RETIREMENT PLAN BENEFITS |
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Feb. 03, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Plan Benefits | RETIREMENT PLAN BENEFITS Defined Benefit Pension Plan In connection with the EMC merger transaction completed on September 7, 2016, the Company assumed all of EMC's defined benefit obligations and related plan assets, including a noncontributory defined benefit pension plan (the "Pension Plan") which was assumed as a result of EMC's prior acquisition of Data General. Certain of the Company's foreign subsidiaries also have defined benefit pension plans which were assumed as part of the EMC merger transaction and do not have a material impact on the results of operations or financial position of the Company. Benefits under the Pension Plan are generally based on either career average or final average salaries and creditable years of service as defined in the plan. The annual cost for the Pension Plan is determined using the projected unit credit actuarial cost method that includes actuarial assumptions and estimates which are subject to change. As of December 1999, this plan was frozen, so employees no longer accrue pension benefits for future services. The measurement date for the Pension Plan is the end of the Company's fiscal year. The following table presents a reconciliation of the Pension Plan benefit obligation:
On a weighted-average basis, the assumed discount rate used to determine the benefit obligations at February 3, 2017 and September 7, 2016 was 4.1% and 3.4%, respectively. The following table presents a reconciliation of the fair value of plan assets:
The under-funded status of the Pension Plan at February 3, 2017 was $65 million and is classified as a component of other long-term liabilities in the Consolidated Statements of Financial Position. The Company does not expect to make any significant contributions to the Pension Plan in Fiscal 2018. The following table presents the components of net periodic benefit cost recognized in the period presented:
The discount rate and expected long-term rate of return on plan assets used in the accounting for the Pension Plan to determine the net periodic benefit cost for the period from September 7, 2016 through February 3, 2017 was 3.4% and 6.5%, respectively. During the period from September 7, 2016 through February 3, 2017, the Pension Plan had net gains of $24 million that were primarily the result of an increase in the discount rate and the rate of return on plan assets. The net gains were recognized in accumulated other comprehensive loss. There were no reclassifications from accumulated other comprehensive loss to a component of net periodic benefit cost during the period from September 7, 2016 through February 3, 2017. Additionally, the Company expects that none of the total balance included in accumulated other comprehensive loss at February 3, 2017 will be recognized as a component of net periodic benefit cost in Fiscal 2018. At February 3, 2017, future benefit payments are expected to be paid as follows: $26 million in Fiscal 2018; $27 million in Fiscal 2019; $29 million in Fiscal 2020; $31 million in Fiscal 2021; $32 million in Fiscal 2022; and $174 million thereafter. Fair Value of Plan Assets — The following table presents the fair value of each class of plan assets by level within the fair value hierarchy as of February 3, 2017:
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Investment Strategy — The Pension Plan's assets are managed by outside investment managers. The Company's investment strategy with respect to plan assets is to achieve a long-term growth of capital, consistent with an appropriate level of risk. The expected long-term rate of return on the plan assets considers the current level of expected returns on risk-free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was weighted based on the target asset allocation to develop the expected long-term rate of return on assets. As market conditions permit, the Company expects to shift the asset allocation to lower the percentage of investments in equities and increase the percentage of investments in long-duration fixed-income securities. The changes could result in a reduction in the long-term rate of return on the plan assets and increase future pension expense. At February 3, 2017, the long-term weighted-average target asset allocations are as follows: 17% U.S. large capitalization equity securities; 4% U.S. small capitalization equity securities; 4% foreign equity securities; and 75% U.S. long-duration fixed income securities. At February 3, 2017, the actual allocation of plan assets is as follows: 27% U.S. large capitalization equity securities; 5% U.S. small capitalization equity securities; 7% foreign equity securities; 57% U.S. long-duration fixed income securities; and 4% below investment grade corporate fixed income securities. Employee Benefit Plans Dell 401(k) Plan — The Company has a defined contribution retirement plan (the "401(k) Plan") that complies with Section 401(k) of the Internal Revenue Code. Substantially all Dell employees in the United States before the completion of the EMC merger transaction are eligible to participate in the 401(k) Plan. Effective January 1, 2008, the Company matches 100% of each participant's voluntary contributions, subject to a maximum contribution of 5% of the participant's eligible compensation, and participants vest immediately in all contributions to the 401(k) Plan. The Company's contributions during the fiscal years ended February 3, 2017, January 29, 2016, and January 30, 2015 were $158 million, $169 million, and $162 million, respectively. The Company's matching contributions as well as participants' voluntary contributions are invested according to each participant's elections in the investment options provided under the 401(k) Plan. The following EMC employee benefit plan was assumed on September 7, 2016 in connection with the EMC merger transaction: EMC 401(k) Plan — The Company has a defined contribution program that complies with Section 401(k) of the Internal Revenue Code for certain employees who were EMC employees before the completion of the EMC merger transaction. EMC matches pre-tax employee contributions up to 6% of eligible compensation during each pay period (subject to a $750 maximum match each quarter). EMC also provides a supplemental matching contribution up to an additional $3,000 at the end of the calendar year. All participants vest in the Company's matching contributions based on the number of years of continuous service over a three-year vesting period. The Company's matching contributions and participants voluntary contributions are invested according to each participant's elections in the investment options provided under the 401(k) Plan. VMware also has a defined contribution program for certain employees that complies with Section 401(k) of the Internal Revenue Code. The Company's contributions during the period from September 7, 2016 through February 3, 2017 to the EMC program were $31 million. On February 15, 2017, subsequent to the fiscal year ended February 3, 2017, the Company contributed an additional $47 million to such program as part of its supplemental matching program. |