Note 4: Retirement and Post-Retirement Benefit Plans

Defined Benefit Plans

HP sponsors a number of defined benefit pension plans worldwide, of which the most significant are in the United States. Both the HP Pension Plan ("Pension Plan"), a defined benefit pension plan under which benefits are based on pay and years of service, and the HP Company Cash Account Pension Plan ("Cash Account Pension Plan"), under which benefits are accrued pursuant to a formula based on a percentage of pay plus interest, were frozen effective January 1, 2008. The Cash Account Pension Plan was merged into the HP Pension Plan in 2005 for certain funding and investment purposes. Effective October 30, 2009 the Electronic Data Systems Corporation ("EDS") U.S. qualified pension plan was also merged into the Pension Plan. The EDS pension plan was frozen effective January 1, 2009.

HP reduces the benefit payable to certain U.S. employees under the Pension Plan for service before 1993, if any, by any amounts due to the employee under HP's frozen defined contribution Deferred Profit-Sharing Plan ("DPSP"). HP closed the DPSP to new participants in 1993. The DPSP plan obligations are equal to the plan assets and are recognized as an offset to the Pension Plan when HP calculates its defined benefit pension cost and obligations. The fair value of plan assets and projected benefit obligations for the U.S. defined benefit plans combined with the DPSP were as follows:

	For the fiscal years ended October 31
	2014				2013
	Plan Assets		Projected Benefit Obligation		Plan Assets		Projected Benefit Obligation
	In millions
U.S. defined benefit plans	$	11,979	$	13,756	$	10,866	$	11,866
DPSP		828		828		837		837

Total	$	12,807	$	14,584	$	11,703	$	12,703

Post-Retirement Benefit Plans

HP sponsors retiree health and welfare benefit plans, of which the most significant are in the U.S. Under the HP Retiree Welfare Benefits Plan, certain pre-2003 retirees and grandfathered participants with continuous service to HP since 2002 are eligible to receive partially-subsidized medical coverage based on years of service at retirement. Former grandfathered employees of Digital Equipment Corporation also receive partially-subsidized medical benefits that are not service-based. HP's share of the premium cost is capped for all subsidized medical coverage provided under the HP Retiree Welfare Benefits Plan. HP currently leverages the employer group waiver plan process to provide HP Retiree Welfare Benefits Plan post-65 prescription drug coverage under Medicare Part D, thereby giving HP access to federal subsidies to help pay for retiree benefits.

Certain employees not grandfathered under the above programs, as well as employees hired after 2002 but before August 2008, are eligible for credits under the HP Retirement Medical Savings Account Plan ("RMSA") upon attaining age 45. Credits offered after September 2008 are provided in the form of matching credits on employee contributions made to a voluntary employee beneficiary association. On retirement, former employees may use these credits for the reimbursement of certain eligible medical expenses, including premiums required for coverage.

Defined Contribution Plans

HP offers various defined contribution plans for U.S. and non-U.S. employees. Total defined contribution expense was $573 million in fiscal 2014, $603 million in fiscal 2013 and $628 million in fiscal 2012. U.S. employees are automatically enrolled in the Hewlett-Packard Company 401(k) Plan ("HP 401(k) Plan") when they meet eligibility requirements, unless they decline participation.

The quarterly employer matching contributions in the HP 401(K) Plan are 100% of an employee's contributions, up to a maximum of 4% of eligible compensation.

Pension and Post-Retirement Benefit Expense

HP's net pension and post-retirement benefit (credit) cost recognized in the Consolidated Statements of Earnings was as follows:

	For the fiscal years ended October 31
	2014			2013			2012			2014			2013			2012			2014			2013			2012
	U.S. Defined Benefit Plans									Non-U.S. Defined Benefit Plans									Post-Retirement Benefit Plans
	In millions
Service cost	$	1		$	1		$	1		$	308		$	337		$	294		$	5		$	6		$	7
Interest cost		569			560			566			737			676			690			32			31			35
Expected return on plan assets		(811	)		(845	)		(793	)		(1,140	)		(1,007	)		(816	)		(34	)		(34	)		(38	)
Amortization and deferrals:
Actuarial loss (gain)		15			77			43			318			341			235			(10	)		2			(3	)
Prior service benefit		—			—			—			(23	)		(27	)		(24	)		(41	)		(67	)		(79	)

Net periodic benefit (credit) cost		(226	)		(207	)		(183	)		200			320			379			(48	)		(62	)		(78	)

Curtailment (gain) loss		—			—			—			(7	)		(3	)		4			—			(7	)		(30	)
Settlement loss (gain)		1			12			11			12			18			(18	)		—			—			—
Special termination benefits		—			—			833			50			31			17			32			(5	)		227

Net benefit (credit) cost	$	(225	)	$	(195	)	$	661		$	255		$	366		$	382		$	(16	)	$	(74	)	$	119

The weighted-average assumptions used to calculate net benefit (credit) cost were as follows:

	For the fiscal years ended October 31
	2014			2013			2012			2014			2013			2012			2014			2013			2012
	U.S. Defined Benefit Plans									Non-U.S. Defined Benefit Plans									Post-Retirement Benefit Plans
Discount rate		4.9	%		4.1	%		4.8	%		3.9	%		3.8	%		4.5	%		3.9	%		3.0	%		4.4	%
Expected increase in compensation levels		2.0	%		2.0	%		2.0	%		2.4	%		2.4	%		2.5	%		—			—			—
Expected long-term return on plan assets		7.7	%		7.8	%		7.6	%		7.0	%		7.2	%		6.4	%		8.9	%		9.0	%		10.0	%

Funded Status

The funded status of the defined benefit and post-retirement benefit plans was as follows:

	As of October 31
	2014			2013			2014			2013			2014			2013
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post-Retirement Benefit Plans
	In millions
Change in fair value of plan assets:
Fair value—beginning of year	$	10,866		$	11,536		$	16,083		$	14,021		$	396		$	395
Acquisition/addition of plans		—			—			8			7			—			—
Actual return on plan assets		1,648			629			1,814			1,842			83			32
Employer contributions		27			54			1,019			634			92			102
Participant contributions		—			—			64			63			54			72
Benefits paid		(558	)		(1,320	)		(568	)		(504	)		(167	)		(205	)
Settlement		(4	)		(33	)		(49	)		(96	)		—			—
Currency impact		—			—			(801	)		116			—			—

Fair value—end of year		11,979			10,866			17,570			16,083			458			396

Change in benefit obligation:
Projected benefit obligation—beginning of year		11,866			14,237			19,152			18,097			867			1,056
Acquisition/addition of plans		—			—			10			14			—			—
Service cost		1			1			308			337			5			6
Interest cost		569			560			737			676			32			31
Participant contributions		—			—			64			63			54			72
Actuarial loss (gain)		1,882			(1,579	)		2,500			343			22			(85	)
Benefits paid		(558	)		(1,320	)		(568	)		(504	)		(167	)		(205	)
Plan amendments		—			—			—			6			—			—
Curtailment		—			—			(49	)		13			—			—
Settlement		(4	)		(33	)		(49	)		(100	)		—			—
Special termination benefits		—			—			50			31			32			(5	)
Currency impact		—			—			(935	)		176			(5	)		(3	)

Projected benefit obligation—end of year		13,756			11,866			21,220			19,152			840			867

Funded status at end of year	$	(1,777	)	$	(1,000	)	$	(3,650	)	$	(3,069	)	$	(382	)	$	(471	)


Accumulated benefit obligation	$	13,755		$	11,865		$	20,207		$	18,254

The weighted-average assumptions used to calculate the projected benefit obligations were as follows:

	For the fiscal years ended October 31
	2014			2013			2014			2013			2014			2013
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post-Retirement Benefit Plans
Discount rate		4.4	%		4.9	%		3.2	%		3.9	%		3.6	%		3.9	%
Expected increase in compensation levels		2.0	%		2.0	%		2.5	%		2.4	%		—			—

For the U.S. defined benefit plan, HP adopted a new mortality rate table in fiscal 2014 to better reflect expected lifetimes of its U.S. plan participants. The table used is based on a historical demographic study of the plans and increased the projected benefit obligation by approximately $870 million. The increase in the projected benefit obligation was recognized as a part of the net actuarial loss as included in the other comprehensive loss which will be amortized over the remaining estimated life of plan participants (approximately 26.5 years).

The net amounts recognized for HP's defined benefit and post-retirement benefit plans in HP's Consolidated Balance Sheets were as follows:

	As of October 31
	2014			2013			2014			2013			2014			2013
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post-Retirement Benefit Plans
	In millions
Noncurrent assets	$	—		$	—		$	421		$	479		$	—		$	—
Current liabilities		(35	)		(33	)		(43	)		(46	)		(47	)		(109	)
Noncurrent liabilities		(1,742	)		(967	)		(4,028	)		(3,502	)		(335	)		(362	)

Funded status at end of year	$	(1,777	)	$	(1,000	)	$	(3,650	)	$	(3,069	)		(382	)	$	(471	)

The following table summarizes the pretax net actuarial loss (gain) and prior service benefit recognized in accumulated other comprehensive loss for the defined benefit and post-retirement benefit plans:

	For the fiscal year ended October 31, 2014
	U.S. Defined Benefit Plans		Non-U.S. Defined Benefit Plans			Post-Retirement Benefit Plans
	In millions
Net actuarial loss (gain)	$	1,405	$	5,423		$	(115	)
Prior service benefit		—		(186	)		(119	)

Total recognized in accumulated other comprehensive loss	$	1,405	$	5,237		$	(234	)

The following table summarizes the net actuarial loss (gain) and prior service benefit that are expected to be amortized from accumulated other comprehensive loss (income) and recognized as components of net periodic benefit cost (credit) during the next fiscal year.

	U.S. Defined Benefit Plans		Non-U.S. Defined Benefit Plans			Post-Retirement Benefit Plans
	In millions
Net actuarial loss (gain)	$	54	$	452		$	(10	)
Prior service benefit		—		(22	)		(20	)

Total expected to be recognized in net periodic benefit cost (credit)	$	54	$	430		$	(30	)

Defined benefit plans with projected benefit obligations exceeding the fair value of plan assets were as follows:

	As of October 31
	2014		2013		2014		2013
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans
	In millions
Aggregate fair value of plan assets	$	11,979	$	10,866	$	12,701	$	10,462
Aggregate projected benefit obligation	$	13,756	$	11,866	$	16,774	$	14,010

Defined benefit plans with accumulated benefit obligations exceeding the fair value of plan assets were as follows:

	As of October 31
	2014		2013		2014		2013
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans
	In millions
Aggregate fair value of plan assets	$	11,979	$	10,866	$	12,578	$	9,926
Aggregate accumulated benefit obligation	$	13,755	$	11,865	$	15,797	$	12,703

Retirement Incentive Program

As part of the 2012 restructuring plan, the company announced a voluntary enhanced early retirement program for its U.S employees. Participation in the EER program was limited to those employees whose combined age and years of service equaled 65 or more. Approximately 8,500 employees elected to participate in the EER program and left the company on dates designated by the company, with the majority of the EER participants having left the company on August 31, 2012 and others exiting through August 31, 2013. The HP Pension Plan was amended to provide for an EER benefit from the plan for electing EER participants who were current participants in the plan. The retirement incentive benefit was calculated as a lump sum and ranged between five and fourteen months of pay depending on years of service at the time of retirement under the program. As a result of this retirement incentive, HP recognized a special termination benefit ("STB") of $833 million, which reflected the present value of all additional benefits that HP would distribute from the HP Pension Plan. HP recorded these expenses as a restructuring charge. In addition, the HP Pension Plan was remeasured on June 30, 2012, which resulted in no material change to the 2012 net periodic benefit cost or funded status.

HP extended to all employees participating in the EER program the opportunity to continue health care coverage at active employee contribution rates for up to 24 months following retirement. In addition, for employees not grandfathered into certain employer-subsidized retiree medical plans, HP provided up to $12,000 in employer credits under the RMSA. These items resulted in an additional special termination benefit STB expense of $227 million, which was offset by net curtailment gains of $37 million, due primarily to the resulting accelerated recognition of the existing prior service benefit. The entire STB and approximately $30 million in curtailment gains were recognized in fiscal 2012. HP reported this net expense as a restructuring charge in the Consolidated Statements of Earnings.

Fair Value of Plan Assets

The table below sets forth the fair value of plan assets by asset category within the fair value hierarchy.

	As of October 31, 2014
	U.S. Defined Benefit Plans									Non-U.S. Defined Benefit Plans								Post-Retirement Benefit Plans
	Level 1			Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1			Level 2		Level 3		Total
	In millions
Asset Category:
Equity securities
U.S.	$	1,787		$	—	$	—	$	1,787	$	2,935	$	30	$	—	$	2,965	$	—		$	—	$	—	$	—
Non-U.S.		1,268			—		—		1,268		4,050		742		80		4,872		—			—		—		—
Debt securities
Corporate		—			3,283		7		3,290		—		2,935		—		2,935		—			20		—		20
Government(1)		—			2,204		—		2,204		—		1,787		—		1,787		—			22		—		22
Alternative Investments
Private Equity(2)		—			—		1,284		1,284		—		2		51		53		—			—		271		271
Hybrids(3)		—			—		3		3		114		2,466		43		2,623		—			—		1		1
Hedge Funds(4)		—			346		263		609		—		103		285		388		—			—		—		—
Real Estate Funds		—			—		—		—		220		277		543		1,040		—			—		—		—
Insurance Group Annuity Contracts		—			—		—		—		—		44		79		123		—			—		—		—
Common Collective Trusts and 103-12 Investment Entities(5)		—			854		—		854		—		—		—		—		—			55		—		55
Registered Investment Companies(6)		68			314		—		382		—		—		—		—		86			1		—		87
Cash and Cash Equivalents(7)		161			66		—		227		573		—		—		573		—			6		—		6
Other(8)		(24	)		95		—		71		79		130		2		211		(4	)		—		—		(4	)

Total	$	3,260		$	7,162	$	1,557	$	11,979	$	7,971	$	8,516	$	1,083	$	17,570	$	82		$	104	$	272	$	458

(1)	Includes debt issued by national, state and local governments and agencies.
(2)	Includes limited partnerships such as equity, buyout, venture capital, real estate and other similar funds that invest in the U.S. and internationally where foreign currencies are hedged.
(3)	Includes a fund that invests in both private and public equities primarily in the U.S. and the United Kingdom, as well as emerging markets across all sectors. The fund also holds fixed income and derivative instruments to hedge interest rate and inflation risk. In addition, the fund includes units in transferable securities, collective investment schemes, money market funds, cash and deposits.
(4)	Includes limited partnerships that invest both long and short primarily in common stocks and credit, relative value, event driven equity, distressed debt and macro strategies. Management of the hedge funds has the ability to shift investments from value to growth strategies, from small to large capitalization stocks and bonds, and from a net long position to a net short position.
(5)	Department of Labor 103-12 IE (Investment Entity) designation is for plan assets held by two or more unrelated employee benefit plans which includes limited partnerships and venture capital partnerships.
(6)	Includes publicly and privately traded Registered Investment Entities.
(7)	Includes cash and cash equivalents such as short-term marketable securities.
(8)	Includes international insured contracts, derivative instruments and unsettled transactions.

Changes in fair value measurements of Level 3 investments were as follows:

	For the fiscal year ended October 31, 2014
	U.S. Defined Benefit Plans												Non-U.S. Defined Benefit Plans																			Post-Retirement Benefit Plans
	Debt Securities		Alternative Investments										Equity		Alternative Investments																	Alternative Investments
	Corporate Debt		Private Equity			Hybrids		Hedge Funds		Total			Non U.S. Equities		Private Equity			Hedge Funds			Hybrids		Real Estate		Insurance Group Annuities			Other		Total		Private Equity			Hybrids		Total
	In millions
Beginning balance at October 31, 2013	$	—	$	1,250		$	2	$	113	$	1,365		$	77	$	48		$	204		$	—	$	325	$	81		$	2	$	737	$	234		$	1	$	235
Actual return on plan assets:
Relating to assets still held at the reporting date		—		92			1		10		103			3		2			14			—		46		(8	)		—		57		51			—		51
Relating to assets sold during the period		—		169			—		—		169			—		2			(1	)		—		—		—			—		1		21			—		21
Purchases, sales, and settlements (net)		7		(227	)		—		140		(80	)		—		(1	)		68			43		108		(2	)		—		216		(35	)		—		(35	)
Transfers in and/or out of Level 3		—		—			—		—		—			—		—			—			—		64		8			—		72		—			—		—

Ending balance at October 31, 2014	$	7	$	1,284		$	3	$	263	$	1,557		$	80	$	51		$	285		$	43	$	543	$	79		$	2	$	1,083	$	271		$	1	$	272

The table below sets forth the fair value of plan assets by asset category within the fair value hierarchy.

	As of October 31, 2013
	U.S. Defined Benefit Plans											Non-U.S. Defined Benefit Plans								Post-Retirement Benefit Plans
	Level 1			Level 2			Level 3		Total			Level 1		Level 2		Level 3		Total		Level 1			Level 2		Level 3		Total
	In millions
Asset Category:
Equity securities
U.S.	$	1,711		$	—		$	—	$	1,711		$	2,456	$	31	$	—	$	2,487	$	—		$	—	$	—	$	—
Non-U.S.		1,274			—			—		1,274			4,059		670		77		4,806		—			—		—		—
Debt securities
Corporate		—			3,028			—		3,028			—		3,347		—		3,347		—			17		—		17
Government(1)		—			1,849			—		1,849			—		1,751		—		1,751		5			17		—		22
Alternative Investments
Private Equity(2)		—			—			1,250		1,250			—		2		48		50		—			—		234		234
Hybrids(3)		—			—			2		2			—		1,223		—		1,223		—			—		1		1
Hedge Funds(4)		—			—			113		113			—		226		204		430		—			—		—		—
Real Estate Funds		—			—			—		—			470		237		325		1,032		—			—		—		—
Insurance Group Annuity Contracts		—			—			—		—			—		50		81		131		—			—		—		—
Common Collective Trusts and 103-12 Investment Entities(5)		—			1,233			—		1,233			—		—		—		—		—			42		—		42
Registered Investment Companies(6)		61			329			—		390			—		—		—		—		79			—		—		79
Cash and Cash Equivalents(7)		11			62			—		73			648		4		—		652		—			3		—		3
Other(8)		(37	)		(20	)		—		(57	)		110		62		2		174		(2	)		—		—		(2	)

Total	$	3,020		$	6,481		$	1,365	$	10,866		$	7,743	$	7,603	$	737	$	16,083	$	82		$	79	$	235	$	396

(1)	Includes debt issued by national, state and local governments and agencies.
(2)	Includes limited partnerships such as equity, buyout, venture capital, real estate and other similar funds that invest in the U.S. and internationally where foreign currencies are hedged.
(3)	Includes a fund that invests in both private and public equities primarily in the U.S. and the United Kingdom, as well as emerging markets across all sectors. The fund also holds fixed income and derivative instruments to hedge interest rate and inflation risk. In addition, the fund includes units in transferable securities, collective investment schemes, money market funds, cash and deposits.
(4)	Includes limited partnerships that invest both long and short primarily in common stocks and credit, relative value, event driven equity, distressed debt and macro strategies. Management of the hedge funds has the ability to shift investments from value to growth strategies, from small to large capitalization stocks and bonds, and from a net long position to a net short position.
(5)	Department of Labor 103-12 IE (Investment Entity) designation is for plan assets held by two or more unrelated employee benefit plans which includes limited partnerships and venture capital partnerships.
(6)	Includes publicly and privately traded Registered Investment Entities.
(7)	Includes cash and cash equivalents such as short-term marketable securities.
(8)	Includes international insured contracts, derivative instruments and unsettled transactions.

Changes in fair value measurements of Level 3 investments were as follows:

	For the fiscal year ended October 31, 2013
	U.S. Defined Benefit Plans													Non-U.S. Defined Benefit Plans																Post-Retirement Benefit Plans
	Debt Securities			Alternative Investments										Equity		Alternative Investments														Alternative Investments
	Corporate Debt			Private Equity			Hybrids		Hedge Funds		Total			Non U.S. Equities		Private Equity		Hedge Funds			Real Estate		Insurance Group Annuities			Other		Total		Private Equity			Hybrids		Total
	In millions
Beginning balance at October 31, 2012	$	1		$	1,300		$	2	$	65	$	1,368		$	76	$	21	$	233		$	194	$	88		$	2	$	614	$	235		$	1	$	236
Actual return on plan assets:
Relating to assets still held at the reporting date		—			(9	)		—		13		4			1		8		—			16		(5	)		—		20		5			—		5
Relating to assets sold during the period		—			143			—		—		143			—		—		11			—		—			—		11		21			—		21
Purchases, sales, and settlements (net)		—			(184	)		—		35		(149	)		—		19		(40	)		115		(2	)		—		92		(27	)		—		(27	)
Transfers in and/or out of Level 3		(1	)		—			—		—		(1	)		—		—		—			—		—			—		—		—			—		—

Ending balance at October 31, 2013	$	—		$	1,250		$	2	$	113	$	1,365		$	77	$	48	$	204		$	325	$	81		$	2	$	737	$	234		$	1	$	235

The following is a description of the valuation methodologies used to measure plan assets at fair value. There have been no changes in the methodologies used during the reporting period.

Investments in publicly-traded equity securities are valued using the closing price on the measurement date as reported on the stock exchange on which the individual securities are traded. For corporate, government and asset-backed debt securities, fair value is based on observable inputs of comparable market transactions. For corporate and government debt securities traded on active exchanges, fair value is based on observable quoted prices. The valuation of alternative investments, such as limited partnerships and joint ventures, may require significant management judgment. For alternative investments, valuation is based on net asset value ("NAV") as reported by the Asset Manager and adjusted for cash flows, if necessary. In making such an assessment, a variety of factors are reviewed by management, including, but not limited to, the timeliness of NAV as reported by the asset manager and changes in general economic and market conditions subsequent to the last NAV reported by the asset manager. Depending on the amount of management judgment, the lack of near-term liquidity, and the absence of quoted market prices, these assets are classified in Level 2 or Level 3 of the fair value hierarchy. Further, depending on how quickly HP can redeem its hedge fund investments, and the extent of any adjustments to NAV, hedge funds are classified in either Level 2 or Level 3 of the fair value hierarchy. Common collective trusts, interests in 103-12 entities and registered investment companies are valued at NAV. The valuation for some of these assets requires judgment due to the absence of quoted market prices, and these assets are generally classified in Level 2 of the fair value hierarchy. Cash and cash equivalents includes money market funds, which are valued based on NAV. Other assets, including insurance group annuity contracts, were classified in the fair value hierarchy based on the lowest level input (e.g., quoted prices and observable inputs) that is significant to the fair value measure in its entirety.

Plan Asset Allocations

The weighted-average target and actual asset allocations across the benefit plans at the respective measurement dates were as follows:

	U.S. Defined Benefit Plans									Non-U.S. Defined Benefit Plans									Post-Retirement Benefit Plans
				Plan Assets									Plan Assets									Plan Assets
	2014 Target Allocation			Plan Assets						2014 Target Allocation			Plan Assets						2014 Target Allocation			Plan Assets
Asset Category	2014 Target Allocation			2014			2013			2014 Target Allocation			2014			2013			2014 Target Allocation			2014			2013
Public equity securities					31.3	%		36.7	%					46.8	%		48.0	%					10.2	%		9.5	%
Private/other equity securities					15.8	%		12.6	%					15.2	%		7.9	%					58.6	%		59.1	%
Real estate and other					0.6	%		—						7.1	%		7.5	%					—			—

Equity-related investments		47.5	%		47.7	%		49.3	%		67.7	%		69.1	%		63.4	%		71.1	%		68.8	%		68.6	%
Debt securities		52.5	%		49.2	%		48.2	%		31.6	%		27.6	%		32.5	%		27.0	%		27.5	%		29.0	%
Cash		—			3.1	%		2.5	%		0.7	%		3.3	%		4.1	%		1.9	%		3.7	%		2.4	%

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Investment Policy

HP's investment strategy is to seek a competitive rate of return relative to an appropriate level of risk depending on the funded status of each plan and the timing of expected benefit payments. The majority of the plans' investment managers employ active investment management strategies with the goal of outperforming the broad markets in which they invest. Risk management practices include diversification across asset classes and investment styles and periodic rebalancing toward asset allocation targets. A number of the plans' investment managers are authorized to utilize derivatives for investment or liability exposures, and HP may utilize derivatives to effect asset allocation changes or to hedge certain investment or liability exposures.

The target asset allocation selected for each U.S. plan reflects a risk/return profile HP believes is appropriate relative to each plan's liability structure and return goals. HP conducts periodic asset-liability studies for U.S. plans in order to model various potential asset allocations in comparison to each plan's forecasted liabilities and liquidity needs. HP invests a portion of the U.S. defined benefit plan assets and post-retirement benefit plan assets in private market securities such as private equity funds to provide diversification and a higher expected return on assets.

Outside the U.S., asset allocation decisions are typically made by an independent board of trustees for the specific plan. As in the U.S., investment objectives are designed to generate returns that will enable the plan to meet its future obligations. In some countries, local regulations may restrict asset allocations, typically leading to a higher percentage of investment in fixed income securities than would otherwise be deployed. HP reviews the investment strategy and provides a recommended list of investment managers for each country plan, with final decisions on asset allocation and investment managers made by the board of trustees for the specific plan.

Basis for Expected Long-Term Rate of Return on Plan Assets

The expected long-term rate of return on plan assets reflects the expected returns for each major asset class in which the plan invests and the weight of each asset class in the target mix. Expected asset returns reflect the current yield on government bonds, risk premiums for each asset class and expected real returns which considers each country's specific inflation outlook. Because HP's investment policy is to employ primarily active investment managers who seek to outperform the broader market, the expected returns are adjusted to reflect the expected additional returns net of fees.

Future Contributions and Funding Policy

In fiscal 2015, HP expects to contribute approximately $686 million to its non-U.S. pension plans and approximately $35 million to cover benefit payments to U.S. non-qualified plan participants. HP expects to pay approximately $47 million to cover benefit claims for HP's post-retirement benefit plans. HP's policy is to fund its pension plans so that it makes at least the minimum contribution required by local government, funding and taxing authorities.

Estimated Future Benefits Payments

As of October 31, 2014, HP estimates that the future benefits payments for the retirement and post-retirement plans are as follows:


Fiscal year	U.S. Defined Benefit Plans		Non-U.S. Defined Benefit Plans		Post-Retirement Benefit Plans
	In millions
2015	$	801	$	567	$	91
2016		588		528		94
2017		613		560		82
2018		648		606		71
2019		694		659		68
Next five fiscal years to October 31, 2024		3,850		3,980		278