Employee benefit plans Employee benefit plans

12 Months Ended

Dec. 31, 2019

Defined Benefit Plan [Abstract]

Employee benefit plans

Employee benefit plans

BNY Mellon has defined benefit and/or defined contribution retirement plans and other post-retirement plans providing healthcare benefits.

The defined benefit pension plans cover approximately 11,200 U.S. employees and approximately 13,100 non-U.S. employees.

BNY Mellon has one qualified and several non-qualified defined benefit pension plans in the U.S. and several pension plans overseas.

Effective June 30, 2015, the benefit accruals under the U.S. qualified and non-qualified defined benefit plans were frozen. This change resulted in no additional benefits being earned by participants in

those plans based on service or pay after June 30, 2015. These plans were previously closed to new participants effective Dec. 31, 2010, at which time a non-elective contribution was added to the Company’s defined contribution plan for employees not eligible to join the pension plan. Employees previously participating in the pension plan received this non-elective contribution starting July 1, 2015.

Effective Dec. 31, 2018, the benefit accruals were frozen under our largest foreign plan, which covers certain UK employees. This change results in no additional benefits being earned by participants in that plan based on service or pay after Dec. 31, 2018. Most UK employees currently earn benefits only on a defined contribution basis. UK employees impacted by the pension plan freeze began earning benefits on a defined contribution basis on Jan. 1, 2019.

Pension and post-retirement healthcare plans

The following tables report the combined data for our domestic and foreign defined benefit pension and post-retirement healthcare plans.

	Pension Benefits												Healthcare Benefits
	Domestic						Foreign						Domestic						Foreign
(dollars in millions)	2019			2018			2019			2018			2019			2018			2019			2018
Weighted-average assumptions used to determine benefit obligations
Discount rate	3.45		%	4.45		%	2.02		%	2.95		%	3.45		%	4.45		%	2.10		%	3.10		%
Rate of compensation increase	N/A			N/A			3.19			2.98			3.00			3.00			N/A			N/A
Cash balance interest crediting rate	4.00			4.00			N/A			N/A			N/A			N/A			N/A			N/A
Change in benefit obligation (a)
Benefit obligation at beginning of period	$	(4,123	)	$	(4,405	)	$	(1,104	)	$	(1,322	)	$	(149	)	$	(175	)	$	(5	)	$	(4	)
Service cost	—			—			(11		)	(28		)	(1		)	(1		)	—			—
Interest cost	(178		)	(169		)	(32		)	(32		)	(6		)	(7		)	—			—
Amendments	—			—			(1		)	—			—			—			—			—
Actuarial gain (loss)	(585		)	219			(264		)	173			(1		)	22			(1		)	(1		)
Curtailments	—			—			—			11			—			—			—			—
Benefits paid	227			232			40			25			12			12			—			—
Foreign exchange adjustment	N/A			N/A			(22		)	69			N/A			N/A			—			—
Benefit obligation at end of period	(4,659		)	(4,123		)	(1,394		)	(1,104		)	(145		)	(149		)	(6		)	(5		)
Change in fair value of plan assets
Fair value at beginning of period	5,040			5,496			1,316			1,393			99			107			—			—
Actual return on plan assets	910			(257		)	191			1			18			(8		)	—			—
Employer contributions	15			33			30			22			12			12			—			—
Benefit payments	(227		)	(232		)	(40		)	(25		)	(12		)	(12		)	—			—
Foreign exchange adjustment	N/A			N/A			32			(75		)	N/A			N/A			—			—
Fair value at end of period	5,738			5,040			1,529			1,316			117			99			—			—
Funded status at end of period	$	1,079		$	917		$	135		$	212		$	(28	)	$	(50	)	$	(6	)	$	(5	)
Amounts recognized in accumulated other comprehensive loss (income) consist of:
Net loss	$	1,557		$	1,598		$	221		$	105		$	70		$	84		$	1		$	—
Prior service cost (credit)	—			—			2			1			(33		)	(40		)	—			—
Total loss (before tax effects)	$	1,557		$	1,598		$	223		$	106		$	37		$	44		$	1		$	—

(a) The benefit obligation for pension benefits is the projected benefit obligation, and for healthcare benefits, it is the accumulated benefit obligation.

A number of key assumptions and measurement date values determine pension expense. The key elements include the long-term rate of return on plan assets, the discount rate, the market-related value of plan assets and the price used to value stock in the Employee Stock Ownership Plan (“ESOP”).

The discount rate for U.S. pension plans was determined after reviewing equivalent rates obtained

by discounting the pension plans’ expected cash flows using various high-quality, long-term corporate bond yield curves. We also reviewed the results of several models that matched bonds to our pension cash flows. After reviewing the various indices and models, we selected a discount rate of 3.45% as of Dec. 31, 2019.

The discount rates for foreign pension plans are based on high-quality corporate bond rates in countries that have an active corporate bond market. In those

countries with no active corporate bond market, discount rates are based on local government bond rates plus a credit spread.

Actuarial losses on the benefit obligation for the domestic and foreign pension plans in 2019 are

primarily attributable to decreases in discount rates. Actuarial gains on the benefit obligation for the domestic and foreign pension plans in 2018 are primarily attributable to increases in discount rates.

Net periodic benefit (credit) cost	Pension Benefits																		Healthcare Benefits
	Domestic									Foreign									Domestic									Foreign
(dollars in millions)	2019			2018			2017			2019			2018			2017			2019			2018			2017			2019			2018			2017
Weighted-average assumptions as of Jan. 1:
Market-related value of plan assets	$	5,304		$	5,238		$	5,026		$	1,277		$	1,266		$	994		$	111		$	108		$	102		N/A			N/A			N/A
Discount rate	4.45		%	3.97		%	4.35		%	2.95		%	2.45		%	2.53		%	4.45		%	3.97		%	4.35		%	3.10		%	2.50		%	2.60		%
Expected rate of return on plan assets	6.500			6.625			6.625			3.54			4.56			4.61			6.500			6.625			6.625			N/A			N/A			N/A
Rate of compensation increase	N/A			N/A			N/A			2.98			3.02			3.60			3.00			3.00			3.00			N/A			N/A			N/A
Cash balance interest crediting rate	4.00			4.00			4.00			N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A
Components of net periodic benefit (credit) cost :
Service cost	$	—		$	—		$	—		$	11		$	28		$	31		$	1		$	1		$	1		$	—		$	—		$	—
Interest cost	178			169			180			32			32			33			6			7			7			—			—			—
Expected return on assets	(337		)	(339		)	(325		)	(45		)	(57		)	(50		)	(7		)	(8		)	(7		)	—			—			—
Amortization of:
Prior service cost (credit)	—			—			—			—			—			—			(7		)	(9		)	(10		)	—			—			—
Net actuarial loss	53			68			67			2			22			35			4			7			6			—			—			—
Settlement loss	—			5			2			—			—			—			—			—			—			—			—			—
Net periodic benefit (credit) cost	$	(106	)	$	(97	)	$	(76	)	$	—		$	25		$	49		$	(3	)	$	(2	)	$	(3	)	$	—		$	—		$	—

Changes in other comprehensive loss (income) in 2019	Pension Benefits						Healthcare Benefits
(in millions)	Domestic			Foreign			Domestic			Foreign
Net loss (gain) arising during period	$	12		$	118		$	(10	)	$	1
Recognition of prior years’ net (loss)	(53		)	(2		)	(4		)	—
Prior service cost arising during the period	—			1			—			—
Recognition of prior years’ service credit	—			—			7			—
Total recognized in other comprehensive (income) loss (before tax effects)	$	(41	)	$	117		$	(7	)	$	1

 

	Domestic						Foreign
(in millions)	2019			2018			2019			2018
Pension benefits:
Prepaid benefit cost	$	1,249		$	1,077		$	222		$	280
Accrued benefit cost	(170		)	(160		)	(87		)	(68		)
Total pension benefits	$	1,079		$	917		$	135		$	212
Healthcare benefits:
Accrued benefit cost	$	(28	)	$	(50	)	$	(6	)	$	(5	)
Total healthcare benefits	$	(28	)	$	(50	)	$	(6	)	$	(5	)

The accumulated benefit obligation for all defined benefit plans was $6.0 billion at Dec. 31, 2019 and $5.2 billion at Dec. 31, 2018.

Plans with obligations in excess of plan assets	Pension Benefits								Healthcare Benefits
	Domestic				Foreign				Domestic		Foreign
(in millions)	2019		2018		2019		2018		2019	2018	2019	2018
Projected benefit obligation	$	170	$	160	$	384	$	245	N/A	N/A	N/A	N/A
Fair value of plan assets	—		—		297		177		N/A	N/A	N/A	N/A
Accumulated benefit obligation	170		160		164		67		85	80	6	5
Fair value of plan assets	—		—		114		27		—	—	—	—

Assumed healthcare cost trend

The assumed healthcare cost trend rate used in determining domestic benefit expense for 2020 is 6.40%, decreasing to 4.75% in 2024 for pre-Medicare costs and 5.35% decreasing to 4.75% in 2024 for Medicare costs. This projection is based on various economic models that forecast a decreasing growth rate of healthcare expenses over time. The underlying assumption is that healthcare expense growth cannot outpace gross national product growth indefinitely, and over time a lower equilibrium growth rate will be achieved. In addition to the assumed health care cost trend rate, a separate adjustment to projected 2021 costs is assumed due to the repeal of the Health Insurance Tax.

The following benefit payments for the pension and healthcare plans, which reflect expected future service as appropriate, are expected to be paid over the next 10 years: 

Expected benefit payments
(in millions)		Domestic		Foreign
Pension benefits:
Year	2020	$	254	$	20
	2021	265		20
	2022	260		21
	2023	266		24
	2024	275		24
	2025-2029	1,333		144
Total pension benefits		$	2,653	$	253
Healthcare benefits:
Year	2020	$	12	$	—
	2021	10		—
	2022	10		—
	2023	10		—
	2024	9		—
	2025-2029	42		1
Total healthcare benefits		$	93	$	1

Plan contributions

We expect to make cash contributions to fund our defined benefit pension plans in 2020 of $15 million for the domestic plans and $11 million for the foreign plans.

We expect to make cash contributions to fund our post-retirement healthcare plans in 2020 of $12 million for the domestic plans and less than $1 million for the foreign plans.

Investment strategy and asset allocation

We are responsible for the administration of various employee pension and healthcare post-retirement benefits plans, both domestically and internationally. The domestic plans are administered by BNY Mellon’s Benefits Administration Committee, a named fiduciary. Subject to the following, at all relevant times, BNY Mellon’s Benefits Investment Committee, another named fiduciary to the domestic plans, is responsible for the investment of plan assets. The Benefits Investment Committee’s responsibilities include the investment of all domestic defined benefit plan assets, as well as the determination of investment options offered to participants in all domestic defined contribution plans. The Benefits Investment Committee conducts periodic reviews of investment performance, asset allocation and investment manager suitability. In addition, the Benefits Investment Committee has oversight of the Regional Governance Committees for the foreign defined benefit plans.

Our investment objective for U.S. and foreign plans is to maximize total return while maintaining a broadly diversified portfolio for the primary purpose of satisfying obligations for future benefit payments. Our plans are primarily invested in fixed income and equity securities. In general, for the domestic plan’s

portfolio, fixed income securities can range from 40% to 80% of plan assets, equity securities and alternative investments can range from 20% to 60% of plan assets and cash equivalents can be held in amounts ranging from 0% to 10% of plan assets. Actual asset allocation within the approved ranges varies from time to time based on economic conditions (both current and forecast), the timing of transitional reallocations and the advice of professional advisors.

Our pension assets were invested as follows:

Asset allocations	Domestic				Foreign
	2019		2018		2019		2018
Fixed income	56	%	45	%	80	%	36	%
Equities	42		52		8		48
Alternative investments	2		2		10		9
Private equities	—		1		—		—
Real estate	—		—		—		4
Cash	—		—		2		3
Total pension benefits	100	%	100	%	100	%	100	%

We held no The Bank of New York Mellon Corporation stock in our pension plans at Dec. 31, 2019 and Dec. 31, 2018. Assets of the U.S. post-retirement healthcare plan are invested in an insurance contract.

Fair value measurement of plan assets

In accordance with ASC 715, Compensation - Retirement Benefits, we have established a three-level hierarchy for fair value measurements of its pension plan assets based upon the transparency of inputs to the valuation of an asset as of the measurement date. The valuation hierarchy is consistent with guidance in ASC 820, Fair Value Measurement, which is detailed in Note 20.

The following is a description of the valuation methodologies used for assets measured at fair value, as well as the general classification of such assets pursuant to the valuation hierarchy.

Cash and currency

This category consists primarily of foreign currency balances and is included in Level 1 of the valuation hierarchy. Foreign currency is translated monthly based on current exchange rates.

Common and preferred stock and mutual funds

These investments include equities and mutual funds and are valued at the closing price reported in the active market in which the individual securities are traded, if available. Common and preferred stock and mutual funds are included in Level 1 of the valuation hierarchy.

Derivative instruments

Our derivative positions are valued using internally developed models that use as their basis readily observable market parameters, and we classify them in Level 2 of the valuation hierarchy. Such derivative financial instruments include equity puts and calls.

Collective trust funds

Collective trust funds include commingled and U.S. equity funds that have no readily available market quotations. The fair value of the funds is based on the securities in the portfolio, which typically are the amount that the fund might reasonably expect to receive for the securities upon a sale. These funds are valued using observable inputs on either a daily or monthly basis. Collective trust funds are included in Level 2 of the valuation hierarchy.

Fixed-income investments

Fixed-income investments include U.S. Treasury securities, U.S. government agencies, sovereign government obligations, U.S. corporate bonds and foreign corporate debt funds. U.S. Treasury securities are valued at the closing price reported in the active market in which the individual security is traded and included as Level 1 of the valuation hierarchy. U.S. government agencies, sovereign government obligations, U.S. corporate bonds and foreign corporate debt funds are valued based on quoted prices for comparable securities with similar yields and credit ratings. When quoted prices are not available for identical or similar bonds, the bonds are valued using discounted cash flows that maximize observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks. U.S. government agencies, sovereign government obligations, U.S. corporate bonds and foreign corporate debt funds are primarily included in Level 2 of the valuation hierarchy.

Other assets measured at NAV

Other assets measured at NAV include funds of funds and venture capital and partnership interests, property funds and other funds. There are no readily available market quotations for these funds. The fair value of the funds of funds is based on NAVs of the funds in the portfolio, which reflects the value of the underlying securities. The fair value of the underlying securities is typically the amount that the fund might reasonably expect to receive upon selling those hard to value or illiquid securities within the portfolios. These funds are either valued on a daily or monthly basis. The fair value of the venture capital and partnership interests is based on the pension plan’s ownership percentage of the fair value of the underlying funds as provided by the fund managers. These funds are typically valued on a quarterly basis. The pension plan’s venture capital and partnership interests are valued at NAV as a practical expedient for fair value.

The following tables present the fair value of each major category of plan assets as of Dec. 31, 2019 and Dec. 31, 2018, by captions and by ASC 820, Fair Value Measurement, valuation hierarchy.

Plan assets measured at fair value on a recurring basis— domestic plans at Dec. 31, 2019
(in millions)	Level 1		Level 2			Level 3		Total fair value
Common and preferred stock:
U.S. equity	$	1,638	$	—		$	—	$	1,638
Non-U.S. equity	195		—			—		195
Derivatives	—		(130		)	—		(130		)
Collective trust funds:
Commingled	—		1,982			—		1,982
U.S. equity	—		688			—		688
Fixed income:
U.S. Treasury securities	362		—			—		362
U.S. government agencies	—		7			—		7
Sovereign government obligations	3		—			—		3
U.S. corporate bonds	—		814			—		814
Other	—		15			—		15
Mutual funds	3		—			—		3
Total domestic plan assets in the fair value hierarchy	$	2,201	$	3,376		$	—	$	5,577
Other assets measured at NAV:
Funds of funds								134
Venture capital and partnership interests								27
Total domestic plan assets, at fair value								$	5,738

 

Plan assets measured at fair value on a recurring basis— foreign plans at Dec. 31, 2019
(in millions)	Level 1		Level 2		Level 3		Total fair value
Equity funds	$	—	$	129	$	—	$	129
Sovereign/government obligation funds	—		130		—		130
Corporate debt funds	—		1,091		—		1,091
Cash and currency	20		—		—		20
Total foreign plan assets in the fair value hierarchy	$	20	$	1,350	$	—	$	1,370
Other assets measured at NAV							159
Total foreign plan assets, at fair value							$	1,529

 

Plan assets measured at fair value on a recurring basis— domestic plans at Dec. 31, 2018
(in millions)	Level 1		Level 2		Level 3		Total fair value
Common and preferred stock:
U.S. equity	$	1,514	$	—	$	—	$	1,514
Non-U.S. equity	160		—		—		160
Collective trust funds:
Commingled	—		435		—		435
U.S. equity	—		934		—		934
Fixed income:
U.S. Treasury securities	630		—		—		630
U.S. government agencies	—		44		—		44
Sovereign government obligations	3		5		—		8
U.S. corporate bonds	—		972		—		972
Other	—		69		—		69
Mutual funds	114		—		—		114
Total domestic plan assets in the fair value hierarchy	$	2,421	$	2,459	$	—	$	4,880
Other assets measured at NAV:
Funds of funds							130
Venture capital and partnership interests							30
Total domestic plan assets, at fair value							$	5,040

 

Plan assets measured at fair value on a recurring basis— foreign plans at Dec. 31, 2018
(in millions)	Level 1		Level 2		Level 3		Total fair value
Equity funds	$	—	$	194	$	—	$	194
Sovereign/government obligation funds	—		126		—		126
Corporate debt funds	—		418		—		418
Cash and currency	356		—		—		356
Total foreign plan assets in the fair value hierarchy	$	356	$	738	$	—	$	1,094
Other assets measured at NAV							222
Total foreign plan assets, at fair value							$	1,316

 

Funds of funds and venture capital and partnership interests valued using NAV per share

Certain pension and post-retirement plan assets are invested in funds of funds, venture capital and partnership interests, property funds and other contracts valued using NAV. The funds of funds investments are redeemable at NAV under agreements with the funds of funds managers.

Assets valued using NAV at Dec. 31, 2019
(dollars in millions)	Fair value		Unfunded commitments		Redemption frequency	Redemption notice period
Funds of funds (a)	$	136	$	—	Monthly	30-45 days
Venture capital and partnership interests (b)	158		—		N/A	N/A
Property funds (c)	4		—		Monthly	0-90 days
Other contracts (d)	22		—		N/A	N/A
Total	$	320	$	—

Assets valued using NAV at Dec. 31, 2018
(dollars in millions)	Fair value		Unfunded commitments		Redemption frequency	Redemption notice period
Funds of funds (a)	$	147	$	—	Monthly	30-45 days
Venture capital and partnership interests (b)	148		—		N/A	N/A
Property funds (c)	52		—		Monthly	0-90 days
Corporate debt	19		—		N/A	N/A
Other contracts (d)	16		—		N/A	N/A
Total	$	382	$	—

(a) Funds of funds include multi-strategy hedge funds that utilize investment strategies that invest over both long-term investment and short-term investment horizons.

(b) Venture capital and partnership interests do not have redemption rights. Distributions from such funds will be received as the underlying investments are liquidated.

(c) Property funds include funds invested in regional real estate vehicles that hold direct interest in real estate properties.

(d)

Other contracts include assets invested in pooled accounts at insurance companies that are privately valued by the asset manager.

Defined contribution plans

We sponsor defined contribution plans in the U.S. and in certain non-U.S. locations, all of which are administered in accordance with local laws. The most significant defined contribution plan is The Bank of New York Mellon Corporation 401(k) Savings Plan sponsored by the Company in the U.S. and covers substantially all U.S. employees.

Under The Bank of New York Mellon Corporation 401(k) Savings Plan, the Company matched 100% of the first 4% of an employee’s eligible base pay plus 50% of the next 2% of eligible pay contributed by the participant for a maximum matching contribution of 5% for 2019, 2018 and 2017, subject to statutory limits. In addition, annual non-elective contribution equal to 2% of eligible base pay were also made during 2017-2019.

At Dec. 31, 2019 and Dec. 31, 2018, The Bank of New York Mellon Corporation 401(k) Savings Plan owned 11.5 million and 12.7 million shares of our common stock, respectively. The fair value of total assets was $7.4 billion at Dec. 31, 2019 and $6.2 billion at Dec. 31, 2018. We recorded expenses of $244 million in 2019, $244 million in 2018 and $232 million in 2017 primarily for contributions to our defined contribution plans.

We also have an ESOP covering certain domestic full-time employees hired on or before July 1, 2008. The ESOP works in conjunction with the defined benefit pension plan. Employees are entitled to the higher of their benefit under the ESOP or such defined benefit pension plan at retirement. Benefits payable under the defined benefit pension plan are offset by the equivalent value of benefits earned under the ESOP.

At Dec. 31, 2019 and Dec. 31, 2018, the ESOP owned 4.6 million and 5.0 million shares of our common stock, respectively. The fair value of total ESOP assets was $235 million at Dec. 31, 2019 and $236 million at Dec. 31, 2018. The Company is not permitted to make contributions to the ESOP.

The Benefits Investment Committee appointed Fiduciary Counselors, Inc. to serve as the independent fiduciary to (i) make all fiduciary decisions related to the continued prudence of offering the common stock of BNY Mellon or its affiliates as an investment option under the plans, other than plan sponsor decisions, and (ii) select and monitor any actively or passively managed investments of BNY Mellon or its affiliates to be offered to participants as investment options under the plans, excluding self-directed accounts.