HEWLETT PACKARD CO | 2013 | FY | 3


Note 15: Retirement and Post-Retirement Benefit Plans

        HP sponsors a number of defined benefit pension plans worldwide, of which the most significant are in the United States. Both the HP Retirement Plan (the "Retirement Plan"), a traditional defined benefit pension plan based on pay and years of service, and the HP Company Cash Account Pension Plan (the "Cash Account Pension Plan"), under which benefits are accrued pursuant to a cash accumulation account formula based upon a percentage of pay plus interest, were frozen effective January 1, 2008. The Cash Account Pension Plan and the Retirement Plan were merged in 2005 for certain funding and investment purposes. Effective October 30, 2009 the EDS U.S. qualified pension plan was also merged into the HP Pension Plan.

        HP reduces the benefit payable to a U.S. employee under the Retirement Plan for service before 1993, if any, by any amounts due to the employee under HP's frozen defined contribution Deferred Profit-Sharing Plan (the "DPSP"). HP closed the DPSP to new participants in 1993. The DPSP plan obligations are equal to the plan assets and are recognized as an offset to the Retirement Plan when HP calculates its defined benefit pension cost and obligations. The fair value of plan assets and projected benefit obligations for the U.S. defined benefit plans combined with the DPSP are as follows for the following fiscal years ended October 31:

 
  2013   2012  
 
  Plan Assets   Projected
Benefit
Obligation
  Plan Assets   Projected
Benefit
Obligation
 
 
  In millions
 

U.S. defined benefit plans

  $ 10,866   $ 11,866   $ 11,536   $ 14,237  

DPSP

    837     837     958     958  
                   

Total

  $ 11,703   $ 12,703   $ 12,494   $ 15,195  
                   

        HP sponsors retiree health and welfare benefit plans in the Americas, of which the most significant are in the United States. Under the HP Retiree Welfare Benefits Plan, certain pre-2003 retirees and grandfathered participants with continuous service with HP since 2002 are eligible to receive partially-subsidized medical coverage based on years of service at retirement. Former grandfathered employees of Digital Equipment Corporation also receive partially-subsidized medical benefits that are not service-based. HP's share of the premium cost is capped for all subsidized medical coverage provided under the HP Retiree Welfare Benefits Plan. HP currently leverages the employer group waiver plan process to provide HP Retiree Welfare Benefits Plan post-65 prescription drug coverage under Medicare Part D, thereby giving HP access to federal subsidies to help pay for retiree benefits.

        Certain employees not grandfathered under the above programs, as well as employees hired after 2002 but before August 2008, are eligible for credits under the HP Retirement Medical Savings Account Plan (the "RMSA") upon attaining age 45. Credits offered after September 2008 are provided only in the form of matching credits on employee contributions made to a voluntary employee beneficiary association. Upon retirement, former employees may use these credits for the reimbursement of certain eligible medical expenses, including premiums required for coverage.

        HP offers various defined contribution plans for U.S. and non-U.S. employees. Total defined contribution expense was $603 million in fiscal 2013, $628 million in fiscal 2012 and $626 million in fiscal 2011. U.S. employees are automatically enrolled in the Hewlett-Packard Company 401(k) Plan (the "HP 401(k) Plan") when they meet eligibility requirements, unless they decline participation.

        Effective at the beginning of fiscal 2011, the quarterly employer matching contributions in the HP 401(k) Plan were set to equal 100% of an employee's contributions, up to a maximum of 4% of eligible compensation.

        HP's net pension and post-retirement benefit cost (credit) recognized in the Consolidated Statements of Earnings was as follows for the following fiscal years ended October 31:

 
  U.S. Defined
Benefit Plans
  Non-U.S. Defined
Benefit Plans
  Post-Retirement
Benefit Plans
 
 
  2013   2012   2011   2013   2012   2011   2013   2012   2011  
 
  In millions
 

Service cost

  $ 1   $ 1   $ 1   $ 337   $ 294   $ 343   $ 6   $ 7   $ 9  

Interest cost

    560     566     594     676     690     694     31     35     35  

Expected return on plan assets

    (845 )   (793 )   (744 )   (1,007 )   (816 )   (890 )   (34 )   (38 )   (37 )

Amortization and deferrals:

                                                       

Actuarial loss (gain)

    77     43     33     341     235     235     2     (3 )   3  

Prior service benefit

                (27 )   (24 )   (14 )   (67 )   (79 )   (83 )
                                       

Net periodic benefit (credit) cost

    (207 )   (183 )   (116 )   320     379     368     (62 )   (78 )   (73 )
                                       

Curtailment (gain) loss

                (3 )   4         (7 )   (30 )    

Settlement loss (gain)

    12     11     3     18     (18 )   9              

Special termination benefits

        833         31     17     16     (5 )   227      
                                       

Net benefit (credit) cost

  $ (195 ) $ 661   $ (113 ) $ 366   $ 382   $ 393   $ (74 ) $ 119   $ (73 )
                                       

        The weighted-average assumptions used to calculate net benefit (credit) cost were as follows for the following fiscal years ended October 31:

 
  U.S. Defined
Benefit Plans
  Non-U.S. Defined
Benefit Plans
  Post-Retirement
Benefit Plans
 
 
  2013   2012   2011   2013   2012   2011   2013   2012   2011  

Discount rate

    4.1 %   4.8 %   5.6 %   3.8 %   4.5 %   4.4 %   3.0 %   4.4 %   4.4 %

Expected increase in compensation levels

    2.0 %   2.0 %   2.0 %   2.4 %   2.5 %   2.5 %            

Expected long-term return on assets

    7.8 %   7.6 %   8.0 %   7.2 %   6.4 %   6.8 %   9.0 %   10.0 %   10.5 %

        The funded status of the defined benefit and post-retirement benefit plans was as follows for the following fiscal years ended October 31:

 
  U.S. Defined
Benefit Plans
  Non-U.S. Defined
Benefit Plans
  Post-Retirement
Benefit Plans
 
 
  2013   2012   2013   2012   2013   2012  
 
  In millions
 

Change in fair value of plan assets:

                                     

Fair value—beginning of year

  $ 11,536   $ 10,662   $ 14,021   $ 13,180   $ 395   $ 394  

Acquisition/addition of plans

            7     8          

Actual return on plan assets

    629     1,411     1,842     1,327     32     36  

Employer contributions

    54     50     634     582     102     31  

Participant contributions

            63     57     72     59  

Benefits paid

    (1,320 )   (556 )   (504 )   (462 )   (205 )   (125 )

Settlement

    (33 )   (31 )   (96 )   (193 )        

Currency impact

            116     (478 )        
                           

Fair value—end of year

    10,866     11,536     16,083     14,021     396     395  
                           

Change in benefit obligation:

                                     

Projected benefit obligation—beginning of year

    14,237     11,945     18,097     16,328     1,056     816  

Acquisition/addition of plans

            14     25          

Service cost

    1     1     337     294     6     7  

Interest cost

    560     566     676     690     31     35  

Participant contributions

            63     57     72     59  

Actuarial (gain) loss

    (1,579 )   1,479     343     2,143     (85 )   34  

Benefits paid

    (1,320 )   (556 )   (504 )   (462 )   (205 )   (125 )

Plan amendments

            6     (67 )        

Curtailment

            13     5         5  

Settlement

    (33 )   (31 )   (100 )   (395 )        

Special termination benefits

        833     31     17     (5 )   227  

Currency impact

            176     (538 )   (3 )   (2 )
                           

Projected benefit obligation—end of year

    11,866     14,237     19,152     18,097     867     1,056  
                           

Funded status at end of year

  $ (1,000 ) $ (2,701 ) $ (3,069 ) $ (4,076 ) $ (471 ) $ (661 )
                           

Accumulated benefit obligation

  $ 11,865   $ 14,236   $ 18,254   $ 17,070              

        The weighted-average assumptions used to calculate the projected benefit obligations were as follows for the fiscal years ended October 31, 2013 and 2012:

 
  U.S. Defined
Benefit Plans
  Non-U.S. Defined
Benefit Plans
  Post-Retirement
Benefit Plans
 
 
  2013   2012   2013   2012   2013   2012  

Discount rate

    4.9 %   4.1 %   3.9 %   3.8 %   3.9 %   3.0 %

Expected increase in compensation levels

    2.0 %   2.0 %   2.4 %   2.4 %        

        The net amounts recognized for HP's defined benefit and post-retirement benefit plans in HP's Consolidated Balance Sheets as of October 31, 2013 and October 31, 2012 were as follows:

 
  U.S. Defined
Benefit Plans
  Non-U.S. Defined
Benefit Plans
  Post-Retirement
Benefit Plans
 
 
  2013   2012   2013   2012   2013   2012  
 
  In millions
 

Noncurrent assets

  $   $   $ 479   $ 260   $   $  

Current liabilities

    (33 )   (33 )   (46 )   (39 )   (109 )   (124 )

Noncurrent liabilities

    (967 )   (2,668 )   (3,502 )   (4,297 )   (362 )   (537 )
                           

Funded status at end of year

  $ (1,000 ) $ (2,701 ) $ (3,069 ) $ (4,076 ) $ (471 ) $ (661 )
                           

        The following table summarizes the pretax net actuarial loss (gain) and prior service benefit recognized in accumulated other comprehensive loss for the defined benefit and post-retirement benefit plans as of October 31, 2013.

 
  U.S. Defined
Benefit Plans
  Non-U.S. Defined
Benefit Plans
  Post-Retirement
Benefit Plans
 
 
  In millions
 

Net actuarial loss (gain)

  $ 377   $ 4,220   $ (96 )

Prior service benefit

        (231 )   (161 )
               

Total recognized in accumulated other comprehensive loss

  $ 377   $ 3,989   $ (257 )
               

        The following table summarizes the net actuarial loss (gain) and prior service benefit that are expected to be amortized from accumulated other comprehensive loss (income) and recognized as components of net periodic benefit cost (credit) during the next fiscal year.

 
  U.S. Defined
Benefit Plans
  Non-U.S. Defined
Benefit Plans
  Post-Retirement
Benefit Plans
 
 
  In millions
 

Net actuarial loss (gain)

  $ 16   $ 311   $ (10 )

Prior service benefit

        (24 )   (41 )
               

Total expected to be recognized in net periodic benefit cost (credit)

  $ 16   $ 287   $ (51 )
               

        Defined benefit plans with projected benefit obligations exceeding the fair value of plan assets were as follows:

 
  U.S. Defined
Benefit Plans
  Non-U.S. Defined
Benefit Plans
 
 
  2013   2012   2013   2012  
 
  In millions
 

Aggregate fair value of plan assets

  $ 10,866   $ 11,536   $ 10,462   $ 10,283  

Aggregate projected benefit obligation

  $ 11,866   $ 14,237   $ 14,010   $ 14,618  

        Defined benefit plans with accumulated benefit obligations exceeding the fair value of plan assets were as follows:

 
  U.S. Defined
Benefit Plans
  Non-U.S. Defined
Benefit Plans
 
 
  2013   2012   2013   2012  
 
  In millions
 

Aggregate fair value of plan assets

  $ 10,866   $ 11,536   $ 9,926   $ 10,193  

Aggregate accumulated benefit obligation

  $ 11,865   $ 14,236   $ 12,703   $ 13,645  

        During the first quarter of fiscal 2012, HP completed the transfer of the substitutional portion of its Japan pension obligation to the Japanese government. This transfer resulted in recognizing a net gain of $28 million, which is comprised of a net settlement loss of $150 million and a gain on government subsidy of $178 million. The government subsidy consisted of the elimination of $344 million of pension obligations and the transfer of $166 million of pension assets to the Japanese government.

        As part of the 2012 restructuring plan, the company announced a voluntary enhanced early retirement program for its U.S employees. Participation in the EER program was limited to those employees whose combined age and years of service equaled 65 or more. Approximately 8,500 employees elected to participate in the EER program and left the company on dates designated by the company with the majority of the EER participants having left the company on August 31, 2012 and others exiting through August 31, 2013. The HP Pension Plan was amended to provide for an EER benefit from the plan for electing EER participants who were current participants in the plan. The retirement incentive benefit was calculated as a lump sum and ranged between five and fourteen months of pay depending on years of service at the time of retirement under the program. As a result of this retirement incentive, HP recognized a special termination benefit ("STB") of $833 million, which reflected the present value of all additional benefits that HP would distribute from the HP Pension Plan. HP recorded these expenses as a restructuring charge. In addition, the HP Pension Plan was remeasured on June 30, 2012, which resulted in no material change to the 2012 net periodic benefit cost or funded status.

        HP extended to all employees participating in the EER program the opportunity to continue health care coverage at active employee contribution rates for up to 24 months following retirement. In addition, for employees not grandfathered into certain employer-subsidized retiree medical plans, HP provided up to $12,000 in employer credits under the RMSA. These items resulted in an additional STB expense of $227 million, which was offset by net curtailment gains of $37 million, due primarily to the resulting accelerated recognition of existing prior service cost/credits. The entire STB and approximately $30 million in curtailment gains were recognized in the second half of fiscal 2012. HP reported this net expense as a restructuring charge.

        The table below sets forth the fair value of plan assets as of October 31, 2013 by asset category within the fair value hierarchy.

 
  U.S. Defined Benefit Plans   Non-U.S. Defined Benefit Plans   Post-Retirement Benefit Plans  
 
  Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total  
 
  In millions
 

Asset Category:

                                                                         

Equity securities

                                                                         

U.S. 

  $ 1,711   $   $   $ 1,711   $ 2,456   $ 31   $   $ 2,487   $   $   $   $  

Non-U.S. 

    1,274             1,274     4,059     670     77     4,806                  

Debt securities

                                                                         

Corporate

        3,028         3,028         3,347         3,347         17         17  

Government(1)

        1,849         1,849         1,751         1,751     5     17         22  

Alternative Investments

                                                                         

Private Equity(2)

            1,250     1,250         2     48     50             234     234  

Hybrids(3)

            2     2           1,223         1,223             1     1  

Hedge Funds(4)

            113     113         226     204     430                  

Real Estate Funds

                    470     237     325     1,032                  

Insurance Group Annuity Contracts

                        50     81     131                  

Common Collective Trusts and 103-12 Investment Entities(5)

        1,233         1,233                         42         42  

Registered Investment Companies ("RICs")(6)

    61     329         390                     79             79  

Cash and Cash Equivalents(7)

    11     62         73     648     4         652         3         3  

Other(8)

    (37 )   (20 )       (57 )   110     62     2     174     (2 )           (2 )
                                                   

Total

  $ 3,020   $ 6,481   $ 1,365   $ 10,866   $ 7,743   $ 7,603   $ 737   $ 16,083   $ 82   $ 79   $ 235   $ 396  
                                                   

(1)
Includes debt issued by national, state and local governments and agencies.

(2)
Includes limited partnerships and venture capital partnerships as well as equity / buyout funds, venture capital, real estate and other similar funds that invest in the United States and internationally where foreign currencies are hedged.

(3)
Includes a fund that invests in both private and public equities primarily in the United States and the United Kingdom, as well as emerging markets across all sectors. The fund also holds fixed income and derivative instruments to hedge interest rate and inflation risk. In addition, the fund includes units in transferable securities, collective investment schemes, money market funds, cash and deposits.

(4)
Includes those that invest both long and short primarily in common stocks and credit, relative value, event driven equity, distressed debt and macro strategies. Management of the hedge funds has the ability to shift investments from value to growth strategies, from small to large capitalization stocks and bonds, and from a net long position to a net short position.

(5)
Department of Labor 103-12 IE (Investment Entity) designation is for plan assets held by two or more unrelated employee benefit plans which includes limited partnerships and venture capital partnerships.

(6)
Includes publicly and privately traded RICs.

(7)
Includes cash and cash equivalents such as short-term marketable securities.

(8)
Includes international insured contracts, derivative instruments and unsettled transactions.

        Changes in fair value measurements of Level 3 investments during the year ended October 31, 2013, were as follows:

 
  U.S. Defined
Benefit Plans
  Non-U.S. Defined Benefit Plans   Post-Retirement Benefit Plans  
 
  Debt
Securities
  Alternative
Investments
   
  Equity   Alternative
Investments
   
   
   
   
  Alternative
Investments
   
 
 
  Corporate
Debt
  Private
Equity
  Hybrids   Hedge
Funds
  Total   Non U.S.
Equities
  Private
Equity
  Hedge
Funds
  Real
Estate
  Insurance
Group
Annuities
  Other   Total   Private
Equity
  Hybrids   Total  

Beginning balance at October 31, 2012

  $ 1   $ 1,300   $ 2   $ 65   $ 1,368   $ 76   $ 21   $ 233   $ 194   $ 88   $ 2   $ 614   $ 235   $ 1   $ 236  

Actual return on plan assets:

                                                                                           

Relating to assets still held at the reporting date

        (9 )       13     4     1     8         16     (5 )       20     5         5  

Relating to assets sold during the period

        143             143             11                 11     21         21  

Purchases, sales, and settlements (net)

        (184 )       35     (149 )       19     (40 )   115     (2 )       92     (27 )       (27 )

Transfers in and/or out of Level 3

    (1 )               (1 )                                        
                                                               

Ending balance at October 31, 2013

  $   $ 1,250   $ 2   $ 113   $ 1,365   $ 77   $ 48   $ 204   $ 325   $ 81   $ 2   $ 737   $ 234   $ 1   $ 235  
                                                               

        The table below sets forth the fair value of our plan assets as of October 31, 2012 by asset category within the fair value hierarchy.

 
  U.S. Defined Benefit Plans   Non-U.S. Defined Benefit Plans   Post-Retirement Benefit Plans  
 
  Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total  
 
  In millions
 

Asset Category:

                                                                         

Equity securities

                                                                         

U.S. 

  $ 1,150   $   $   $ 1,150   $ 1,621   $ 28   $   $ 1,649   $   $   $   $  

Non-U.S. 

    866             866     4,049     50     76     4,175                  

Debt securities

                                                                         

Corporate

        3,442     1     3,443         2,878         2,878         17         17  

Government(1)

        3,037         3,037         1,653         1,653     6     16         22  

Alternative Investments

                                                                         

Private Equity(2)

    3         1,300     1,303     2         21     23             235     235  

Hybrids(3)

            2     2         1,089         1,089             1     1  

Hedge Funds(4)

            65     65         296     233     529                  

Real Estate Funds

                    449     177     194     820                  

Insurance Group Annuity Contracts

                        60     88     148                  

Common Collective Trusts and 103-12 Investment Entities(5)

        1,546         1,546                         49         49  

Registered Investment Companies ("RICs")(6)

    119     342         461                     73             73  

Cash and Cash Equivalents(7)

    (66 )   108         42     439     5         444         2         2  

Other(8)

    (245 )   (134 )       (379 )   575     36     2     613     (4 )           (4 )
                                                   

Total

  $ 1,827   $ 8,341   $ 1,368   $ 11,536   $ 7,135   $ 6,272   $ 614   $ 14,021   $ 75   $ 84   $ 236   $ 395  
                                                   

(1)
Includes debt issued by national, state and local governments and agencies. Certain U.S. treasury debt securities in the aggregate of $1.6 billion have been reclassified from level 1 to level 2 based upon further analysis of the investments.

(2)
Includes limited partnerships and venture capital partnerships as well as equity / buyout funds, venture capital, real estate and other similar funds that invest in the United States and internationally where foreign currencies are hedged.

(3)
Includes a fund that invests in both private and public equities primarily in the United States and the United Kingdom, as well as emerging markets across all sectors. The fund also holds fixed income and derivative instruments to hedge interest rate and inflation risk. In addition, the fund includes units in transferable securities, collective investment schemes, money market funds, cash and deposits.

(4)
Includes those that invest both long and short primarily in common stocks and credit, relative value, event driven equity, distressed debt and macro strategies. Management of the hedge funds has the ability to shift investments from value to growth strategies, from small to large capitalization stocks and bonds, and from a net long position to a net short position.

(5)
Department of Labor 103-12 IE (Investment Entity) designation is for plan assets held by two or more unrelated employee benefit plans which includes limited partnerships and venture capital partnerships.

(6)
Includes publicly and privately traded RICs.

(7)
Includes cash and cash equivalents such as short-term marketable securities.

(8)
Includes international insured contracts, derivative instruments and unsettled transactions.

        Changes in fair value measurements of Level 3 investments during the year ended October 31, 2012, were as follows:

 
  U.S. Defined Benefit Plans   Non-U.S. Defined Benefit Plans   Post-Retirement Benefit Plans  
 
  Debt Securities   Alternative Investments    
  Equity   Debt Securities   Alternative Investments    
   
   
   
   
  Alternative Investments    
 
 
  Corporate
Debt
  Private
Equity
  Hybrids   Hedge
Funds
  Total   U.S.
Equities
  Non U.S.
Equities
  Corporate
Debt
  Private
Equity
  Hedge
Funds
  Real
Estate
  Insurance
Group
Annuities
  Cash   Other   Total   Private
Equity
  Hybrids   Total  
 
  In millions
 

Beginning balance at October 31, 2011

  $   $ 1,356   $ 4   $   $ 1,360   $ 30   $   $ 3   $ 20   $ 300   $ 199   $ 89   $ (4 ) $ 19   $ 656   $ 227   $ 1   $ 228  

Actual return on plan assets:

                                                                                                             

Relating to assets still held at the reporting date

        (67 )   (1 )       (68 )   (2 )       (1 )   (1 )   (76 )   (5 )   1         (1 )   (85 )   13         13  

Relating to assets sold during the period

        103     1         104                                             3         3  

Purchases, sales, and settlements (net)

    1     (92 )   (2 )   65     (28 )           (2 )   16         43     (2 )           55     (8 )       (8 )

Transfers in and/or out of Level 3

                        (28 )   76         (14 )   9     (43 )       4     (16 )   (12 )            
                                                                           

Ending balance at October 31, 2012

  $ 1   $ 1,300   $ 2   $ 65   $ 1,368   $   $ 76   $   $ 21   $ 233   $ 194   $ 88   $   $ 2   $ 614   $ 235   $ 1   $ 236  
                                                                           

        The following is a description of the valuation methodologies used for plan assets measured at fair value. There have been no changes in the methodologies used during the reporting period.

        Investments in publicly-traded equity securities are valued using the closing price on the measurement date as reported on the stock exchange on which the individual securities are traded. For corporate, government and asset-backed debt securities, fair value is based upon observable inputs of comparable market transactions. For corporate and government debt securities traded on active exchanges, fair value is based upon observable quoted prices. The valuation of alternative investments, such as limited partnerships and joint ventures, may require significant management judgment. For alternative investments, valuation is based on net asset value ("NAV") as reported by the asset manager and is adjusted when management determines that NAV is not representative of fair value. In making such an assessment, a variety of factors are reviewed by management, including, but not limited to, the timeliness of NAV as reported by the asset manager and changes in general economic and market conditions subsequent to the last NAV reported by the asset manager. Depending on the amount of management judgment, the lack of near-term liquidity, and the absence of quoted market prices, these assets are classified in Level 2 or Level 3 of the fair value hierarchy. Further, depending on how quickly HP can redeem its hedge fund investments, and the extent of any adjustments to NAV, hedge funds are classified within either Level 2 or Level 3 of the fair value hierarchy. Common collective trusts, interest in 103-12 entities and registered investment companies are valued at NAV. The valuation for some of these assets requires judgment due to the absence of quoted market prices, and these assets are generally classified in Level 2 of the fair value hierarchy. Cash and cash equivalents includes money market funds, which are valued based on NAV. Other assets were classified in the fair value hierarchy based on the lowest level input (e.g., quoted prices and observable inputs) that is significant to the fair value measure in its entirety.

        The weighted-average target and actual asset allocations across the benefit plans at the respective measurement dates were as follows:

 
  U. S. Defined
Benefit Plans
  Non-U.S. Defined
Benefit Plans
  Post-Retirement
Benefit Plans
 
 
   
  Plan Assets    
  Plan Assets    
  Plan Assets  
 
  2013
Target
Allocation
  2013
Target
Allocation
  2013
Target
Allocation
 
Asset Category
  2013   2012   2013   2012   2013   2012  

Public equity securities

          37.2 %   23.7 %         48.0 %   41.5 %         9.5 %   8.6 %

Private/other equity securities

          12.6 %   11.9 %         7.9 %   11.7 %         59.2 %   59.6 %

Real estate and other

          (0.5 )%   (3.3 )%         7.5 %   10.2 %         (0.1 )%   (0.9 )%
                                             

Equity related investments

    55.0 %   49.3 %   32.3 %   64.0 %   63.4 %   63.4 %   68.0 %   68.6 %   67.3 %

Debt securities

    45.0 %   48.2 %   61.5 %   35.2 %   32.5 %   33.4 %   28.0 %   29.0 %   27.9 %

Cash

        2.5 %   6.2 %   0.8 %   4.1 %   3.2 %   4.0 %   2.4 %   4.8 %
                                       

Total

    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                                       

        HP's investment strategy is to seek a competitive rate of return relative to an appropriate level of risk depending on the funded status of each plan. The majority of the plans' investment managers employ active investment management strategies with the goal of outperforming the broad markets in which they invest. Risk management practices include diversification across asset classes and investment styles and periodic rebalancing toward asset allocation targets. A number of the plans' investment managers are authorized to utilize derivatives for investment or liability exposures, and HP may utilize derivatives to effect asset allocation changes or to hedge certain investment or liability exposures.

        The target asset allocation selected for each U.S. plan reflects a risk/return profile HP believes is appropriate relative to each plan's liability structure and return goals. HP conducts periodic asset-liability studies for U.S. plans in order to model various potential asset allocations in comparison to each plan's forecasted liabilities and liquidity needs. HP invests a portion of the U.S. defined benefit plan assets and post-retirement benefit plan assets in private market securities such as private equity funds to provide diversification and a higher expected return on assets.

        Outside the United States, asset allocation decisions are typically made by an independent board of trustees for the specific plan. As in the U.S., investment objectives are designed to generate returns that will enable the plan to meet its future obligations. In some countries, local regulations may restrict asset allocations, typically leading to a higher percentage of investment in fixed income securities than would otherwise be deployed. HP reviews the investment strategy and provides a recommended list of investment managers for each country plan, with final decisions on asset allocation and investment managers made by the board of trustees for the specific plan.

        The expected long-term rate of return on plan assets reflects the expected returns for each major asset class in which the plan invests and the weight of each asset class in the target mix. Expected asset returns reflect the current yield on government bonds, risk premiums for each asset class, and expected real returns which considers each country's specific inflation outlook. Because HP's investment policy is to employ primarily active investment managers who seek to outperform the broader market, the expected returns are adjusted to reflect the expected additional returns net of fees.

        In fiscal 2014, HP expects to contribute approximately $617 million to its non-U.S. pension plans and approximately $33 million to cover benefit payments to U.S. non-qualified plan participants. HP expects to pay approximately $109 million to cover benefit claims for HP's post-retirement benefit plans. HP's funding policy is to fund its pension plans so that it meets at least the minimum contribution requirements, as established by local government, funding and taxing authorities.

        HP estimates that the future benefits payable for the retirement and post-retirement plans were as follows at October 31, 2013:

 
  U.S. Defined
Benefit Plans
  Non-U.S.
Defined
Benefit Plans
  Post-Retirement
Benefit Plans
 
 
  In millions
 

Fiscal year ending October 31

                   

2014

  $ 694   $ 549   $ 146  

2015

  $ 553   $ 538   $ 76  (1)

2016

  $ 573   $ 546   $ 70  

2017

  $ 610   $ 596   $ 67  

2018

  $ 653   $ 636   $ 65  

Next five fiscal years to October 31, 2023

  $ 3,681   $ 3,960   $ 286  

(1)
Decrease in future benefits payable due to the winding down of the 2012 EER program.

us-gaap:PensionAndOtherPostretirementBenefitsDisclosureTextBlock