Pension and Other Postretirement Benefits

12 Months Ended

Sep. 30, 2020

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefits

Note 11—Pension and Other Postretirement 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 U.S. 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.

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 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 funding amounts may be agreed to with the UK pension plan trustees.

Summary of Plan Activities

A reconciliation of pension benefit obligations, plan assets, funded status and amounts recognized in the Company’s consolidated balance sheets were as follows:

	U.S. Plans				Non-U.S. Plans
	September 30,				September 30,
	2020		2019		2020		2019
	(in millions)
Change in pension benefit obligation:
Benefit obligation at beginning of period	$	919	$	844	$	528	$	452
Service cost	—		—		4		4
Interest cost	28		32		10		13
Actuarial loss (gain)	37		95		11		109
Benefit payments	(64)		(52)		(17)		(22)
Plan amendment	—		—		—		1
Foreign currency exchange rate changes	—		—		27		(29)
Benefit obligation at end of period	$	920	$	919	$	563	$	528
Accumulated benefit obligation	$	920	$	919	$	563	$	528
Change in plan assets:
Fair value of plan assets at beginning of period	$	1,090	$	1,090	$	490	$	436
Actual return on plan assets	114		52		5		93
Company contribution	2		—		22		10
Benefit payments	(64)		(52)		(17)		(22)
Foreign currency exchange rate changes	—		—		25		(27)
Fair value of plan assets at end of period	$	1,142	$	1,090	$	525	$	490
Funded status at end of period	$	222	$	171	$	(38)	$	(38)
Recognized in consolidated balance sheets:
Non-current asset	$	229	$	178	$	—	$	—
Current liability	(1)		(1)		—		—
Non-current liability	(6)		(6)		(38)		(38)
Funded status at end of period	$	222	$	171	$	(38)	$	(38)

Amounts recognized in accumulated other comprehensive income (loss) before tax consist of the following: 

	U.S. Plans				Non-U.S. Plans
	September 30,				September 30,
	2020		2019		2020		2019
	(in millions)
Net actuarial loss	$	135	$	154	$	93	$	70

Benefit obligations in excess of plan assets were as follows:

	U.S. Plans				Non-U.S. Plans
	September 30,				September 30,
	2020		2019		2020		2019
	(in millions)
Accumulated benefit obligation in excess of plan assets
Accumulated benefit obligation at end of period	$	(7)	$	(7)	$	(563)	$	(528)
Fair value of plan assets at end of period	$	—	$	—	$	525	$	490
Projected benefit obligation in excess of plan assets
Benefit obligation at end of period	$	(7)	$	(7)	$	(563)	$	(528)
Fair value of plan assets at end of period	$	—	$	—	$	525	$	490

Net periodic benefit cost consist of the following:

	U.S. Plans						Non-U.S. Plans
	For the Years Ended September 30,
	2020		2019		2018		2020		2019		2018
	(in millions)
Service cost	$	—	$	—	$	—	$	4	$	4	$	4
Interest cost	28		32		32		10		13		12
Expected return on assets	(72)		(71)		(70)		(15)		(18)		(20)
Amortization of actuarial loss	6		—		—		2		—		—
Settlement loss	8		7		3		—		—		—
Total net periodic benefit cost	$	(30)	$	(32)	$	(35)	$	1	$	(1)	$	(4)

The service cost component of net periodic benefit cost is presented in personnel expenses while the other components are presented in other non-operating income (expense) on the Company’s consolidated statement of operations.

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) consist of the following: 

	U.S. Plans						Non-U.S. Plans
	For the Years Ended September 30,
	2020		2019		2018		2020		2019		2018
	(in millions)
Current year actuarial loss (gain)	$	(5)	$	114	$	(47)	$	21	$	27	$	30
Amortization of actuarial (loss) gain	(14)		(7)		(3)		(2)		—		—
Current year prior service cost	—		—		—		—		1		—
Total recognized in other comprehensive income (loss)	$	(19)	$	107	$	(50)	$	19	$	28	$	30
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	(49)	$	75	$	(85)	$	20	$	27	$	26

Weighted-average actuarial assumptions used to estimate the benefit obligation and net periodic benefit cost were as follows:

	U.S. Plans						Non-U.S. Plans
	For the Years Ended September 30,
	2020		2019		2018		2020		2019		2018
Discount rate for benefit obligation:
Pension	2.88	%	3.26	%	4.23	%	1.60	%	1.80	%	2.90	%
Discount rate for net periodic benefit cost:
Pension	3.27	%	4.23	%	3.84	%	1.80	%	2.90	%	2.70	%
Expected long-term rate of return on plan assets	7.00	%	7.00	%	7.00	%	3.00	%	3.00	%	4.25	%
Rate of increase(1) in compensation levels for:
Benefit obligation	NA		NA		NA		2.50	%	2.50	%	3.20	%
Net periodic benefit cost	NA		NA		NA		2.50	%	2.50	%	3.20	%

(1)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 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 35% to 65%, fixed income securities of 43% to 53% and other, primarily consisting of cash equivalents to meet near term expected benefit payments and expenses, of up to 4%. At September 30, 2020, U.S. pension plan asset allocations for these categories were 53%, 46% and 1%, 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 funds of 12%, interest and inflation hedging assets of 50% and other of 38%, consisting of cash and cash equivalents, corporate debt and asset-backed securities, multi-asset funds and property. At September 30, 2020, non-U.S. pension plan asset allocations for these categories were 13%, 50% and 37%, respectively, which generally aligned with the target allocations.

The following tables set forth by level, within the fair value hierarchy, the pension plans’ investments at fair value as of September 30, 2020 and 2019, 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
	2020		2019		2020		2019		2020		2019		2020		2019
	(in millions)
Cash equivalents	$	17	$	18	$	—	$	—	$	—	$	—	$	17	$	18
Collective investment funds	—		—		509		580		—		—		509		580
Corporate debt securities	—		—		373		188		—		—		373		188
U.S. government-sponsored debt securities	—		—		30		35		—		—		30		35
U.S. Treasury securities	84		99		—		—		—		—		84		99
Asset-backed securities	—		—		—		—		37		37		37		37
Equity securities	92		133		—		—		—		—		92		133
Total	$	193	$	250	$	912	$	803	$	37	$	37	$	1,142	$	1,090

	Non-U.S. Plans
	Fair Value Measurements at September 30 Using Inputs Considered as
	Level 1				Level 2				Level 3				Total
	2020		2019		2020		2019		2020		2019		2020		2019
	(in millions)
Cash and cash equivalents	$	6	$	16	$	—	$	—	$	—	$	—	$	6	$	16
Equity securities	—		66		—		—		—		—		—		66
Corporate debt securities	—		—		48		44		—		—		48		44
Asset-backed securities	—		—		—		—		67		51		67		51
Equity funds	—		—		65		—		—		—		65		—
Multi-asset securities(1)	—		—		339		313		—		—		339		313
Total	$	6	$	82	$	452	$	357	$	67	$	51	$	525	$	490

(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. Treasury securities and equity securities are classified as Level 1 within the fair value hierarchy, as fair value is based on unadjusted quoted prices in active markets for identical assets.

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 a 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. Equity funds are investments in mutual funds that in-turn ultimately invest in equity securities of various jurisdictions. These are classified as level 2 as the equity funds held by the plan are not actively traded but the fair value of underlying securities are generally, although not always, determined with observable data and inputs. The fair values of corporate debt, multi-asset and U.S. government-sponsored securities are based on quoted prices in active markets for similar, not identical, assets.

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.

Cash Flows

Expected future employer contributions and benefit payments are as follows:

	U.S. Plans		Non-U.S. Plans
	(in millions)
Expected employer contributions
2021	$	1	$	10
Expected benefit payments
2021	130		7
2022	93		7
2023	89		8
2024	80		8
2025	74		8
2026-2030	289		43

Other Benefits

The Company sponsors a defined contribution plan, or 401(k) plan, that covers substantially all of its employees residing in the U.S. In fiscal 2020, 2019 and 2018, personnel costs included $140 million, $121 million, and $93 million, respectively, of 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.