18. Pension and Other Benefit Plans

Pension Plans

Schlumberger sponsors several defined benefit pension plans that cover substantially all US employees hired prior to October 1, 2004. The benefits are based on years of service and compensation, on a career-average pay basis.

In addition to the United States defined benefit pension plans, Schlumberger sponsors several other international defined benefit pension plans. The most significant of these international plans are the International Staff Pension Plan and the UK pension plan (collectively, the “International plans”). The International Staff Pension Plan covers certain international employees hired prior to July 1, 2014 and is based on years of service and compensation on a career-average pay basis. The UK plan covers employees hired prior to April 1, 1999, and is based on years of service and compensation, on a final salary basis.

The weighted-average assumed discount rate, compensation increases and the expected long-term rate of return on plan assets used to determine the net pension cost for the US and International plans were as follows:

	US									International
	2014			2013			2012			2014			2013			2012
Discount rate		4.85	%		4.25	%		5.50	%		4.76	%		4.38	%		4.95	%
Compensation increases		4.00	%		4.00	%		4.00	%		4.80	%		4.83	%		4.91	%
Return on plan assets		7.25	%		7.50	%		7.50	%		7.50	%		7.50	%		7.50	%

Net pension cost for 2014, 2013 and 2012 included the following components:

	(Stated in millions)

	US									International
	2014			2013			2012			2014			2013			2012
Service cost - benefits earned during the period	$	72		$	80		$	68		$	126		$	127		$	86
Interest cost on projected benefit obligation		164			150			152			288			253			241
Expected return on plan assets		(208	)		(200	)		(185	)		(450	)		(384	)		(328	)
Amortization of net loss		82			122			95			94			155			76
Amortization of prior service cost		12			12			12			120			117			120
	$	122		$	164		$	142		$	178		$	268		$	195

The weighted-average assumed discount rate and compensation increases used to determine the projected benefit obligations for the US and International plans were as follows:

	US						International
	2014			2013			2014			2013
Discount rate		4.15	%		4.85	%		4.07	%		4.76	%
Compensation increases		4.00	%		4.00	%		4.79	%		4.80	%

The changes in the projected benefit obligation, plan assets and funded status of the plans were as follows:

	(Stated in millions)

	US						International
	2014			2013			2014			2013
Change in Projected Benefit Obligations
Projected benefit obligation at beginning of year	$	3,418		$	3,558		$	5,981		$	5,798
Service cost		72			80			126			127
Interest cost		164			150			288			253
Contributions by plan participants		—			—			122			104
Actuarial losses (gains)		627			(232	)		1,000			(168	)
Currency effect		—			—			(90	)		30
Benefits paid		(144	)		(138	)		(178	)		(163	)
Projected benefit obligation at end of year	$	4,137		$	3,418		$	7,249		$	5,981
Change in Plan Assets
Plan assets at fair value at beginning of year	$	3,269		$	2,910		$	6,246		$	5,120
Actual return on plan assets		339			356			502			836
Currency effect		—			—			(102	)		35
Company contributions		85			141			240			314
Contributions by plan participants		—			—			122			104
Benefits paid		(144	)		(138	)		(178	)		(163	)
Plan assets at fair value at end of year	$	3,549		$	3,269		$	6,830		$	6,246
(Unfunded Liability) / Asset	$	(588	)	$	(149	)	$	(419	)	$	265
Amounts Recognized in Balance Sheet
Postretirement Benefits	$	(588	)	$	(149	)	$	(546	)	$	(5	)
Other Assets		—			—			127			270
	$	(588	)	$	(149	)	$	(419	)	$	265
Amounts Recognized in Accumulated Other Comprehensive Loss
Actuarial losses	$	1,104		$	687		$	1,658		$	882
Prior service cost		66			78			357			418
	$	1,170		$	765		$	2,015		$	1,300
Accumulated benefit obligation	$	3,805		$	3,158		$	6,793		$	5,593

The unfunded liability represents the difference between the plan assets and the projected benefit obligation (“PBO”). The PBO represents the actuarial present value of benefits based on employee service and compensation and includes an assumption about future compensation levels. The accumulated benefit obligation represents the actuarial present value of benefits based on employee service and compensation, but does not include an assumption about future compensation levels.

The weighted-average allocation of plan assets and the target allocations by asset category are as follows:

	US									International
	Target			2014			2013			Target			2014			2013
Equity securities		37 - 56	%		48	%		50	%		50 - 71	%		58	%		60	%
Debt securities		35 - 62			42			40			20 - 35			32			31
Cash and cash equivalents		0 - 3			2			2			0 - 5			4			3
Alternative investments		0 - 8			8			8			0 - 25			6			6
		100	%		100	%		100	%		100	%		100	%		100	%

Asset performance is monitored frequently with an overall expectation that plan assets will meet or exceed the weighted index of its target asset allocation and component benchmark over rolling five-year periods.

The expected long-term rate of return on assets assumptions reflect the average rate of earnings expected on funds invested or to be invested. The assumptions have been determined based on expectations regarding future rates of return for the portfolio considering the asset allocation and related historical rates of return. The appropriateness of the assumptions is reviewed annually.

The fair value of Schlumberger’s pension plan assets at December 31, 2014 and 2013, by asset category, is presented below and was determined based on valuation techniques categorized as follows:

●	Level One: The use of quoted prices in active markets for identical instruments.

●	Level Two: The use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or other inputs that are observable in the market or can be corroborated by observable market data.

●	Level Three: The use of significant unobservable inputs that typically require the use of management’s estimates of assumptions that market participants would use in pricing.

	(Stated in millions)

	US Plan Assets
	2014								2013
	Total		Level One		Level Two		Level Three		Total		Level One		Level Two		Level Three
Asset Category:
Cash and Cash Equivalents	$	59	$	40	$	19	$	—	$	77	$	24	$	53	$	—
Equity Securities:
US ^(a)		1,149		622		527				1,068		625		443
International^(b)		552		433		119				572		454		118
Debt Securities:
Corporate bonds^(c)		654				654				548				548
Government and government-related debt securities ^(d)		735		175		560				639		161		478
Collateralized mortgage obligations and mortgage backed securities^(e)		107				107				99				99
Alternative Investments:
Private equity ^(f)		210						210		204						204
Real estate ^(g)		83						83		62						62
Total	$	3,549	$	1,270	$	1,986	$	293	$	3,269	$	1,264	$	1,739	$	266

	(Stated in millions)

	International Plan Assets
	2014								2013
	Total		Level One		Level Two		Level Three		Total		Level One		Level Two		Level Three
Asset Category:
Cash and Cash Equivalents	$	264	$	174	$	90	$	—	$	267	$	127	$	140	$	—
Equity Securities:
US ^(a)		2,432		1,757		675				2,175		1,603		572
International^(b)		1,534		1,047		487				1,566		990		576
Debt Securities:
Corporate bonds^(c)		780				780				576				576
Government and government-related debt securities ^(d)		1,181		8		1,173				997		6		991
Collateralized mortgage obligations and mortgage backed securities ^(e)		256				256				301				301
Alternative Investments:
Private equity ^(f)		246						246		206						206
Real estate^(g)		49						49		60						60
Other		88						88		98						98
Total	$	6,830	$	2,986	$	3,461	$	383	$	6,246	$	2,726	$	3,156	$	364

^(a)	US equities include companies that are well diversified by industry sector and equity style (i.e., growth and value strategies). Active and passive management strategies are employed. Investments are primarily in large capitalization stocks and, to a lesser extent, mid- and small-cap stocks.

^(b)

International equities are invested in companies that are traded on exchanges outside the US and are well diversified by industry sector, country and equity style. Active and passive strategies are employed. The vast majority of the investments are made in companies in developed markets with a small percentage in emerging markets.

^(c)	Corporate bonds consist primarily of investment grade bonds from diversified industries.

^(d)	Government and government-related debt securities are comprised primarily of inflation-protected US treasuries and, to a lesser extent, other government-related securities.

^(e)

Collateralized mortgage obligations and mortgage backed-securities are debt obligations that represent claims to the cash flows from pools of mortgage loans which are purchased from banks, mortgage companies, and other originators and then assembled into pools by governmental, quasi-governmental and private entities.

^(f)	Private equity includes investments in several fund of funds limited partnerships.

^(g)	Real estate primarily includes investments in real estate limited partnerships, concentrated in commercial real estate.

Schlumberger’s funding policy is to annually contribute amounts that are based upon a number of factors including the actuarial accrued liability, amounts that are deductible for income tax purposes, legal funding requirements and available cash flow. Schlumberger currently anticipates contributing approximately $400 million to its postretirement benefit plans in 2015, subject to market and business conditions.

Postretirement Benefits Other Than Pensions

Schlumberger provides certain healthcare benefits to certain former US employees who have retired. During the fourth quarter of 2014 Schlumberger announced that, effective April 1, 2015, it will change the way it provides healthcare coverage to certain retirees who are age 65 and over. Under the amended plan, these retirees will transfer to individual coverage under the Medicare Exchange. Schlumberger will subsidize the cost of the program by providing these retirees with a Health Reimbursement Account. The annual subsidy may be increased based on medical cost inflation, but it will not be increased more than 5% in any given year. The benefit obligation relating to these retirees represents approximately 66% of Schlumberger’s total accumulated benefit obligation for postretirement benefits other than pensions as of December 31, 2014.

The actuarial assumptions used to determine the accumulated postretirement benefit obligation and net periodic benefit cost for the US postretirement medical plan were as follows:

	Benefit Obligation at December 31,						Net Periodic Benefit Cost for the year
	2014			2013			2014			2013			2012
Discount rate		4.15	%		4.85	%		4.85	%		4.25	%		5.00	%
Return on plan assets		—			—			7.00	%		7.00	%		7.00	%
Current medical cost trend rate		7.00	%		7.25	%		7.25	%		7.50	%		8.00	%
Ultimate medical cost trend rate		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%
Year that the rate reaches the ultimate trend rate		2023			2023			2023			2023			2018

The net periodic benefit cost for the US postretirement medical plan included the following components:

	(Stated in millions)

	2014			2013			2012
Service cost — benefits earned during the period	$	43		$	48		$	29
Interest cost on projected benefit obligation		60			56			58
Expected return on plan assets		(45	)		(37	)		(30	)
Amortization of net loss		1			23			16
Amortization of prior service credit		(4	)		(4	)		(7	)
	$	55		$	86		$	66

The changes in the accumulated postretirement benefit obligation, plan assets and funded status were as follows:

	(Stated in millions)

	2014			2013
Change in Accumulated Postretirement Benefit Obligation
Benefit obligation at beginning of year	$	1,247		$	1,410
Service cost		43			48
Interest cost		60			56
Contributions by plan participants		6			6
Actuarial losses (gains)		210			(232	)
Benefits paid		(46	)		(41	)
Plan amendments		(299	)		—
Benefit obligation at end of year	$	1,221		$	1,247
Change in Plan Assets
Plan assets at fair value at beginning of year	$	731		$	576
Company contributions		65			83
Contributions by plan participants		6			6
Benefits paid		(46	)		(41	)
Actual return on plan assets		98			107
Plan assets at fair value at end of year	$	854		$	731
Unfunded Liability	$	(367	)	$	(516	)
Amounts Recognized in Accumulated Other Comprehensive Loss
Actuarial losses	$	242		$	87
Prior service credit		(307	)		(12	)
	$	(65	)	$	75

The unfunded liability is included in Postretirement Benefits in the Consolidated Balance Sheet.

The assets of the US postretirement medical plan are invested 60% in equity securities and 40% in debt securities at December 31, 2014. The fair value of these assets was primarily determined based on Level Two valuation techniques.

Assumed health care cost trend rates have a significant effect on the amounts reported for the US postretirement medical plan. A one percentage point change in assumed health care cost trend rates would have the following effects:

	(Stated in millions)

	One percentage point increase		One percentage point decrease
Effect on total service and interest cost components	$	42	$	(17	)
Effect on accumulated postretirement benefit obligation	$	37	$	(33	)

Other Information

The expected benefits to be paid under the US and International pension plans as well as the postretirement medical plan were as follows:

	(Stated in millions)

	Pension Benefits				Postretirement Medical Plan
	US		International		Postretirement Medical Plan
2015	$	155	$	222	$	46
2016		162		240		49
2017		171		256		52
2018		181		274		56
2019		190		290		59
2020 - 2024		1,112		1,675		344

Included in Accumulated other comprehensive loss at December 31, 2014 are non-cash pretax charges which have not yet been recognized in net periodic benefit cost. The estimated portion of each component of Accumulated other comprehensive loss which is expected to be recognized as a component of net periodic benefit cost during the year ending December 31, 2015 is as follows:

	(Stated in millions)

	Pension Plans		Postretirement Medical Plan
Net actuarial losses	$	274	$	17
Prior service cost (credit)	$	133	$	(32	)

In addition to providing defined pension benefits and a postretirement medical plan, Schlumberger and its subsidiaries have other deferred benefit programs, primarily profit sharing and defined contribution pension plans. Expenses for these programs were $749 million, $671 million and $620 million in 2014, 2013 and 2012, respectively.