Retirement Plans and Post-Retirement Benefits

Pension and Post-Retirement Benefit Plans

Defined Benefit Plans. The U.S. defined benefit pension plans include a management plan and a represented plan. Benefits under the management plan are provided under either an adjusted career-average-pay program or a cash-balance program. Benefits under the represented plan are based on a dollar-per-month formula. Benefit accruals under the management plan were frozen in 2009. Participants in the adjusted career-average-pay program no longer earn service accruals. Participants in the cash-balance program no longer earn service accruals, but continue to earn 4% interest per year on their cash-balance accounts. There are no active participants under the represented plan. We also have a non-qualified supplemental pension plan in the United States that principally provides benefits based on compensation in excess of amounts that can be considered under the management plan. We also have pension plans covering certain non-U.S. employees.

Post-Retirement Benefit Plans. Certain of our U.S. employees who meet the retirement eligibility requirements as of their termination dates, may receive post-retirement medical benefits under our retiree medical account program. Eligible employees receive a medical benefit spending account of $55,000 upon retirement to pay premiums for medical coverage through the maximum age of 75 as retiree.

Our group life insurance plan offers post-retirement life insurance coverage for certain U.S. employees.

Non-U.S Retirement Benefit Plans. In addition to the defined benefit plans for certain employees in Taiwan, India, Japan, Israel, Italy and Germany, other eligible employees outside of the U.S. receive retirement benefits under various defined contribution retirement plans. Eligibility is generally determined based on the terms of our plans and local statutory requirements.

Net Periodic Benefit (Income) Cost



	Pension Benefits									Post-Retirement Benefits
	Fiscal Year									Fiscal Year
	2018			2017			2016			2018			2017			2016

	(In millions)
Service cost	$	4		$	4		$	3		$	—		$	—		$	—
Interest cost	51			53			59			3			3			3
Expected return on plan assets	(51		)	(65		)	(72		)	(4		)	(4		)	(4		)
Other	1			1			4			—			—			—
Net periodic benefit (income) cost	$	5		$	(7	)	$	(6	)	$	(1	)	$	(1	)	$	(1	)

Net actuarial (gain) loss	$	14		$	(60	)	$	88		$	(3	)	$	(3	)	$	11

Funded Status



	Pension Benefits						Post-Retirement Benefits
	November 4, 2018			October 29, 2017			November 4, 2018			October 29, 2017

	(In millions)
Change in plan assets:
Fair value of plan assets — beginning of period	$	1,426		$	1,050		$	83		$	78
Actual return on plan assets	(65		)	108			—			7
Employer contributions	130			361			—			—
Payments from plan assets	(93		)	(93		)	(2		)	(2		)
Foreign currency impact	(4		)	—			—			—
Fair value of plan assets — end of period	1,394			1,426			81			83
Change in benefit obligations:
Benefit obligations — beginning of period	1,508			1,566			80			79
Service cost	4			4			—			—
Interest cost	51			53			3			3
Actuarial gain	(102		)	(13		)	(7		)	—
Benefit payments	(93		)	(93		)	(2		)	(2		)
Curtailments	—			(4		)	—			—
Settlements	—			(8		)	—			—
Plan amendment	3			—			—			—
Foreign currency impact	(7		)	3			—			—
Benefit obligations — end of period	1,364			1,508			74			80

Overfunded (underfunded) status of benefit obligations ^(a)	$	30		$	(82	)	$	7		$	3

Actuarial losses and prior service costs recognized in accumulated other comprehensive loss, net of taxes	$	(110	)	$	(85	)	$	(5	)	$	(6	)

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(a)	Substantially all amounts recognized in the consolidated balance sheets were recorded in other long-term assets and other long-term liabilities for all periods presented.

Plans with benefit obligations in excess of plan assets:



	Pension Benefits				Post-Retirement Benefits
	November 4, 2018		October 29, 2017		November 4, 2018		October 29, 2017

	(In millions)
Projected benefit obligations	$	551	$	701	$	—	$	—
Accumulated benefit obligations	$	546	$	696	$	14	$	15
Fair value of plan assets	$	528	$	603	$	—	$	—

Plans with benefit obligations less than plan assets:



	Pension Benefits				Post-Retirement Benefits
	November 4, 2018		October 29, 2017		November 4, 2018		October 29, 2017

	(In millions)
Projected benefit obligations	$	813	$	807	$	—	$	—
Accumulated benefit obligations	$	812	$	805	$	60	$	65
Fair value of plan assets	$	866	$	823	$	81	$	83

The fair value of pension plan assets at November 4, 2018 and October 29, 2017 included $147 million and $20 million, respectively, of assets for our non-U.S. pension plans.

The projected benefit obligations as of November 4, 2018 and October 29, 2017 included $129 million and $106 million, respectively, of obligations related to our non-U.S. plans. The accumulated benefit obligations as of November 4, 2018 and October 29, 2017 included $122 million and $100 million, respectively, of obligations related to our non-U.S. plans.

We currently expect to make contributions of $6 million to our defined benefit pension plans in fiscal year 2019.

Expected Future Benefit Payments



Fiscal Years:	Pension Benefits		Post-Retirement Benefits

	(In millions)
2019	$	93	$	3
2020	$	91	$	3
2021	$	91	$	3
2022	$	91	$	3
2023	$	91	$	4
2024-2028	$	445	$	20

Defined Benefit Plan Investment Policy

Plan assets of the funded defined benefit pension plans are invested in funds held by third-party fund managers or are deposited into government-managed accounts in which we have no active involvement in and no control over investment strategy, other than establishing broad investment guidelines and parameters.

Our plan’s investment committee has set the investment strategy to fully match the liability. We direct the overall portfolio allocation and use a third-party investment consultant that has discretion to structure portfolios and select the investment managers within those allocation parameters. Multiple investment managers are utilized, including both active and passive management approaches. The plan assets are invested using the liability-driven investment strategy intended to minimize market and interest rate risks, and those assets are periodically rebalanced toward asset allocation targets.

The target asset allocation for U.S. plans reflects a risk/return profile that we believe is appropriate relative to the liability structure and return goals for the plans. We periodically review the allocation of plan assets relative to alternative allocation models to evaluate the need for adjustments based on forecasted liabilities and plan liquidity needs. For both fiscal years 2018 and 2017, 100% of U. S. plan assets were allocated to fixed income, in line with the target allocation. The fixed income allocation is primarily directed toward long-term core bond investments, with smaller allocations to Treasury Inflation-Protected Securities and high-yield bonds.

Fair Value Measurement of Plan Assets



	November 4, 2018
	Fair Value Measurements at Reporting Date Using
	Level 1			Level 2			Level 3		Total

	(In millions)
Cash equivalents	$	36	(a)	$	—		$	—	$	36
Equity securities:
Non-U.S. equity securities	19		(b)	—			—		19
Fixed-income securities:
U.S. treasuries	—			80		(c)	—		80
Corporate bonds	—			1,229		(c)	—		1,229
Municipal bonds	—			17		(c)	—		17
Government bonds	—			13		(c)	—		13
Total plan assets	$	55		$	1,339		$	—	$	1,394



	October 29, 2017
	Fair Value Measurements at Reporting Date Using
	Level 1			Level 2			Level 3		Total

	(In millions)
Cash equivalents	$	943	(a)	$	—		$	—	$	943
Equity securities:
Non-U.S. equity securities	7		(b)	—			—		7
Fixed-income securities:
U.S. treasuries	—			39		(c)	—		39
Corporate bonds	—			393		(c)	—		393
Asset-backed and mortgage-backed securities	—			1		(c)	—		1
Municipal bonds	—			25		(c)	—		25
Government bonds	—			18		(c)	—		18
Total plan assets	$	950		$	476		$	—	$	1,426

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(a)	Cash equivalents primarily included short-term investment funds which consisted of short-term money market instruments that were valued based on quoted prices in active markets.


(b)	These equity securities were valued based on quoted prices in active markets.

(c)

These amounts consisted of investments that were traded less frequently than Level 1 securities and were valued using inputs that included quoted prices for similar assets in active markets and inputs other than quoted prices that were observable for the asset, such as interest rates, yield curves, prepayment speeds, collateral performance, broker/dealer quotes and indices that were observable at commonly quoted intervals.

Post-Retirement Benefit Plan Investment Policy

Our overall investment strategy for the group life insurance plan is to allocate assets in a manner that seeks to both maximize the safety of promised benefits and minimize the cost of funding those benefits. The target asset allocation for plan assets reflects a risk/return profile that we believe is appropriate relative to the liability structure and return goals for the plan. We periodically review the allocation of plan assets relative to alternative allocation models to evaluate the need for adjustments based on forecasted liabilities and plan liquidity needs. We set the overall portfolio allocation and use an investment manager that directs the investment of funds consistent with that allocation. The investment manager invests the plan assets in index funds that it manages.

The following table presents the plan asset allocations by category:



	November 4, 2018				October 29, 2017
	Actual		Target		Actual		Target
Commingled funds - U.S. equities	—	%	—	%	20	%	20	%
Commingled funds - Non-U.S. equities	—		—		20		20
Commingled funds - bonds	100		100		60		60
Total	100	%	100	%	100	%	100	%

Assumptions

The assumptions used to determine the benefit obligations and net periodic benefit (income) cost from our defined benefit and post-retirement benefit plans are presented in the table below. The expected long-term return on assets shown in the table below represents an estimate of long-term returns on investment portfolios primarily consisting of combinations of debt, equity and other investments, depending on the plan. The long-term rates of return are then weighted based on the asset classes (both historical and forecasted) in which we expect the pension and post-retirement funds to be invested. Discount rates reflect the current rate at which defined benefit and post-retirement benefit obligations could be settled based on the measurement dates of the plans, which in each case is our fiscal year end. The range of assumptions that are used for defined benefit pension plans reflects the different economic environments within various countries.



	Assumptions for Benefit Obligations as of		Assumptions for Net Periodic Benefit (Income) Cost Fiscal Year
	November 4, 2018	October 29, 2017	2018	2017	2016
Defined benefit pension plans:
Discount rate	0.50%-8.00%	0.50%-7.00%	0.50%-7.00%	0.50%-7.00%	0.75%-7.75%
Average increase in compensation levels	2.00%-10.00%	2.00%-11.00%	2.00%-11.00%	2.00%-9.15%	2.50%-11.72%
Expected long-term return on assets	N/A	N/A	1.50%-7.50%	0.25%-8.00%	1.50%-9.00%



	Assumptions for Benefit Obligations as of		Assumptions for Net Periodic Benefit (Income) Cost Fiscal Year
	November 4, 2018	October 29, 2017	2018	2017	2016
Post-retirement benefits plans:
Discount rate	4.30%-4.60%	3.40%-3.80%	3.40%-3.80%	3.30%-3.90%	3.90%-4.50%
Average increase in compensation levels	3.00%	3.00%	3.00%	3.50%	3.50%
Expected long-term return on assets	N/A	N/A	4.80%	4.40%	5.10%

We assume that the health care cost trend rate for fiscal year 2019 will be 6.7% and will decrease to the ultimate health care cost trend rate of 3.5% in fiscal year 2031.

A one percentage point increase or decrease in the assumed health care cost trend rates would not have had a material effect on the benefit obligations or service and interest cost components of the net periodic benefit cost for all the periods presented.

401(k) Defined Contribution Plans

Our eligible U.S. employees participate in company-sponsored 401(k) plans. Under these plans, we provide matching contributions to employees up to 6% of their eligible earnings. All matching contributions vest immediately. During fiscal years 2018, 2017 and 2016, we made contributions of $73 million, $61 million and $43 million, respectively, to the 401(k) plans.