Pension Plans

We have elective defined contribution plans for our employees in the U.S. and retirement savings plans for our employees in the U.K., Canada and other locations. Our defined contribution plans provide retirement benefits in return for services rendered. These plans provide an individual account for each participant and have terms that specify how contributions to the participant’s account are to be determined rather than the amount of retirement benefits the participant is to receive. Contributions to these plans are based on pretax income discretionary amounts determined on an annual basis. Our expense for the defined contribution plans totaled $67 million in 2015, $72 million in 2014 and $78 million in 2013.

In addition, we have two frozen defined benefit plans in the U.S. and one frozen plan in the U.K. and participate in multi-employer plans in Canada. Our defined benefit plans are funded pension plans, which define an amount of pension benefit to be provided, usually as a function of age, years of service or compensation.

Benefit obligations and plan assets

We used a December 31 measurement date for all plans in 2015 and 2014. Plan assets, expenses and obligations for retirement plans are presented in the following tables.



	United States			Int’l			United States			Int’l
Dollars in millions	2015						2014
Change in projected benefit obligations:
Projected benefit obligations at beginning of period	$	87		$	2,138		$	79		$	2,048
Service cost	—			2			—			2
Interest cost	2			76			3			90
Foreign currency exchange rate changes	(3		)	(174		)	—			(123		)
Actuarial (gain) loss	—			(112		)	11			191
Other	—			—			—			(4		)
Benefits paid	(11		)	(81		)	(6		)	(66		)
Projected benefit obligations at end of period	$	75		$	1,849		$	87		$	2,138
Change in plan assets:
Fair value of plan assets at beginning of period	$	66		$	1,652		$	70		$	1,580
Actual return on plan assets	(1		)	8			—			194
Employer contributions	5			43			2			46
Foreign currency exchange rate changes	—			(90		)	—			(98		)
Benefits paid	(11		)	(81		)	(6		)	(66		)
Other	—			—			—			(4		)
Fair value of plan assets at end of period	$	59		$	1,532		$	66		$	1,652
Funded status	$	(16	)	$	(317	)	$	(21	)	$	(486	)



	United States			Int’l			United States			Int’l
Dollars in millions	2015						2014
Amounts recognized on the consolidated balance sheets
Other current liabilities (a)	$	—		$	—		$	(5	)	$	—
Pension obligations	(16		)	(317		)	(16		)	(486		)
Total	$	(16	)	$	(317	)	$	(21	)	$	(486	)


(a)	In 2015, we made a $5 million contribution to fund settlement of our terminated U.S. pension plan. In 2014, we reclassified the $5 million to "other current liabilities" on our consolidated balance sheets, in anticipation of this contribution.

Net periodic cost



	United States			Int’l			United States			Int’l			United States			Int’l
Dollars in millions	2015						2014						2013
Components of net periodic benefit cost
Service cost	$	—		$	2		$	—		$	2		$	—		$	2
Interest cost	2			76			3			90			3			79
Expected return on plan assets	(3		)	(97		)	(4		)	(102		)	(5		)	(86		)
Settlements/curtailments	—			—			1			—			2			—
Recognized actuarial loss	5			43			3			39			2			33
Net periodic benefit cost	$	4		$	24		$	3		$	29		$	2		$	28

The amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at December 31, 2015, net of tax were as follows:



	United States		Int’l		United States		Int’l
Dollars in millions	2015				2014
Unrecognized actuarial loss, net of tax of $11 and $198, and $9 and $222, respectively	$	25	$	535	$	31	$	639
Total in accumulated other comprehensive loss	$	25	$	535	$	31	$	639

Estimated amounts that will be amortized from accumulated other comprehensive income, net of tax, into net periodic benefit cost in 2016 are as follows:



Dollars in millions	United States		International
Actuarial loss	$	1	$	24
Total	$	1	$	24



Weighted-average assumptions used to determine net periodic benefit cost
	United States		Int'l		United States		Int'l		United States		Int'l
	2015				2014				2013
Discount rate	2.89	%	3.65	%	3.38	%	4.45	%	3.09	%	4.50	%
Expected return on plan assets	4.81	%	6.25	%	5.28	%	6.45	%	7.00	%	6.15	%



Weighted-average assumptions used to determine benefit obligations at measurement date
	United States		Int'l		United States		Int'l
	2015				2014
Discount rate	3.42	%	3.75	%	2.89	%	3.65	%

Assumed long-term rates of return on plan assets and discount rates for estimating benefit obligations vary for the different plans according to the local economic conditions. The expected long-term rate of return on assets was determined by a stochastic projection that takes into account asset allocation strategies, historical long-term performance of individual asset classes, an analysis of additional return (net of fees) generated by active management, risks using standard deviations and correlations of returns among the asset classes that comprise the plans’ asset mix. The discount rate used to determine the benefit obligations was computed using a yield curve approach that matches plan specific cash flows to a spot rate yield curve based on high quality corporate bonds. Because all plans have been frozen, there is no rate of compensation increase.

Plan fiduciaries of our retirement plans set investment policies and strategies and oversee the investment direction, which includes selecting investment managers, commissioning asset-liability studies and setting long-term strategic targets. Long-term strategic investment objectives include preserving the funded status of the plan and balancing risk and return and have diversified asset types, fund strategies and fund managers. Targeted asset allocation ranges are guidelines, not limitations and occasionally plan fiduciaries will approve allocations above or below a target range.

The target asset allocation for our U.S. and International plans for 2016 is as follows:



Asset Allocation	2016 Targeted
	United States		Int'l
Cash and cash equivalents	19	%	—	%
Equity funds and securities	49	%	20	%
Fixed income funds and securities	32	%	37	%
Hedge funds	—	%	22	%
Real estate funds	—	%	5	%
Other	—	%	16	%
Total	100	%	100	%

The range of targeted asset allocations for our International plans for 2016 and 2015, by asset class, are as follows:



International Plans	2016 Targeted				2015 Targeted
	Percentage Range				Percentage Range
	Minimum		Maximum		Minimum		Maximum
Equity funds and securities	—	%	60	%	—	%	51	%
Fixed income funds and securities	—	%	100	%	—	%	100	%
Hedge funds	—	%	35	%	—	%	20	%
Real estate funds	—	%	10	%	—	%	10	%
Other	—	%	20	%	—	%	35	%

The range of targeted asset allocations for our U.S. plans for 2016 and 2015, by asset class, are as follows:



Domestic Plans	2016 Targeted				2015 Targeted
	Percentage Range				Percentage Range
	Minimum		Maximum		Minimum		Maximum
Cash and cash equivalents	19	%	19	%	22	%	22	%
Equity funds, securities and other	49	%	49	%	47	%	47	%
Fixed income funds and securities	32	%	32	%	31	%	31	%

ASC 820 - Fair Value Measurement addresses fair value measurements and disclosures, defines fair value, establishes a framework for using fair value to measure assets and liabilities and expands disclosures about fair value measurements. This standard applies whenever other standards require or permit assets or liabilities to be measured at fair value. ASC 820 establishes a three-tier value hierarchy, categorizing the inputs used to measure fair value. The inputs and methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a description of the primary valuation methodologies and classification used for assets measured at fair value.

Fair values of our Level 1 assets are based on observable inputs such as unadjusted quoted prices for identical assets in active markets. These consist of securities valued at the closing price reported on the active market on which the individual securities are traded.

Fair values of our Level 2 assets are based on inputs other than the quoted prices in active markets that are observable either directly or indirectly, such as quoted prices for similar assets; quoted prices that are in inactive markets; inputs other than quoted prices that are observable for the asset; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Fair values of our Level 3 assets are based on unobservable inputs in which there is little or no market data and require us to develop our own assumptions.

A summary of total investments for KBR’s pension plan assets measured at fair value is presented below.



	Fair Value Measurements at Reporting Date
Dollars in millions	Total		Level 1		Level 2		Level 3
Asset Category at December 31, 2015
United States plan assets
Investments measured at net asset value (a)	$	59	$	—	$	—	$	—
Total United States plan assets	$	59	$	—	$	—	$	—
International plan assets
Equities	66		54		—		12
Fixed income	14		—		—		14
Real estate	6		—		—		6
Cash and cash equivalents	10		10		—		—
Other	13		—		—		13
Investments measured at net asset value (a)	1,423		—		—		—
Total international plan assets	$	1,532	$	64	$	—	$	45
Total plan assets at December 31, 2015	$	1,591	$	64	$	—	$	45



	Fair Value Measurements at Reporting Date
Dollars in millions	Total		Level 1		Level 2		Level 3
Asset Category at December 31, 2014
United States plan assets
Investments measured at net asset value (a)	$	66	$	—	$	—	$	—
Total United States plan assets	$	66	$	—	$	—	$	—
International plan assets
Equities	61		53		2		6
Fixed income	11		—		—		11
Real estate	12		—		—		12
Cash and cash equivalents	9		9		—		—
Other	13		—		—		13
Investments measured at net asset value (a)	1,546		—		—		—
Total international plan assets	$	1,652	$	62	$	2	$	42
Total plan assets at December 31, 2014	$	1,718	$	62	$	2	$	42


(a)	In accordance with ASU 2015-07, these investments are measured at fair value using the net asset value per share (or its equivalent) practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in the tables are intended to allow reconciliation of the fair value hierarchy to the amounts on our consolidated balance sheets.

The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed each year due to the following:

Level 3 fair value measurement rollforward



Dollars in millions	Total			Equities		Fixed Income			Real Estate			Other
International plan assets
Balance as of December 31, 2013	$	24		$	1	$	6		$	5		$	12
Return on assets held at end of year	5			—		(1		)	4			2
Return on assets sold during the year	—			—		—			—			—
Purchases, sales and settlements	15			5		7			3			—
Foreign exchange impact	(2		)	—		(1		)	—			(1		)
Balance as of December 31, 2014	$	42		$	6	$	11		$	12		$	13
Return on assets held at end of year	2			1		—			(2		)	3
Return on assets sold during the year	5			—		—			5			—
Purchases, sales and settlements, net	(1		)	5		4			(8		)	(2		)
Foreign exchange impact	(3		)	—		(1		)	(1		)	(1		)
Balance as of December 31, 2015	$	45		$	12	$	14		$	6		$	13

Expected cash flows

Contributions. Funding requirements for each plan are determined based on the local laws of the country where such plans reside. In certain countries the funding requirements are mandatory while in other countries they are discretionary. We expect to contribute $41 million to our international pension plan in 2016.

Benefit payments. The following table presents the expected benefit payments over the next 10 years.



	Pension Benefits
Dollars in millions	United States		Int’l
2016	$	15	$	79
2017	$	4	$	81
2018	$	4	$	83
2019	$	4	$	85
2020	$	4	$	87
Years 2021 – 2025	$	22	$	471

Multiemployer Pension Plans

We participate in multiemployer plans in Canada. Generally, the plans provide defined benefits to substantially all employees covered by collective bargain agreements. Under the terms of these agreements, our obligations are discharged upon plan contributions and are not subject to any assessments for unfunded liabilities upon our termination or withdrawal.

Our aggregate contributions to these plans were $8 million in 2015, $29 million in 2014 and $22 million in 2013. At December 31, 2015, none of the plans in which we participate is individually significant to our consolidated financial statements.

Deferred Compensation Plans

Our Elective Deferral Plan is a nonqualified deferred compensation program that provides benefits payable to officers, certain key employees or their designated beneficiaries and non-employee directors at specified future dates, upon retirement, or death. Except for $8 million of mutual funds included in "other assets" on our consolidated balance sheets at December 31, 2015 and 2014 designated for a portion of our employee deferral plan, the plan is unfunded. The mutual funds are carried at fair value which includes readily determinable or published net asset values and may be liquidated in the near term without restrictions.

The following table presents our obligations under our employee deferred compensation plan included in "employee compensation and benefits" in our consolidated balance sheets.



	December 31,
Dollars in millions	2015		2014
Deferred compensation plans obligations	$	70	$	71