v3.20.4
Pension, Postretirement and Savings Plans
 12 Months Ended
Dec. 31, 2020
Retirement Benefits [Abstract]  
Pension, Postretirement and Savings Plans
The Company and certain of its subsidiaries maintain various pension and other postretirement plans that cover substantially all employees worldwide.
Defined Contribution Plans
The Company sponsors defined contribution retirement plans. The primary plan is the Mastercard Savings Plan, a 401(k) plan for substantially all of the Company’s U.S. employees, which is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. In addition, the Company has several defined contribution plans outside of the U.S. The Company’s total expense for its defined contribution plans was $150 million, $127 million and $98 million in 2020, 2019 and 2018, respectively.
Defined Benefit and Other Postretirement Plans
The Company sponsors pension and postretirement plans for certain non-U.S. employees (the “non-U.S. Plans”) that cover various benefits specific to their country of employment. Additionally, Vocalink has a defined benefit pension plan (the “Vocalink Plan”) which was permanently closed to new entrants and future accruals as of July 21, 2013, however, plan participants’ obligations are adjusted for future salary changes. The Company has agreed to make contributions of £15 million (approximately $20 million as of December 31, 2020) annually until September 2022. The term “Pension Plans” includes the non-U.S. Plans and the Vocalink Plan.
The Company maintains a postretirement plan providing health coverage and life insurance benefits for substantially all of its U.S. employees hired before July 1, 2007 (the “Postretirement Plan”).
The Company uses a December 31 measurement date for the Pension Plans and its Postretirement Plan (collectively the “Plans”). The Company recognizes the funded status of its Plans, measured as the difference between the fair value of the plan assets and the projected benefit obligation, in the consolidated balance sheet. The following table sets forth the Plans’ funded status, key assumptions and amounts recognized in the Company’s consolidated balance sheet at December 31:
 Pension PlansPostretirement Plan
 2020201920202019
 ($ in millions)
Change in benefit obligation
Benefit obligation at beginning of year$531 $438 $64 $57 
Service cost13 11 1 1 
Interest cost9 13 2 2 
Actuarial (gain) loss43 73 7 9 
Benefits paid(18)(15)(4)(5)
Transfers in3 2 — — 
Foreign currency translation 23 9 — — 
Benefit obligation at end of year604 531 70 64 
Change in plan assets
Fair value of plan assets at beginning of year518 410 — — 
Actual (loss) gain on plan assets56 79 — — 
Employer contributions34 32 4 5 
Benefits paid(18)(15)(4)(5)
Transfers in5 2 — — 
Foreign currency translation 22 10 — — 
Fair value of plan assets at end of year617 518 — — 
Funded status at end of year$13 $(13)$(70)$(64)
Amounts recognized on the consolidated balance sheet consist of:
Noncurrent assets$28 $— $— $— 
Other liabilities, short-term— — (4)(3)
Other liabilities, long-term(15)(13)(66)(61)
$13 $(13)$(70)$(64)
Accumulated other comprehensive income consists of:
Net actuarial (gain) loss$12 $7 $9 $2 
Prior service credit1 1 (4)(5)
Balance at end of year$13 $8 $5 $(3)
Weighted-average assumptions used to determine end of year benefit obligations
Discount rate
Non-U.S. Plans0.70 %0.70 %**
Vocalink Plan1.55 %2.00 %**
Postretirement Plan**2.50 %3.25 %
Rate of compensation increase
Non-U.S. Plans1.50 %1.50 %**
Vocalink Plan2.75 %2.50 %**
Postretirement Plan**3.00 %3.00 %
* Not applicable
At December 31, 2020, the Company’s aggregated Pension Plan assets exceed the benefit obligations. For plans where the benefit obligations exceeded plan assets, the projected benefit obligation was $112 million, the accumulated benefit obligation was $111 million and plan assets were $97 million. At December 31, 2019, all of the Pension Plans had benefit obligations in excess of plan assets. Information on the Pension Plans were as follows as of December 31:
20202019
(in millions)
Projected benefit obligation$604 $531 
Accumulated benefit obligation601 524 
Fair value of plan assets617 518 
For the years ended December 31, 2020 and 2019, the Company’s projected benefit obligation related to its Pension Plans increased $73 million and $93 million, respectively, primarily attributable to actuarial losses related to lower discount rate assumptions.
Components of net periodic benefit cost recorded in earnings were as follows for the Plans for each of the years ended December 31:
Pension PlansPostretirement Plan
202020192018202020192018
(in millions)
Service cost$13 $11 $9 $1 $1 $1 
Interest cost9 13 12 2 2 2 
Expected return on plan assets(18)(18)(20)— — — 
Amortization of actuarial loss— 1 — — — — 
Amortization of prior service credit— — — (1)(1)(2)
Net periodic benefit cost$4 $7 $1 $2 $2 $1 
The service cost component is recognized in general and administrative expenses on the consolidated statement of operations. Net periodic benefit cost, excluding the service cost component, is recognized in other income (expense) on the consolidated statement of operations.
Other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31 were as follows:
Pension PlansPostretirement Plan
202020192018202020192018
(in millions)
Current year actuarial loss (gain)$5 $12 $17 $7 $9 $(2)
Current year prior service credit — — 1 — — — 
Amortization of prior service credit— — — 1 1 2 
Total other comprehensive loss (income)$5 $12 $18 $8 $10 $— 
Total net periodic benefit cost and other comprehensive loss (income)$9 $19 $19 $10 $12 $1 
Assumptions
Weighted-average assumptions used to determine net periodic benefit cost were as follows for the years ended December 31:
Pension PlansPostretirement Plan
202020192018202020192018
Discount rate
Non-U.S. Plans0.70 %1.80 %1.80 %***
Vocalink Plan1.55 %2.00 %2.80 %***
Postretirement Plan***3.25 %4.25 %3.50 %
Expected return on plan assets
Non-U.S. Plans1.60 %2.10 %3.00 %***
Vocalink Plan3.20 %3.75 %4.75 %***
Rate of compensation increase
Non-U.S. Plans1.50 %1.50 %2.60 %***
Vocalink Plan2.75 %2.50 %3.85 %***
Postretirement Plan***3.00 %3.00 %3.00 %
* Not applicable
The Company’s discount rate assumptions are based on yield curves derived from high quality corporate bonds, which are matched to the expected cash flows of each respective plan. The expected return on plan assets assumptions are derived using the current and expected asset allocations of the Pension Plans’ assets and considering historical as well as expected returns on various classes of plan assets. The rates of compensation increases are determined by the Company, based upon its long-term plans for such increases.
The following additional assumptions were used at December 31 in accounting for the Postretirement Plan:
20202019
Healthcare cost trend rate assumed for next year7.00 %6.00 %
Ultimate trend rate 5.00 %5.00 %
Year that the rate reaches the ultimate trend rate82
Assets
Plan assets are managed taking into account the timing and amount of future benefit payments. The Vocalink Plan assets are managed with the following target asset allocations: fixed income 35%, U.K. government securities 23%, equity 22%, cash and cash equivalents 12% and real estate 8%. For the non-U.S. Plans, the assets are concentrated primarily in insurance contracts.
The Valuation Hierarchy of the Pension Plans’ assets is determined using a consistent application of the categorization measurements for the Company’s financial instruments. See Note 1 (Summary of Significant Accounting Policies) for additional information.
The following tables set forth by level, within the Valuation Hierarchy, the Pension Plans’ assets at fair value:
December 31, 2020December 31, 2019
Quoted Prices in Active Markets (Level 1)Significant Other Observable Inputs (Level 2)Significant
Unobservable
Inputs
(Level 3)		Fair ValueQuoted Prices in Active Markets (Level 1)Significant Other Observable Inputs (Level 2)Significant
Unobservable
Inputs
(Level 3)		Fair Value
(in millions)
Cash and cash equivalents 1
$59 $— $— $59 $16 $— $— $16 
Mutual funds 2
270 117 — 387 153 193 — 346 
Insurance contracts 3
— 96 — 96 — 75 — 75 
Total$329 $213 $— $542 $169 $268 $— $437 
Investments at Net Asset Value (“NAV”) 4
75 81 
Total Plan Assets$617 $518 
1Cash and cash equivalents are valued at quoted market prices, which represent the net asset value of the shares held by the Plans.
2Certain mutual funds are valued at quoted market prices, which represent the value of the shares held by the Plans, and are therefore included in Level 1. Certain other mutual funds are valued at unit values provided by investment managers, which are based on the fair value of the underlying investments utilizing public information, independent external valuation from third-party services or third-party advisors, and are therefore included in Level 2.
3Insurance contracts are valued at unit values provided by investment managers, which are based on the fair value of the underlying investments utilizing public information, independent external valuation from third-party services or third-party advisors.
4Investments at NAV include mutual funds (comprised primarily of credit investments) and other investments (comprised primarily of real estate investments) and are valued using the net asset value provided by the administrator as a practical expedient, and therefore these investments are not included in the valuation hierarchy. These investments have quarterly redemption frequencies with redemption notice periods ranging from 60 to 90 days.
The following table summarizes expected benefit payments (as of December 31, 2020) through 2030 for the Pension Plans and the Postretirement Plan, including those payments expected to be paid from the Company’s general assets. Actual benefit payments may differ from expected benefit payments.
Pension PlansPostretirement Plan
(in millions)
2021$19 $4 
202212 4 
202314 4 
202415 4 
202515 4 
2026 - 203077 20