MasterCard 2014 Annual Report Download - page 66

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
64
Personnel costs as of December 31, 2014 include an accrual related to a severance charge of $87 million, recorded in the fourth
quarter of 2014, in general and administrative expenses on the consolidated statement of operations. The Company has restructured
its organization to align with its strategic priorities and to best meet the Company’s continued growth. The Company expects to
be substantially complete with these restructuring activities by the second quarter of 2015.
As of December 31, 2014 and December 31, 2013, the Company’s provision related to U.S. merchant litigations was $771 million
and $886 million, respectively. These amounts are not included in the accrued expenses table above and are separately reported
as accrued litigation on the consolidated balance sheet. The accrued litigation item at December 31, 2013 includes $68 million
related to the timing of MasterCard’s administration of the short-term reduction in default credit interchange from U.S. issuers
which expired in April 2014. During 2014, MasterCard executed settlement agreements with a number of opt-out merchants and
no adjustment to the amount previously recorded was deemed necessary. See Note 18 (Legal and Regulatory Proceedings) for
further discussion of the U.S. merchant class litigation.
Note 11. Pension, Postretirement and Savings Plans
The Company maintains various pension, postretirement, savings and other postemployment benefit plans that cover substantially
all employees worldwide.
U.S. employees hired before July 1, 2007 participate in a non-contributory, qualified, defined benefit pension plan (the “Qualified
Plan”) with a cash balance feature. In 2010, the Company amended the Qualified Plan to phase out participant pay credit percentages
in the years 2011 and 2012 and eliminate the pay credit effective January 1, 2013. Plan participants continue to earn interest
credits. The Company recorded a $2 million partial settlement charge from lump sum distribution activity in the Qualified Plan
in each of the years ended December 31, 2014 and 2013. The Company also recognized corresponding effects in accumulated
other comprehensive income and deferred taxes.
The Company also has an unfunded non-qualified supplemental executive retirement plan (the “Non-qualified Plan”) that provides
certain key employees with supplemental retirement benefits in excess of limits imposed on qualified plans by U.S. tax laws.
Internationally-based employees of the Company participate in plans that cover various pension and postemployment benefits
specific to their country of employment. These benefits are incorporated into the disclosures below as they are not a material
component of the total benefit obligations, fair value of plan assets, or plan funded status. The term “Pension Plans” includes the
Qualified Plan, the Non-qualified Plan and these international defined benefit pension plans.
The Company maintains a postretirement plan providing health coverage and life insurance benefits for substantially all of its U.S.
employees hired before July 1, 2007. The U.S. postretirement plan and the various international postemployment benefit plans
are collectively referred to as the “Postretirement Plans”.