8.1)
Foreign currency translation(6.0)(6.9)
December 31$228.6 $289.4 
Fair Value of Plan Assets:  
January 1$63.0 $63.3 
Actual return on plan assets(14.3)4.1 
Employer contributions8.2 6.4 
Benefits paid(10.9)(8.1)
Foreign currency translation and other(2.0)(2.7)
December 31$44.0 $63.0 
The funded status and balance sheet classification of the defined benefit pension plans were (in millions):
December 31,
20222021
Funded Status$(184.6)$(226.4)
Other assets$2.4 $3.7 
Other current liabilities(7.5)(5.8)
Long-term liabilities(179.5)(224.3)
 $(184.6)$(226.4)
At December 31, 2022 and 2021, the accumulated benefit obligation for our defined benefit pension plans was $181.4 million and $226.6 million, respectively.
Plans with benefit obligations in excess of plan assets were (in millions):
December 31,
20222021
Benefit obligation$(221.2)$(258.1)
Plan assets34.2 28.0 
 $(187.0)$(230.1)
The weighted average assumptions used to determine the benefit obligation were:
December 31,
20222021
Discount rate4.4 %2.1 %
Compensation increases3.5 %2.7 %
At December 31, 2022, the estimated benefits expected to be paid over the next 10 years are (in millions):
2023$11.2 
202415.3 
202517.9 
202617.5 
202718.7 
2028 - 203297.1 
Postemployment Arrangements
We have executive retirement agreements under which benefits will be paid to participants or to their beneficiaries over periods up to ten years beginning after cessation of full-time employment. Our postemployment arrangements are unfunded and benefits are paid when due.
The components of net periodic benefit expense were (in millions):
Year Ended December 31,
202220212020
Service cost$4.5 $4.8 $4.6 
Interest cost2.6 2.1 3.4 
Amortization of prior service cost3.8 4.1 4.3 
Amortization of actuarial loss2.5 3.9 2.1 
 $13.4 $14.9 $14.4 
Included in accumulated other comprehensive income at December 31, 2022 and 2021 were unrecognized costs for actuarial losses and prior service cost of $31.6 million ($21.9 million net of income taxes) and $56.7 million ($39.5 million net of income taxes), respectively, that have not yet been recognized in the net periodic benefit cost. The unrecognized costs for actuarial gains and losses and prior service cost included in accumulated other comprehensive income and expected to be recognized in net periodic benefit cost in 2023 is $3.8 million.
The weighted average assumptions used to determine net periodic benefit expense were:
Year Ended December 31,
202220212020
Discount rate1.8 %1.4 %2.5 %
Compensation increases3.5 %3.5 %3.5 %
Experience gains and losses and effects of changes in actuarial assumptions are amortized over a period no longer than the expected average future service of active employees.
The benefit obligation and balance sheet classification at December 31, 2022 and 2021, were (in millions):
20222021
January 1$153.0 $164.6 
Service cost4.5 4.8 
Interest cost2.6 2.1 
Amendments5.8 (1.2)
Actuarial (gain) loss(24.7)(7.8)
Benefits paid(10.4)(9.5)
December 31$130.8 $153.0 
Other current liabilities$10.5 $10.4 
Long-term liabilities120.3 142.6 
 $130.8 $153.0 
The weighted average assumptions used to determine the benefit obligation were:
December 31,
20222021
Discount rate4.8 %2.4 %
Compensation increases3.5 %3.5 %
At December 31, 2022, the estimated benefits expected to be paid over the next 10 years are (in millions):
2023$10.5 
202410.7 
202511.5 
202610.8 
202710.9 
2028 - 203250.2