Pension and Postretirement Health Care Plans

We have qualified defined benefit pension plans covering team members who meet age and service requirements, including date of hire in certain circumstances. Effective January 1, 2009, our U.S. qualified defined benefit pension plan was closed to new participants, with limited exceptions. We also have unfunded nonqualified pension plans for team members with qualified plan compensation restrictions. Eligibility for, and the level of, these benefits varies depending on each team members' date of hire, length of service and/or team member compensation. Effective April 1, 2016, we will discontinue the postretirement health care benefits that were offered to team members upon early retirement and prior to Medicare eligibility. This decision resulted in a $58 million reduction in the projected postretirement health care benefit obligation and a $43 million curtailment gain recorded in SG&A during 2015. As of January 30, 2016, we have extinguished the remaining benefit obligation related to this plan.



Change in Projected Benefit Obligation	Qualified Plans						Nonqualified Plans
(millions)	2015			2014			2015			2014
Benefit obligation at beginning of period	$	3,844		$	3,173		$	43		$	35
Service cost	108			111			1			1
Interest cost	152			148			2			1
Actuarial (gain)/loss	(400		)	556			(4		)	9
Participant contributions	6			3			—			—
Benefits paid	(155		)	(147		)	(3		)	(3		)
Plan amendments	3			—			—			—
Benefit obligation at end of period	$	3,558		$	3,844		$	39		$	43



Change in Plan Assets	Qualified Plans						Nonqualified Plans
(millions)	2015			2014			2015			2014
Fair value of plan assets at beginning of period	$	3,784		$	3,267		$	—		$	—
Actual return on plan assets	(231		)	507			—			—
Employer contributions	203			154			3			3
Participant contributions	6			3			—			—
Benefits paid	(155		)	(147		)	(3		)	(3		)
Fair value of plan assets at end of period	3,607			3,784			—			—
Benefit obligation at end of period	3,558			3,844			39			43
Funded/(underfunded) status	$	49		$	(60	)	$	(39	)	$	(43	)



Recognition of Funded/(Underfunded) Status	Qualified Plans						Nonqualified Plans
(millions)	2015			2014			2015			2014
Other noncurrent assets	$	66		$	—		$	—		$	—
Accrued and other current liabilities	(1		)	(1		)	(6		)	(4		)
Other noncurrent liabilities	(16		)	(59		)	(33		)	(39		)
Net amounts recognized	$	49		$	(60	)	$	(39	)	$	(43	)



Amounts in Accumulated Other Comprehensive Income
(millions)	2015			2014
Net actuarial loss	$	1,022		$	1,018
Prior service credits	(57		)	(69		)
Amounts in accumulated other comprehensive income	$	965		$	949



Change in Accumulated Other Comprehensive Income
(millions)	Pretax			Net of Tax
February 1, 2014	$	712		$	430
Net actuarial loss	291			176
Amortization of net actuarial losses	(65		)	(40		)
Amortization of prior service costs and transition	11			7
January 31, 2015	$	949		$	573
Net actuarial loss	87			53
Amortization of net actuarial losses	(82		)	(50		)
Amortization of prior service costs and transition	11			7
January 30, 2016	$	965		$	583



Expected Amortization of Amounts in Accumulated Other Comprehensive Income (millions)	Pretax			Net of Tax
Net actuarial loss	$	46		$	28
Prior service credits	(11		)	(7		)
Total amortization expense	$	35		$	21



Net Pension Benefits Expense
(millions)	2015			2014			2013
Service cost benefits earned during the period	$	109		$	112		$	118
Interest cost on projected benefit obligation	154			149			137
Expected return on assets	(260		)	(233		)	(235		)
Amortization of losses	82			65			103
Amortization of prior service cost	(11		)	(11		)	(11		)
Settlement and special termination charges	4			—			3
Total	$	78		$	82		$	115

Prior service cost amortization is determined using the straight-line method over the average remaining service period of team members expected to receive benefits under the plan.



Defined Benefit Pension Plan Information (millions)	2015		2014
Accumulated benefit obligation (ABO) for all plans ^(a)	$	3,550	$	3,834
Projected benefit obligation for pension plans with an ABO in excess of plan assets ^(b)	65		65
Total ABO for pension plans with an ABO in excess of plan assets	60		56
Fair value of plan assets for pension plans with an ABO in excess of plan assets	10		—


^(a)	The present value of benefits earned to date assuming no future salary growth.


^(b)	The present value of benefits earned to date by plan participants, including the effect of assumed future salary increases.

Assumptions



Benefit Obligation Weighted Average Assumptions
	2015		2014
Discount rate	4.70	%	3.87	%
Average assumed rate of compensation increase	3.00		3.00



Net Periodic Benefit Expense Weighted Average Assumptions
	2015		2014		2013
Discount rate	3.87	%	4.77	%	4.40	%
Expected long-term rate of return on plan assets	7.50		7.50		8.00
Average assumed rate of compensation increase	3.00		3.00		3.00

The weighted average assumptions used to measure net periodic benefit expense each year are the rates as of the beginning of the year (i.e., the prior measurement date). Based on a stable asset allocation, our most recent compound annual rate of return on qualified plans' assets was 8.4 percent, 7.2 percent, 6.8 percent, and 8.5 percent for the 5-year, 10-year, 15-year, and 20-year time periods, respectively.

The market-related value of plan assets, which is used in calculating expected return on assets in net periodic benefit cost, is determined each year by adjusting the previous year's value by expected return, benefit payments, and cash contributions. The market-related value is adjusted for asset gains and losses in equal 20 percent adjustments over a five-year period.

We review the expected long-term rate of return annually, and revise it as appropriate. Additionally, we monitor the mix of investments in our portfolio to ensure alignment with our long-term strategy to manage pension cost and reduce volatility in our assets. Our expected annualized long-term rate of return assumptions as of January 30, 2016 were 8.0 percent for domestic and international equity securities, 5.0 percent for long-duration debt securities, 8.0 percent for balanced funds, and 9.5 percent for other investments. These estimates are a judgmental matter in which we consider the composition of our asset portfolio, our historical long-term investment performance, and current market conditions.

Plan Assets

Our asset allocation policy is designed to reduce the long-term cost of funding our pension obligations. The plan invests with both passive and active investment managers depending on the investment's asset class. The plan also seeks to reduce the risk associated with adverse movements in interest rates by employing an interest rate hedging program, which may include the use of interest rate swaps, total return swaps, and other instruments.



Asset Category	Current Targeted		Actual Allocation
	Allocation		2015		2014
Domestic equity securities ^(a)	14	%	16	%	19	%
International equity securities	9		10		12
Debt securities	45		44		28
Balanced funds	23		21		31
Other ^(b)	9		9		10
Total	100	%	100	%	100	%


^(a)	Equity securities include our common stock in amounts substantially less than 1 percent of total plan assets as of January 30, 2016 and January 31, 2015.


^(b)	Other assets include private equity, mezzanine and high-yield debt, natural resources and timberland funds, multi-strategy hedge funds, derivative instruments, and a 4 percent allocation to real estate.

In May 2015, the FASB issued ASU No. 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). ASU 2015-07 amended ASC 820, Fair Value Measurements and Disclosures, to remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendment also removes the requirement to make certain disclosures for these investments. We have retrospectively adopted this ASU for the year ended January 30, 2016.



Fair Value Measurements		Fair Value at
(millions)	Pricing Category	January 30, 2016		January 31, 2015
Cash and cash equivalents	Level 1	$	43	$	7
Government securities ^(a)	Level 2	470		349
Fixed income ^(b)	Level 2	979		571
Other ^(c)	Level 2	8		21
		1,500		948
Investments valued using NAV per share ^(d)
Cash and cash equivalents		455		204
Common collective trusts		544		1,102
Fixed Income		49		53
Balanced funds		756		1,152
Private equity funds		141		171
Other		162		154
Total plan assets		$	3,607	$	3,784


^(a)	Investments in government securities and long-term government bonds.


^(b)	Investments in corporate and municipal bonds.


^(c)	Investments in derivative investments.


^(d)	In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.



Position		Valuation Technique
Cash and cash equivalents		Carrying value approximates fair value.
Government securities and fixed income		Valued using matrix pricing models and quoted prices of securities with similar characteristics.
Derivatives		Swap derivatives - Valued initially using models calibrated to initial trade price. Subsequent valuations are based on observable inputs to the valuation model (e.g., interest rates and credit spreads). Model inputs are changed only when corroborated by market data. A credit risk adjustment is made on each swap using observable market credit spreads. Option derivatives - Valued at transaction price initially. Subsequent valuations are based on observable inputs to the valuation model (e.g., underlying investments).

Contributions

Our obligations to plan participants can be met over time through a combination of company contributions to these plans and earnings on plan assets. In 2015 and 2014, we made discretionary contributions of $200 million and $150 million, respectively, to our qualified defined benefit pension plans. We are not required to make any contributions in 2016. However, depending on investment performance and plan funded status, we may elect to make a contribution.



Estimated Future Benefit Payments (millions)	Pension Benefits
2016	$	169
2017	170
2018	172
2019	180
2020	188
2021-2025	1,068