Employee Benefit Plans

Defined Contribution Plans

The Western Union Company Incentive Savings Plan (the "401(k)") covers eligible employees on the United States payroll of the Company. Employees who make voluntary contributions to this plan receive up to a 4% Company matching contribution. All matching contributions are immediately vested.

The Company administers more than 25 defined contribution plans in various countries globally on behalf of approximately 1,700 employee participants as of December 31, 2013. Such plans have vesting and employer contribution provisions that vary by country.

In addition, the Company sponsors a non-qualified deferred compensation plan for a select group of highly compensated United States employees. The plan provides tax-deferred contributions and the restoration of Company matching contributions otherwise limited under the 401(k).

The aggregate amount charged to expense in connection with all of the above plans was $16.9 million, $15.3 million and $12.8 million during the years ended December 31, 2013, 2012 and 2011, respectively.

Defined Benefit Plan

The Company has one frozen defined benefit pension plan (the "Plan") for which it had a recorded unfunded pension obligation of $70.4 million and $102.1 million as of December 31, 2013 and 2012, respectively, included in "Other liabilities" in the Consolidated Balance Sheets. The Company made contributions of $15.7 million and $25.0 million to the Plan in the years ended December 31, 2013 and 2012, respectively, including discretionary contributions of $5 million for the year ended December 31, 2012. The Company will be required to fund approximately $13 million to the Plan in 2014.

The Company recognizes the funded status of the Plan in its Consolidated Balance Sheets with a corresponding adjustment to "Accumulated other comprehensive loss," net of tax.

The following table provides a reconciliation of the changes in the Plan's projected benefit obligation, fair value of assets and the funded status (in millions):



	2013			2012
Change in projected benefit obligation:
Projected benefit obligation as of January 1,	$	418.8		$	414.4
Interest cost	12.1			14.7
Actuarial (gain)/loss	(25.4		)	30.2
Benefits paid	(39.3		)	(40.5		)
Projected benefit obligation as of December 31,	$	366.2		$	418.8
Change in plan assets:
Fair value of plan assets as of January 1,	$	316.7		$	301.7
Actual return on plan assets	2.7			30.5
Benefits paid	(39.3		)	(40.5		)
Company contributions	15.7			25.0
Fair value of plan assets as of December 31,	295.8			316.7
Funded status of the Plan as of December 31,	$	(70.4	)	$	(102.1	)
Accumulated benefit obligation as of December 31,	$	366.2		$	418.8

Differences in expected returns on plan assets estimated at the beginning of the year versus actual returns, and assumptions used to estimate the beginning of year projected benefit obligation versus the end of year obligation (principally discount rate and mortality assumptions) are, on a combined basis, considered actuarial gains and losses. Such actuarial gains and losses are recognized as a component of "Comprehensive income" and amortized to income over the average remaining life expectancy of the plan participants. Included in "Accumulated other comprehensive loss" as of December 31, 2013 is $10.4 million ($6.6 million, net of tax) of actuarial losses that are expected to be recognized in net periodic benefit cost during the year ended December 31, 2014.

The following table provides the amounts recognized in the Consolidated Balance Sheets (in millions):



	December 31,
	2013			2012
Accrued benefit liability	$	(70.4	)	$	(102.1	)
Accumulated other comprehensive loss (pre-tax)	187.0			206.8
Net amount recognized	$	116.6		$	104.7

The following table provides the components of net periodic benefit cost for the Plan (in millions):



	Year Ended December 31,
	2013			2012			2011
Interest cost	$	12.1		$	14.7		$	17.9
Expected return on plan assets	(20.7		)	(20.8		)	(21.3		)
Amortization of actuarial loss	12.4			10.5			8.1
Net periodic benefit cost	$	3.8		$	4.4		$	4.7

The accrued loss related to the pension liability included in "Accumulated other comprehensive loss", net of tax, decreased$11.4 million in 2013 and increased $7.7 million and $12.5 million in 2012 and 2011, respectively.

The rate assumptions used in the measurement of the Company's benefit obligation were as follows:



	2013		2012
Discount rate	3.91	%	3.03	%

The rate assumptions used in the measurement of the Company's net cost were as follows:



	2013		2012		2011
Discount rate	3.03	%	3.72	%	4.69	%
Expected long-term return on plan assets	7.00	%	7.00	%	7.00	%

The Company measures the Plan's obligations and annual expense using assumptions that reflect best estimates and are consistent to the extent that each assumption reflects expectations of future economic conditions. As the bulk of the pension benefits will not be paid for many years, the computation of pension expenses and benefits is based on assumptions about future interest rates and expected rates of return on plan assets. In general, pension obligations are most sensitive to the discount rate assumption, and it is set based on the rate at which the pension benefits could be settled effectively. The discount rate is determined by matching the timing and amount of anticipated payouts under the Plan to the rates from an AA spot rate yield curve. The curve is derived from AA bonds of varying maturities.

The estimated undiscounted future benefit payments are expected to be $37.9 million in 2014, $36.3 million in 2015, $34.9 million in 2016, $33.2 million in 2017, $31.6 million in 2018 and $132.3 million in 2019 through 2023.

The Company employs a building block approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-term historical risk, return, and co-variance relationships between equities, fixed-income securities, and alternative investments are considered consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. Consideration is given to diversification, re-balancing and yields anticipated on fixed income securities held. Historical returns are reviewed within the context of current economic conditions to check for reasonableness and appropriateness. The Company then applies this rate against a calculated value for its plan assets. The calculated value recognizes changes in the fair value of plan assets over a five-year period.

Pension plan asset allocation as of December 31, 2013 and 2012, and target allocations based on investment policies, were as follows:



	Percentage of Plan Assets as of Measurement Date
Asset Class	2013		2012
Equity investments	18	%	16	%
Debt securities	59	%	62	%
Alternative investments	23	%	22	%



	Target Allocation
Equity investments	15%
Debt securities	60%
Alternative investments	25%

The Plan's assets are managed in a third-party Trust. The investment policy and allocation of the assets in the Trust are overseen by the Company's Investment Council. The Company employs a total return investment approach whereby a mix of equity, fixed income, and alternative investments are used in an effort to maximize the long-term return of plan assets. Risk tolerance is established through careful consideration of plan liabilities and plan funded status. The investment portfolio contains a diversified blend of equity, fixed-income, and alternative investments (e.g. hedge funds, royalty rights and private equity funds). Furthermore, equity investments are diversified across United States and non-United States stocks, as well as securities deemed to be growth, value, and small and large capitalizations. Alternative investments, the majority of which are hedge funds, are used in an effort to enhance long-term returns while improving portfolio diversification. Hedge fund strategy types include, but are not limited to: relative value, equity long-short, commodities/currencies, multi-strategy, event driven, and global-macro. The Plan holds derivative contracts directly which consist of interest rate swap agreements, under which the Plan is committed to pay a short-term LIBOR-based variable interest rate in exchange for a fixed interest rate based on five and ten-year maturities. Additionally, derivatives are held indirectly through funds in which the Plan is invested. Derivatives are used by the Plan to help reduce the Plan's exposure to interest rate volatility and to provide an additional source of return. Cash held by the Plan is used to satisfy margin requirements on the derivatives. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and periodic asset and liability studies.

The following tables reflect investments of the Trust that were measured and carried at fair value (in millions). For information on how the Company measures fair value, refer to Note 2.



December 31, 2013	Fair Value Measurement Using						Total Assets
Asset Class	Level 1		Level 2		Level 3		at Fair Value
Equity investments:
Domestic	$	26.2	$	—	$	—	$	26.2
International (a)	1.5		26.5		—		28.0
Debt securities:
Corporate debt (b)	—		127.3		—		127.3
U.S. treasury bonds	36.8		—		—		36.8
State and municipal debt securities	—		3.9		—		3.9
Other	—		4.4		—		4.4
Alternative investments:
Hedge funds (c)	—		42.4		—		42.4
Royalty rights and private equity (d)	—		—		25.9		25.9
Total investments of the Trust at fair value	$	64.5	$	204.5	$	25.9	$	294.9
Other assets							0.9
Total investments of the Trust	$	64.5	$	204.5	$	25.9	$	295.8



December 31, 2012	Fair Value Measurement Using						Total Assets
Asset Class	Level 1		Level 2		Level 3		at Fair Value
Equity investments:
Domestic	$	24.2	$	—	$	—	$	24.2
International (a)	1.4		25.0		—		26.4
Debt securities:
Corporate debt (b)	—		131.4		—		131.4
U.S. treasury bonds	52.3		—		—		52.3
State and municipal debt securities	—		4.4		—		4.4
Other	—		3.1		—		3.1
Alternative investments:
Hedge funds	—		44.7		—		44.7
Royalty rights and private equity (d)	—		—		23.8		23.8
Total investments of the Trust at fair value	$	77.9	$	208.6	$	23.8	$	310.3
Other assets							6.4
Total investments of the Trust	$	77.9	$	208.6	$	23.8	$	316.7

____________



(a)	Funds included herein have redemption frequencies of daily to monthly, with redemption notice periods of one to ten business days.
(b)	Substantially all corporate debt securities are investment grade securities.
(c)	Hedge funds generally hold liquid and readily priceable securities, such as public equities, exchange-traded derivatives, and corporate bonds. Hedge funds themselves do not have readily available market quotations, and therefore are valued using the Net Asset Value ("NAV") per share provided by the investment sponsor or third party administrator. Funds investing in diverse hedge fund strategies (primarily commingled funds) had the following composition of underlying hedge fund investments within the pension plan at December 31, 2013: relative value (24%), equity long/short (21%), commodities/currencies (20%), multi-strategy (13%), event driven (12%), and global-macro (10%). As of December 31, 2013, funds included herein had redemption frequencies of monthly to quarterly, with redemption notice periods of three to 60 days.
(d)	Diversified investments in royalty rights related to the sale of pharmaceutical products by third parties. Also included are private equity funds with a focus on venture capital. These investments are illiquid, with investment distributions expected to be received over the lives of the funds, which are uncertain but based on the voting rights of investors and the maturities of the underlying investments.

The maturities of debt securities as of December 31, 2013 range from less than one year to approximately 32 years with a weighted-average maturity of 14 years.

The following tables provide summaries of changes in the fair value of the Trust's Level 3 financial assets (in millions):



	Royalty Rights			Private Equity			Total
Balance, January 1, 2012	$	11.4		$	2.2		$	13.6
Actual return on plan assets:
Relating to assets still held as of the reporting date	1.6			0.1			1.7
Relating to assets sold during the year	0.8			(0.1		)	0.7
Net purchases and sales	7.6			0.2			7.8
Balance, December 31, 2012	$	21.4		$	2.4		$	23.8
Actual return on plan assets:
Relating to assets still held as of the reporting date	2.3			0.3			2.6
Relating to assets sold during the year	1.6			0.1			1.7
Net purchases and sales	(2.0		)	(0.2		)	(2.2		)
Balance, December 31, 2013	$	23.3		$	2.6		$	25.9

Royalty rights are held through investment funds. These investments are priority interests in contractual royalty revenue derived from the sale of pharmaceutical products that entitle the investment fund to receive a portion of revenue from the patent-protected product. The fair value of the Company's investment in royalty rights is estimated using consensus sales estimates for the pharmaceutical products obtained from third-party experts, which are multiplied by the contractual royalty rate, and then discounted by an interest rate based off the estimated weighted average cost of capital of the pharmaceutical sector (approximately 10%).

Private equity funds invest in the non-marketable securities of individual private companies. These private companies ultimately may become public in the future. The fair value of the Company's investment in private equity funds is estimated using many types of inputs, including historical sales multiples, valuations of comparable public companies, and recently completed equity financings.