8. Employee Stock and Savings Plans

Stock Plans

The Company recognizes the fair value of share-based compensation awards granted to employees in cost of processing and services, cost of product, and selling, general and administrative expense in its consolidated statements of income.

The Company’s share-based compensation primarily consists of the following:

Stock Options – The Company grants stock options to employees and non-employee directors at exercise prices equal to the fair market value of the Company’s stock on the dates of grant, which are typically in the first quarter of the year. Stock options generally vest over a three-year period beginning on the first anniversary of the grant. All stock options expire ten years from the date of the award. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period of the stock option award.

Restricted Stock Units – The Company awards restricted stock units to employees and non-employee directors. The Company recognizes compensation expense for restricted stock units based on the market price of the common stock on the date of award over the period during which the awards vest.

Employee Stock Purchase Plan – The Company maintains an employee stock purchase plan that allows eligible employees to purchase a limited number of shares of common stock each quarter through payroll deductions at 85% of the closing price of the Company’s common stock on the last business day of each calendar quarter. The Company recognizes compensation expense related to the 15% discount on the purchase date.

Share-based compensation expense was $49 million in 2014, $46 million in 2013 and $44 million in 2012. The income tax benefits related to share-based compensation totaled $17 million, $16 million and $15 million in 2014, 2013 and 2012, respectively. At December 31, 2014, the total remaining unrecognized compensation cost for unvested stock options and restricted stock units, net of estimated forfeitures, of $71 million is expected to be recognized over a weighted-average period of 2.3 years.

The weighted-average estimated fair value of stock options granted during 2014, 2013 and 2012 was $18.90, $13.00 and $10.86 per share, respectively. The fair values of stock options granted were estimated on the date of grant using a binomial option-pricing model with the following assumptions:


	2014			2013			2012

Expected life (in years)		6.3			6.4			6.5
Average risk-free interest rate		2.0	%		0.9	%		1.3	%
Expected volatility		29.6	%		29.9	%		31.1	%
Expected dividend yield		0	%		0	%		0	%

The Company determined the expected life of stock options using historical data adjusted for known factors that could alter historical exercise behavior. The risk-free interest rate is based on the U.S. treasury yield curve in effect as of the grant date. Expected volatility is determined using weighted-average implied market volatility combined with historical volatility. The Company believes that a blend of historical volatility and implied volatility better reflects future market conditions and better indicates expected volatility than purely historical volatility.

A summary of stock option activity is as follows:


	Shares (In thousands)			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (In millions)
Stock options outstanding - December 31, 2013		10,080		$	28.97
Granted		1,357			57.29
Forfeited		(288	)		40.60
Exercised		(1,275	)		27.65

Stock options outstanding - December 31, 2014		9,874		$	32.69		5.7	$	378

Stock options exercisable - December 31, 2014		6,838		$	26.40		4.4	$	305

A summary of restricted stock unit activity is as follows:


	Shares (In thousands)			Weighted- Average Grant Date Fair Value

Restricted stock units - December 31, 2013		2,157		$	34.92
Granted		539			58.87
Forfeited		(240	)		39.86
Vested		(594	)		32.16

Restricted stock units - December 31, 2014		1,862		$	42.02

The table below presents additional information related to stock option and restricted stock unit activity:


(In millions)	2014		2013		2012

Total intrinsic value of stock options exercised	$	43	$	27	$	51
Cash received from stock option exercises		33		32		80
Gross income tax benefit from stock option exercises		16		10		20
Fair value of restricted stock units upon vesting		35		31		29

As of December 31, 2014, 21.6 million share-based awards were available for grant under the Fiserv, Inc. 2007 Omnibus Incentive Plan. Under its employee stock purchase plan, the Company issued 0.6 million, 0.7 million and 0.8 million shares in 2014, 2013 and 2012, respectively. As of December 31, 2014, there were 6.4 million shares available for issuance under the employee stock purchase plan. The number of shares remaining available for future issuance under the employee stock purchase plan is subject to an annual increase on the first day of each fiscal year equal to the lesser of (i) 2.0 million shares, (ii) 1% of the shares of the Company’s common stock outstanding on such date or (iii) a lesser amount determined by the Company’s board of directors.

Employee Savings Plans

The Company and its subsidiaries have defined contribution savings plans covering substantially all employees. Under the plans, eligible participants may elect to contribute a specified percentage of their salaries and the Company makes matching contributions, each subject to certain limitations. Expenses for company contributions under these plans totaled $37 million, $36 million and $33 million in 2014, 2013 and 2012, respectively.