Employee Benefit Plans

Defined Contribution Retirement Plans

We and certain of our subsidiaries sponsor defined contribution retirement plans intended to qualify under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). Certain of the plans were amended and restated effective January 1, 2013 to comply with, among other things, Section 415 of the Code, and certain of the plans were further amended in 2014. Participation in the Company's active plan is available to all employees who meet certain eligibility requirements and elect to participate. Employees may contribute up to the maximum limits allowed by Sections 401(k) and 415 of the Code, with Company contributions based on matching or other formulas. Our expense under these plans totaled $16.3 million, $16.0 million and $16.4 million for the years ended December 31, 2014, 2013 and 2012, respectively, and is included in general and administrative expense in our consolidated statements of operations.

Deferred Compensation Plans

We have a voluntary deferred compensation plan pursuant to which certain management and highly compensated employees are eligible to defer a certain portion of their regular compensation and bonuses (the "Employee Plan"). In addition, we have a voluntary deferred compensation plan pursuant to which the non-employee members of the Health Net, Inc. Board of Directors are eligible to defer a certain portion of their cash retainers, meeting fees and other cash remuneration (the "BOD Plan"). The compensation deferred under these plans is credited with earnings or losses measured by the mirrored rate of return on investments elected by plan participants. These plans are unfunded. Each plan participant is fully vested in all deferred compensation and earnings credited to his or her account. The BOD Plan was amended and restated effective December 1, 2009 and the Employee Plan was amended and restated effective January 1, 2010. The plans were amended effective November 18, 2013.

As of December 31, 2014 and 2013, the liability under these plans amounted to $50.6 million and $52.0 million, respectively. These liabilities are included in other noncurrent liabilities on our consolidated balance sheets. Deferred compensation expense is recognized for the amount of earnings or losses credited to participant accounts. Our expense under these plans totaled $1.5 million, $2.8 million and $4.2 million for the years ended December 31, 2014, 2013 and 2012, respectively, and is included in general and administrative expense in our consolidated statements of operations.

Pension and Other Postretirement Benefit Plans

Pension Plans—We have an unfunded non-qualified defined benefit pension plan, the Supplemental Executive Retirement Plan. The plan was amended and restated effective January 1, 2008. This plan is noncontributory and covers key executives as selected by our Board of Directors. Benefits under the plan are based on years of service and level of compensation during the final five years of service.

Postretirement Health and Life Plans—Certain of our subsidiaries sponsor postretirement defined benefit health care and life insurance plans that provide postretirement medical and life insurance benefits to directors, key executives, employees and dependents who meet certain eligibility requirements. The Health Net of California Retiree Medical and Life Benefits Plan is non-contributory for employees retired prior to December 1, 1995 who have attained the age of 62; employees retiring after December 1, 1995 who have attained age 62 contribute from 25% to 100% of the cost of coverage depending upon years of service. The plan was amended in 2008 to vest benefits for eligible associates who were terminated in connection with the Company’s operations strategy. We have two other benefit plans that we have acquired as part of acquisitions made in 1997. One of the plans is frozen and non-contributory, whereas the other plan is contributory by certain participants. Under these plans, we pay a percentage of the costs of medical, dental and vision benefits during retirement. The plans include certain cost-sharing features such as deductibles, co-insurance and maximum annual benefit amounts that vary based principally on years of credited service.

The following table sets forth the plans' obligations and funded status at December 31:



	Pension Benefits						Other Benefits
	2014			2013			2014			2013
	(Dollars in millions)
Change in benefit obligation:
Benefit obligation, beginning of year	$	40.4		$	43.4		$	24.1		$	26.9
Service cost	1.1			1.2			0.3			0.4
Interest cost	1.8			1.6			1.1			1.0
Change in plan provisions	—			—			—			(0.6		)
Benefits paid	(1.2		)	(1.2		)	(1.1		)	(0.9		)
Actuarial (gain) loss	7.6			(4.6		)	4.4			(2.7		)
Benefit obligation, end of year	$	49.7		$	40.4		$	28.8		$	24.1
Change in fair value of plan assets:
Plan assets, beginning of year	$	—		$	—		$	—		$	—
Employer contribution	1.2			1.2			1.1			0.9
Benefits paid	(1.2		)	(1.2		)	(1.1		)	(0.9		)
Plan assets, end of year	$	—		$	—		$	—		$	—
Underfunded status, end of year	$	(49.7	)	$	(40.4	)	$	(28.8	)	$	(24.1	)

Amounts recognized in our consolidated balance sheet as of December 31 consist of:



	Pension Benefits						Other Benefits
	2014			2013			2014			2013
	(Dollars in millions)
Noncurrent assets	$	—		$	—		$	—		$	—
Current liabilities	(1.7		)	(1.7		)	(0.9		)	(1.1		)
Noncurrent liabilities	(48.0		)	(38.7		)	(27.9		)	(23.0		)
Net amount recognized	$	(49.7	)	$	(40.4	)	$	(28.8	)	$	(24.1	)

Amounts recognized in accumulated other comprehensive income as of December 31 consist of:



	Pension Benefits				Other Benefits
	2014		2013		2014		2013
	(Dollars in millions)
Prior service cost	$	—	$	—	$	0.1	$	0.3
Net loss (gain)	5.3		0.7		6.1		3.6
	$	5.3	$	0.7	$	6.2	$	3.9

The following table sets forth our plans with an accumulated benefit obligation in excess of plan assets at December 31:



	Pension Benefits				Other Benefits
	2014		2013		2014		2013
	(Dollars in millions)
Projected benefit obligation	$	49.7	$	40.4	$	28.8	$	24.1
Accumulated benefit obligation	46.1		37.1		28.8		24.1
Fair value of plan assets	—		—		—		—

Components of net periodic benefit cost recognized in our consolidated statements of operations as general and administrative expense for years ended December 31:



	Pension Benefits						Other Benefits
	2014		2013		2012		2014		2013		2012
	(Dollars in millions)
Service cost	$	1.1	$	1.2	$	1.7	$	0.3	$	0.4	$	0.4
Interest cost	1.8		1.6		1.8		1.1		1.0		1.1
Amortization of prior service cost	—		—		—		0.4		0.1		0.1
Amortization of net loss (gain)	—		0.5		1.2		0.2		1.9		2.9
Net periodic benefit cost	$	2.9	$	3.3	$	4.7	$	2.0	$	3.4	$	4.5

The estimated net (gain) loss and prior service cost for the pension and other postretirement benefit plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $2.2 million and $0.4 million, respectively.

All of our pension and other postretirement benefit plans are unfunded. Employer contributions equal benefits paid during the year. Therefore, no return on assets is expected.

Additional Information



	Pension Benefits				Other Benefits
	2014		2013		2014		2013
Assumptions
Weighted average assumptions used to determine benefit obligations at December 31:
Discount rate	3.7	%	4.5	%	3.9	%	4.8	%
Rate of compensation increase	6.0	%	6.0	%	3.5	%	3.5	%



	Pension Benefits						Other Benefits
	2014		2013		2012		2014		2013		2012
Weighted average assumptions used to determine net cost for years ended December 31:
Discount rate	4.5	%	3.7	%	4.4	%	4.8	%	4.0	%	4.5	%
Rate of compensation increase	6.0	%	6.0	%	5.9	%	3.5	%	3.5	%	3.5	%

The discount rates we used to measure our obligations under our pension and other postretirement plans at December 31, 2014 and 2013 mirror the rate of return expected from high-quality fixed income investments.



	2014					2013
Assumed Health Care Cost Trend Rates at December 31:
Health care cost trend rates assumed for next year	6.5	%	to	12.8	%	7.3	%	to	16.3	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5%					5%
Years that the rate reaches the ultimate trend rate	2024		to	2024		2022		to	2023

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects for the year ended December 31, 2014:



	1-Percentage Point Increase		1-Percentage Point Decrease
	(Dollars in millions)
Effect on total of service and interest cost	$	0.2	$	(0.2	)
Effect on postretirement benefit obligation	$	4.7	$	(3.8	)

Contributions

We expect to contribute $1.7 million to our pension plan and $0.9 million to our postretirement health and life plans throughout 2015. The entire amount expected to be contributed, in the form of cash, to the defined benefit pension and postretirement health and life plans during 2014 is expected to be paid out as benefits during the same year.

Estimated Future Benefit Payments

We estimate that benefit payments related to our pension and postretirement health and life plans over the next ten years will be as follows:



	Pension Benefits		Other Benefits
	(Dollars in millions)
2015	$	1.7	$	0.9
2016	2.9		1.0
2017	2.9		1.0
2018	2.8		1.1
2019	2.8		1.1
Years 2019—2024	16.7		6.7