Morgan Stanley 2014 Annual Report Download - page 281

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The expected long-term rate of return on plan assets represents the Company’s best estimate of the long-term
return on plan assets. For the U.S. Qualified Plan, the expected long-term rate of return was estimated by
computing a weighted average return of the underlying long-term expected returns on the plan’s fixed income
assets based on the investment managers’ target allocations within this asset class. The expected long-term return
on assets is a long-term assumption that generally is expected to remain the same from one year to the next
unless there is a significant change in the target asset allocation, the fees and expenses paid by the plan or market
conditions. The U.S. Qualified Plan is primarily invested in fixed income securities and related derivative
instruments, including interest rate swap contracts. This asset allocation is expected to help protect the plan’s
funded status and limit volatility of the Company’s contributions. Total U.S. Qualified Plan investment portfolio
performance is assessed by comparing actual investment performance to changes in the estimated present value
of the U.S. Qualified Plan’s benefit obligation.
Benefit Obligations and Funded Status.
The following table provides a reconciliation of the changes in the benefit obligation and fair value of plan assets
for 2014 and 2013 as well as the funded status at December 31, 2014 and December 31, 2013:
Pension Postretirement
2014 2013 2014 2013
(dollars in millions)
Reconciliation of benefit obligation:
Benefit obligation at beginning of year .......................... $3,330 $3,883 $128 $ 174
Service cost ................................................. 20 23 2 4
Interest cost ................................................. 154 151 5 7
Actuarial loss (gain) ........................................... 555 (537) 5 (52)
Plan amendments ............................................. 2 2 (64) —
Plan curtailments ............................................. (1) — — —
Plan settlements .............................................. (8) (7) — —
Change in mortality assumptions(1) .............................. 203 — 4 —
Benefits paid ................................................ (213) (186) (5) (6)
Other, including foreign currency exchange rate changes .............. (35) 1 — 1
Benefit obligation at end of year ................................ $4,007 $3,330 $ 75 $ 128
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year ..................... $2,867 $3,519 $— $ —
Actual return on plan assets ..................................... 850 (512) — —
Employer contributions(2) ...................................... 244 42 5 6
Benefits paid ................................................ (213) (186) (5) (6)
Plan settlements .............................................. (8) (7) — —
Other, including foreign currency exchange rate changes .............. (35) 11 — —
Fair value of plan assets at end of year .......................... $3,705 $2,867 $— $ —
Funded (unfunded) status ........................................... $ (302) $ (463) $ (75) $(128)
(1) Amounts represent adoption of new mortality tables published by the Society of Actuaries in October 2014.
(2) In December 2014, an elective $200 million contribution was made to the U.S. Qualified Plan primarily to offset the increase in liability
due to the Plan’s adoption of new mortality tables.
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