Pension and Other Post-Retirement Benefit Plans

The Company and its subsidiaries sponsor a number of pension and other post-retirement benefit plans. During the first quarter of fiscal 2015, the Company changed its accounting policies related to its defined benefit pension and other post-retirement benefit plans (see Note 2).

The net periodic pension benefit for U.S. and non-U.S. pension plans included the following components:



	Quarter Ended
	U.S. Plans						Non-U.S. Plans
(Amounts in millions)	October 3, 2014			September 27, 2013			October 3, 2014			September 27, 2013
Service cost	$	1		$	1		$	6		$	6
Interest cost	38			37			30			31
Expected return on assets	(60		)	(54		)	(47		)	(39		)
Amortization of transition obligation	—			—			1			—
Amortization of prior service cost	—			1			(4		)	(1		)
Contractual termination benefits	—			—			(7		)	3
Settlement (income)	—			(28		)	—			—
Net periodic pension benefit	$	(21	)	$	(43	)	$	(21	)	$	—



	Six Months Ended
	U.S. Plans						Non-U.S. Plans
(Amounts in millions)	October 3, 2014			September 27, 2013			October 3, 2014			September 27, 2013
Service cost	$	2		$	3		$	12		$	13
Interest cost	76			75			61			62
Expected return on assets	(121		)	(110		)	(94		)	(79		)
Amortization of transition obligation	—			—			1			—
Amortization of prior service cost	—			2			(6		)	(2		)
Recognition of actuarial losses	1			—			—			—
Contractual termination benefits	—			—			(7		)	3
Settlement loss (income)	2			(28		)	—			—
Net periodic pension benefit	$	(40	)	$	(58	)	$	(33	)	$	(3	)

The year-over-year decrease in net periodic pension benefit, both for the second quarter and the first six months of fiscal 2015, was primarily due to the fiscal 2014 settlement gain associated with the ATD sale (see Note 4) that did not recur in fiscal 2015, greater return on pension assets of the U.S. and U.K. plans, due to a higher amount of pension assets at the beginning of fiscal 2015 as compared to fiscal 2014 as well as higher than expected returns on the pension assets and a reduction in the accrual for contractual termination pension benefits.

During the first quarter of fiscal 2015, a curtailment loss of $2 million was recorded. This curtailment charge was associated with one of the U.S. pension plans and resulted from amortization of the prior service cost. The plan was remeasured on April 30, 2014 using a discount rate of 4.14%, a decrease from 4.23% at the prior fiscal year end, which resulted in an increase to the fair value of actuarial pension benefit obligation of $1 million, increasing the plan’s unfunded obligations.

On July 31, 2014, CSC completed the sale of a German software business, which had a pension plan (see Note 4). The plan was remeasured as of the date of the sale, resulting in settlement costs totaling $3 million, which has been reported within discontinued operations.

On July 19, 2013, CSC completed the sale of ATD (See Note 4), which had a pension and a retiree medical plan. The plans were remeasured as of the date of the sale, resulting a in settlement benefit of $28 million associated with the pension plan and $8 million associated with the retiree medical plan, and a reduction to long-term liabilities of $28 million.

The Company contributed $10 million and $46 million to the defined benefit pension plans during the second quarter and six months ended October 3, 2014, respectively. The Company expects to contribute $18 million during the remainder of fiscal 2015. Additional contributions may be required to meet funding levels as required by Section 430 of the Internal Revenue Code, as amended by the Pension Protection Act of 2006, the amount of which will be determined based upon actuarial valuations that will be performed in the fourth quarter of fiscal 2015.

The components of net periodic benefit cost for other post-retirement benefit plans, reported on a global basis, included the following:



	Quarter Ended
(Amounts in millions)	October 3, 2014			September 27, 2013
Service cost	$	1		$	1
Interest cost	2			2
Expected return on assets	(2		)	(1		)
Amortization of prior service costs	—			(1		)
Settlement (gain)				(8		)
Net provision for post-retirement benefits	$	1		$	(7	)



	Six Months Ended
(Amounts in millions)	October 3, 2014			September 27, 2013
Service cost	$	2		$	2
Interest cost	4			5
Expected return on assets	(3		)	(2		)
Amortization of prior service cost	(1		)	(2		)
Settlement (gain)	—			(8		)
Net provision for post-retirement benefits	$	2		$	(5	)

The Company contributed $2 million and $4 million to the other post-retirement benefit plans during the quarter and six months ended October 3, 2014. The Company expects to contribute $4 million during the remainder of fiscal 2015.

In September 2014, CSC initiated a pension lump sum or annuity distribution offer to U.S. terminated vested participants who earned benefits in a CSC sponsored pension plan. Eligible participants have the option to choose a distribution from the pension plan in the form of a single lump sum payment or annuity plan. Distributions to participants, who accept the offer, are expected during December 2014 (see Note 20).

During the third quarter of fiscal 2015, the Company amended its retiree medical health plans to provide coverage to eligible Medicare retirees through a private insurance marketplace. The insurance marketplace will allow retirees to choose the health insurance terms, cost and coverage that best fit their needs. CSC will continue to provide financial support to the Medicare eligible participants in the form of a tax free contribution to a health reimbursement account (see Note 20).