Morgan Stanley 2015 Annual Report Download - page 235

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Components of the Net Periodic Benefit Expense (Income).
Pension Plans Other Postretirement Plans
2015 2014 2013 2015 2014 2013
(dollars in millions)
Service cost, benefits earned during the period .................... $ 19 $ 20 $ 23 $ 1 $ 2 $ 4
Interest cost on projected benefit obligation ...................... 152 154 151 3 5 7
Expected return on plan assets ................................. (120) (110) (114) — — —
Net amortization of prior service credit .......................... (1) — — (18) (14) (13)
Net amortization of actuarial loss .............................. 26 22 36 — — 3
Curtailment loss ............................................ — 3 — — — —
Settlement loss ............................................. 2 2 1 — — —
Net periodic benefit expense (income) ...................... $ 78 $ 91 $ 97 $(14) $ (7) $ 1
Pre-Tax Amounts Recognized in Other Comprehensive Loss (Income).
Pension Plans Other Postretirement Plans
2015 2014 2013 2015 2014 2013
(dollars in millions)
Net loss (gain) ............................................. $(212) $ 18 $ 87 $ 3 $ 9 $(52)
Prior service cost (credit) ..................................... (1) 2 3 9 (64) —
Amortization of prior service credit ............................. 1 — — 18 14 13
Amortization of net loss ...................................... (28) (27) (37) — — (3)
Total recognized in other comprehensive loss (income) ......... $(240) $ (7) $ 53 $30 $(41) $(42)
The Company generally amortizes unrecognized net gains and losses into net periodic benefit expense to the extent that the
gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets. The
amortization of the unrecognized net gains and losses is generally over the future service of active participants. The U.S.
Qualified Plan and, effective October 1, 2014, the SEREP amortize the unrecognized net gains and losses over the average
life expectancy of participants.
Weighted Average Assumptions Used to Determine Net Periodic Benefit Expense.
Pension Plans
Other
Postretirement Plans
2015 2014 2013 2015 2014 2013
Discount rate(1) ................................................ 3.86% 4.74% 3.95% 3.77% 3.77% 3.88%
Expected long-term rate of return on plan assets ...................... 3.59% 3.75% 3.73% N/A N/A N/A
Rate of future compensation increases .............................. 2.85% 1.06% 0.98% N/A N/A N/A
N/A—Not Applicable.
(1) The Other postretirement plans’ discount rate for 2015 changed to 3.77% from 3.69% effective April 30, 2015 with the amendment and remeasurement of the
Morgan Stanley Medical Plan.
The accounting for pension and postretirement plans involves certain assumptions and estimates. The expected long-term
rate of return on plan 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 expected long-term rate of return for the U.S. Qualified Plan was estimated by computing a weighted average of the
underlying long-term expected returns based on the investment managers’ target allocations. 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
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