XML 48 R24.htm IDEA: XBRL DOCUMENT v3.21.1
Pension and Other Benefit Plans
 12 Months Ended
Mar. 31, 2021
Retirement Benefits [Abstract]  
Pension and Other Benefit Plans Pension and Other Benefit Plans
The Company offers a number of pension and OPEB plans, life insurance benefits, deferred compensation and defined contribution plans. Most of the Company's pension plans are not admitting new participants; therefore, changes to pension liabilities are primarily due to market fluctuations of investments for existing participants and changes in interest rates.

Defined Benefit Plans

The Company sponsors a number of defined benefit and post-retirement medical benefit plans for the benefit of eligible employees. The benefit obligations of the Company's U.S. pension, U.S. OPEB, and non-U.S. OPEB plans represent an insignificant portion of the Company's pension and other post-retirement benefit plans. As a result, the disclosures below include the Company's U.S. and non-U.S. pension plans on a global consolidated basis.

Eligible employees are enrolled in defined benefit pension plans in their country of domicile. The Contributory defined benefit pension plan in the U.K. represents the largest plan. In addition, healthcare, dental and life insurance benefits are also provided to certain non-U.S. employees. A significant number of employees outside the United States are covered by government sponsored programs at no direct cost to the Company other than related payroll taxes.

The Company accrued $13 million, $10 million and $3 million, for fiscal 2021, 2020 and 2019, respectively, as additional contractual termination benefits for certain employees are part of the Company's restructuring plans. These amounts are reflected in the projected benefit obligation and in the net periodic pension cost.

The change in projected benefit obligation for fiscal year 2021 is primarily related to actuarial losses and foreign currency exchange rate changes. Actuarial losses were primarily due to a decrease in discount rates and an increase in inflation rates across most plans, with partially offsetting impact of actuarial gains from a mortality update and lower than expected benefit indexation in the United Kingdom.

Projected Benefit Obligations
As of
(in millions)March 31, 2021March 31, 2020
Projected benefit obligation at beginning of year$10,150 $11,016 
Service cost91 92 
Interest cost245 237 
Plan participants’ contributions31 30 
Amendments(9)— 
Business/contract acquisitions/divestitures11 12 
Contractual termination benefits13 10 
Settlement/curtailment(37)(60)
Actuarial loss (gain)1,262 (362)
Benefits paid(393)(359)
Foreign currency exchange rate changes1,084 (457)
Other(12)(9)
Projected benefit obligation at end of year$12,436 $10,150 
The following table summarizes the weighted average rates used in the determination of the Company’s benefit obligations:
Fiscal Years Ended
March 31, 2021March 31, 2020
Discount rate2.0 %2.4 %
Rates of increase in compensation levels2.5 %1.6 %
Interest Crediting Rate4.0 %N/A

Fair Value of Plan Assets and Funded Status
As of
(in millions)March 31, 2021March 31, 2020
Fair value of plan assets at beginning of year$11,090 $11,343 
Actual return on plan assets1,401 526 
Employer contribution117 108 
Plan participants’ contributions31 30 
Benefits paid(393)(359)
Business/contract acquisitions/divestitures— 7 
Contractual termination benefits7 15 
Plan settlement(31)(63)
Foreign currency exchange rate changes1,224 (507)
Other(21)(10)
Fair value of plan assets at end of year$13,425 $11,090 
Funded status at end of year$989 $940 


Selected Information
As of
(in millions)March 31, 2021March 31, 2020
Other assets$1,884 $1,735 
Accrued expenses and other current liabilities(81)(16)
Non-current pension obligations (796)(761)
Other long-term liabilities - OPEB(18)(18)
Net amount recorded$989 $940 
Accumulated benefit obligation$12,346 $10,072 

Benefit Plans with Projected Benefit Obligation in Excess of Plan Assets Benefit Plans with Accumulated Benefit Obligation in Excess of Plan Assets
(in millions)March 31, 2021March 31, 2020March 31, 2021March 31, 2020
Projected benefit obligation$2,490 $2,191 $2,453 $2,159 
Accumulated benefit obligation$2,431 $2,131 $2,402 $2,108 
Fair value of plan assets$1,596 $1,397 $1,562 $1,369 
Net Periodic Pension Cost
Fiscal Years Ended
(in millions)
March 31, 2021March 31, 2020March 31, 2019
Service cost
$91 $92 $88 
Interest cost
245 237 253 
Expected return on assets
(659)(651)(570)
Amortization of transition obligation
— — — 
Amortization of prior service costs
(8)(9)(15)
Contractual termination benefit
13 10 3 
Settlement/curtailment (gain) loss(18)7 (10)
Recognition of actuarial loss (gain)537 (252)153 
Net periodic pension expense (income)$201 $(566)$(98)

The service cost component of net periodic pension (income) expense is presented in cost of services and selling, general and administrative and the other components of net periodic pension income are presented in other income, net in the Company’s statements of operations.

Estimated prior service credit of $9 million will be amortized from AOCI into net periodic pension cost over the next fiscal year. The weighted-average rates used to determine net periodic pension cost were:
Fiscal Years Ended
March 31, 2021March 31, 2020March 31, 2019
Discount or settlement rates2.4 %2.4 %2.5 %
Expected long-term rates of return on assets5.6 %5.8 %5.3 %
Rates of increase in compensation levels1.7 %2.0 %2.1 %

The following is a summary of amounts in AOCI, before tax effects:
Fiscal Years Ended
(in millions)March 31, 2021March 31, 2020
Prior service cost$(239)$(247)

Estimated Future Contributions and Benefits Payments
(in millions)
Employer contributions:
2022$155 
Benefit Payments:
2022$506 
2023443 
2024444 
2025452 
2026462 
2026 and thereafter2,454 
    Total$4,761 
Fair Value of Plan Assets

The tables below set forth the fair value of plan assets by asset category within the fair value hierarchy:
As of March 31, 2021
(in millions)Level 1Level 2 Level 3Total
Equity:
US Domestic Stocks$— $— $— $— 
Global Stocks— — — — 
Global/International Equity commingled funds246 2,260 — 2,506 
Global equity mutual funds— — — — 
U.S./North American Equity commingled funds— 6 — 6 
Fixed Income:
Non-U.S. Government funds— — — — 
Fixed income commingled funds1 42 15 58 
Fixed income mutual funds— 4 — 4 
Corporate bonds— 5,500 — 5,500 
Alternatives:
Other Alternatives (1)
1 2,706 1,930 4,637 
Hedge Funds(2)
— 10 1 11 
Other Assets70 65 85 220 
Insurance contracts4 380 — 384 
Cash and cash equivalents97 2 — 99 
Totals
$419 $10,975 $2,031 $13,425 
As of March 31, 2020
(in millions)Level 1Level 2Level 3Total
Equity:
US Domestic Stocks$— $3 $— $3 
Global Stocks— 3 — 3 
Global/International Equity commingled funds315 1,763 — 2,078 
Global equity mutual funds8 — — 8 
U.S./North American Equity commingled funds1 4 — 5 
Fixed Income:
Non-U.S. Government funds136 — — 136 
Fixed income commingled funds55 71 — 126 
Fixed income mutual funds3 — — 3 
Corporate bonds1 4,807 — 4,808 
Alternatives:
Other Alternatives (1)
— 2,038 1,297 3,335 
Hedge Funds(2)
2 7 2 11 
Other Assets87 229 59 375 
Insurance contracts— 136 — 136 
Cash and cash equivalents61 2 — 63 
Totals$669 $9,063 $1,358 $11,090 
        

(1) Represents real estate and other commingled funds consisting mainly of equities, bonds, or commodities.
(2) Represents investments in diversified fund of hedge funds.

Changes in fair value measurements of level 3 investments for the defined benefit plans were as follows:
(in millions)
Balance as of March 31, 2019$1,032 
Actual return on plan assets held at the reporting date83 
Purchases, sales and settlements282 
Transfers in and / or out of Level 38 
Changes due to exchange rates(47)
Balance as of March 31, 20201,358 
Actual return on plan assets held at the reporting date233 
Purchases, sales and settlements279 
Transfers in and / or out of Level 3— 
Changes due to exchange rates161 
Balance as of March 31, 2021$2,031 

Domestic and global equity accounts are categorized as Level 1 if the securities trade on national or international exchanges and are valued at their last reported closing price. Equity assets in commingled funds reporting a net asset value are categorized as Level 2 and valued using broker dealer bids or quotes of securities with similar characteristics.
Fixed income accounts are categorized as Level 1 if traded on a publicly quoted exchange or as level 2 if investments in corporate bonds are primarily investment grade bonds, generally priced using model-based pricing methods that use observable market data as inputs. Broker dealer bids or quotes of securities with similar characteristics may also be used.

Alternative investment fund securities are categorized as Level 1 if held in a mutual fund or in a separate account structure and actively traded through a recognized exchange, or as Level 2 if they are held in commingled or collective account structures and are actively traded. Alternative investment fund securities are classified as Level 3 if they are held in Limited Company or Limited Partnership structures or cannot otherwise be classified as Level 1 or Level 2.

Other assets represent property holdings by certain pension plans. As above, the property holdings represent a master lease arrangement entered into by DXC in the U.K. and certain U.K. pension plans as a financing transaction.

Insurance contracts purchased to cover benefits payable to retirees are valued using the assumptions used to value the projected benefit obligation.

Cash equivalents that have quoted prices in active markets are classified as Level 1. Short-term money market commingled funds are categorized as Level 2 and valued at cost plus accrued interest which approximates fair value.

Plan Asset Allocations
As of
Asset CategoryMarch 31, 2021March 31, 2020
Equity securities19 %19 %
Debt securities42 %46 %
Alternatives37 %31 %
Cash and other2 %4 %
Total100 %100 %

Plan assets are held in a trust that includes commingled funds subject to country specific regulations and invested primarily in commingled funds. For the U.K. pension plans, the Company's largest pension plans by assets and projected liabilities, a target allocation by asset class was developed to achieve their long-term objectives. Asset allocations are monitored closely and investment reviews regarding asset strategy are conducted regularly with internal and external advisors.

The Company’s investment goals and risk management strategy for plan assets evaluates a number of factors, including the time horizon of the plans’ obligations. Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification in order to reduce risk, yet produces a reasonable amount of return on investment over the long term. Sufficient liquidity is maintained to meet benefit obligations as they become due. Third party investment managers are employed to invest assets in both passively-indexed and actively-managed strategies. Equities are primarily invested broadly in domestic and foreign companies across market capitalizations and industries. Fixed income securities are invested broadly, primarily in government treasury, corporate credit, mortgage backed and asset backed investments. Alternative investment allocations are included in selected plans to achieve greater portfolio diversity intended to reduce the overall volatility risk of the plans.

Plan asset risks include longevity, inflation, and other changes in market conditions that could reduce the value of plan assets. Also, a decline in the yield of high quality corporate bonds may adversely affect discount rates resulting in an increase in DXC's pension and other post-retirement obligations. These risks, among others, could cause the plans’ funded status to deteriorate, resulting in an increased reliance on Company contributions. Derivatives are permitted although their current use is limited within traditional funds and broadly allowed within alternative funds. Derivatives are used for inflation risk management and within the liability driven investing strategy. The Company also has investments in insurance contracts to pay plan benefits in certain countries.
Return on Assets

The Company consults with internal and external advisors regarding the expected long-term rate of return on assets. The Company uses various sources in its approach to compute the expected long-term rate of return of the major asset classes expected in each of the plans. DXC utilizes long-term, asset class return assumptions of typically 30 years, which are provided by external advisors. Consideration is also given to the extent active management is employed in each asset class and also to management expenses. A single expected long-term rate of return is calculated for each plan by assessing the plan's expected asset allocation strategy, the benefits of diversification therefrom, historical excess returns from actively managed traditional investments, expected long-term returns for alternative investments and expected investment expenses. The resulting composite rate of return is reviewed by internal and external parties for reasonableness.

Retirement Plan Discount Rate

The U.K. discount rate is based on the yield curve approach using the U.K. Aon Hewitt GBP Single Agency AA Corporates-Only Curve.

U.K. Pension Equalization Ruling

On October 26, 2018 the High Court of Justice in the U.K. (the "High Court") issued a ruling related to the equalization of benefits payable to men and women for the effect of guaranteed minimum pensions under U.K. defined benefit pension plans. As a result of this ruling, the Company estimated the impact of retroactively increasing benefits in its U.K. plans in accordance with the High Court ruling. The Company treated the additional benefits as a prior service cost which resulted in an increase to its projected benefit obligation and accumulated other comprehensive loss of $28 million. The Company will amortize this cost over the average remaining life expectancy of the U.K. participants. Given the immaterial effect on the U.K. plan's projected benefit, an interim remeasurement was not performed.

Defined Contribution Plans

The Company sponsors defined contribution plans for substantially all U.S. employees and certain foreign employees. The plans allow employees to contribute a portion of their earnings in accordance with specified guidelines. Matching contributions are made annually in January to participants employed on December 31 of the prior year and vest in one year. However, if a participant retires from the Company or dies prior to December 31, the participant will be eligible to receive matching contributions approximately 30 days following separation from service. During fiscal 2021, 2020 and 2019, the Company contributed $221 million, $192 million and $219 million, respectively, to its defined contribution plans. As of March 31, 2021, plan assets included 3,046,140 shares of the Company’s common stock.

Deferred Compensation Plans

Effective as of the HPES Merger, DXC assumed sponsorship of the Computer Sciences Corporation Deferred Compensation Plan, which was renamed the “DXC Technology Company Deferred Compensation Plan” (the “DXC DCP”), and adopted the Enterprise Services Executive Deferred Compensation Plan (the “ES DCP”). Both plans are non-qualified deferred compensation plans maintained for a select group of management, highly compensated employees and non-employee directors.

The DXC DCP covers eligible employees who participated in CSC’s Deferred Compensation Plan prior to the HPES Merger. The ES DCP covers eligible employees who participated in the HPE Executive Deferred Compensation Plan prior to the HPES Merger. Both plans allow participating employees to defer the receipt of current compensation to a future distribution date or event above the amounts that may be deferred under DXC’s tax-qualified 401(k) plan, the DXC Technology Matched Asset Plan. Neither plan provides for employer contributions. As of April 3, 2017, the ES DCP does not admit new participants.
Certain management and highly compensated employees are eligible to defer all, or a portion of, their regular salary that exceeds the limitation set forth in Internal Revenue Section 401(a)(17) and all or a portion of their incentive compensation. Non-employee directors are eligible to defer up to 100% of their cash compensation. The liability under the plan, which is included in other long-term liabilities in the Company's balance sheets, amounted to $42 million as of March 31, 2021 and $48 million as of March 31, 2020. The Company's expense under the Plan totaled $8 million, $0 million and $2 million, for fiscal 2021, 2020 and 2019, respectively.