Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

Defined Contribution Plans

The Company and its subsidiaries maintain defined contribution savings plans covering substantially all employees. Under the plans, eligible participants may elect to contribute a specified percentage of their salaries and the Company makes matching contributions, each subject to certain limitations. In connection with the acquisition of First Data (see Note 4), the Company assumed defined contribution savings plans and defined contribution pension plans covering substantially all employees of the former First Data. The Plans provide tax-deferred amounts for each participant, consisting of employee elective contributions, company matching and discretionary company contributions. Expenses for company contributions under these plans totaled $65 million in 2019 and $44 million in each of 2018 and 2017.

Defined Benefit Plans

In connection with the acquisition of First Data, the Company assumed noncontributory defined benefit pension plans covering a portion of the employees in the United Kingdom (“U.K.”), the U.S., Germany and Austria. The majority of these plans are frozen and provide benefits to eligible employees based on an employee’s average final compensation and years of service.

The following table provides a reconciliation of benefit obligations, plan assets and the funded status of these defined benefit plans:



(In millions)	U.K. plan			U.S. and other plans
Change in projected benefit obligations:
Balance at December 31, 2018	$	—		$	—
Acquired	(687		)	(219		)
Interest cost	(6		)	(3		)
Actuarial gain (loss)	28			(15		)
Benefits paid	12			12
Foreign currency translation	(19		)	—
Balance at December 31, 2019	$	(672	)	$	(225	)

Change in fair value of plan assets:
Balance at December 31, 2018	$	—		$	—
Acquired	866			160
Actual return on plan assets	(19		)	19
Benefits paid	(12		)	(12		)
Foreign currency translation	25			—
Balance at December 31, 2019	$	860		$	167

Funded status of the plans	$	188		$	(58	)

The funded status of the defined benefit plans is recognized as an asset or a liability within other long-term assets or within other long-term liabilities in the consolidated balance sheet.

Projected Benefit Obligations

The Company records amounts relating to its defined benefit pension plan obligations and their associated expenses based on calculations which include actuarial assumptions, including the discount rate and the expected rate of return on plan assets. Changes in any of the assumptions and the amortization of differences between the assumptions and actual experience will affect the amount of pension expense in future periods. The Company reviews its actuarial assumptions at least annually and modifies the assumptions based on current rates and trends, as appropriate. The effects of modifications are recognized immediately within the consolidated balance sheet, and are generally amortized to operating income over future periods, with the deferred amount recorded in accumulated other comprehensive loss within the consolidated balance sheet. The Company’s funding policy is to contribute quarterly an amount as recommended by the plans’ independent actuaries. Company contributions under these plans were nominal in 2019 and are also expected to be nominal in 2020. The Company employs a building block approach in determining the expected long-term rate of return for plan assets with proper consideration of diversification and re-balancing. Historical markets are studied and long-term historical relationships between equities and fixed-income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. Peer data and historical returns are reviewed to check for reasonableness and appropriateness.

The weighted-average rate assumptions used in the measurement of the Company’s projected benefit obligations at December 31, 2019 and net periodic benefit expense during the year ended December 31, 2019 were as follows:



	Projected Benefit Obligations		Net Periodic Benefit Expense
Discount rate	2.28	%	2.16	%
Expected long-term return on plan assets	n/a		2.83	%

The estimated future benefit payments are expected to be as follows:



(In millions)
Year ending December 31,
2020	$	30
2021	31
2022	32
2023	35
2024	35
2025-2029	191

Plan Assets

The Company’s investment strategy for the U.K. plan is to allocate the assets into two pools: (i) off-risk assets whereby the focus is risk management, protection and insurance relative to the liability target invested in, but not limited to, debt, U.K. government bonds and U.K. government index-linked bonds; and (ii) on-risk assets whereby the focus is on return generation and taking risk in a controlled manner. Such assets could include equities, government bonds, high-yield bonds, property, commodities or hedge funds. The Company’s target allocation for the U.K. plan is 45% on-risk assets and 55% off-risk assets. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and periodic asset and liability studies. The Company’s investment strategy for the U.S. plan employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. The investment portfolio contains a diversified blend of equity and fixed-income investments. The Company sets an allocation mix necessary to support the underlying plan liabilities as influenced significantly by the demographics of the participants and the frozen nature of the plan. The Company’s target allocation for the U.S. plan based on the investment policy at December 31, 2019 was 50% on-risk assets and 50% off-risk assets.

The following table sets forth the Company’s plan assets carried and measured at fair value on a recurring basis at December 31, 2019:



(In millions)	Level 1		Level 2			Level 3
Cash and cash equivalents	$	17	$	—		$	—
Equity securities ⁽¹⁾	134		123			—
Fixed income securities ⁽²⁾	188		214			—
Other investments ⁽³⁾	315		(22		)	10
Total investments at fair value	$	654	$	315		$	10


⁽¹⁾	Equity securities primarily consist of domestic, international and global equity pooled funds.


⁽²⁾	Fixed income securities primarily consist of debt securities issued by U.S. and foreign government agencies and debt obligations issued by a variety of private and public corporations.


⁽³⁾	Other investments primarily consist of index linked government bonds, derivatives and other investments.

In addition to the investments presented within the fair value hierarchy table above, the Company’s plan assets include investments in various hedge funds that are measured at fair value using the net asset value per share (or its equivalent) practical expedient. Such investments totaled $48 million at December 31, 2019.

Net Periodic Benefit Cost

The components of net periodic benefit expense were as follows for the year ended December 31:



(In millions)	2019
Interest cost	$	9
Expected return on plan assets	(10		)
Net periodic benefit income	$	(1	)