Note 11—Pension, Postretirement and Other Benefits

The Company sponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for substantially all employees residing in the United States. The Company uses a September 30 measurement date for its pension and other postretirement benefit plans.

Defined Benefit Pension Plan

The defined benefit pension plan benefits are based on years of service, age, and eligible compensation. Prior to January 1, 2011, employees hired before January 1, 2008 earned benefits based on their pay during their last five years of employment. Employees hired or rehired on or after January 1, 2008 earned benefits based on a cash balance formula. Effective January 1, 2011, all employees began accruing benefits under the cash balance formula and ceased accruing benefits under any other formula. An employee’s cash balance account is credited with an amount equal to 6% of eligible compensation plus interest based on 30-year Treasury securities. The funding policy is to contribute annually no less than the minimum required contribution under ERISA.

On January 12, 2010, the Company approved an amendment to the pension plan to conform the plan to the Pension Protection Act of 2006. The combined effects of the resulting plan remeasurement, as well as the completion of the annual census data update, reduced fiscal 2010 net periodic pension cost by $19 million.

Participation in the plan was extended to former employees of CyberSource and PlaySpan residing in the U.S., effective August 1, 2010 and April 1, 2011, respectively, subsequent to their acquisitions. See Note 5—Acquisitions . Fiscal 2011 pension cost did not materially increase and future pension cost is not expected to materially increase due to additional participants.

Postretirement Benefits Plan

The postretirement benefits plan provides medical benefits for retirees and dependents who meet minimum age and service requirements. Benefits are provided from retirement date until age 65. Retirees must contribute on a monthly basis for the same coverage that is generally available to active employees and their dependents. The Company’s contributions are funded on a current basis.

Summary of Plan Activities

Change in Benefit Obligation:


	Pension Benefits						Other Postretirement Benefits
	September 30,						September 30,
	2011			2010			2011			2010
	(in millions)
Benefit obligation-beginning of fiscal year	$	743		$	739		$	34		$	43
Service cost		41			45			—			—
Interest cost		38			40			1			1
Plan amendments		—			(12	)		—			—
Actuarial loss (gain)		77			3			7			(6	)
Benefit payments		(63	)		(72	)		(4	)		(4	)
Settlements		3			—			—			—

Benefit obligation-end of fiscal year	$	839		$	743		$	38		$	34

Accumulated benefit obligation	$	839		$	743			NA			NA

Change in Plan Assets:
Fair value of plan assets-beginning of fiscal year	$	766		$	703		$	—		$	—
Actual return on plan assets		10			73			—			—
Company contribution		70			62			4			4
Benefit payments		(63	)		(72	)		(4	)		(4	)

Fair value of plan assets-end of fiscal year	$	783		$	766		$	—		$	—

Funded status at end of fiscal year	$	(56	)	$	23		$	(38	)	$	(34	)

Recognized in Consolidated Balance Sheets:
Non-current asset	$	—		$	53		$	—		$	—
Current liability		(4	)		(10	)		(4	)		(4	)
Non-current liability		(52	)		(20	)		(34	)		(30	)

Funded status at end of fiscal year	$	(56	)	$	23		$	(38	)	$	(34	)

Amounts recognized in accumulated other comprehensive income before tax:


	Pension Benefits						Other Postretirement Benefits
	September 30,						September 30,
	2011			2010			2011			2010
	(in millions)
Net actuarial loss (gain)	$	343		$	240		$	1		$	(7	)
Prior service credit		(42	)		(51	)		(17	)		(20	)

Total	$	301		$	189		$	(16	)	$	(27	)

Amounts from accumulated other comprehensive income to be amortized into net periodic benefit cost in fiscal 2012:


	Pension Benefits			Other Postretirement Benefits
	(in millions)
Actuarial loss (gain)	$	30		$	—
Prior service credit		(9	)		(3	)

Total	$	21		$	(3	)

Benefit obligation and fair value of plan assets with obligations in excess of plan assets:


	Pension Benefits
	September 30,
	2011			2010
	(in millions)
Accumulated benefit obligation in excess of plan assets
Accumulated benefit obligation, end of year	$	(839	)	$	(30	)
Fair value of plan assets, end of year		783			—
Projected benefit obligation in excess of plan assets
Benefit obligation, end of year	$	(839	)	$	(30	)
Fair value of plan assets, end of year		783			—

Net periodic pension and other postretirement plan cost:


	Pension Benefits									Other Postretirement Benefits
	Fiscal
	2011			2010			2009			2011			2010			2009
	(in millions)
Service cost	$	41		$	45		$	51		$	—		$	—		$	—
Interest cost		38			40			46			1			1			2
Expected return on assets		(54	)		(50	)		(45	)		—			—			—
Amortization of:
Prior service credit		(9	)		(9	)		(8	)		(3	)		(3	)		(3	)
Actuarial loss (gain)		19			16			14			(1	)		(1	)		—

Net benefit cost		35			42			58			(3	)		(3	)		(1	)
Settlement loss		2			—			3			—			—			—

Total net periodic benefit cost	$	37		$	42		$	61		$	(3	)	$	(3	)	$	(1	)

Other changes in plan assets and benefit obligations recognized in other comprehensive income:


	Pension Benefits						Other Postretirement Benefits
	2011			2010			2011		2010
	(in millions)
Current year actuarial loss (gain)	$	124		$	(20	)	$	7	$	(5	)
Amortization of actuarial (loss) gain		(21	)		(16	)		1		1
Current year prior service cost (credit)		—			(12	)		—		—
Amortization of prior service credit		9			9			3		3

Total loss (gain) recognized in other comprehensive income	$	112		$	(39	)	$	11	$	(1	)

Total recognized in net periodic benefit cost and other comprehensive income	$	149		$	3		$	8	$	(4	)

Weighted Average Actuarial Assumptions:


	Fiscal
	2011			2010			2009
Discount rate for benefit obligation⁽¹⁾
Pension		4.70	%		5.25	%		5.60	%
Postretirement		3.39	%		3.45	%		4.43	%
Discount rate for net periodic benefit cost
Pension		5.25	%		5.63	%		6.75	%
Postretirement		3.45	%		4.43	%		6.24	%
Expected long-term rate of return on plan assets⁽²⁾		7.50	%		7.50	%		7.50	%
Rate of increase in compensation levels for:
Benefit obligation		4.50	%		4.50	%		5.50	%
Net periodic benefit cost		4.50	%		5.5	%⁽³⁾		5.50	%

⁽¹⁾	Based on a “bond duration matching” methodology, which reflects the matching of projected plan liability cash flows to an average of high-quality corporate bond yield curves whose duration matches the projected cash flows.

⁽²⁾

Primarily based on the targeted allocation, and evaluated for reasonableness by considering such factors as: (i) actual return on plan assets; (ii) historical rates of return on various asset classes in the portfolio; (iii) projections of returns on various asset classes; and (iv) current and prospective capital market conditions and economic forecasts.

⁽³⁾	For the net periodic benefit cost for fiscal 2010, rate of increase in compensation is 0% for fiscal 2010 and 5.50% for fiscal 2011 and thereafter.

The assumed annual rate of future increases in health benefits for the other postretirement benefits plan is 8% for fiscal 2012. The rate is assumed to decrease to 5% by 2019 and remain at that level thereafter. These trend rates reflect management’s expectations of future rates. Increasing or decreasing the healthcare cost trend by 1% would change the postretirement accumulated plan benefit obligation by less than $1 million.

Pension Plan Assets

Plan assets are managed with a long-term perspective to ensure that there is an adequate level of assets to support benefit payments to participants over the life of the pension plan. Plan assets are managed by external investment managers. Investment manager performance is measured against benchmarks for each asset class on a quarterly basis. An independent consultant assists management with investment manager selections and performance evaluations.

Plan assets are broadly diversified to maintain a prudent level of risk and to provide adequate liquidity for benefit payments. The Company generally evaluates and rebalances the plan assets, as appropriate, to ensure that allocations are consistent with target allocation ranges. The current target allocation for plan assets is as follows: equity securities of 50% to 80%, fixed income securities of 25% to 35%, and other, primarily consisting of cash to meet near term expected benefit payments and expenses, of up to 7%. At September 30, 2011, plan asset allocations for the above categories were 60%, 33% and 7% respectively, which are within these allocation ranges.

The following table sets forth by level, within the fair value hierarchy, the plan’s investments at fair value as of September 30, 2011 and 2010, including the impact of unsettled transactions:


	Fair Value Measurements at September 30
	Level 1				Level 2				Level 3				Total
	2011		2010		2011		2010		2011		2010		2011		2010
	(in millions)
Cash equivalents	$	55	$	46			$	1					$	55	$	47
Collective investment funds					$	289		307						289		307
Corporate debt securities						122		99						122		99
Debt securities of U.S. Treasury and federal agencies						104		111						104		111
Asset-backed securities										33		26		33		26
Equity securities		180		190										180		190

Total	$	235	$	236	$	515	$	518	$	33	$	26	$	783	$	780

Cash equivalents. Securities classified as Level 1 primarily include money market funds and valuations for these securities are based on quoted market prices in active markets. Securities classified as Level 2 include a government agency discount note, which is a short-term obligation issued at discount from par. This security is traded over-the-counter and the valuation is based on inputs derived from observable market data of related assets.

Collective investment funds. Collective investment funds are unregistered investment vehicles that commingle the assets of multiple fiduciary clients, such as pension and other employee benefits plans, to invest in portfolios of stocks, bonds, or other securities. Although the single collective investment fund held by the plan is ultimately invested in the common stocks of companies in the S&P 500 index, its own unit value is not directly observable, and it is therefore classified as Level 2.

Corporate debt securities. Securities in this category primarily include fixed income securities issued by domestic and foreign corporations. Valuations for these securities are based on quoted prices in active markets for similar assets, or inputs other than quoted prices that are observable in the market, and are generally classified as Level 2.

Debt securities of U.S. Treasury and federal agencies. These securities primarily include debt issued by the U.S. Department of the Treasury and securities issued or backed by U.S. government agencies. Valuations for these securities are based on quoted prices in active markets for similar assets, or inputs other than quoted prices that are observable in the market, and are generally classified as Level 2.

Asset-backed securities. Asset-backed securities are bonds that are backed by various types of assets and primarily consist of mortgage-backed securities. Valuations for these securities are based on significant unobservable inputs. These investments are classified as Level 3.

Equity securities. Securities are classified as Level 1 and include securities regularly traded on a security exchange. These securities are valued at their last quoted sales price at the reporting date, or if there was no sale on that day, the last reported bid price. This category also includes mutual funds, which are classified as Level 1, as their net asset values are observable in the market, and the access to the investment is not restricted.

There were no transfers between Level 1 and Level 2 assets during fiscal 2011 or 2010. A separate roll-forward of Level 3 plan assets measured at fair value is not presented because activities during fiscal 2011 and 2010 were immaterial.

Cash Flows


	Pension Benefits		Other Postretirement Benefits
Actual employer contributions	(in millions)
2011	$	70	$	4
2010		62		4
Expected employer contributions
2012	$	49	$	5
Expected benefit payments
2012	$	102	$	5
2013		99		5
2014		98		5
2015		89		5
2016		90		4
2017-2021		373		17

Other Benefits

The Company sponsors a defined contribution plan that covers substantially all of its employees residing in the United States. Personnel costs included $34 million, $29 million and $28 million in fiscal 2011, 2010 and 2009, respectively, for expenses attributable to the Company’s employees under the plan. The Company’s contributions to this plan are funded on a current basis, and the related expenses are recognized in the period that the payroll expenses are incurred.