Moody’s maintains funded and unfunded noncontributory Defined Benefit Pension Plans ("DBPPs"). The DBPPs provide defined benefits using a cash balance formula based on years of service and career average salary or final average pay for selected executives. The Company also provides certain healthcare and life insurance benefits for retired U.S. employees. The retirement healthcare plans are contributory; the life insurance plans are noncontributory. Moody’s funded and unfunded U.S. pension plans, the U.S. retirement healthcare plans and the U.S. retirement life insurance plans are collectively referred to herein as the “Retirement Plans”. The U.S. retirement healthcare plans and the U.S. retirement life insurance plans are collectively referred to herein as the “Other Retirement Plans”.

Through 2007, substantially all U.S. employees were eligible to participate in the Company’s DBPPs. Effective January 1, 2008, the Company no longer offers DBPPs to U.S. employees hired or rehired on or after January 1, 2008 and new hires in the U.S. instead will receive a retirement contribution in similar benefit value under the Company’s Profit Participation Plan. Current participants of the Company’s Retirement Plans and Other Retirement Plans continue to accrue benefits based on existing plan benefit formulas.


	Pension Plans						Other Retirement Plans
	2019		2018		2019		2018
Change in benefit obligation:
Benefit obligation, beginning of the period	$	(508)	$	(518)	$	(32)	$	(31)
Service cost	(17)		(19)		(3)		(3)
Interest cost	(21)		(17)		(1)		(1)
Plan participants’ contributions	—		—		(1)		(1)
Benefits paid	21		11		1		1
Actuarial loss	(3)		—		—		—
Assumption changes	(61)		35		(6)		3
Benefit obligation, end of the period	$	(589)	$	(508)	$	(42)	$	(32)
Change in plan assets:
Fair value of plan assets, beginning of the period	$	348	$	357	$	—	$	—
Actual return on plan assets	60		(18)		—		—
Benefits paid	(21)		(11)		(1)		(1)
Employer contributions	8		20		—		—
Plan participants’ contributions	—		—		1		1
Fair value of plan assets, end of the period	$	395	$	348	$	—	$	—
Funded Status of the plans	$	(194)	$	(160)	$	(42)	$	(32)
Amounts recorded on the consolidated balance sheets:
Pension and retirement benefits liability – current	$	(6)	$	(5)	$	(1)	$	(1)
Pension and retirement benefits liability – non current	(188)		(155)		(41)		(31)
Net amount recognized	$	(194)	$	(160)	$	(42)	$	(32)
Accumulated benefit obligation, end of the period	$	(529)	$	(458)


	Pension Plans										Other Retirement Plans
	2019		2018		2017		2019		2018		2017
Components of net periodic expense
Service cost	$	17	$	19	$	18	$	3	$	3	$	2
Interest cost	21		17		19		1		1		1
Expected return on plan assets	(20)		(15)		(17)		—		—		—
Amortization of net actuarial loss from earlier periods	4		6		9		—		—		—
Net periodic expense	$	22	$	27	$	29	$	4	$	4	$	3

The expected rate of return on plan assets represents the Company’s best estimate of the long-term return on plan assets and is determined by using a building block approach, which generally weighs the underlying long-term expected rate of return for each major asset class based on their respective allocation target within the plan portfolio, net of plan paid expenses. As the assumption reflects a long-term time horizon, the plan performance in any one particular year does not, by itself, significantly influence the Company’s evaluation. For 2019, the expected rate of return used in calculating the net periodic benefit costs was 5.65%. For 2020, the Company’s expected rate of return assumption is 4.45% to reflect the Company’s current view of long-term capital market outlook. In addition, the Company has updated its mortality assumption by adopting the newly released mortality improvement scale MP-2019 to accompany the Pri2012 mortality tables to reflect the latest information regarding future mortality expectations by the Society of Actuaries. Additionally, the assumed healthcare cost trend rate assumption is not material to the valuation of the other retirement plans.

Moody’s investment objective for the assets in the funded pension plan is to earn total returns that will minimize future contribution requirements over the long-term within a prudent level of risk. The Company works with its independent investment consultants to determine asset allocation targets for its pension plan investment portfolio based on its assessment of business and financial conditions, demographic and actuarial data, funding characteristics, and related risk factors. Other relevant factors, including historical and forward looking views of inflation and capital market returns, are also considered. Risk management practices include monitoring plan asset performance, diversification across asset classes and investment styles, and periodic rebalancing toward asset allocation targets. The Company’s Asset Management Committee is responsible for overseeing the investment activities of the plan, which includes selecting acceptable asset classes, defining allowable ranges of holdings by asset class and by individual investment managers, defining acceptable securities within each asset class, and establishing investment performance expectations. Ongoing monitoring of the plan includes reviews of investment performance and managers on a regular basis, annual liability measurements, and periodic asset/liability studies.

The Company’s investment policy uses risk-controlled investment strategies by increasing the plan’s asset allocation to fixed income securities and specifying ranges of acceptable target allocation by asset class based on different levels of the plan’s accounting funded status. In addition, the investment policy also requires the investment-grade fixed income assets be rebalanced between shorter and longer duration bonds as the interest rate environment changes. This investment policy is designed to help protect the plan’s funded status and to limit volatility of the Company’s contributions. Based on the policy, the Company’s current target asset allocation is approximately 49% (range of 44% to 54%) in equity securities, 45% (range of 40% to 50%) in fixed income securities and 6% (range of 3% to 9%) in other investments and the plan will use a combination of active and passive investment strategies and different investment styles for its investment portfolios within each asset class. The plan’s equity investments are diversified across U.S. and non-U.S. stocks of small, medium and large capitalization. The plan’s fixed income investments are diversified principally across U.S. and non-U.S. government and corporate bonds, which are expected to help reduce plan exposure to interest rate variation and to better align assets with obligations. The plan also invests in other fixed income investments such as debts rated below investment grade, emerging market debt, and convertible securities. The plan’s other investment, which is made through a private real estate debt fund, is expected to provide additional diversification benefits and absolute return enhancement to the plan assets.


	Fair Value Measurement as of December 31, 2019
Asset Category	Balance		Level 1		Level 2		Measured using NAV practical expedient ⁽¹⁾		% of total assets
Cash and cash equivalent	$	2	$	—	$	2	$	—	1	%
Common/collective trust funds—equity securities
U.S. large-cap	140		—		140		—		35	%
U.S. small and mid-cap	21		—		21		—		5	%
Emerging markets	29		—		29		—		7	%
Total equity investments	190		—		190		—		48	%
Emerging markets bond fund	15		—		—		15		4	%
Common/collective trust funds—fixed income securities
Intermediate-term investment grade U.S. government/ corporate bonds	119		—		119		—		30	%
Mutual funds
U.S. Treasury Inflation-Protected Securities (TIPs)	22		22		—		—		6	%
Convertible securities	12		12		—		—		3	%
Private investment fund—high yield securities	12		—		—		12		3	%
Total fixed-income investments	180		34		119		27		46	%
Other investment—private real estate fund	23		—		—		23		6	%
Total Assets	$	395	$	34	$	311	$	50	100	%


	Fair Value Measurement as of December 31, 2018
Asset Category	Balance		Level 1		Level 2		Measured using NAV practical expedient ⁽¹⁾		% of total assets
Cash and cash equivalent	$	1	$	—	$	1	$	—	—	%
Common/collective trust funds—equity securities
U.S. large-cap	122		—		122		—		35	%
U.S. small and mid-cap	16		—		16		—		5	%
Emerging markets	23		—		23		—		7	%
Total equity investments	161		—		161		—		47	%
Emerging markets bond fund	13		—		—		13		4	%
Common/collective trust funds—fixed income securities
Intermediate-term investment grade U.S. government/ corporate bonds	109		—		109		—		31	%
U.S. Treasury Inflation-Protected Securities (TIPs)	21		21		—		—		6	%
Private investment fund—convertible securities	11		—		—		11		3	%
Private investment fund—high yield securities	11		—		—		11		3	%
Total fixed-income investments	165		21		109		35		47	%
Other investment—private real estate debt fund	21		—		—		21		6	%
Total Assets	$	348	$	21	$	271	$	56	100	%

Cash and cash equivalents are primarily comprised of investments in money market mutual funds. In determining fair value, Level 1 investments are valued based on quoted market prices in active markets. Investments in common/collective trust funds are valued using the NAV per unit in each fund. The NAV is based on the value of the underlying investments owned by each trust, minus its liabilities, and then divided by the number of shares outstanding. Common/collective trust funds are categorized in Level 2 to the extent that they are considered to have a readily determinable fair value. Investments for which fair value is estimated by using the NAV per share (or its equivalent) as a practical expedient are not categorized in the fair value hierarchy.

The Company did not contribute to its U.S. funded pension plan during 2019, but contributed $16 million to this plan during the year ended December 31, 2018. The Company made payments of $8 million and $5 million related to its U.S. unfunded pension plan obligations during the years ended December 31, 2019 and 2018, respectively. The Company anticipates making payments of $99 million to its funded U.S. pension plan and $6 million related to its unfunded U.S. pension plans during the year ended December 31, 2020.

Moody’s has a Profit Participation Plan covering substantially all U.S. employees. The Profit Participation Plan provides for an employee salary deferral and the Company matches employee contributions, equal to 50% of employee contribution up to a maximum of 3% of the employee’s pay. Moody’s also makes additional contributions to the Profit Participation Plan based on year-to-year growth in the Company’s EPS (i.e. profit sharing contribution). The Company did not make this profit sharing contribution in 2019. Effective January 1, 2008, all new hires are automatically enrolled in the Profit Participation Plan when they meet eligibility requirements unless they decline participation. As the Company’s U.S. DBPPs are closed to new entrants effective January 1, 2008, all eligible new hires will instead receive a retirement contribution into the Profit Participation Plan in value similar to the pension benefits. Additionally, effective January 1, 2008, the Company implemented a deferred compensation plan in the U.S., which is unfunded and provides for employee deferral of compensation and Company matching contributions related to compensation in excess of the IRS limitations on benefits and contributions under qualified retirement plans. Total expenses associated with U.S. defined contribution plans were $43 million, $27 million and $43 million in the years ended December 31, 2019, 2018, and 2017, respectively.

Effective January 1, 2008, Moody’s has designated the Moody’s Stock Fund, an investment option under the Profit Participation Plan, as an Employee Stock Ownership Plan and, as a result, participants in the Moody’s Stock Fund may receive dividends in cash or may reinvest such dividends into the Moody’s Stock Fund. Moody’s paid approximately $1 million during each of the years ended December 31, 2019, 2018 and 2017, respectively, for the Company’s common shares held by the Moody’s Stock Fund. The Company records the dividends as a reduction of retained earnings in the Consolidated Statements of Shareholders’ Equity (Deficit). The Moody’s Stock Fund held approximately 411,100 and 435,500 shares of Moody’s common stock at December 31, 2019 and 2018, respectively.

Certain of the Company’s non-U.S. operations provide pension benefits to their employees. The non-U.S. defined benefit pension plans are immaterial. For defined contribution plans, company contributions are primarily determined as a percentage of employees’ eligible compensation. Moody’s also makes contributions to non-U.S. employees under a profit sharing plan which is based on year-to-year growth in the Company’s diluted EPS. The Company did not make this profit sharing contribution in 2019. Expenses related to these defined contribution plans for the years ended December 31, 2019, 2018 and 2017 were $25 million, $26 million and $24 million, respectively.