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
	2015			2014			2013			2015			2014			2013
Discount rate...........................		4.15	%		4.85	%		4.25	%		4.07	%		4.76	%		4.38	%
Compensation increases...................		4.00	%		4.00	%		4.00	%		4.79	%		4.80	%		4.83	%
Return on plan assets.....................		7.25	%		7.25	%		7.50	%		7.50	%		7.50	%		7.50	%

Net pension cost for 2015, 2014 and 2013 included the following components:

(Stated in millions)

	US									International
	2015			2014			2013			2015			2014			2013
Service cost - benefits earned during the period....	$	86		$	72		$	80		$	167		$	126		$	127
Interest cost on projected benefit obligation......		170			164			150			297			288			253
Expected return on plan assets...............		(229	)		(208	)		(200	)		(498	)		(450	)		(384	)
Amortization of prior service cost.............		12			12			12			121			120			117
Amortization of net loss...................		123			82			122			170			94			155
	$	162		$	122		$	164		$	257		$	178		$	268

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
	2015			2014			2015			2014
Discount rate....................................		4.50	%		4.15	%		4.36	%		4.07	%
Compensation increases.............................		4.00	%		4.00	%		4.80	%		4.79	%

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

(Stated in millions)

	US						International
	2015			2014			2015			2014
Change in Projected Benefit Obligations
Projected benefit obligation at beginning of year............	$	4,137		$	3,418		$	7,249		$	5,981
Service cost....................................		86			72			167			126
Interest cost....................................		170			164			297			288
Contribution by plan participants......................		-			-			143			122
Actuarial (gains) losses.............................		(205	)		627			(203	)		1,000
Currency effect..................................		-			-			(66	)		(90	)
Benefits paid...................................		(163	)		(144	)		(247	)		(178	)
Projected benefit obligation at end of year................	$	4,025		$	4,137		$	7,340		$	7,249
Change in Plan Assets
Plan assets at fair value at beginning of year...............	$	3,549		$	3,269		$	6,830		$	6,246
Actual return on plan assets..........................		(1	)		339			(4	)		502
Currency effect..................................		-			-			(69	)		(102	)
Company contributions.............................		82			85			198			240
Contributions by plan participants......................		-			-			125			122
Benefits paid...................................		(163	)		(144	)		(248	)		(178	)
Plan assets at fair value at end of year...................	$	3,467		$	3,549		$	6,832		$	6,830
Unfunded Liability...............................	$	(558	)	$	(588	)	$	(508	)	$	(419	)
Amounts Recognized in Balance Sheet
Postretirement Benefits.............................	$	(558	)	$	(588	)	$	(657	)	$	(546	)
Other Assets....................................		-			-			149			127
	$	(558	)	$	(588	)	$	(508	)	$	(419	)
Amounts Recognized in Accumulated Other Comprehensive Loss
Actuarial losses..................................	$	1,008		$	1,104		$	335		$	1,658
Prior service cost.................................		54			66			-			357
	$	1,062		$	1,170		$	335		$	2,015
Accumulated benefit obligation.......................	$	3,763		$	3,805		$	6,913		$	6,793

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			2015			2014			Target			2015			2014
Equity securities.........................	37 - 56		%		52	%		48	%	45 - 71		%		64	%		58	%
Debt securities..........................	35 - 62				36			42		20 - 35				27			32
Cash and cash equivalents..................	0 - 3				2			5		0 - 5				2			4
Alternative investments....................	0 - 10				10			8		0 - 25				7			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, 2015 and 2014, 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
	2015								2014
			Level		Level		Level				Level		Level		Level
	Total		One		Two		Three		Total		One		Two		Three
Asset Category:
Cash and Cash Equivalents..........	$	86	$	40	$	46	$	-	$	59	$	40	$	19	$	-
Equity Securities:
US (a).......................		1,195		655		540				1,149		622		527
International (b)................		605		473		132				552		433		119
Debt Securities
Corporate bonds (c)..............		599				599				654				654
Government and government-related debt securities (d)		589		159		430				735		175		560
Collateralized mortgage obligations and mortgage backed securities (e)		65				65				107				107
Alternative Investments:
Private equity (f)................		203						203		210						210
Real estate (g)..................		125						125		83						83
Total..........................	$	3,467	$	1,327	$	1,812	$	328	$	3,549	$	1,270	$	1,986	$	293

(Stated in millions)

	International Plan Assets
	2015								2014
			Level		Level		Level				Level		Level		Level
	Total		One		Two		Three		Total		One		Two		Three
Asset Category:
Cash and Cash Equivalents..........	$	138	$	115	$	23	$	-	$	264	$	174	$	90	$	-
Equity Securities:
US (a).......................		2,736		2,240		496				2,432		1,757		675
International (b).................		1,639		1,179		460				1,534		1,047		487
Debt Securities
Corporate bonds (c)..............		657				657				780				780
Government and government-related debt securities (d)		1,036		8		1,028				1,181		8		1,173
Collateralized mortgage obligations and mortgage backed securities (e)		143				143				256				256
Alternative Investments:
Private equity (f)................		331						331		246						246
Real estate (g)..................		49						49		49						49
Other........................		103						103		88						88
Total..........................	$	6,832	$	3,542	$	2,807	$	483	$	6,830	$	2,986	$	3,461	$	383

(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.

(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 $350 million to its postretirement benefit plans in 2016, 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 transferred 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 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 Obligations						Net Periodic Benefit
	At December 31,						Cost for the year
	2015			2014			2015			2014			2013
Discount rate...............................		4.50	%		4.15	%		4.15	%		4.85	%		4.25	%
Return on plan assets..........................	-			-				7.00	%		7.00	%		7.00	%
Current medical cost trend rate...................		7.00	%		7.00	%		7.00	%		7.25	%		7.50	%
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			2023

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

(Stated in millions)

	2015			2014			2013
Service cost...........................................	$	42		$	43		$	48
Interest cost...........................................		48			60			56
Expected return on plan assets...............................		(52	)		(45	)		(37	)
Amortization of prior service credit............................		(32	)		(4	)		(4	)
Amortization of net loss...................................		13			1			23
	$	19		$	55		$	86

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

(Stated in millions)

	2015			2014
Change in Projected Benefit Obligations
Benefit obligation at beginning of year..................................	$	1,221		$	1,247
Service cost....................................................		42			43
Interest cost....................................................		48			60
Contribution by plan participants......................................		7			6
Actuarial (gains) losses............................................		(168	)		210
Benefits paid...................................................		(47	)		(46	)
Plan amendments................................................		-			(299	)
Benefit obligation at end of year.......................................	$	1,103		$	1,221
Change in Plan Assets
Plan assets at fair value at beginning of year...............................	$	854		$	731
Company contributions............................................		66			65
Contributions by plan participants.....................................		7			6
Benefits paid...................................................		(47	)		(46	)
Actual return on plan assets..........................................		4			98
Plan assets at fair value at end of year...................................	$	884		$	854
Unfunded Liability...............................................	$	(219	)	$	(367	)
Amounts Recognized in Accumulated Other Comprehensive Loss
Actuarial losses..................................................	$	106		$	242
Prior service cost.................................................		(275	)		(307	)
	$	(169	)	$	(65	)

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, 2015. 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		One percentage
	point increase		point decrease
Effect on total service and interest cost components..........................	$	7	$	(6	)
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
	US		International		Medical Plan
2016................................................	$	176	$	242	$	50
2017................................................	$	183	$	259	$	53
2018................................................	$	189	$	278	$	57
2019................................................	$	197	$	294	$	60
2020................................................	$	205	$	310	$	62
2021-2025............................................	$	1,152	$	1,781	$	341

Included in Accumulated other comprehensive loss at December 31, 2015 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, 2016 is as follows:

(Stated in millions)

			Postretirement
	Pension Plans		Medical Plan
Net actuarial losses...............................................	$	163	$	-
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 $565 million, $749 million and $671 million in 2015, 2014 and 2013, respectively.