Discover 2015 Annual Report Download - page 140

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Benefit Obligations and Funded Status
The following table provides a reconciliation of the changes in the benefit obligation and fair value of plan assets
as well as a summary of the Discover Pension Plan's funded status (dollars in millions):
For the Years Ended December 31,
2015 2014
Reconciliation of benefit obligation
Benefit obligation at beginning of year ................................................................................................... $ 570 $ 452
Service cost .......................................................................................................................................... — —
Interest cost .......................................................................................................................................... 23 22
Employee contributions ......................................................................................................................... — —
Actuarial (gain) loss .............................................................................................................................. (48) 112
Plan amendments ................................................................................................................................. — —
Benefits paid ........................................................................................................................................ (17)(16)
Benefit obligation at end of year ......................................................................................................... 528 570
Reconciliation of fair value of plan assets
Fair value of plan assets at beginning of year .......................................................................................... 401 367
Actual return on plan assets ................................................................................................................... (6) 50
Employer contributions .......................................................................................................................... — —
Employee contributions ......................................................................................................................... — —
Benefits paid ........................................................................................................................................ (17)(16)
Fair value of plan assets at end of year ............................................................................................... 378 401
Unfunded status (recorded in accrued expenses and other liabilities) ..................................................... $ (150) $ (169)
Assumptions
The following table presents the assumptions used to determine the benefit obligation:
December 31,
2015 2014
Discount rate ................................................................................................................................................ 4.50%4.08%
The following table presents the assumptions used to determine net periodic benefit cost:
For the Years Ended December 31,
2015 2014 2013
Discount rate ....................................................................................................................... 4.08% 4.93%4.09%
Expected long-term rate of return on plan assets ...................................................................... 6.50% 6.50%6.75%
The expected long-term rate of return on plan assets was estimated by computing a weighted-average return of
the underlying long-term expected returns on the different asset classes, based on the target asset allocations. Asset
class return assumptions are created by integrating information on past capital market performance, current levels of
key economic indicators and the market insights of investment professionals. Individual asset classes are analyzed as
part of a larger system, acknowledging both the interaction between asset classes and the influence of larger
macroeconomic variables such as inflation and economic growth on the entire structure of capital markets. Medium and
long-term economic outlooks for the U.S. and other major industrial economies are forecast in order to understand the
range of possible economic scenarios and evaluate their likelihood. Historical relationships between key economic