Retirement Plan Benefits

401(k) Plan

EMC’s Information Infrastructure business has a defined contribution program for certain employees that is qualified under Section 401(k) of the Code. EMC matches pre-tax employee contributions up to 6% of eligible compensation during each pay period (subject to a $750 maximum match each quarter). During 2015, EMC instituted a supplemental matching contribution up to an additional $3,000 following the end of each calendar year payable in EMC common stock. During the year ended December 31, 2015, EMC recognized $47 million in stock-based compensation related to this additional matching contribution. All participants vest in Company matching contributions based on the number of years of continuous service over a three year vesting period. VMware also has a defined contribution program for certain employees that is qualified under Section 401(k) of the Code. Our combined cash contributions amounted to $107 million, $105 million and $91 million in 2015, 2014 and 2013, respectively.

Employees may elect to invest their contributions in a variety of funds, including an EMC stock fund. The program limits an employee’s maximum investment allocation in the EMC stock fund to 30% of their total contribution. EMC matching contribution mirrors the investment allocation of the employee’s contribution.

Defined Benefit Pension Plan

We have a noncontributory defined benefit pension plan which was assumed as part of the Data General acquisition, which covers substantially all former Data General employees located in the U.S. In addition, certain of our foreign subsidiaries also have a defined benefit pension plan.

Benefits under these plans are generally based on either career average or final average salaries and creditable years of service as defined in the plans. The annual cost for these plans is determined using the projected unit credit actuarial cost method that includes actuarial assumptions and estimates which are subject to change. The measurement date for the plans is December 31.

The Data General U.S. pension plan’s (the “Pension Plan”) investment policy provides that no security, except issues of the U.S. Government, shall comprise more than 5% of total plan assets, measured at market.

The Pension Plan is summarized in the following tables. The other pension plans are not presented because they do not have a material impact on our consolidated financial statements.

The components of the change in benefit obligation of the Pension Plan is as follows (table in millions):



	December 31, 2015			December 31, 2014
Benefit obligation, at beginning of year	$	554		$	495
Interest cost	21			22
Benefits paid	(21		)	(19		)
Actuarial loss (gain)	(29		)	56
Benefit obligation, at end of year	$	525		$	554

The reconciliation of the beginning and ending balances of the fair value of the assets of the Pension Plan is as follows (table in millions):



	December 31, 2015			December 31, 2014
Fair value of plan assets, at beginning of year	$	486		$	449
Actual return on plan assets	(12		)	56
Benefits paid	(21		)	(19		)
Fair value of plan assets, at end of year	$	453		$	486

We did not make any significant contributions to the Pension Plan in 2015 or 2014 and we do not expect to make a contribution to the Pension Plan in 2016. The under-funded status of the Pension Plan at December 31, 2015 and 2014 was $72 million and $68 million, respectively. This amount is classified as a component of other long-term liabilities on the consolidated balance sheets.

During 2015, $12 million of the accumulated actuarial loss and prior services cost associated with the Pension Plan was reclassified from accumulated comprehensive loss to a component of net periodic benefit cost. Additionally, the Pension Plan had net losses of $14 million that are included in accumulated other comprehensive income (loss), which were primarily the result of a decrease in the discount rate at the end of 2015, changes to the mortality table and a lower rate of return on plan assets. We expect that $13 million of the total balance included in accumulated other comprehensive income (loss) at December 31, 2015 will be recognized as a component of net periodic benefit costs in 2016.

The components of net periodic expense of the Pension Plan are as follows (table in millions):



	2015			2014
Interest cost	$	21		$	22
Expected return on plan assets	(31		)	(29		)
Recognized actuarial loss	12			9
Net periodic expense	$	2		$	2

The weighted-average assumptions used in the Pension Plan to determine benefit obligations at December 31 are as follows:



	December 31, 2015		December 31, 2014		December 31, 2013
Discount rate	4.2	%	3.9	%	4.7	%
Rate of compensation increase	N/A		N/A		N/A

The weighted-average assumptions used in the Pension Plan to determine periodic benefit cost for the years ended December 31 are as follows:



	December 31, 2015		December 31, 2014		December 31, 2013
Discount rate	3.9	%	4.7	%	3.7	%
Expected long-term rate of return on plan assets	6.50	%	6.75	%	6.75	%
Rate of compensation increase	N/A		N/A		N/A

The benefit payments are expected to be paid in the following years (table in millions):



2016	$	22
2017	23
2018	25
2019	27
2020	29
2021-2025	165

Fair Value of Plan Assets

Following is a description of the valuation methodologies used for assets measured at fair value at December 31, 2015:

Common Collective Trusts – valued at the net asset value calculated by the fund manager based on the underlying investments and are all classified within Level 2 of the valuation hierarchy. These include: EB Daily Valued Large Cap Growth Stock Index Fund, EB Daily Valued Large Cap Value Stock Index Fund, EB Daily Valued Stock Index Fund, EB Daily Valued Small Cap Stock Index Fund, EB Daily Valued International Stock Index Fund, EB Daily Valued Emerging Markets Stock Index Fund, Custom Long Duration Fixed Income, Collective Trust High Yield Fund, EB Long Term Credit Bond Index, EB Long Term Government Bond Index Fund and EB Temporary Investment Fund.

Corporate Debt Securities – valued daily at the closing price reported in active U.S. financial markets and are classified within Level 2 of the valuation hierarchy.

The following table sets forth, by level within the fair value hierarchy, the Pension Plan’s assets at fair value as of December 31, 2015 and 2014 (table in millions):



	December 31, 2015
	Level 1		Level 2		Level 3		Total
Common collective trusts	$	—	$	324	$	—	$	324
U.S. Treasury securities	5		—		—		5
Corporate debt securities	—		123		—		123
Total	$	5	$	447	$	—	452
Plan payables, net of accrued interest and dividends							1
Total							$	453
	December 31, 2014
	Level 1		Level 2		Level 3		Total
Common collective trusts	$	—	$	350	$	—	$	350
U.S. Treasury securities	2		—		—		2
Corporate debt securities	—		132		—		132
Total	$	2	$	482	$	—	484
Plan payables, net of accrued interest and dividends							2
Total							$	486

Dividends, accrued interest and net plan payables are not material to the plan assets. Accordingly, we have not classified these into the fair value hierarchy above at December 31, 2015 and 2014.

Concentration of Risks

Pension Plan investments at fair value as of December 31, 2015 and 2014 which represented 5% or more of the Pension Plan’s net assets were as follows (table in millions):



	2015		2014
EB Daily Valued Small Cap Stock Index Fund	$	26	$	30
EB Daily Valued Stock Index Fund	91		103
EB Daily Valued International Stock Index Fund	26		27
EB Long Term Government Bond Index	49		50
EB Long Term Credit Bond Index	71		74
Custom Long Duration Fixed Income	130		137
	$	393	$	421

Investment Strategy

The Pension Plan’s assets are managed by outside investment managers. Our investment strategy with respect to pension 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 Pension 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, we expect 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 Pension Plan assets and increase future pension expense. The long-term weighted average target asset allocations are as follows:



	December 31, 2015
U.S. large capitalization equities	17	%
U.S. small capitalization equities	4
International equities	4
U.S. long-duration fixed income	75
Total	100	%

The actual allocation of the assets in the Pension Plan at December 31, 2015 and 2014 were as follows:



	December 31, 2015		December 31, 2014
U.S. large capitalization equities	29	%	30	%
U.S. small capitalization equities	6		6
International equities	7		7
U.S. long-duration fixed income	55		54
Below Investment Grade Corporate Fixed Income	3		3
Total	100	%	100	%