Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K

FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2019
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number  1-3215

------------------------------
JOHNSON & JOHNSON
SAVINGS PLAN

(Full title of the Plan)

JOHNSON & JOHNSON
ONE JOHNSON & JOHNSON PLAZA
NEW BRUNSWICK, NEW JERSEY 08933

(Name of issuer of the securities held pursuant to the Plan
and the address of its principal executive office)




REQUIRED INFORMATION

Item 4.    Financial Statements and Supplemental Schedules

Financial statements prepared in accordance with the financial reporting requirements of ERISA filed herewith are listed below in lieu of the requirements of Items 1 to 3.

Report of Independent Registered Public Accounting Firm

Financial Statements:

Statements of Net Assets Available for Benefits

Statement of Changes in Net Assets Available for Benefits

Notes to Financial Statements

Supplemental Schedules*:

Schedule H, line 4i - Schedule of Assets (Held at End of Year)

Schedule H, line 4a - Schedule of Delinquent Participant Contributions

Signatures

*Other supplemental schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, have been omitted because they are not required or are not applicable.

Exhibits:

23.  Consent of PricewaterhouseCoopers LLP, dated June 18, 2020




SIGNATURES


The Plan.   Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.



 
JOHNSON & JOHNSON SAVINGS PLAN
 
 
 
Date: June 18, 2020
By:
/s/ Peter Fasolo
 
 
Peter Fasolo
 
 
Chairman, Pension and Benefits Committee
 
 
 







JOHNSON & JOHNSON SAVINGS PLAN
__________________


FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES


DECEMBER 31, 2019 AND 2018



Johnson & Johnson Savings Plan
Index to Financial Statements and Supplemental Schedules
December 31, 2019 and 2018







 
Page(s)
 
 
Report of Independent Registered Public Accounting Firm
1
 
 
Financial Statements:
 
 
 
Statements of Net Assets Available for Benefits
2
 
 
Statement of Changes in Net Assets Available for Benefits
3
 
 
Notes to Financial Statements
4 - 15
 
 
Supplemental Schedules*:
 
 
 
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
16
 
 
Schedule H, line 4a - Schedule of Delinquent Participant Contributions
17
* Other supplemental schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974  (“ERISA”), as amended, have been omitted because they are not required or are not applicable.





Report of Independent Registered Public Accounting Firm

To the Administrator and Plan Participants of Johnson & Johnson Savings Plan

Opinion on the Financial Statements

We have audited the accompanying statements of net assets available for benefits of Johnson & Johnson Savings Plan (the “Plan”) as of December 31, 2019 and 2018 and the related statement of changes in net assets available for benefits for the year ended December 31, 2019, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2019 and 2018, and the changes in net assets available for benefits for the year ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Supplemental Information

The supplemental Schedule of Assets (Held at End of Year) as of December 31, 2019 and Schedule of Delinquent Participant Contributions for the year ended December 31, 2019 have been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental schedules are the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental schedules reconcile to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedules. In forming our opinion on the supplemental schedules, we evaluated whether the supplemental schedules, including their form and content, are presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental schedules are fairly stated, in all material respects, in relation to the financial statements as a whole.
/s/ PricewaterhouseCoopers LLP

New York, New York
June 18, 2020


We have served as the Plan’s auditor since at least 1987. We have not been able to determine the specific year we began serving as auditor of the Plan.


1

Johnson & Johnson Savings Plan
Statements of Net Assets Available for Benefits
December 31, 2019 and 2018





 
2019
 
2018
Assets
 
 
 
Interest in Johnson & Johnson Pension and Savings Plans Master Trust, at fair value
$
19,019,082,020

 
$
16,125,133,540

Total investments
19,019,082,020

 
16,125,133,540

Receivables
 
 
 
Employee contributions
747,708

 
65,931

Employer contributions

 

                                  Notes receivable from participants
110,135,810

 
115,528,971

Total receivables
110,883,518

 
115,594,902

                 Other assets
11,485,084

 

Total assets
19,141,450,622

 
16,240,728,442

Liabilities
 
 
 
Accrued expenses

 
12,769,575

Total liabilities

 
12,769,575

Net assets available for benefits
$
19,141,450,622

 
$
16,227,958,867


The accompanying notes are an integral part of these financial statements.

2

Johnson & Johnson Savings Plan
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2019





Additions to net assets attributed to
2019
Investment Income/Loss
 
Plan's interest in the Johnson & Johnson Pension and Savings Plans Master Trust net
investment income/loss
$
3,323,479,432

Contributions
 
Employee contributions
680,912,681

Employer contributions
227,950,305

Total additions
4,232,342,418

Deductions from net assets attributed to
 
Benefits paid to participants
1,298,419,254

Administrative expenses
41,069,128

Total deductions
1,339,488,382

Net increase
2,892,854,036

 
 
         Asset transfers due to plan mergers
20,637,719

Net assets available for benefits
 
Beginning of year
16,227,958,867

       End of year
$
19,141,450,622

The accompanying notes are an integral part of these financial statements.

3

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018

1.    Description of the Plan
General
The Johnson & Johnson Savings Plan (the “Plan”) is a participant directed defined contribution plan which was established on June 1, 1982 for eligible salaried and certain hourly employees of Johnson & Johnson (the “Plan Administrator” or the “Company”) and certain domestic subsidiaries.  The Plan was designed to enhance the existing retirement program of eligible employees.  The funding of the Plan is made through employee and Company contributions.  The net assets of the Plan are held in the Johnson & Johnson Pension and Savings Plans Master Trust (the “Trust” or "the Master Trust").  Transactions in the Trust are executed by the trustee, State Street Bank and Trust Company (“State Street” or “Trustee”). Recordkeeping services are provided by Alight Solutions. The Plan’s interest in the Trust is allocated to the Plan based upon the total of each participant’s share of the Trust.
This brief description of the Plan is provided for general information purposes only.  Participants should refer to the Plan document for complete information.
Contributions
In general, full-time salaried employees and certain hourly, part-time and temporary employees can contribute to the Plan. There is no service requirement for employee contributions. If a participant does not take action to enroll or decline enrollment in the Plan within their first 30 days of employment, they will be automatically enrolled for pre-tax employee contributions equal to 6% of their eligible pay and these contributions will be invested in the Plan's default investment option. Prior to September 30, 2019, the default investment option was the Balanced Fund. Effective September 30, 2019, the Plan's default investment option is the Target Retirement Fund that aligns with, or is closest to, the year in which the participant will turn age 62.
Contributions are made to the Plan by participants through payroll deductions and by the Company on behalf of the participants.  Participating employees may contribute a minimum of 3% up to a maximum of 50% of eligible pay, as defined by the Plan.  Contributions can be pre-tax, Roth, post-tax or a combination of all three.  Pre-tax and Roth contributions may not exceed the smaller of (i) 50% of a participant’s base salary (and 1/2 paid commissions, if applicable) or (ii) $19,000 for 2019.  The maximum contributions to a participant’s account including participant pre-tax, Roth and post-tax contributions and the Company match is $56,000 for 2019.
Participants age 50 and over are eligible to contribute extra pre-tax and/or Roth contributions (“catch-up contributions”) above the annual Internal Revenue Service ("IRS") limitation up to $6,000 in 2019. Participants can elect an amount to be contributed from each paycheck as their catch-up contribution.  This amount will be in addition to the pre-tax, Roth and post-tax contribution percentages that participants have elected. The catch-up contribution is not eligible for the Company matching contribution.
Participants receive a Company matching contribution equal to 75% of the first 6% of a participant’s contributions. The Company matching contribution is comprised of cash and invested in the current investment fund mix chosen by the participant.
Investments
Participants may invest in one or more of the various investment funds offered by the Plan.  On September 30, 2019, the Plan eliminated the Balanced Fund and introduced the Target Retirement Funds as new investment options for Plan participants. Each of the Plan's funds represents a mix of various investments. The investment mix chosen by the participant will apply to employee and Company matching contributions.  Rollover contributions are invested at the election of the participant.

Participants receive dividends on Johnson & Johnson Common Stock shares held in the Johnson & Johnson Stock Fund and Johnson & Johnson Stock Contributions Fund.  The dividends are automatically reinvested in the Johnson & Johnson Stock Fund unless specific elections are made to receive a cash payment.  The 2019 dividend pass-through amount paid to participants of $6,925,489 is reflected in benefits paid to participants in the Statement of Changes in Net Assets Available for Benefits.  For all other funds, the Trustee reinvests all dividend and interest income.



4

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018

Vesting
A participant's contributions (pre-tax, after-tax, Roth and rollover) and the earnings on them are always fully vested.

For the Company matching contributions, if a participant was hired before March 1, 2017, the Company matching contributions were made to the participant's account after a one-year eligibility period was satisfied. These contributions and the associated earnings are fully vested. If a participant was hired on or after March 1, 2017, the Company matching contributions made to the participant's account, and the earnings on these contributions, become vested after the participant has completed a three-year period of service. These contributions become vested if, while employed by the Company, the participant should die, become disabled, or reach age 55. If the Company matching contributions and associated earnings are not vested when the participant employment ends, they will be forfeited unless the participant returns to employment with the Company before (1) taking a total distribution of their vested account balance and (2) incurs a break in service (a period of at least five consecutive years in which the participant is not employed by the Company).

Forfeitures
Forfeitures of non-vested Company contributions are used to reduce future Company contributions. During 2019 and 2018, $1,958,605 and $330,764, respectively, of forfeited participant accounts were used to reduce the Company's contributions. At December 31, 2019, there were $168,073 of forfeitures that have not yet been applied to reduce the Company's contributions.

Payment of Benefits
Participants are allowed to withdraw an amount equal to their pre-August 1, 2003 post-tax contributions and earnings thereon, and unmatched post-tax contributions made after August 1, 2003 by the employee and earnings thereon, at any time. Participants may withdraw pre-tax, Roth or post-tax matched contributions, and the vested employer match after August 1, 2003, only upon meeting certain hardship conditions. The benefits to which participants are entitled are the amounts provided by contributions (Company and participant) and investment earnings thereon, including net realized and unrealized gains and losses which have been allocated to the participant’s account balance.  Participants have the option of receiving all or part of their vested balance in the Johnson & Johnson Stock Fund and/or the Johnson & Johnson Stock Contributions Fund as either cash or in shares of Johnson & Johnson Common Stock (plus cash for fractional shares) for lump sum distributions other than a hardship.
Benefits are also paid to participants upon termination of employment, long-term disability or retirement. Participants can elect to defer payment until age 70 1/2 if their vested account balances are greater than $5,000. Distributions are paid either in a lump sum payment, partial payments or installment payments made on a monthly, quarterly, or annual basis over a period of years selected by the participant.
A participant’s vested account may be distributed to his/her beneficiaries in lump sum, partials, in installments or maintained in the Trust upon the participant’s death only if the beneficiary is a spouse.  Otherwise, it is paid to the beneficiary in a lump sum, either directly or rolled over to an Individual Retirement Account ("IRA").
Administrative Expenses
All third-party administrative expenses are paid by the Plan, unless otherwise provided for by the Company.
Notes Receivable from Participants
Participants may borrow up to a maximum of 50% of their vested account balance.  The minimum loan amount is $1,000 and the maximum amount of all outstanding loans cannot exceed $50,000.  Loans bear an interest rate of prime plus 1% and are repayable within one to five years.  Due to acquisitions, there are some existing loans extending beyond five years, which must be allowed to continue once transferred into the Johnson & Johnson Savings Plan. The collateralized balances in the participant’s accounts have interest rates that range from 3.25% to 11.33%.  Principal and interest is paid ratably through payroll deductions for active employees.  Loans must be paid within two months following retirement or termination of employment with the Company.  If the loan is not repaid in full, the unpaid balance, plus accrued interest, will be deducted from the participant’s account balance and reported to the IRS as a distribution.




5

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018

Termination
Although it has not expressed an intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.  In the event of a partial or full Plan termination, all Plan funds must be used exclusively for the benefit of the Plan participants, in that each participant would receive the respective value in their account.
2.    Summary of Significant Accounting Policies
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement which removes, modifies and adds disclosures to Topic 820. The amendments in this ASU 2018-13 apply to all entities that are required, under existing U.S. Generally Accepted Accounting Principles (GAAP), to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This update is not expected to have a material impact on the Plan's financial statements and Plan's management, Johnson & Johnson, is evaluating the impact of the update on the Plan's notes to the financial statements

In February 2017, the FASB issued ASU 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965). This update removes the requirement to disclose the percentage interest in the master trust for plans with divided interests and requires that all plans disclose the dollar amount of their interest in each of those general types of investments. This update is effective for fiscal years beginning after December 15, 2018, with early application permitted. Management of the Company has adopted the new guidance effective December 31, 2019 and has applied it retrospectively. The adoption of this guidance did not have a material impact on the Plan's financial statements.
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America.
Investment Valuation and Income Recognition of the Trust
The Plan’s interest in the Trust is stated at fair value, except for the fully benefit-responsive investment contracts which are stated at contract value. The investment in the Trust represents the Plan's interest in the net assets of the Trust.
As the investment funds contain various underlying assets such as stocks and short-term investments, the participant’s account balance is reported in units of participation, which allows for immediate transfers in and out of the funds.  The purchase or redemption price of the units is determined by the Trustee, based on the current market value of the underlying assets of the funds.  Each fund’s net asset value for a single unit is computed by adding the value of the fund’s investments, cash and other assets, and subtracting liabilities, then dividing the result by the number of units outstanding.
Purchases and sales of securities are recorded on a trade-date basis.  Gains and losses on the sale of investment securities are determined on the average cost method.  Dividend income is recorded on the ex-dividend date. Interest income and administrative expenses are recorded on an accrual basis.
The Plan presents, in the Statement of Changes in Net Assets Available for Benefits, the net investment income/loss for the Plan's interest in the Trust which consists of the Plan’s allocated change in unrealized appreciation and depreciation of the underlying investments, realized gains and losses on sales of investments and investment income/loss based upon the total of each participant's share of the Trust.
Payment of Benefits
Benefit payments to participants are recorded upon distribution.

6

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018

Derivatives
The Trust mitigates risk through structured trading with reputable parties and continual monitoring procedures. The Trust enters into forward foreign exchange contracts to hedge against adverse changes in foreign exchange rates related to non-U.S. dollar denominated investments. The Trust is exposed to credit risk for non-performance by the counterparty and to market risk for changes in interest and currency rates. The Trust accounts for forward foreign exchange contracts at fair value.

The fair value of a forward foreign exchange contract is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. Dollar at the current spot foreign exchange rate.

The Trust actively manages risk by periodically investing in interest rate swaps, credit default swaps and fixed income options. Interest rate swaps are used to manage interest rate risk and provide an effective means to adjust portfolio duration, maturity mix and term-structure. Credit default swaps are used to either synthetically add or reduce credit risk to an individual issuer or a basket of issuers. Depending on the type of contract, the counterparty risk exposure can be either with the exchange or another counterparty. Fixed income options are used in various ways including: to pursue upside exposure to a portion of the yield curve, to capitalize on anticipated changes in market volatility, to focus on generating income, and to serve as a hedge. The Trust records interest rate swaps, credit default swaps and options at fair value. Interest rate swaps are valued daily using underlying yield curves based upon broker/dealer sources, the present value of expected cash flows, and frequency of which they compound and pay. Credit default swaps are valued using daily underlying yield curves and/or credit curves and spreads based upon broker/dealer/index sources, the present value of expected cash flows, and the frequency of which they compound and pay including a weighted default calculation. Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively, the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs.

A futures contract is an agreement to buy or sell a security or other asset for a set price on a future date. These contracts are traded on major exchanges and are marked to market daily, thus minimizing counterparty risk. The Trust enters into futures contracts mainly to manage the duration and refine the curve positioning of the fixed income portfolios, thus, allowing the investment managers to achieve the overall investment portfolios' objectives. These contracts are priced by an exchange and the fair value is the daily mark to market, which is a function of price movements for the contract relative to the level it was originally entered into.
There have been no changes in the methodologies used at December 31, 2019 and 2018.
Use of Estimates
The preparation of the Plan’s financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of Net Assets Available for Benefits at the date of the financial statements and the Changes in Net Assets Available for Benefits during the reporting period and the applicable disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Risks and Uncertainties
The Plan provides for various investment options in funds which can invest in a combination of equity, fixed income securities and other investments. Investments are exposed to various risks, such as interest rate, market and credit.  Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in risks in the near term, including the macroeconomic impact of COVID-19, could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits.



7

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018

Reporting of Fully Benefit-Responsive Investment Contracts
Fully benefit-responsive investment contracts are reported at contract value. Contract value is the relevant measurement criteria for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan.
3.    Johnson & Johnson Pension and Savings Plans Master Trust
The assets of the Johnson & Johnson Savings Plan, the Johnson & Johnson Retirement Savings Plan, the Retirement Plan of Johnson & Johnson and Affiliated Companies, the Johnson & Johnson Retirement Plan for Union Represented Employees, and the Johnson & Johnson Retirement Plan for Puerto Rico Employees comprise the total of the Trust which is held by State Street.
The following table presents the net assets of the Master Trust and the Plan's interest in the net assets of the Master Trust as of December 31, 2019 and 2018.

 

 

 
Salaried Savings

 
Master Trust
 
Plan's Interest in Master Trust

 

 

 

 


 
2019
 
2018
 
2019
 
2018

 

 

 

 

ASSETS
 

 

 

 

Investments, at fair value
 

 

 

 

Short-term investment funds
 
$
1,027,210,232

 
$
902,645,443

 
$
585,878,141

 
$
509,750,417

Government and agency securities
 
3,292,007,871

 
2,930,753,380

 
652,177,661

 
609,182,750

Debt instruments
 
4,012,430,134

 
3,669,624,160

 
590,580,565

 
586,173,077

Equity securities
 
19,817,248,502

 
17,652,669,523

 
10,332,491,007

 
9,384,344,419

Mutual funds
 

 
154,977,294

 

 
19,578,915

Common collective trusts
 
9,693,759,710

 
6,451,392,787

 
4,760,725,487

 
3,013,965,328

Partnership/joint venture interests
 
831,928,422

 
640,511,714

 
96,761,880

 
81,957,730

Other, net
 

 

 

 

Total Investments at Fair Value
 
$
38,674,584,871

 
$
32,402,574,301

 
$
17,018,614,741

 
$
14,204,952,636


 

 

 

 

Other assets
 

 

 

 

Guaranteed and synthetic investment

 

 

 

   contracts at contract value
 
$
2,099,713,678

 
$
2,060,481,456

 
$
2,047,235,024

 
$
2,014,873,218

Purchase paid in advance
 
180,000,000

 

 

 

Receivable for investments sold
 
92,311,495

 
155,501,180

 
63,072,879

 
74,494,296

Interest receivables
 
48,797,577

 
51,528,091

 
32,015,421

 
23,005,658

Dividend receivables
 
13,423,321

 
17,042,394

 
9,171,637

 
8,164,318

Other receivables
 
8,336,014

 
4,251,600

 
5,695,675

 
2,036,768

Total Other Assets
 
$
2,442,582,085

 
$
2,288,804,721

 
$
2,157,190,636

 
$
2,122,574,258


 

 

 

 

Total Master Trust assets
 
$
41,117,166,956

 
$
34,691,379,022

 
$
19,175,805,377

 
$
16,327,526,894


 

 

 

 


 

 

 

 

LIABILITIES
 

 

 

 

Payables for investments purchased
 
$
(221,349,890
)
 
$
(447,485,865
)
 
$
(151,239,830
)
 
$
(214,372,292
)
All other payables
 
(8,025,519
)
 
(13,286,557
)
 
(5,483,257
)
 
(6,365,050
)
Total Liabilities
 
$
(229,375,409
)
 
$
(460,772,422
)
 
$
(156,723,357
)
 
$
(220,737,342
)

 

 

 

 


 

 

 

 

Net Master Trust assets
 
$
40,887,791,547

 
$
34,230,606,600

 
$
19,019,082,020

 
$
16,106,789,552

 
 
 
 
 
 
 
 
 



8

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018


The following table presents the changes in net assets for the Master Trust for the year ended December 31, 2019:
     

2019
Changes in Net Assets:

  Net appreciation (depreciation) in fair value of investments
$
7,104,130,489

   Interest
303,047,256

   Dividends
416,581,895

        Total net investment income (loss)
7,823,759,640




   Contributions received, benefits paid and other, net
(1,166,574,693
)



         Increase (decrease) in net assets
6,657,184,947

Net assets

Beginning of year
34,230,606,600

End of year
$
40,887,791,547

a.     Fair Value Measurements
The Plan’s valuation methodologies were applied to all of the Trust's investments carried at fair value. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon models that primarily use, as inputs, market-based or independently sourced market parameters, including yield curves, interest rates, volatilities, equity or debt prices, foreign exchange rates and credit curves.
While the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Valuation Hierarchy
FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:
Level 1 - Quoted prices in active markets for identical assets and liabilities.
Level 2 - Significant other observable inputs.
Level 3 - Significant unobservable inputs.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following is a description of the valuation methodologies used for the investments measured at fair value:
Short-term investment funds - Cash and quoted short-term instruments are valued at the closing price or the amount held on deposit by the custodian bank where quoted prices are available in an active market and are classified as Level 1.  Other investments are through investment vehicles valued using the Net Asset Value ("NAV") provided by the administrator of the fund. The NAV is based on the value of the underlying assets owned by the

9

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018

fund, minus its liabilities, and then divided by the number of shares outstanding. The NAV is a quoted price in a market that is not active and classified as Level 2.
Government and agency securities - The assets are comprised of government and agency securities and U.S. Treasury bills and notes of varying maturities. These are all considered Level 2 fair values which are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.
Debt instruments - The assets are comprised of corporate debt and commercial loans and mortgages. Fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are generally classified as Level 2. Level 3 debt instruments are priced based on unobservable inputs.
Equity securities - U.S. and International equity securities are valued at the closing price reported on the major market on which the individual securities are traded. Substantially all equity securities are classified within Level 1 of the valuation hierarchy.
Common Collective Trusts (CCT's) - The fair value of all CCT interests have been determined using NAV as a practical expedient. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The CCT's are included in Investments measured at Net Asset Value. A majority of the CCT's are used for liquidity purposes for both the defined benefit and defined contribution plans within the Trust. The CCTs are primarily passive funds that provide daily liquidity with no prior notice for participant transactions, and 2-day prior notice for Plan Sponsor transactions for the various Plan investment options. Participant directed purchases and sales are transacted at the NAV.  At December 31, 2019 and 2018, approximately 73% and 71%, respectively, of the CCT's are invested in passive strategies that mimic the indices, and 27% and 29%, respectively, in active strategies.  Additionally, at December 31, 2019 and 2018, 70% and 68%, respectively, of the active and passive CCT's are invested in U.S. equities, 24% and 23%, respectively, are invested in global equities and emerging markets, and the remaining 6% and 9%, respectively, are invested in fixed income.  There are no unfunded commitments for any of the CCT's that the Trust invests in.
Mutual Funds - Mutual funds that have a quoted market price are classified as Level 2.
Other assets and liabilities, net - Other assets and liabilities are represented primarily by derivatives. Other assets and liabilities, that are exchange listed and actively traded, are classified as Level 1 while inactively traded assets are classified as Level 2. The other assets and liabilities valued using unobservable inputs are classified as Level 3.
Limited Partnerships ("LP") - The Trust invests in LP investments including a Hedge Fund, Emerging Market Long-Only Equity Funds and Private Market Funds. As of December 31, 2019 and 2018, approximately 41% and 49%, respectively, of these investments are invested in a Hedge Fund, 35% and 36%, respectively, in Emerging Market Long-Only Equity Funds and 24% and 15%, respectively, in Private Market Funds.
The Trust's private market program has invested as a limited partner in a well-diversified portfolio of funds managed by general partners. The program is being managed to ensure adequate diversification by general partner, strategy type (private equity, real assets, and private credit), and geographic region. As of December 31, 2019 and 2018, approximately 56% and 69%, respectively, of these investments are invested in private equity, 27% and 31%, respectively, in real assets, and 17% and 0%, respectively, in private credit. The Trust has entered into a number of private markets agreements that commit the Trust, upon request, to make additional investment purchases up to predetermined amounts. As of December 31, 2019, and 2018, the Trust had aggregate unfunded commitments of $1,096,139,808 and $255,255,109 respectively. These commitments are expected to be satisfied with distributions from existing funds, reinvestment of proceeds and/or periodic rebalancing of existing investments. The LP investments have target maturity dates ranging from 2020 to at least 2029 with the possibility of 2 to 4 years of extensions in accordance with the respective LP's governing documents. Distributions to the Trust from LP investments are driven by portfolio company liquidation in the public and private markets. Otherwise, the LP investments are not redeemable. The fair value of the Trust's LP investments has been determined using NAV provided by the respective general partners as a practical expedient. The NAV is the pro-rata share of the Trust's position based on the value of the underlying assets owned by the LP, minus its liabilities.

10

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018


2019 Master Trust Investments Measured at Fair Value
 
 
Quoted market
prices inputs
 
Observable
inputs
 
Investments measured at Net
 
Total Assets
December 31, 2019
 
(Level 1)
 
(Level 2)
 
Asset Value
 
 
Short-term investment funds
 
$
17,389,636

 
$
1,009,820,596

 
$

 
$
1,027,210,232

Government and agency securities
 

 
3,292,007,871

 

 
3,292,007,871

Debt instruments
 

 
4,012,430,134

 

 
4,012,430,134

Equity securities
 
19,814,099,250

 
3,149,252

 

 
19,817,248,502

Common collective trusts
 

 

 
9,693,759,710

 
9,693,759,710

Partnership/joint venture interests


 

 
831,928,422

 
831,928,422

Trust investments at fair value
 
$
19,831,488,886

 
$
8,317,407,853

 
$
10,525,688,132

 
$
38,674,584,871

2018 Master Trust Investments Measured at Fair Value
 
 
Quoted market
prices inputs
 
Observable
inputs
 
Investments measured at Net
 
Total Assets
December 31, 2018
 
(Level 1)
 
(Level 2)
 
Asset Value
 
 
Short-term investment funds
 
$
805,939

 
$
901,839,504

 
$

 
$
902,645,443

Government and agency securities
 

 
2,930,753,380

 

 
2,930,753,380

Debt instruments
 

 
3,669,624,160

 

 
3,669,624,160

Equity securities
 
17,645,754,837

 
6,914,686

 

 
17,652,669,523

Mutual funds
 

 
154,977,294

 

 
154,977,294

Common Collective Trusts
 

 

 
6,451,392,787

 
6,451,392,787

Partnership/joint venture interests
 

 

 
640,511,714

 
640,511,714

Trust investments at fair value
 
$
17,646,560,776

 
$
7,664,109,024

 
$
7,091,904,501

 
$
32,402,574,301

 
b.    Guaranteed and Synthetic Investment Contracts
The Trust holds investments in traditional and synthetic GICs.  The weighted average insurance financial strength rating of the insurers for these contracts is AA3.  These investments are recorded at their book values. The traditional and synthetic GICs’ contract value represents book value plus reinvested income adjusted for net cash flows. Both the traditional and synthetic GICs are fully benefit-responsive. Participants may under most circumstances direct the withdrawal or transfer of all or a portion of their investment at contract value. Currently no reserves are needed against contract values for credit risk of the contract issuers or otherwise.
The traditional GICs provide a fixed return on principal over a specified period of time through fully benefit-responsive contracts issued by an insurance company, which are backed by the general account of that insurer. The contract value of the traditional GICs was $329,647,652 and $737,114,328 at December 31, 2019 and December 31, 2018, respectively.
The synthetic GICs provide a return over a period of time through a fully benefit-responsive contract, or wrapper contract, which is backed by the underlying assets owned by the Trust.  The portfolio of assets with overall Aa1/AA+ credit quality, underlying the synthetic GICs primarily includes government and agency securities, corporate debt, mortgage backed securities, and asset backed securities. The contract value of the synthetic GICs was $1,770,066,026 and $1,323,367,128 at December 31, 2019 and December 31, 2018, respectively.
There are certain events not initiated by Plan participants that limit the ability of the Plan to transact with the issuer of a GIC at its contract value. Specific coverage provided by each traditional and synthetic GIC may be different from each issuer. Examples of such events include:  the Plan’s failure to qualify under the Internal Revenue Code ("IRC")

11

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018

of 1986 as amended; full or partial termination of the Plan; involuntary termination of employment as a result of a corporate merger, divestiture, spin-off, or other significant business restructuring, which may include early retirement incentive programs or bankruptcy; changes to the administration of the Plan which decreases employee or employer contributions, the establishment of a competing plan by the plan sponsor, the introduction of a competing investment option, or other Plan amendment that has not been approved by the contract issuers; dissemination of a participant communication that is designed to induce participants to transfer assets from this investment option; events resulting in a material and adverse financial impact on the contract issuer, including changes in the tax code, laws or regulations.  The Plan fiduciaries believe that the occurrence of any of the aforementioned events, which would limit the Plan’s ability to transact with the issuer of a GIC at its contract value, is not probable.
c.     Derivatives
Presented in the following table is the fair value of derivatives within the Trust as of December 31, 2019 and 2018. The net unrealized appreciation/depreciation of these derivative instruments is included in the Interest in Johnson & Johnson Pension and Savings Plans Master Trust, at fair value in the Statements of Net Assets Available for Benefits.
 
 
2019
 
2018
 
 
Asset
Liability
 
Asset
Liability
Fair Value of Derivatives
 
 
 
 
 
 
Forward Foreign Exchange Contracts
 
$
949,359

$
699,917

 
$
287,731

$
1,727,565

Futures
 

42,641

 
136,369

46,469

Interest Rate Swaps
 

1,356,567

 

1,030,104

Credit Default Swaps
 
435,217


 

368,679

Options
 
30,478

6,436

 
72,633

54,135

Total
 
$
1,415,054

$
2,105,561

 
$
496,733

$
3,226,952

The following tables provide information on the investment gains/(losses) on derivatives within the Trust for the years ended December 31, 2019 and 2018. These amounts are included in the Plan’s interest in the Johnson & Johnson Pension and Savings Plans Master Trust net investment income/loss on the Statement of Changes in Net Assets Available for Benefits.
 
 
2019
 
 
Realized (Loss)/Gain
Unrealized (Loss)/Gain
Total Investment (Loss)/Gain
Forward Foreign Exchange Contracts
 
$
(88,364
)
$
1,689,276

$
1,600,912

Futures
 
2,711,322

171,492

2,882,814

Interest Rate Swaps
 
(1,932,019
)
(326,463
)
(2,258,482
)
Credit Default Swaps
 
755,510

803,897

1,559,407

Options
 
201,916

5,544

207,460

Total
 
$
1,648,365

$
2,343,746

$
3,992,111


12

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018

 
 
2018
 
 
Realized (Loss)/Gain
Unrealized (Loss)/Gain
Total Investment (Loss)/Gain
Forward Foreign Exchange Contracts
 
$
(2,055,926
)
$
2,199,062

$
143,136

Futures
 
(1,237,665
)
947,548

(290,117
)
Interest Rate Swaps
 
414,145

(1,416,347
)
(1,002,202
)
Credit Default Swaps
 
80,092

(693,477
)
(613,385
)
Options
 
(107,800
)
36,620

(71,180
)
Total
 
$
(2,907,154
)
$
1,073,406

$
(1,833,748
)
The following table provides information on collateral pledged by and owed to the Trust as of December 31, 2019 and 2018.
 
 
2019
 
2018
 
 
Pledged/ (Owed)
 
Pledged/ (Owed)
 
 
Cash
Treasury Securities
 
Cash
Treasury Securities
Forward Foreign Exchange Contracts
 
$

$

 
$

$

Futures
 
45,000


 


Interest Rate Swaps
 
1,292,000


 
360,000


Credit Default Swaps
 
2,329,000


 
2,657,000


The following table provides the average notional value of derivatives held by the Trust as of December 31, 2019 and 2018.
 
 
Average Notional Value
 
 
2019
2018
Purchased Forward Foreign Exchange Contracts
 
$
19,817,733

$
25,725,590

Sold Forward Foreign Exchange Contracts
 
110,763,444

143,386,921

Purchased Futures Contracts
 
64,253,703

71,320,620

Sold Futures Contracts
 
23,704,188

12,921,695

Purchased Options Contracts
 

15,187,500

Written Options Contracts
 
44,900,000

21,208,333

Interest Rate Swaps
 
148,508,311

70,845,099

Written Credit Default Swaps
 
60,041,667

23,724,117


For the written credit default swaps, the recourse provisions are determined either by the International Swaps and Derivatives Association ("ISDA") agreements or the exchange. Where the Trust is a seller of credit default swaps and if a credit event occurs due to the default of the underlying security or the underlying tranche, this would result in a net loss to the Trust. At December 31, 2019, the maximum payout for outstanding credit default swaps aggregated to $102,700,000 with terms as follows:

    

December 31, 2019

Number of Contracts
Maturity
Total Value
28
Less than 1 Year
$
57,900,000

2
1 Year
1,600,000

5
3 Years
2,900,000

10
4 Years
23,700,000

8
5 Years
16,600,000


13

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018


At December 31, 2018, the maximum payout for outstanding credit default swaps aggregated to $67,800,000
with terms as follows:     

 
December 31, 2018
 
Number of Contracts
Maturity
Total Value
9
Less than 1 Year
$
10,000,000

1
1 Year
1,700,000

4
2 Years
4,200,000

5
4 Years
3,700,000

6
5 Years
48,200,000


4.    Notes Receivable from Participants
The Plan had participant loans outstanding at December 31, 2019 and December 31, 2018 of $110.1 million and $115.5 million, respectively.  The net decrease of $5.4 million for 2019 represents loan issuances of $55.8 million less loan retirements and payments toward outstanding loans of $61.2 million. Delinquent notes receivable from participants are reclassified to benefit payments based on terms of the Plan document.
5.    Tax Status
The IRS has determined and informed the Company by a letter dated August 17, 2017, that the Plan is in compliance with applicable sections of the IRC.  Although the Plan has been amended since receiving the determination letter, the Plan Administrator believes that the Plan is currently designed and is currently being operated in compliance with the applicable requirements of the IRC.
Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain tax position that more likely than not would not be sustained upon examination by the IRS.  The Plan Administrator has concluded that as of December 31, 2019, there are no uncertain tax positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements.  The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. 
6.    Related Party Transactions
Certain Plan investments, such as shares of CCT's managed by State Street Global Advisors, a division of State Street, and shares of State Street common stock and bonds, qualify as party-in interest transactions as State Street is the Trustee as defined by the Plan.  As of December 31, 2019 and December 31, 2018, the total market value of investments in these interests allocated to the Plan and managed by State Street was $4,742,077,035 and $3,173,245,524, respectively.
The Plan also invests in shares of the Company.  The Company is the Plan sponsor and, therefore, these transactions qualify as party-in-interest transactions. As of December 31, 2019 and December 31, 2018, the fair value of investments in Johnson & Johnson Common Stock was $3,648,789,117 and $3,620,999,367, respectively. During the year ended December 31, 2019, the Plan made purchases of $223,798,206 and sales of $641,915,951 of the Company’s common stock. The total dividend income received during 2019 was $100,394,491. The total realized and unrealized gains during 2019 were $295,242,475 and $1,844,890,511, respectively.
7.    Asset Transfers
As a result of business acquisitions by the Plan Administrator, the following transfers into the Plan were completed in 2019:

14

Johnson & Johnson Savings Plan
Notes to Financial Statements
For the years ended December 31, 2019 and 2018

Plan Name
Amount Transferred

Date of Transfer
Torax Medical Inc 401(k) Profit Sharing Plan and Trust
$2,405,863
April 2019
Megadyne Medical Products, Inc Profit Sharing Plan
13,919,048

June 2019
TearScience Inc, 401(k) Profit Sharing Plan and Trust
2,920,937

August 2019
Zarbee's 401 (k) Plan
1,391,871

November 2019
All transfers are reflected in the Statement of Changes in Net Assets Available for Benefits.
8.    Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
 
 
December 31,
 
 
2019
 
2018
Net assets available for benefits per the financial statements
 
$
19,141,450,622

 
$
16,227,958,867

Deemed distributions
 
(1,020,558
)
 
(877,117
)
Amounts allocated to withdrawing participants
 
(4,561,109
)
 
(4,818,593
)
Net assets available for benefits per the Form 5500
 
$
19,135,868,955

 
$
16,222,263,157

The following is a reconciliation of the net increase in net assets available for benefits per the financial statements to the Form 5500:
 
December 31, 2019
Net increase in net assets available for benefits per the financial statements
$
2,892,854,036

  Less: Amounts allocated to withdrawing participants at December 31, 2019 (not yet paid)
(4,561,109
)
Less: Deemed distributions
(327,573
)
Add: Amounts allocated to withdrawing participants at December 31, 2018
4,818,593

  Add: Loan offset
184,132

Net increase in net assets available for benefits per the Form 5500
$
2,892,968,079

9.    Subsequent Events
On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. The CARES Act allows retirement plans to provide participants who are impacted by the coronavirus (as defined in the CARES Act) with greater access to their savings. As permitted by the CARES Act, the Plan has implemented the following provisions:

Through December 31, 2020, qualified individuals are permitted to take a distribution in an amount up to $100,000 from the Plan. Any such distribution is not subject to the 10% early distribution penalty or the mandatory 20% federal income tax withholding rate. Participants who take a qualified distribution have the option to have the distribution taxed over a three-year period, with the ability to recontribute up to the full amount of the distribution within three years and not be subject to federal income tax as a result.

Loans repayments with respect to qualified participants that are due between March 27, 2020 and December 31, 2020 may be delayed for one year upon participant request.

Required minimum distributions for calendar year 2020 are waived for retired and retirement-aged individuals.
The Plan has assessed subsequent events through the date that the financial statements were available to be issued and has determined that no other items require disclosure.

15

Johnson & Johnson Savings Plan
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
As of December 31, 2019




Identity of Issue, Borrower,
Lessor, or Similar Party
 
Description of Investment
Including Maturity Date, Rate of
Interest, Collateral, Par or
Maturity Value
 
Cost
 
Current Value
Plan's interest in the Trust
 
Plan's interest in the Johnson & Johnson Pension and Savings Plans Master Trust
 
**
 
$
19,019,082,020

*Participant loans
 
Interest rates ranging from 3.25% to 11.33%. Maturities ranging from 2020 - 2040
 
**
 
$
110,135,810



*
Represents party-in-interest transactions
**
Not applicable

16

Johnson & Johnson Savings Plan
Schedule H, line 4a - Schedule of Delinquent Participant Contributions
For the year ended December 31, 2019








Participant Contributions Transferred Late to Plan
Total that Constitute Nonexempt Prohibited Transaction
Total Fully Corrected Under VFCP and PTE 2002-51
Check here if Late Participant Loan Repayments are included: q    
Contributions Not Corrected
Contributions Corrected Outside VFCP
Contributions Pending Correction in VFCP
 
 
$ 0
$ 164*
$ 0
$ 0

*All delinquent contributions, adjusted for earnings, have been contributed to the Plan.

17
Exhibit


Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-211250) of Johnson & Johnson of our report dated June 18, 2020 relating to the financial statements and supplemental schedules of Johnson & Johnson Savings Plan, which appears in this Form 11-K.

/s/ PricewaterhouseCoopers LLP
 
New York, New York
June 18, 2020