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 cost (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)	January 2, 2015			December 27, 2013			January 2, 2015			December 27, 2013
Service cost	$	1		$	1		$	5		$	6
Interest cost	38			37			29			32
Expected return on assets	(61		)	(52		)	(44		)	(42		)
Amortization of transition obligation	—			—			—			1
Amortization of prior service (credit) cost	—			—			(2		)	—
Recognition of actuarial losses (gains)	374			—			26			(114		)
Contractual termination benefits	—			—			(1		)	—
Settlement loss	56			—			3			—
Net periodic pension cost (benefit)	$	408		$	(14	)	$	16		$	(117	)



	Nine Months Ended
	U.S. Plans						Non-U.S. Plans
(Amounts in millions)	January 2, 2015			December 27, 2013			January 2, 2015			December 27, 2013
Service cost	$	3		$	4		$	17		$	19
Interest cost	114			112			90			94
Expected return on assets	(182		)	(162		)	(138		)	(121		)
Amortization of transition obligation	—			—			1			1
Amortization of prior service cost (credit)	—			2			(8		)	(2		)
Recognition of actuarial losses (gains)	375			—			26			(114		)
Contractual termination benefits	—			—			(8		)	3
Settlement loss (income)	58			(28		)	3			—
Net periodic pension cost (benefit)	$	368		$	(72	)	$	(17	)	$	(120	)

The net periodic pension cost, both for the third quarter and the first nine months of fiscal 2015, was primarily due to the recognition of actuarial and settlement losses arising from the interim remeasurement of certain defined benefit U.S. and Swiss pension plans.

During the third quarter of fiscal 2015, the Company offered lump sum settlements to the vested participants of certain of its U.S. defined benefit pension plans, who were no longer with the Company. The lump-sum settlement required interim remeasurement of the plans' assets and liabilities, as of the end of the third quarter of fiscal 2015, which resulted in a net loss of $430 million, comprising actuarial losses of $374 million and a settlement loss of $56 million. The actuarial and settlement losses were primarily a result of the adoption of the new mortality tables issued by the Society of Actuaries in October 2014. The economic benefit realized due to the lump sum payments was $98 million which is included in the net loss of $430 million.

The lump sum settlement resulted in reduction of the aggregate pension benefit obligation (PBO) of these U.S. defined benefit plans by $583 million, whereas the interim remeasurement resulted in an increase in PBO of $474 million. A weighted average discount rate of 4.13% was used to remeasure the plans; a decrease from 4.58% used in the prior fiscal year. The average funded status of the impacted U.S. pension plans, after remeasurement, was 87%. The weighted-average expected long-term rate of return on plan assets, after remeasurement, is 7.60% which is consistent with the rate used at the beginning of the fiscal year 2015.

During the third quarter, a defined benefit pension plan in Switzerland was subject to interim remeasurement due to the significant amount of settlement payments from the plan. The interim remeasurement of the plan assets and liabilities resulted in an aggregate charge of $29 million, comprising actuarial losses of $26 million and a settlement loss of $3 million. A discount rate of 1.20% was used to remeasure the plans; a decrease from 2.10% in the prior fiscal year. As a result of the remeasurement, the plan's PBO decreased by $38 million and the funded status was 78%. The weighted-average expected long-term rate of return on plan assets, after remeasurement, is 3.60%, which is consistent with the rate used at the beginning of fiscal 2015.

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 PBO 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.

On December 20, 2013, two U.K. pension plans were remeasured due to a plan amendment arising from a change in index used to determine the level of pension increases, from the Retail Prices Index (RPI) to the Consumer Price Index (CPI). A weighted average discount rate of 4.65% was used to remeasure the plans; an increase from 4.31% in the prior fiscal year. The remeasurement resulted in recognition of actuarial gains of $114 million during the third quarter of fiscal 2014, and reduction of PBO decreased by $443 million.

The Company contributed $14 million and $60 million to the defined benefit pension plans during the third quarter and nine months ended January 2, 2015, respectively. The Company expects to contribute an additional $18 million during the remainder of fiscal 2015. Additional contributions may be required to meet funding levels or ongoing service costs of unfunded plans as required by Section 430 of the United States Internal Revenue Code, as amended (the Code) and the Pension Protection Act of 2006, or by local regulations. In the case of the U.S. defined benefit pension plans, the Company currently expects no additional contributions during remainder 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)	January 2, 2015			December 27, 2013
Service cost	$	—		$	1
Interest cost	2			2
Expected return on assets	(2		)	(2		)
Amortization of prior service (credit) costs	(7		)	—
Recognition of actuarial losses	1			—
Net provision for post-retirement benefits	$	(6	)	$	1



	Nine Months Ended
(Amounts in millions)	January 2, 2015			December 27, 2013
Service cost	$	2		$	3
Interest cost	6			7
Expected return on assets	(5		)	(4		)
Amortization of prior service (credit)	(8		)	(2		)
Recognition of actuarial losses	1			—
Settlement (gain)	—			(8		)
Net provision for post-retirement benefits	$	(4	)	$	(4	)

On October 6, 2014, the Company amended its U.S. 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, while 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. These amendments resulted in interim remeasurement of the retiree medical plans, which resulted in an actuarial loss of $1 million. A weighted average discount rate of 4.01% was used to remeasure the plans; a decrease from 4.32% in the prior fiscal year. As a result of the remeasurement, the benefit obligations decreased and the prior service credit increased by $99 million each. Subsequent to the remeasurement, the average funded status was 74%. The weighted-average expected long-term rate of return on plan assets is 7.50% as of October 6, 2014, after remeasurement, which is consistent with the rate at the beginning of the year, March 29, 2014.

The Company contributed $0 million and $3 million to the other post-retirement benefit plans during the quarter and nine months ended January 2, 2015, respectively. The Company does not expect to contribute any incremental amounts during the remainder of fiscal 2015.