Retirement and Other Post-Retirement Benefit Plans

The Company offers a number of pension and OPEB plans, life insurance benefits, deferred compensation and other benefit plans. Most of CSC's pension plans are not admitting new participants; therefore, changes to pension liabilities are primarily due to market fluctuations of investments for existing participants and changes in interest rates.

Defined Benefit Plans

The Company has combined its U.S. pension, non-U.S. pension, OPEB and non-U.S. OPEB disclosures as the benefit obligations are not significant and the plans do not use significantly different assumptions, unless otherwise disclosed. After the Separation, the majority of U.S. pension and other benefit plans and nearly all of the plan assets associated with OPEB plans were transferred to CSRA and amended, resulting in a remeasurement. The Company recorded reductions in noncurrent assets of $3 million, current liabilities of $9 million, noncurrent liabilities of $473 million and accumulated other comprehensive income of $51 million. The remeasurement resulted in an actuarial gain of $21 million. See Note 3 - "Divestitures" for a further description of the Separation of NPS.

Eligible employees are enrolled in defined benefit pension plans in their country of domicile. The Contributory defined benefit pension plan in the U.K. represents the largest plan. In addition, healthcare, dental and life insurance benefits are also provided to certain non-U.S. employees. A significant number of employees outside the U.S. are covered by government sponsored programs at no direct cost to the Company other than related payroll taxes.

On December 31, 2015, 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 actuarial gain of $7 million using a discount rate of 0.81%, a decrease from 1.2% in prior fiscal year. As a result of the remeasurement, the plan's Projected Benefit Obligation ("PBO") decreased by $14 million and the funded status was 74%. The weighted-average expected long-term rate of return on plan assets, after remeasurement, was 4.15% which was consistent with fiscal 2016.

On December 31, 2014, 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, was 3.60% which is consistent with the rate used at the beginning of fiscal 2015.

As additional contractual termination benefits for certain employees are part of the restructuring plans (see Note 19 - "Restructuring Costs"), the Company accrued $1 million, $6 million and $3 million, for fiscal 2017, 2016 and 2015, respectively. These amounts are reflected in the projected benefit obligation and in the net periodic pension cost.

Projected Benefit Obligations



(in millions)	March 31, 2017			April 1, 2016
Projected benefit obligation at beginning of year	$	2,879		$	3,061
Service cost	23			25
Interest cost	82			92
Plan participants’ contributions	3			4
Amendments	—			(3		)
Business/contract acquisitions/divestitures	313			1
Contractual termination benefits	1			6
Settlement/curtailment	(13		)	(14		)
Actuarial loss (gain)	413			(92		)
Benefits paid	(120		)	(104		)
Foreign currency exchange rate changes	(283		)	(95		)
Other	(1		)	(2		)
Projected benefit obligation at end of year	$	3,297		$	2,879

The following table summarizes the weighted average rates used in the determination of the Company’s benefit obligations:



	March 31, 2017		April 1, 2016
Discount rate	2.5	%	3.1	%
Rates of increase in compensation levels	2.2	%	2.6	%

Fair Value of Plan Assets and Funded Status



(in millions)	March 31, 2017			April 1, 2016
Fair value of plan assets at beginning of year	$	2,597		$	2,828
Actual return on plan assets	483			(49		)
Employer contribution	123			21
Plan participants’ contributions	3			4
Benefits paid	(120		)	(104		)
Business/contract acquisitions/divestitures	199			—
Contractual termination benefits	6			11
Plan settlement	(13		)	(14		)
Foreign currency exchange rate changes	(279		)	(100		)
Other	(1		)	—
Fair value of plan assets at end of year	$	2,998		$	2,597

Funded status at end of year	$	(299	)	$	(282	)

During fiscal 2017, the Company, along with the Trustee of CSC Computer Sciences Ltd. Main Pension Scheme (“CSC UK Pension”), the Trustee of the Rebus Pension Scheme (“Xchanging UK Pension”), and a financial institution (the "Institution"), entered into a multi-party arrangement whereby the Company’s corporate campus in Aldershot, U.K. (the "Property") was monetized for approximately $85 million in proceeds net of stamp duties paid. The Company concurrently contributed $85 million to the CSC UK Pension and Xchanging UK Pension plans as a special discretionary employer contribution. The transaction was executed by contributing the Property to a property limited partnership and all such LP interests were contributed to a Jersey Unit Trust owned 1% by the Company and 99% by the Institution.

Under the structured sale transaction, the Company entered into a 15-year master lease arrangement as master tenant, at approximately $4 million rent per year. Under U.S. GAAP, due to the continuing interest of the Company as master tenant, residual profit participation retained by the Company, Xchanging UK Pension and CSC UK Pension, and the Company's ownership of the general partner of the property limited partnership that owns the Property, the structured sale transaction resulted in accounting treatment as a financing transaction. As a consequence, the Property remains accounted for as an asset on the balance sheet of the Company at historical cost basis and accumulated depreciation thereon, with no gain or loss recorded. A corresponding $85 million liability was recorded as other long-term liabilities on the Company's consolidated balance sheet.

Selected Information



(in millions)	March 31, 2017			April 1, 2016
Other assets	$	73		$	44
Accrued expenses and other current liabilities	(7		)	(5		)
Non-current pension obligations	(342		)	(298		)
Other long-term liabilities - OPEB	(23		)	(24		)
Net amount recorded	$	(299	)	$	(283	)

Accumulated benefit obligation	$	3,262		$	2,835



	Benefit Plans with Projected Benefit Obligation in Excess of Plan Assets				Benefit Plans with Accumulated Benefit Obligation in Excess of Plan Assets
(in millions)	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
Projected benefit obligation	$	996	$	693	$	938	$	668
Accumulated benefit obligation	$	963	$	658	$	913	$	640
Fair value of plan assets	$	624	$	366	$	574	$	346

Net Periodic Pension Cost



(in millions)	March 31, 2017				April 1, 2016			April 3, 2015
Service cost	$	23			$	25		$	23
Interest cost	82			81	92			118
Expected return on assets	(161		)		(179		)	(183		)
Amortization of transition obligation	1				1			1
Amortization of prior service costs	(17		)		(19		)	(10		)
Contractual termination benefit	1				6			3
Settlement (gain) loss	—				(2		)	1
Recognition of actuarial loss (gain)	87				127			278
Net periodic pension expense (income)	$	16			$	51		$	231

Estimated net transitional obligations of $1 million and prior service credit of $(18) million will be amortized from accumulated other comprehensive income into net periodic pension cost over the next fiscal year. The weighted-average rates used to determine net periodic pension cost were:



	March 31, 2017		April 1, 2016		April 3, 2015
Discount or settlement rates	3.1	%	3.0	%	4.4	%
Expected long-term rates of return on assets	6.3	%	6.3	%	7.1	%
Rates of increase in compensation levels	2.6	%	2.8	%	4.2	%

The following is a summary of amounts in accumulated other comprehensive loss, before tax effects:



(in millions)	March 31, 2017			April 1, 2016
Net transition obligation	$	—		$	1
Prior service cost	(269		)	(289		)
Accumulated other comprehensive (loss) income	$	(269	)	$	(288	)

Estimated Future Benefits Payments



(in millions)
Employer contributions:
2018	$	29

Benefit Payments:
2018	$	100
2019	$	104
2020	$	111
2021	$	116
2022	$	120
2023 and thereafter	$	679

Fair Value of Plan Assets

The tables below set forth the fair value of plan assets by asset category within the fair value hierarchy:



		As of March 31, 2017
(in millions)		Level 1		Level 2		Level 3		Total
Equity:
	Global/International Equity commingled funds	$	1	$	710	$	—	$	711
	Global equity mutual funds	1		251		—		252
	U.S./North American Equity commingled funds	1		39		—		40
Fixed Income:
	Non-U.S. Government funds	—		3		—		3
	Fixed income commingled funds	1		991		—		992
	Fixed income mutual funds	3		—		—		3
Alternatives:
	Other Alternatives ⁽¹⁾	3		412		343		758
	Hedge Funds⁽²⁾	—		1		—		1
Insurance contracts		—		131		5		136
Cash and cash equivalents		94		8		—		102
Totals		$	104	$	2,546	$	348	$	2,998



		As of April 1, 2016
(in millions)		Level 1		Level 2		Level 3		Total
Equity:
	Global/International Equity commingled funds	$	1	$	419	$	—	$	420
	Global equity mutual funds	—		230		—		230
	U.S./North American Equity commingled funds	1		264		—		265
Fixed Income:
	Fixed income commingled funds	1		846		—		847
Alternatives:
	Other Alternatives ⁽¹⁾	3		373		165		541
	Hedge Funds⁽²⁾	—		—		146		146
Insurance contracts		—		135		4		139
Cash equivalents		5		4		—		9
Totals		$	11	$	2,271	$	315	$	2,597

⁽¹⁾ Represents real estate and other commingled funds consisting mainly of equities, bonds, or commodities.

⁽²⁾ Represents investments in diversified fund of hedge funds.

Changes in fair value measurements of level 3 investments for the defined benefit plans were as follows:



(in millions)
Balance as of April 3, 2015	$	289
Actual return on plan assets held at the reporting date	6
Purchases, sales and settlements	34
Changes due to exchange rates	(14		)
Balance as of April 1, 2016	315
Actual return on plan assets held at the reporting date	60
Purchases, sales and settlements	9
Changes due to exchange rates	(36		)
Balance as of March 31, 2017	$	348

Domestic and global equity accounts are categorized as Level 1 if the securities trade on national or international exchanges and are valued at their last reported closing price. Equity assets in commingled funds reporting a net asset value are categorized as Level 2 and valued using broker dealer bids or quotes of securities with similar characteristics.

Fixed income accounts are categorized as Level 1 if traded on a publicly quoted exchange or as level 2 if investments in corporate bonds are primarily investment grade bonds, generally priced using model-based pricing methods that use observable market data as inputs. Broker dealer bids or quotes of securities with similar characteristics may also be used.

Alternative investment fund securities are categorized as Level 1 if held in a mutual fund or in a separate account structure and actively traded through a recognized exchange, or as Level 2 if they are held in commingled or collective account structures and are actively traded. Alternative investment fund securities are classified as Level 3 if they are held in Limited Company or Limited Partnership structures or cannot otherwise be classified as Level 1 or Level 2.

Insurance contracts purchased to cover benefits payable to retirees are valued using the assumptions used to value the projected benefit obligation.

Cash equivalents that have quoted prices in active markets are classified as Level 1. Short-term money market commingled funds are categorized as Level 2 and valued at cost plus accrued interest which approximates fair value.

Plan Asset Allocations



Asset Category	March 31, 2017		April 1, 2016
Equity securities	33	%	35	%
Debt securities	33	%	33	%
Alternatives	25	%	26	%
Cash and other	9	%	6	%
Total	100	%	100	%

Plan assets are held in a trust that includes commingled funds subject to country specific regulations and invested primarily in commingled funds. The U.K. pension plans, the Company's largest pension plans by assets and projected liabilities, a target allocation by asset class was developed to achieve their long-term objectives. Asset allocations are monitored closely and investment reviews regarding asset strategy are conducted regularly with internal and external advisors.

The Company’s investment goals and risk management strategy for plan assets evaluates a number of factors, including the time horizon of the plans’ obligations. Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification in order to minimize risk, yet produces a reasonable amount of return on investment over the long term. Sufficient liquidity is maintained to meet benefit obligations as they become due. Third party investment managers are employed to invest assets in both passively-indexed and actively-managed strategies. Equities are primarily invested broadly in domestic and foreign companies across market capitalizations and industries. Fixed income securities are invested broadly, primarily in government treasury, corporate credit, mortgage backed and asset backed investments. Alternative investment allocations are included in selected plans to achieve greater portfolio diversity intended to reduce the overall risk of the plans.

Plan asset risks include longevity, inflation, and other changes in market conditions that could reduce the value of plan assets. Also, a decline in the yield of high quality corporate bonds may adversely affect discount rates resulting in an increase in CSC's pension and other post-retirement obligations. These risks, among others, could cause the plans’ funded status to deteriorate, resulting in an increased reliance on Company contributions. Derivatives are permitted although their current use is limited within traditional funds and broadly allowed within alternative funds. Derivatives are used for inflation risk management and within the liability driven investing strategy. The Company also has investments in insurance contracts to pay plan benefits in certain countries.

Return on Assets

The Company consults with internal and external advisors regarding the expected long-term rate of return on assets. The Company uses various sources in its approach to compute the expected long-term rate of return of the major asset classes expected in each of the plans. CSC utilizes long-term, typically 30 years, asset class return assumptions provided by external advisors. Consideration is also given to the extent active management is employed in each asset class and also to management expenses. A single expected long-term rate of return is calculated for each plan by assessing the plan's expected asset allocation strategy, the benefits of diversification therefrom, historical excess returns from actively managed traditional investments, expected long-term returns for alternative investments and expected investment expenses. The resulting composite rate of return is reviewed by internal and external parties for reasonableness.

Retirement Plan Discount Rate

The U.K. discount rate is based on the yield curve approach using the U.K. Aon Hewitt GBP Single Agency AA Corporates-Only Curve. In fiscal 2016, the bond universe was modified to include corporate bonds only.

Defined Contribution Plans

The Company sponsors defined contribution plans for substantially all U.S. employees and certain foreign employees. The plans allow employees to contribute a portion of their earnings in accordance with specified guidelines. Matching contributions are made annually in January to participants employed on December 31 of the prior year and vest in one year. However, if a participant retires from CSC or dies prior to December 31, the participant will be eligible to receive matching contributions approximately 30 days following separation from service. During fiscal 2017, 2016 and 2015, the Company contributed $124 million, $132 million and $177 million, respectively, to its defined contribution plans. At March 31, 2017, plan assets included 4,628,230 shares of the Company’s common stock.

Deferred Compensation Plan

Effective August 14, 1995, the Company adopted the Computer Sciences Corporation Deferred Compensation Plan (the "Plan"). The Plan consists of one plan for the benefit of key executives and non-employee directors. Pursuant to the Plan, certain management and highly compensated employees are eligible to defer all or a portion of their regular salary that exceeds the limitation set forth in Internal Revenue Section 401(a)(17) and all or a portion of their incentive compensation, and non-employee directors are eligible to defer up to 100% of their compensation. The liability, which is included in Other long-term liabilities in the Company's consolidated balance sheets under the Plan, amounted to $67 million as of March 31, 2017 and $74 million as of April 1, 2016. The Company’s expense under the Plan totaled $5 million, $3 million and $2 million, for fiscal 2017, 2016 and 2015, respectively.