Notes to Financial Statements

December 31, 2016 and 2015

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The following brief description of the Marathon Petroleum Thrift Plan (the “Plan”) is provided for general informational purposes only. Participants should refer to the Summary Plan Description or the Plan document for a more complete description of the Plan’s provisions.

General

The Plan is a defined contribution retirement plan sponsored by Marathon Petroleum Company LP ("Company"). The Plan generally covers employees of the Company and other related employers who have elected to participate in the Plan. Eligible employees may participate in the Plan by electing to make contributions in accordance with procedures established by the Plan Administrator. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Effective January 1, 2016, the Plan became a Section 401(k) safe harbor plan.

Plan Mergers

Effective January 1, 2016, the Speedway Retirement Savings Plan became a sub-plan of the Plan. As part of this merger, net assets of $188,419,476 were transferred into the Plan as of December 31, 2015.

Effective immediately after the close of trading on the New York Stock Exchange on March 28, 2016, the MarkWest Hydrocarbon Inc. 401(k) Savings and Profit Sharing Plan was merged with and into the Plan. As part of the merger, net assets of $92,988,656 were transferred into the Plan.

Effective as of 12:01 a.m. on August 8, 2016, the Savings and Profit Sharing Plan of WilcoHess LLC was merged with and into the Plan. As part of the merger, net assets of $15,043,152 were transferred into the Plan.

Contributions

Eligible employees may contribute up to 25 percent of eligible pay to the Plan. Employees who are not “highly compensated,” within the meaning of Section 414(q) of the Internal Revenue Code (“Code”), may also contribute after-tax contributions up to 18 percent of eligible pay. Any participants who are at least age 50 during the Plan year may make additional catch-up contributions. All contributions are subject to Plan restrictions and limitations under the Code, including the annual compensation limit under Code Section 401(a)(17). The Company also makes contributions on behalf of eligible Speedway LLC employees in an amount equal to 3.5 percent of their eligible pay. Participants may also make rollover contributions or direct-plan transfer contributions in accordance with the terms of the Plan.

The Company makes matching contributions on eligible contributions up to a maximum of 6 percent of eligible pay at a rate of $1.17 per dollar contributed.

Valuation of Participant Accounts

Each participant’s account is credited with the participant’s contribution and allocations of (a) the Company’s contributions and (b) Plan earnings (losses) based on the participant’s relative investment holdings. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

Marathon Petroleum

Thrift Plan

Notes to Financial Statements

December 31, 2016 and 2015

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Vesting

Participants are fully and immediately vested in their contributions and Company match contributions occurring on or after January 1, 2016, plus actual earnings thereon. For Company match contributions occurring prior to January 1, 2016, participants generally become fully vested in these Company contributions, plus actual earnings thereon, upon the earliest of the following: upon retirement under the Retirement Plan of the Company; upon the death of an active participant; after three years of service with the Company or a participating employer; upon attainment of age 65; or upon termination or partial termination of the Plan.

Participant Loans

Participants may borrow from their fund accounts a minimum of $500 up to a maximum equal to the lesser of $50,000 or 50 percent of their vested account balance. The loans are collateralized by the balance in the participant’s account and bear interest rates that currently range from 3.25 percent to 9.94 percent, determined in accordance with Plan provisions. Principal and interest is paid ratably through payroll deductions for active employees and through ACH payments for participants not receiving pay and retirees.

Payment of Benefits

A participant whose employment is terminated may elect to receive a lump-sum distribution of the participant’s account. Alternatively, a participant may elect to defer the commencement of benefits until a date no later than the first calendar day in April, immediately following the calendar year in which such participant attains age 70-1/2. In accordance with the provisions of the Code, mandatory distributions greater than $1,000 require automatic rollover to an IRA for participants who fail to make an active election otherwise available under the Plan. A retired member or a spouse beneficiary member may withdraw, during any year, all or any portion of the remaining balance in his or her account subject to certain restrictions. An installment settlement option is available to retired participants, active participants (currently employed) who are at least age 70-1/2 and spouse beneficiary participants, subject to certain requirements and restrictions.

Forfeitures

Non-vested participants whose services with the Company have been terminated will forfeit their entire Company-matching contribution and earnings thereon when either of the following takes place: (1) they remove their participant contributions from the Plan, or (2) they do not regain employment within five years of termination. Company contributions and earnings thereon are eligible for reinstatement under the rules set forth in the Plan document. As of December 31, 2016 and 2015 forfeited non-vested accounts totaled $294,647 and $659 , respectively. Total forfeitures used to reduce certain employer contributions in 2016 totaled $58,591.

Investment Options

Upon enrollment in the Plan, a participant may direct employee contributions in any of the funds provided by the Plan.

Marathon Petroleum

Thrift Plan

Notes to Financial Statements

December 31, 2016 and 2015

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Basis of Accounting

The financial statements of the Plan are prepared under the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

Reclassification

The Plan early adopted ASU No. 2015-12 Part I and presented the Plan’s Stable Value Fund (SVF) as a fully benefit-responsive investment at contract value as of December 31, 2015.  However, upon further review of the SVFs structure and valuation methodology, management determined that the presentation of the Plan’s SVF should include the related cash equivalents that were previously considered investments at fair value. Accordingly, 2015 financial statements were reclassified to conform to the 2016 financial statement presentation.  This reclassification had no effect on changes in net assets available for benefits.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires the Plan’s management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Investment Valuation and Income Recognition

Fully benefit responsive investment contracts are reported at contract value. Contract value is the relevant measurement attribute for fully benefit responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. All other investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 4 for discussion of fair value measurements.

Purchases and sales of securities are recorded on a trade-date basis. Investment related expenses are also included in net appreciation (depreciation) of fair value of investments. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation includes gains and losses on investments bought and sold as well as held during the year.

Payment of Benefits

Benefits are recorded when paid.

Notes Receivable from Participants

Notes receivable from participants represent loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. No allowance for credit losses has been recorded. Delinquent notes receivable from participants are recorded as a distribution based upon the terms of the Plan document.

 

Administration of Plan Assets

All costs, expenses and fees incurred in administering the Plan, to the extent not paid by the Company, are incurred by the participants. Fees or charges for investment management services are not paid by the Company but are borne by the participants electing such services. Any taxes applicable to the participants’ account are charged or credited to the participants’ account by Fidelity Management Trust Company (“Fidelity”, or the “Trustee”).

The Stable Value Fund (the “Fund”) is managed by the Trustee pursuant to a trust agreement. Any fees charged by the Trustee are deducted from the interest earned by Plan members in the Fund. The total amount of fees charged for 2016 in connection with the Fund was $1,040,359 .

Marathon Petroleum

Thrift Plan

Notes to Financial Statements

December 31, 2016 and 2015

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In May 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-07, " Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). " ASU No. 2015-07 removes the requirement to include investments in the fair value hierarchy for which fair value is measured using the net asset value per share practical expedient under ASC 820. ASU No. 2015-07 was effective for the Plan retrospectively for the year ending December 31, 2016. Adoption of this accounting standard in 2016 did not have a material impact on the Plan's disclosures.

The FASB Accounting Standards codification (ASC) 820, Fair Value Measurement and Disclosures (ASC 820) establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. There are three approaches for measuring the fair value of assets and liabilities: the market approach, the income approach and the cost approach, each of which includes multiple valuation techniques. This hierarchy consists of three broad levels:

The Plan’s investments are reported at fair value in the accompanying statement of net assets available for benefits, except for fully benefit-responsive investment contracts which are reported at contract value. The methods used to measure fair value may produce an amount that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following provides a description of the valuation techniques employed for each major Plan asset category at December 31, 2016 and 2015 .

Common stock – Investments in common stocks are valued using a market approach at the closing price reported in an active market and is therefore considered Level 1.

Mutual funds – Investments in mutual funds, including money market mutual funds, are valued using a market approach at the net asset value (“NAV”) of shares held. The NAV is generally based on prices from a public exchange, which is normally the principal market on which the investments are traded, and is considered Level 1.

Marathon Petroleum

Thrift Plan

Notes to Financial Statements

December 31, 2016 and 2015

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Common Collective Trusts (“CCTs”) – Investment in CCTs are valued using a market approach at the NAV of units held, but investment opportunities in such funds are limited to institutional investors on behalf of defined contribution plans. The investments are mainly publicly traded. This investment is considered Level 2.

The CCTs are the Pyramis Core Lifecycle (Income, 2005, 2010, 2015, 2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055 and 2060) Commingled Pools, the Low Price Commingled Pool, the Growth Commingled Pool, and the Contrafund Commingled Pool. These pools seek active return until the pool’s targeted retirement year. Thereafter, the pool’s objective will be capital preservation. These pools invest in a diversified portfolio of equity, fixed income, and/or short-term products and may use futures, options, swaps, and exchange-traded funds to remain fully invested.

The following tables set forth by level, within the fair value hierarchy, the Plan’s assets at fair value:

 

Marathon Petroleum

Thrift Plan

Notes to Financial Statements

December 31, 2016 and 2015

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At December 31, 2016 and 2015 the Plan held Synthetic Investment Contracts (SICs) of $400,998,786 and $398,118,394 , respectively, recorded at contract value. The remaining assets of $21,226,784 and $6,797,917 held by the Fund at December 31, 2016 and 2015 , respectively, are invested in cash equivalents and stated at amortized cost, which approximates fair value. Ordinarily, participants may direct the withdrawal or transfer of all or a portion of their investment in the Fund at contract value.

Wrap contracts use a crediting rate formula to convert market value changes in the underlying assets into income distributions in order to minimize the difference between the market value and contract value of the underlying assets over time. Using the crediting rate formula, an estimated future market value is calculated by compounding the current market value at the current yield to maturity for a period equal to the duration of the wrapped assets. The crediting rate may be affected by many factors, including purchases and redemptions by participants, but the precise impact depends on whether the market value of the underlying assets is higher or lower than the contract value of those assets. Crediting rates are typically reset, if needed, on a monthly basis. The wrap contracts provide a guarantee that the crediting rate will not fall below zero percent.

A wrap issuer may terminate a wrap contract at any time subject to the provisions of the contract agreement. In addition, wrap contracts limit the ability of the Fund to transact at contract value upon the occurrence of certain events (including but not limited to, the complete or partial termination of the Plan, group layoffs, early retirement programs, or the Plan’s failure to qualify under Section 401(a) or Section 401(k) of the Code). However, the Plan Administrator believes the occurrence of these types of events is not probable at this time.

The following is a reconciliation of the changes in net assets available for benefits per the financial statements to the Form 5500 for the year ended December 31, 2016 :

Transactions involving shares of Marathon Petroleum Corporation common stock are performed by the Trustee on the open market, unless otherwise directed by the Company, in which case, shares may be bought or sold directly from Marathon Petroleum Corporation. During 2016 , all shares of Marathon Petroleum Corporation common stock were purchased on the open market. At December 31, 2016 and 2015 , the Plan held 5,774,077 and 4,917,228 shares of common stock of Marathon Petroleum Corporation, respectively, with fair value of $ 290,724,776 and $ 254,909,120 , respectively, and a cost basis of $ 226,896,677 and $ 199,745,943 , respectively.

Certain Plan investments are shares of mutual funds managed by Fidelity. Certain Plan investments, amounting to $ 1,453,112,515 and $ 1,238,784,430 at December 31, 2016 and 2015 , respectively, are units of funds managed by the Trustee. In addition, there is a brokerage link fund managed by Fidelity. The Trustee also provides certain accounting and administrative services to the Plan for a negotiated fee. Fidelity is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions; however, they are exempt from the prohibited transaction rules under ERISA.

Certain employees and officers of the Company, who may also participate in the Plan, perform administrative services to the Plan at no cost.

Although it has not expressed any interest to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent vested in their accounts.

Marathon Petroleum

Thrift Plan

Notes to Financial Statements

December 31, 2016 and 2015

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The Plan, as amended and restated effective as of January 1, 2016, received a favorable determination letter from the Internal Revenue Service (“IRS”) dated April 11, 2017. Although the Plan has since been amended since receiving the determination letter, the Plan Administrator and the Plan’s tax counsel believe that the Plan is designed, and is currently being operated, in compliance with the applicable requirements of the Code and, therefore, believe that the Plan is qualified, and the related trust is tax-exempt.

US GAAP requires Plan management to evaluate uncertain tax positions taken by the Plan and to recognize a tax liability (or asset) when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS.  The Plan Administrator has analyzed the tax positions taken by the Plan and has concluded that as of December 31, 2016 and December 31, 2015 there were no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements.  The Plan has recognized no interest or penalties related to uncertain tax positions.  The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.  The Plan Administrator believes it is no longer subject to income tax examination for the years prior to 2013.

The Plan provides for various investment options. These investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with investment securities and the level of uncertainty related to changes in the value of investment securities, it is possible that changes in the near or long term could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits and the statement of changes in net assets available for benefits.

Effective January 1, 2017, eligible employees can contribute up to 75 percent of eligible pay.  In addition, catch-up contributions have increased from 50 percent to 75 percent for those who attain age 50 during a Plan year.