RETIREMENT PLANS AND POST-RETIREMENT PENSION PLANS

General. Prior to the Capitalization, substantially all of our employees were covered under various defined benefit and/or defined contribution retirement plans sponsored by Agilent. All defined benefit retirement plans and the post-retirement health care plan were considered multi-employer plans. As a result, no asset or liability was recorded by us to recognize the funded status in our combined and consolidated balance sheet until the Capitalization. At the Capitalization, the assets and liabilities of these plans that were allocable to Keysight employees were transferred to Keysight plans. Plan assets of $2,037 million, benefit obligations of $2,157 million and $344 million of accumulated other comprehensive loss ($270 million, net of tax) were recorded for the plans transferred to us. In 2015, additional plan assets of $9 million that were allocable to Keysight employees were transferred to Keysight plans by Agilent.

Substantially all of our employees are covered under various defined benefit and/or defined contribution retirement plans. Additionally, we sponsor post-retirement health care benefits for our eligible U.S. employees. We provide U.S. employees, who meet eligibility criteria under the Keysight Technologies, Inc. Retirement Plan ("RP"), defined benefits which are based on an employee's base or target pay during the years of employment and on length of service. For eligible service through October 31, 1993, the benefit payable under the RP is reduced by any amounts due to the eligible employee under our defined contribution Deferred Profit-Sharing Plan ("DPSP"), which was closed to new participants as of November 1993.

In addition, in the U.S. we maintain the Supplemental Benefits Retirement Plan ("SBRP"), a supplemental unfunded non-qualified defined benefit plan to provide benefits that would be provided under the RP but for limitations imposed by the Internal Revenue Code. The RP and the SBRP comprise the "U.S. Plans."

As of October 31, 2015, the fair value of plan assets of the DPSP for U.S. employees was $300 million. Note that the projected benefit obligation for the DPSP equals the fair value of plan assets.

Eligible employees outside the U.S. generally receive retirement benefits under various retirement plans ("Non-U.S. Plans") based upon factors such as years of service and/or employee compensation levels. Eligibility is generally determined in accordance with local statutory requirements.

401(k) defined contribution plan. Eligible U.S. employees may participate in the Keysight Technologies, Inc. 401(k) Plan (the "401(k) Plan"). Enrollment in the 401(k) Plan is automatic for employees who meet eligibility requirements unless they decline participation. Under the 401(k) Plan, we provide matching contributions to employees up to a maximum of 4 percent of an employee's annual eligible compensation. The maximum contribution to the 401(k) Plan is 50 percent of an employee's annual eligible compensation, subject to regulatory limitations. The 401(k) Plan employer expense included in income from operations was $14 million in 2015 and $12 million in 2014, including allocated costs and contributions made from Agilent of $9 million. Agilent allocated costs and made contributions to the 401(k) Plan on our behalf in the amount of $12 million for the year ended October 31, 2013.

Employees hired on or after August 1, 2015 are not eligible to participate in the RP or the U.S. Post-Retirement Benefit Plan. We provide matching contributions to these employees under the 401(k) Plan up to a maximum of 6 percent of the employee's annual eligible compensation.

Post-retirement medical benefit plans. In addition to receiving retirement benefits, U.S. employees who meet eligibility requirements as of their termination date may participate in the Keysight Technologies, Inc. Health Plan for Retirees ("U.S. Post-Retirement Benefit Plan"). Eligible retirees who were less than age 50 as of January 1, 2005 and who retire after age 55 with 15 or more years of service (age 54 with 14 or more years of service for workforce managed terminations) are eligible for a fixed amount which can be utilized to pay for premiums under a Keysight sponsored pre-Medicare medical plan, non-Keysight sponsored medical, dental and vision plans purchased in the individual insurance market, as well as Medicare Part A, Medicare Part B and prescription drug premiums. Premiums to purchase other employer-sponsored coverage are not eligible for reimbursement. Eligible retirees who were at least age 50 as of January 1, 2005 and who retire after age 55 with 15 or more years of service (age 54 with 14 or more years of service for workforce managed terminations) currently choose from managed-care or indemnity options, with the company subsidization level or stipend dependent on a number of factors including eligibility and length of service. Grandfathered retirees receive a fixed monthly subsidy toward pre-65 premium costs (subsidy capped at 2011 levels) and a fixed monthly stipend post-65. The subsidy amounts will not increase.

Components of net periodic cost. The company uses alternate methods of amortization, as allowed by the authoritative guidance, which amortizes the actuarial gains and losses on a consistent basis for the years presented. For the U.S. Plans, gains and losses are amortized over the average future working lifetime. For most Non-U.S. Plans and the U.S. Post-Retirement Benefit Plan, gains and losses are amortized using a separate layer for each year's gains and losses.

For the years ended October 31, 2015, 2014 and 2013, components of net periodic benefit cost (benefit) and other amounts recognized in other comprehensive income were comprised of:



	Defined Benefit Plans																U.S. Post-Retirement Benefit Plan
	U.S. Plans								Non-U.S. Plans								U.S. Post-Retirement Benefit Plan
	2015			2014			2013		2015			2014			2013		2015			2014			2013
	(in millions)
Net periodic benefit cost (benefit)
Service cost — benefits earned during the period	$	22		$	5		$	—	$	18		$	4		$	—	$	1		$	—		$	—
Interest cost on benefit obligation	20			5			—		41			11			—		7			2			—
Expected return on plan assets	(38		)	(10		)	—		(72		)	(19		)	—		(13		)	(4		)	—
Amortization of net actuarial loss	4			1			—		27			7			—		12			2			—
Amortization of prior service credit	(7		)	(1		)	—		(1		)	—			—		(21		)	(5		)	—
Net periodic benefit cost (benefit)	1			—			—		13			3			—		(14		)	(5		)	—
Allocated benefit cost (benefit) from Agilent	—			3			9		—			9			23		—			(9		)	(10		)
Total periodic benefit cost (benefit)	$	1		$	3		$	9	$	13		$	12		$	23	$	(14	)	$	(14	)	$	(10	)
Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss
Prior service credits assumed at the Capitalization	$	—		$	(33	)	$	—	$	—		$	(3	)	$	—	$	—		$	(102	)	$	—
Net actuarial loss assumed at the Capitalization	—			40			—		—			367			—		—			75			—
Net actuarial loss	57			5			—		51			39			—		31			7			—
Amortization of net actuarial loss	(4		)	(1		)	—		(27		)	(7		)	—		(12		)	(2		)	—
Amortization of prior service credit	7			1			—		1			—			—		21			5			—
Foreign currency	—			—			—		24			9			—		—			—			—
Total recognized in other comprehensive (income) loss	$	60		$	12		$	—	$	49		$	405		$	—	$	40		$	(17	)	$	—
Total recognized in net periodic benefit cost (benefit) and other comprehensive (income) loss	$	61		$	15		$	9	$	62		$	417		$	23	$	26		$	(31	)	$	(10	)

Funded status. As of October 31, 2015 and 2014, the funded status of the defined benefit and post-retirement benefit plans was as follows:



	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						U.S. Post-Retirement Benefit Plan
	2015			2014			2015			2014			2015			2014
	(in millions)
Change in fair value of plan assets:
Fair value — beginning of year	$	491		$	—		$	1,318		$	—		$	187		$	—
Assets received from Agilent	—			490			9			1,358			—			189
Actual return on plan assets	7			7			81			46			2			2
Employer contributions	—			—			48			10			1			—
Benefits paid	(23		)	(6		)	(33		)	(9		)	(11		)	(4		)
Currency impact	—			—			(80		)	(87		)	—			—
Fair value — end of year	$	475		$	491		$	1,343		$	1,318		$	179		$	187
Change in benefit obligation:
Benefit obligation — beginning of year	$	514		$	—		$	1,429		$	—		$	206		$	—
Liabilities assumed from Agilent	—			508			—			1,446			—			203
Service cost	22			5			18			4			1			—
Interest cost	20			5			41			11			7			2
Plan amendment	—			—			—			(1		)	—			—
Actuarial loss	27			2			60			70			20			5
Benefits paid	(24		)	(6		)	(33		)	(9		)	(11		)	(4		)
Currency impact	—			—			(90		)	(92		)	—			—
Benefit obligation — end of year	$	559		$	514		$	1,425		$	1,429		$	223		$	206
Underfunded status of PBO	$	(84	)	$	(23	)	$	(82	)	$	(111	)	$	(44	)	$	(19	)
Amounts recognized in the consolidated balance sheet consist of:
Other assets	$	—		$	—		$	57		$	48		$	—		$	—
Employee compensation and benefits	(1		)	(1		)	—			—			—			—
Retirement and post-retirement benefits	(83		)	(22		)	(139		)	(159		)	(44		)	(19		)
Net liability	$	(84	)	$	(23	)	$	(82	)	$	(111	)	$	(44	)	$	(19	)
Amounts recognized in accumulated other comprehensive income (loss):
Actuarial losses	$	97		$	44		$	430		$	408		$	99		$	80
Prior service credits	(25		)	(32		)	(4		)	(3		)	(76		)	(97		)
Total	$	72		$	12		$	426		$	405		$	23		$	(17	)

The amounts in accumulated other comprehensive income expected to be amortized into net periodic benefit cost (benefit) during 2016 are as follows:



	U.S. Defined Benefit Plans			Non-U.S. Defined Benefit Plans			U.S. Post-Retirement Benefit Plan
	(in millions)
Amortization of net prior service credit	$	(7	)	$	(1	)	$	(17	)
Amortization of actuarial net loss	$	9		$	27		$	20

Investment policies and strategies as of October 31, 2015. In the U.S., our RP and U.S. Post-Retirement Benefit Plan target asset allocations are approximately 80 percent to equities and approximately 20 percent to fixed income investments. Our DPSP target asset allocation is approximately 60 percent to equities and approximately 40 percent to fixed income investments. The general investment objective for all our plan assets is to obtain the optimum rate of investment return on the total investment portfolio consistent with the assumption of a reasonable level of risk. Specific investment objectives for the plans' portfolios are to: maintain and enhance the purchasing power of the plans' assets; achieve investment returns consistent with the level of risk being taken; and earn performance rates of return in accordance with the benchmarks adopted for each asset class. Outside of the U.S., our target asset allocation is from 37 to 60 percent to equities, from 40 to 60 percent to fixed income investments, from zero to 6 percent to real estate investments and from zero to 14 percent to cash, depending on the plan. All plans' assets are broadly diversified. Due to fluctuations in capital markets, our actual allocations of plan assets at October 31, 2015, differ from the target allocation. Our policy is to periodically bring the actual allocation in line with the target allocation.

Equity securities include exchange-traded common stock and preferred stock of companies from broadly diversified industries. Fixed income securities include a portfolio of corporate bonds of companies from diversified industries, government securities, mortgage-backed securities, asset-backed securities, derivative instruments and other. Portions of the cash and cash equivalent, equity, and fixed income investments are held in commingled funds.

Fair Value. The measurement of the fair value of pension and post-retirement plan assets uses the valuation methodologies and the inputs as described in Note 13, "Fair Value Measurements."

Cash and Cash Equivalents - Cash and cash equivalents consist of short-term investment funds. The funds also invest in short-term domestic fixed income securities and other securities with debt-like characteristics emphasizing short-term maturities and quality. Cash and cash equivalents are classified as Level 1 investments except when the cash and cash equivalents are held in commingled funds, which have a daily net value derived from quoted prices for the underlying securities in active markets; these are classified as Level 2 investments.

Equity - Some equity securities consisting of common and preferred stock are held in commingled funds, which have daily net asset values derived from quoted prices for the underlying securities in active markets; these are classified as Level 2 investments. Commingled funds which have quoted prices in active markets are classified as Level 1 investments.

Fixed Income - Some of the fixed income securities are held in commingled funds, which have daily net asset values derived from the underlying securities; these are classified as Level 2 investments. Commingled funds which have quoted prices in active markets are classified as Level 1 investments.

Other Investments - Other investments include property-based pooled vehicles which invest in real estate. Market net asset values are regularly published in the financial press or on corporate websites and so these investments are classified as Level 2 and 3.

The following table presents the fair value of U.S. Defined Benefit Plans assets classified under the appropriate level of the fair value hierarchy as of October 31, 2015 and 2014:



			Fair Value Measurement at October 31, 2015 Using
	October 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Cash and Cash Equivalents	$	4	$	1	$	3	$	—
Equity	374		94		280		—
Fixed Income	97		21		76		—
Other Investments	—		—		—		—
Total assets measured at fair value	$	475	$	116	$	359	$	—



			Fair Value Measurement at October 31, 2014 Using
	October 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Cash and Cash Equivalents	$	6	$	1	$	5	$	—
Equity	365		86		279		—
Fixed Income	120		40		80		—
Other Investments	—		—		—		—
Total assets measured at fair value	$	491	$	127	$	364	$	—

For U.S. Defined Benefit Plans, there was no activity relating to assets measured at fair value using significant unobservable inputs (Level 3) during 2015 and 2014.

The following table presents the fair value of U.S. Post-Retirement Benefit Plan assets classified under the appropriate level of the fair value hierarchy as of October 31, 2015 and 2014:



			Fair Value Measurement at October 31, 2015 Using
	October 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Cash and Cash Equivalents	$	4	$	3	$	1	$	—
Equity	137		34		103		—
Fixed Income	38		8		30		—
Other Investments	—		—		—		—
Total assets measured at fair value	$	179	$	45	$	134	$	—



			Fair Value Measurement at October 31, 2014 Using
	October 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Cash and Cash Equivalents	$	3	$	1	$	2	$	—
Equity	143		34		109		—
Fixed Income	41		14		27		—
Other Investments	—		—		—		—
Total assets measured at fair value	$	187	$	49	$	138	$	—

For U.S. Post-Retirement Benefit Plan, there was no activity relating to assets measured at fair value using significant unobservable inputs (Level 3) during 2015 and 2014.

The following table presents the fair value of Non-U.S. Defined Benefit Plans assets classified under the appropriate level of the fair value hierarchy as of October 31, 2015 and 2014:



			Fair Value Measurement at October 31, 2015 Using
	October 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Cash and Cash Equivalents	$	7	$	2	$	5	$	—
Equity	709		129		580		—
Fixed Income	624		20		604		—
Other Investments	3		—		3		—
Total assets measured at fair value	$	1,343	$	151	$	1,192	$	—



			Fair Value Measurement at October 31, 2014 Using
	October 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Cash and Cash Equivalents	$	5	$	2	$	3	$	—
Equity	672		150		522		—
Fixed Income	603		23		580		—
Other Investments	38		—		21		17
Total assets measured at fair value	$	1,318	$	175	$	1,126	$	17

For Non-U.S. Defined Benefit Plans assets measured at fair value using significant unobservable inputs (Level 3), the following table summarizes the change in balances during 2015 and 2014:



	Year Ended
	October 31,
	2015			2014
	(in millions)
Balance, beginning of year	$	17		$	—
Realized gains	—			—
Unrealized gains/(losses)	—			1
Purchases, sales, issuances, and settlements	(17		)	(5		)
Transfers in (out)	—			21
Balance, end of year	$	—		$	17

The table below presents the combined projected benefit obligation ("PBO"), accumulated benefit obligation ("ABO") and fair value of plan assets, grouping plans using comparisons of the PBO and ABO relative to the plan assets as of October 31, 2015 and 2014:



	2015				2014
	Benefit Obligation		Fair Value of Plan Assets		Benefit Obligation		Fair Value of Plan Assets
	Benefit Obligation				Benefit Obligation
	PBO				PBO
	(in millions)				(in millions)
U.S. defined benefit plans where PBO exceeds the fair value of plan assets	$	559	$	475	$	514	$	491
U.S. defined benefit plans where fair value of plan assets exceeds PBO	—		—		—		—
Total	$	559	$	475	$	514	$	491
Non-U.S. defined benefit plans where PBO exceeds or is equal to the fair value of plan assets	$	1,061	$	921	$	1,111	$	952
Non-U.S. defined benefit plans where fair value of plan assets exceeds PBO	364		422		318		366
Total	$	1,425	$	1,343	$	1,429	$	1,318

	ABO				ABO
U.S. defined benefit plans where ABO exceeds the fair value of plan assets	$	527	$	475	$	5	$	—
U.S. defined benefit plans where the fair value of plan assets exceeds ABO	—		—		472		491
Total	$	527	$	475	$	477	$	491
Non-U.S. defined benefit plans where ABO exceeds or is equal to the fair value of plan assets	$	1,031	$	921	$	1,081	$	952
Non-U.S. defined benefit plans where fair value of plan assets exceeds ABO	354		422		310		366
Total	$	1,385	$	1,343	$	1,391	$	1,318

Contributions and estimated future benefit payments. During fiscal year 2016, we do not expect to contribute to the U.S. Defined Benefit Plans, and expect to contribute $43 million to the Non-U.S. Defined Benefit Plans and $2 million to the U.S. Post-Retirement Benefit Plan. The following table presents expected future benefit payments for the next 10 years.



	U.S. Defined Benefit Plans		Non-U.S. Defined Benefit Plans		U.S. Post-Retirement Benefit Plan
	(in millions)
2016	$	35	$	35	$	17
2017	$	38	$	37	$	17
2018	$	39	$	40	$	18
2019	$	42	$	45	$	17
2020	$	47	$	48	$	17
2021 - 2025	$	254	$	316	$	80

Assumptions. The assumptions used to determine the benefit obligations and expense for our defined benefit and post-retirement benefit plans are presented in the tables below. The expected long-term return on assets below represents an estimate of long-term returns on investment portfolios consisting of a mixture of equities, fixed income and other investments in proportion to the asset allocations of each of our plans. We consider long-term rates of return, which are weighted based on the asset classes (both historical and forecasted) in which we expect our pension and post-retirement funds to be invested. Discount rates reflect the current rate at which pension and post-retirement obligations could be settled based on the measurement dates of the plans - October 31. The U.S. discount rates at October 31, 2015 and 2014 were determined based on the results of matching expected plan benefit payments with cash flows from a hypothetically constructed bond portfolio. The Non-U.S. discount rates at October 31, 2015 were determined using spot rates along the yield curve to calculate disaggregated discount rates. In addition, we used this method to calculate two components of the periodic benefit cost: service cost and interest cost. The Non-U.S. discount rates at October 31, 2014 were generally based on published rates for high-quality corporate bonds. The range of assumptions that were used for the Non-U.S. defined benefit plans reflects the different economic environments within various countries.

Assumptions used to calculate the net periodic benefit cost for the year ended October 31, 2015 and 2014 were as follows:



	For years ended October 31,
	2015	2014
U.S. Defined Benefit Plans:
Discount rate	4.00%	4.00%
Average increase in compensation levels	3.50%	3.50%
Expected long-term return on assets	8.00%	8.00%
Non-U.S. Defined Benefit Plans:
Discount rate	1.50-4.00%	1.75-4.25%
Average increase in compensation levels	2.50-3.25%	2.50-3.25%
Expected long-term return on assets	4.00-6.50%	4.00-6.50%
U.S. Post-Retirement Benefits Plan:
Discount rate	3.75%	4.00%
Expected long-term return on assets	8.00%	8.00%
Current medical cost trend rate	8.00%	8.00%
Ultimate medical cost trend rate	3.50%	3.50%
Medical cost trend rate decreases to ultimate rate in year	2028	2028

Assumptions used to calculate the benefit obligation as of October 31, 2015 and 2014 were as follows:



	As of the years ended October 31,
	2015	2014
U.S. Defined Benefit Plans:
Discount rate	4.00%	4.00%
Average increase in compensation levels	3.00%	3.50%
Non-U.S. Defined Benefit Plans:
Discount rate	0.76-3.80%	1.50-4.00%
Average increase in compensation levels	2.50-3.50%	2.50-3.25%
U.S. Post-Retirement Benefits Plan:
Discount rate	4.00%	3.75%
Current medical cost trend rate	7.00%	8.00%
Ultimate medical cost trend rate	3.50%	3.50%
Medical cost trend rate decreases to ultimate rate in year	2028	2028

Health care trend rates do not have a significant effect on the total service and interest cost components or on the post-retirement benefit obligation amounts reported for the U.S. Post-Retirement Benefit Plan for the years ended October 31, 2015 and 2014.