Retirement and Post-Retirement Benefit Plans

12 Months Ended

Oct. 31, 2015

Retirement and Post-Retirement Benefit Plans

Retirement and Post-Retirement Benefit Plans

Note 4: Retirement and Post-Retirement Benefit Plans

Defined Benefit Plans

        HP sponsors a number of defined benefit pension plans worldwide. The most significant defined benefit plans are in the U.S. The HP Pension Plan ("Pension Plan") includes the former HP Retirement Plan and the former HP Company Cash Account Pension Plan ("Cash Account Pension Plan"). Under the HP Retirement Plan, benefits are based on pay and years of service, and under the Cash Account Pension Plan, benefits are accrued pursuant to a formula based on a percentage of pay plus interest. The Pension Plan was frozen effective January 1, 2008. The Cash Account Pension Plan was merged into the 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 merged into the Pension Plan. The EDS 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 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
	2015				2014
	Plan Assets		Projected Benefit Obligation		Plan Assets		Projected Benefit Obligation
	In millions
U.S. defined benefit plans	$	11,077	$	12,716	$	11,979	$	13,756
DPSP		742		742		828		828
Total	$	11,819	$	13,458	$	12,807	$	14,584

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. Upon 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 $542 million in fiscal 2015, $573 million in fiscal 2014 and $603 million in fiscal 2013.

        U.S. employees are automatically enrolled in the 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
	2015			2014			2013			2015			2014			2013			2015			2014			2013
	U.S. Defined Benefit Plans									Non-U.S. Defined Benefit Plans									Post-Retirement Benefit Plans
	In millions
Service cost	$	1		$	1		$	1		$	326		$	308		$	337		$	5		$	5		$	6
Interest cost		566			569			560			622			737			676			29			32			31
Expected return on plan assets		(818	)		(811	)		(845	)		(1,166	)		(1,140	)		(1,007	)		(39	)		(34	)		(34	)
Amortization and deferrals:
Actuarial loss (gain)		54			15			77			441			318			341			(11	)		(10	)		2
Prior service benefit		—			—			—			(21	)		(23	)		(27	)		(20	)		(41	)		(67	)
Net periodic benefit (credit) cost		(197	)		(226	)		(207	)		202			200			320			(36	)		(48	)		(62	)
Curtailment gain		—			—			—			—			(7	)		(3	)		—			—			(7	)
Settlement loss		114			1			12			4			12			18			—			—			—
Special termination benefits		—			—			—			25			50			31			1			32			(5	)
Net benefit (credit) cost	$	(83	)	$	(225	)	$	(195	)	$	231		$	255		$	366		$	(35	)	$	(16	)	$	(74	)

Lump sum program

        In January 2015, HP offered certain terminated vested participants of the U.S. HP Pension Plan the option of receiving their pension benefit in a one-time voluntary lump sum within a specified window. Approximately 50% of the eligible participants elected to receive their benefits and as a result the pension plan trust paid $826 million in lump sum payments to these participants in fiscal 2015. As a result of the lump sum program, HP recognized a settlement expense of approximately $96 million and a remeasurement of the U.S. HP Pension Plan was required. The remeasurement also resulted in an additional net periodic benefit cost of $45 million for fiscal 2015 which was recognized in the Consolidated Statements of Earnings along with the settlement expense.

        During fiscal 2015, certain events, primarily the Separation and settlement as a result of the lump sum program, required multiple pension plans to be remeasured during the year. Thus, the assumptions used to calculate the net benefit (credit) cost for the remaining portion of the fiscal year after remeasurement were re-determined based on then current market conditions.

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

	For the fiscal years ended October 31
	2015			2014			2013			2015			2014			2013			2015			2014			2013
	U.S. Defined Benefit Plans									Non-U.S. Defined Benefit Plans									Post-Retirement Benefit Plans
Discount rate		4.4	%		4.9	%		4.1	%		3.0	%		3.9	%		3.8	%		3.6	%		3.9	%		3.0	%
Expected increase in compensation levels		2.0	%		2.0	%		2.0	%		2.4	%		2.4	%		2.4	%		—			—			—
Expected long-term return on plan assets		7.2	%		7.7	%		7.8	%		6.9	%		7.0	%		7.2	%		9.0	%		8.9	%		9.0	%

Funded Status

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

	As of October 31
	2015			2014			2015			2014			2015			2014
	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	$	11,979		$	10,866		$	17,570		$	16,083		$	458		$	396
Acquisition/addition of plans		(1	)		—			5			8			—			—
Actual return on plan assets		506			1,648			1,059			1,814			45			83
Employer contributions		29			27			619			1,019			39			92
Participant contributions		—			—			55			64			57			54
Benefits paid		(322	)		(558	)		(570	)		(568	)		(125	)		(167	)
Settlement		(1,114	)		(4	)		(17	)		(49	)		—			—
Currency impact		—			—			(1,244	)		(801	)		—			—
Fair value—end of year		11,077			11,979			17,477			17,570			474			458
Change in benefit obligation:
Projected benefit obligation—beginning of year		13,756			11,866			21,220			19,152			840			867
Acquisition/addition of plans		(1	)		—			1			10			—			—
Service cost		1			1			326			308			5			5
Interest cost		566			569			622			737			29			32
Participant contributions		—			—			55			64			57			54
Actuarial (gain) loss		(170	)		1,882			457			2,500			(59	)		22
Benefits paid		(322	)		(558	)		(570	)		(568	)		(126	)		(167	)
Plan amendments		—			—			(89	)		—			—			—
Curtailment		—			—			—			(49	)		—			—
Settlement		(1,114	)		(4	)		(17	)		(49	)		—			—
Special termination benefits		—			—			25			50			1			32
Currency impact		—			—			(1,509	)		(935	)		(10	)		(5	)
Projected benefit obligation—end of year		12,716			13,756			20,521			21,220			737			840
Funded status at end of year	$	(1,639	)	$	(1,777	)	$	(3,044	)	$	(3,650	)	$	(263	)	$	(382	)
Accumulated benefit obligation	$	12,715		$	13,755		$	19,695		$	20,207

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

	For the fiscal years ended October 31
	2015			2014			2015			2014			2015			2014
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post-Retirement Benefit Plans
Discount rate		4.4	%		4.4	%		3.0	%		3.2	%		3.8	%		3.6	%
Expected increase in compensation levels		2.0	%		2.0	%		2.5	%		2.5	%		—			—

        For the U.S. defined benefit plans, HP adopted a new mortality 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 for the year ended October 31, 2014. The increase in the projected benefit obligation in fiscal 2014 was recognized as a part of the net actuarial loss as included in the other comprehensive loss which is being amortized over the remaining estimated life of plan participants.

        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
	2015			2014			2015			2014			2015			2014
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post-Retirement Benefit Plans
	In millions
Noncurrent assets	$	—		$	—		$	532		$	421		$	—		$	—
Current liabilities		(37	)		(35	)		(42	)		(43	)		(46	)		(47	)
Noncurrent liabilities		(1,602	)		(1,742	)		(3,534	)		(4,028	)		(217	)		(335	)
Funded status at end of year	$	(1,639	)	$	(1,777	)	$	(3,044	)	$	(3,650	)	$	(263	)	$	(382	)

        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:

	As of October 31, 2015
	U.S. Defined Benefit Plans		Non-U.S. Defined Benefit Plans			Post-Retirement Benefit Plans
	In millions
Net actuarial loss (gain)	$	1,379	$	5,161		$	(173	)
Prior service benefit		—		(242	)		(99	)
Total recognized in Accumulated other comprehensive loss	$	1,379	$	4,919		$	(272	)

        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 HP Inc.'s net periodic benefit (credit) cost 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)	$	55	$	25		$	(12	)
Prior service benefit		—		(3	)		(17	)
Total expected to be recognized in net periodic benefit (credit) cost	$	55	$	22		$	(29	)

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

	As of October 31
	2015		2014		2015		2014
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans
	In millions
Aggregate fair value of plan assets	$	11,077	$	11,979	$	8,928	$	12,701
Aggregate projected benefit obligation	$	12,716	$	13,756	$	12,504	$	16,774

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

	As of October 31
	2015		2014		2015		2014
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans
	In millions
Aggregate fair value of plan assets	$	11,077	$	11,979	$	8,858	$	12,578
Aggregate accumulated benefit obligation	$	12,715	$	13,755	$	11,804	$	15,797

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, 2015.

	As of October 31, 2015
	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.	$	1,833		$	47	$	—	$	1,880		$	2,851	$	76	$	—	$	2,927	$	—		$	1	$	—	$	1
Non-U.S.		1,322			13		—		1,335			4,085		494		83		4,662		—			—		—		—
Debt securities
Corporate		—			3,238		31		3,269			—		3,352		—		3,352		—			28		—		28
Government(1)		—			1,756		—		1,756			—		1,534		—		1,534		—			39		—		39
Alternative Investments
Private Equity(2)		—			—		1,170		1,170			—		1		70		71		—			—		253		253
Hybrids(3)		—			—		—		—			—		2,670		30		2,700		—			—		—		—
Hedge Funds(4)		—			388		260		648			28		125		250		403		—			—		—		—
Real Estate Funds		—			—		—		—			464		49		571		1,084		—			—		—		—
Insurance Group Annuity Contracts		—			—		—		—			—		46		73		119		—			—		—		—
Common Collective Trusts and 103-12 Investment Entities(5)		—			756		—		756			—		7		—		7		—			59		—		59
Registered Investment Companies(6)		38			176		—		214			—		1		—		1		92			3		—		95
Cash and Cash Equivalents(7)		38			203		—		241			493		—		—		493		4			3		—		7
Other(8)		(224	)		32		—		(192	)		68		14		42		124		(8	)		—		—		(8	)
Total	$	3,007		$	6,609	$	1,461	$	11,077		$	7,989	$	8,369	$	1,119	$	17,477	$	88		$	133	$	253	$	474

(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 primarily unsettled transactions, international insured contracts and derivative instruments. Such unsettled transactions relate primarily to fixed income securities to be settled in the first quarter of fiscal 2016.

        Changes in fair value measurements of Level 3 investments for the fiscal year ended October 31, 2015 were as follows:

	For the fiscal year ended October 31, 2015
	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			Hybrids			Hedge Funds			Real Estate		Insurance Group Annuities			Other		Total			Private Equity			Hybrids			Total
	In millions
Beginning balance at October 31, 2014	$	7	$	1,284		$	3		$	263		$	1,557		$	80		$	51		$	43		$	285		$	543	$	79		$	2	$	1,083		$	271		$	1		$	272
Actual return on plan assets:
Relating to assets still held at the reporting date		—		(25	)		—			(3	)		(28	)		(18	)		(1	)		—			—			13		(6	)		3		(9	)		(2	)		—			(2	)
Relating to assets sold during the period		—		145			(1	)		—			144			—			7			(22	)		—			—		—			—		(15	)		46			—			46
Purchases, sales, and settlements (net)		24		(234	)		(2	)		—			(212	)		—			13			—			48			14		(2	)		—		73			(62	)		(1	)		(63	)
Transfers in and/or out of Level 3		—		—			—			—			—			21			—			9			(83	)		1		2			37		(13	)		—			—			—
Ending balance at October 31, 2015	$	31	$	1,170		$	—		$	260		$	1,461		$	83		$	70		$	30		$	250		$	571	$	73		$	42	$	1,119		$	253		$	—		$	253

        The table below sets forth the fair value of plan assets by asset category within the fair value hierarchy as of October 31, 2014.

	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 for the fiscal year ended October 31, 2014 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			Hybrids		Hedge Funds			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	)		43		68			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		$	43	$	285		$	543	$	79		$	2	$	1,083	$	271		$	1	$	272

        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
	2015 Target Allocation									2015 Target Allocation									2015 Target Allocation
Asset Category				2015			2014						2015			2014						2015			2014
Public equity securities					34.2	%		31.3	%					45.7	%		46.8	%					10.7	%		10.2	%
Private/other equity securities					16.4	%		15.8	%					15.9	%		15.2	%					53.4	%		58.6	%
Real estate and other					(1.7	)%		0.6	%					6.9	%		7.1	%					(1.8	)%		—
Equity-related investments		53.5	%		48.9	%		47.7	%		66.4	%		68.5	%		69.1	%		66.1	%		62.3	%		68.8	%
Debt securities		46.1	%		47.5	%		49.2	%		33.4	%		28.7	%		27.6	%		32.0	%		33.2	%		27.5	%
Cash		0.4	%		3.6	%		3.1	%		0.2	%		2.8	%		3.3	%		1.9	%		4.5	%		3.7	%
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

        As of October 31, 2015, HP (including Hewlett Packard Enterprise) expects to contribute approximately $384 million to its non-U.S. pension plans and approximately $37 million to cover benefit payments to U.S. non-qualified plan participants and approximately $46 million to cover benefit claims for HP's post-retirement benefit plans in fiscal 2016. Subsequent to the Separation, HP Inc. expects to contribute approximately $18 million to its non-U.S. pension plans, approximately $36 million to cover benefit payments to U.S. non-qualified plan participants and approximately $43 million to cover benefit claims for HP's post-retirement benefit plans in fiscal 2016. 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, 2015, HP Inc. 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
2016	$	879	$	22	$	82
2017		636		24		71
2018		645		26		58
2019		670		28		54
2020		705		29		51
Next five fiscal years to October 31, 2025		3,785		188		197

Separation related activities

        In advance of the Separation, HP underwent a plan-by-plan analysis in which it was determined if each plan would be assigned to HP Inc. or Hewlett Packard Enterprise. While some pension plans transitioned in their entirety to Hewlett Packard Enterprise or remain in their entirety with HP Inc., other plans were split into two identical plans resulting in both companies splitting the plan's assets and liabilities. As a result of these plan separations, HP Inc. will retain defined benefit plan assets of approximately $11,930 million, of which approximately $11,077 million pertain to the U.S. defined benefit plans. The projected benefit obligation for these defined benefit plans as of October 31, 2015 was $13,792 million, of which $12,709 million pertains to the U.S. defined benefit plans. The net funded status of these plans represents a net obligation which is recognized on HP Inc.'s Consolidated Balance Sheets for approximately $1,862 million of which $1,632 million pertains to the U.S. defined benefit plans. In addition, HP Inc. will retain post-retirement benefit plan assets of approximately $434 million. The projected benefit obligation for these post-retirement benefit plans as of October 31, 2015 was approximately $598 million. The net funded status of these plans represents a net obligation which is recognized on HP Inc.'s Consolidated Balance Sheets for approximately $164 million.

        The current Hewlett-Packard Company 401(k) Plan ("HP 401(k) Plan") will remain with HP Inc. A new 401(k) Plan was created for the employees of Hewlett Packard Enterprise and the respective balances were transferred after the Separation.