Note 7—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 all eligible employees residing in the United States. The Company also sponsors other pension benefit plans that provide benefits for internationally-based employees at certain non-U.S. locations.

Disclosures presented below include the U.S. pension plans and the non-U.S. plans, comprising only the Visa Europe plans. Disclosures relating to other U.S. postretirement benefit plans and other non-U.S. pension benefit plans are not included as they are immaterial, individually and in aggregate. The Company uses a September 30 measurement date for its pension and other postretirement benefit plans.

Defined benefit pension plans. The U.S. pension benefits under the defined benefit pension plan were earned based on a cash balance formula. An employee’s cash balance account was credited with an amount equal to 6% of eligible compensation plus interest based on 30-year Treasury securities. In October 2015, the Company’s board of directors approved an amendment of the U.S. qualified defined benefit pension plan such that the Company discontinued employer provided credits after December 31, 2015. Plan participants continue to earn interest credits on existing balances at the time of the freeze. As a result, a curtailment gain totaling $8 million was recognized in fiscal 2016 as part of the Company’s net periodic benefit cost.

The funding policy for the U.S. pension benefits is to contribute annually no less than the minimum required contribution under ERISA.

Under the Visa Europe UK pension plans, presented below under “non-U.S. plans”, retirement benefits are provided based on the participants’ final pensionable pay and are currently closed to new entrants. However, future benefits continue to accrue for active participants. The funding policy is to contribute in accordance with the appropriate funding requirements agreed with the trustees of the UK pension plans. Additional amounts may be agreed with the UK pension plan trustees.

Summary of Plan Activities

Reconciliation of pension benefit obligations, plan assets, funded status and amounts recognized in the Company’s consolidated balance sheets:



	U.S. Plans						Non-U.S. Plans
	September 30,						September 30,
	2018			2017			2018			2017
	(in millions)
Change in Pension Benefit Obligation:
Benefit obligation—beginning of fiscal year	$	913		$	1,072		$	433		$	474
Service cost	—			—			4			6
Interest cost	32			36			12			11
Actuarial loss (gain)	(38		)	(58		)	24			(52		)
Benefit payments	(63		)	(137		)	(9		)	(14		)
Foreign currency exchange rate changes	—			—			(12		)	8
Benefit obligation—end of fiscal year	$	844		$	913		$	452		$	433
Accumulated benefit obligation	$	844		$	913		$	452		$	433
Change in Plan Assets:
Fair value of plan assets—beginning of fiscal year	$	1,074		$	1,077		$	433		$	415
Actual return on plan assets	78			125			13			17
Company contribution	1			9			11			5
Benefit payments	(63		)	(137		)	(9		)	(14		)
Foreign currency exchange rate changes	—			—			(12		)	10
Fair value of plan assets—end of fiscal year	$	1,090		$	1,074		$	436		$	433
Funded status at end of fiscal year	$	246		$	161		$	(16	)	$	—
Recognized in Consolidated Balance Sheets:
Non-current asset	$	252		$	168		$	—		$	5
Current liability	(1		)	(1		)	(10		)	(5		)
Non-current liability	(5		)	(6		)	(6		)	—
Funded status at end of fiscal year	$	246		$	161		$	(16	)	$	—

Amounts recognized in accumulated other comprehensive income before tax:



	U.S. Plans				Non-U.S. Plans
	September 30,				September 30,
	2018		2017		2018		2017
	(in millions)
Net actuarial loss	$	47	$	97	$	39	$	9

Benefit obligations in excess of plan assets related to the Company’s U.S. non-qualified plan and the non-U.S. pension plans⁽¹⁾:



	U.S. Plans						Non-U.S. Plans
	September 30,						September 30,
	2018			2017			2018			2017
	(in millions)
Accumulated benefit obligation in excess of plan assets
Accumulated benefit obligation—end of year	$	(6	)	$	(7	)	$	(452	)	$	(5	)
Fair value of plan assets—end of year	$	—		$	—		$	436		$	—
Projected benefit obligation in excess of plan assets
Benefit obligation—end of year	$	(6	)	$	(7	)	$	(452	)	$	(5	)
Fair value of plan assets—end of year	$	—		$	—		$	436		$	—

Net periodic pension cost:



	U.S. Plans									Non-U.S. Plans⁽¹⁾
	For the Years Ended September 30,
	2018			2017			2016			2018			2017			2016
	(in millions)
Service cost	$	—		$	—		$	13		$	4		$	6		$	1
Interest cost	32			36			40			12			11			3
Expected return on assets	(70		)	(70		)	(69		)	(20		)	(16		)	(4		)
Amortization of prior service credit	—			—			(1		)	—			—			—
Amortization of actuarial loss	—			15			7			—			2			—
Curtailment gain	—			—			(8		)	—			—			—
Settlement loss	3			15			13			—			—			—
Total net periodic benefit cost	$	(35	)	$	(4	)	$	(5	)	$	(4	)	$	3		$	—


⁽¹⁾	For fiscal 2016, the amounts represent the Visa Europe plans’ net pension benefit cost recognized from the Closing through September 30, 2016.

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



	U.S. Plans									Non-U.S. Plans
	For the Years Ended September 30,
	2018			2017			2016			2018		2017			2016
	(in millions)
Current year actuarial loss (gain)	$	(47	)	$	(113	)	$	30		$	30	$	(53	)	$	66
Amortization of actuarial (loss) gain	(3		)	(30		)	(20		)	—		(2		)	—
Amortization of prior service credit	—			—			9			—		—			—
Total recognized in other comprehensive income	$	(50	)	$	(143	)	$	19		$	30	$	(55	)	$	66
Total recognized in net periodic benefit cost and other comprehensive income	$	(85	)	$	(147	)	$	14		$	26	$	(52	)	$	66

Weighted-Average Actuarial Assumptions:



	U.S. Plans						Non-U.S. Plans
	For the Years Ended September 30,
	2018		2017		2016		2018		2017		2016
Discount rate⁽¹⁾ for benefit obligation:
Pension	4.23	%	3.84	%	3.62	%	2.90	%	2.70	%	2.40	%
Discount rate for net periodic benefit cost:
Pension	3.84	%	3.62	%	4.33	%	2.70	%	2.40	%	3.10	%
Expected long-term rate of return on plan assets⁽²⁾	7.00	%	7.00	%	7.00	%	4.25	%	4.50	%	3.92	%
Rate of increase⁽³⁾ in compensation levels for:
Benefit obligation	NA		NA		NA		3.20	%	3.20	%	3.20	%
Net periodic benefit cost	NA		NA		NA		3.20	%	3.20	%	3.00	%


⁽¹⁾	Represents a single weighted-average discount rate derived based on a cash flow matching analysis, with the projected benefit payments matching spot rates from a yield curve developed from high-quality corporate bonds.


⁽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⁾	This assumption is not applicable for the U.S. plans due to the amendment of the U.S. qualified defined benefit pension plan in October 2015, which discontinued the employer provided credits effective after December 31, 2015.

Pension Plan Assets

Pension 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. Pension 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.

Pension 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 pension plan assets, as appropriate, to ensure that allocations are consistent with its investment strategy and within target allocation ranges. For U.S. pension plan assets, the Company’s investment strategy is to invest in the following: equity securities of 50% to 80%, fixed income securities of 25% to 35% and other, primarily consisting of cash equivalents to meet near term expected benefit payments and expenses, of up to 7%. At September 30, 2018, U.S. pension plan asset allocations for these categories were 65%, 29% and 6%, respectively, which were within target allocation ranges.

For non-U.S. pension plan assets, the Company’s investment strategy is to invest in the following: equity securities of 15%, interest and inflation hedging assets of 40% and other of 45%, consisting of cash, certain multi-asset funds and property. At September 30, 2018, non-U.S. pension plan asset allocations for these categories were 16%, 38% and 46%, respectively, which were generally aligned with the target allocations.

The following tables set forth by level, within the fair value hierarchy, the pension plan’s investments at fair value as of September 30, 2018 and 2017, including the impact of transactions that were not settled at the end of September:



	U.S. Plans
	Fair Value Measurements at September 30 Using Inputs Considered as
	Level 1				Level 2				Level 3				Total
	2018		2017		2018		2017		2018		2017		2018		2017
	(in millions)
Cash equivalents	$	65	$	31									$	65	$	31
Collective investment funds					571		540						571		540
Corporate debt securities					187		197						187		197
U.S. government-sponsored debt securities					30		47						30		47
U.S. Treasury securities	62		75										62		75
Asset-backed securities									34		39		34		39
Equity securities	141		145										141		145
Total	$	268	$	251	$	788	$	784	$	34	$	39	$	1,090	$	1,074



	Non-U.S. Plans
	Fair Value Measurements at September 30 Using Inputs Considered as
	Level 1				Level 2				Level 3				Total
	2018		2017		2018		2017		2018		2017		2018		2017
	(in millions)
Cash equivalents	$	6	$	1									$	6	$	1
Corporate debt securities					—		39						—		39
UK Treasury securities	—		150										—		150
Asset-backed securities									33		32		33		32
Equity securities	68		134										68		134
Multi-asset securities ⁽¹⁾					329		77						329		77
Total	$	74	$	285	$	329	$	116	$	33	$	32	$	436	$	433


⁽¹⁾	Multi-asset securities represent pension plan assets that are invested in funds comprised of broad ranges of assets.

Level 1 assets. Cash equivalents (money market funds and time deposits), U.S. and UK Treasury securities and equity securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets.

Level 2 assets. Collective investment funds are unregistered investment vehicles that generally commingle the assets of multiple fiduciary clients, such as pension and other employee benefit plans, to invest in portfolio of stocks, bonds or other securities. Although the collective investment funds held by the plan are ultimately invested in publicly traded equity securities, their own unit values are not directly observable, and therefore they are classified as Level 2. The fair values of corporate debt, multi-asset, derivatives and U.S. government-sponsored securities are based on quoted prices in active markets for similar assets as provided by third-party pricing vendors. This pricing data is reviewed internally for reasonableness through comparisons with benchmark quotes from independent third-party sources. Based on this review, the valuation is confirmed or revised accordingly.

Level 3 assets. Asset-backed securities are bonds that are backed by various types of assets and primarily consist of mortgage-backed securities. Asset-backed securities are classified as Level 3 due to a lack of observable inputs in measuring fair value.

There were no transfers between Level 1 and Level 2 assets during fiscal 2018 or 2017. A roll-forward of Level 3 plan assets measured at fair value is not presented because activities during fiscal 2018 and 2017 were immaterial.

Cash Flows



	U.S. Plans		Non-U.S. Plans
Actual employer contributions	(in millions)
2018	$	1	$	11
2017	9		5
Expected employer contributions
2019	1		10
Expected benefit payments
2019	150		5
2020	73		5
2021	70		5
2022	67		5
2023	64		5
2024-2028	284		28

Other Benefits

The Company sponsors a defined contribution plan, or 401(k) plan, that covers substantially all of its employees residing in the United States. Personnel costs included $93 million, $58 million, and $55 million in fiscal 2018, 2017 and 2016, respectively, for expenses attributable to the Company’s employees under the 401(k) plan. The Company’s contributions to this 401(k) plan are funded on a current basis, and the related expenses are recognized in the period that the payroll expenses are incurred.