Pension Plans and Other Post-Retirement Benefits

12 Months Ended

Dec. 31, 2024

Pension Plans and Other Post-Retirement Benefits

24. Pension Plans and Other Post-Retirement Benefits

We sponsor defined benefit pension plans and defined contribution plans for eligible employees. All of our significant defined benefit plans worldwide are closed to new entrants with new hires participating in defined contribution plans. Significant defined benefit plans are located in Canada and the U.S. The defined benefit pension plans offer benefits based on length of service and final average earnings and certain plans offer some indexation of benefits. The specific features of these plans vary in accordance with the employee group and countries in which employees are located. In addition, we maintain supplementary non-contributory defined benefit pension arrangements for eligible employees, which are primarily for benefits which are in excess of local tax limits. As of December 31, 2014, there are no active members in the U.S. defined benefit plans continuing to accrue future service benefits. On January 1, 2009, the Canadian defined benefit plans were closed to new employees. In 2023, all assets and liabilities associated with the UK pension plans were transferred to the buyer as part of the sale of Sun Life's UK business. Canadian employees hired before January 1, 2009 continue to earn future service benefits in the previous plans, which includes both defined benefit and defined contribution components, while new hires since then are eligible to join a defined contribution plan. In addition, one small defined benefit plan in the Philippines remains open to new hires.

Our funding policy for defined benefit pension plans is to make at least the minimum annual contributions required by regulations in the countries in which the plans are offered. The defined benefit pension arrangements are governed by local pension committees. Significant plan changes require the approval of the Board of Directors of the sponsoring subsidiary of SLF Inc.

We also established defined contribution plans for eligible employees. Our contributions to these defined contribution pension plans may be subject to certain vesting requirements. Generally, our contributions are a set percentage of employees’ annual income and may be a set percentage of employee contributions, up to specified levels.

In addition to our pension plans, in Canada and the U.S., we provide certain post-retirement health care and life insurance benefits to eligible employees and to their dependents upon meeting certain requirements. Eligible retirees may be required to pay a portion of the premiums for these benefits and, in general, deductible amounts and co-insurance percentages apply to benefit payments. These post-retirement benefits are not pre-funded. In Canada, certain post-retirement health care and life insurance benefits are provided for eligible employees who retired before December 31, 2015. Eligible employees in Canada who retire after December 31, 2015 will have access to voluntary retiree-paid health care coverage. In the U.S., certain post-retirement health care and life insurance benefits are provided to eligible retirees. In the U.S., employees who were not age 50 with 10 years of service as of December 31, 2015 only have access to subsidized retiree health care coverage until eligible for Medicare. Eligible existing and future retirees and covered dependents eligible for Medicare receive an annual contribution to a health reimbursement account to be applied against individual coverage and other eligible expenses.

24.A Risks Associated with Employee Defined Benefit Plans

With the closure of the significant defined benefit pension and retiree benefit plans to new entrants, the volatility associated with future service accruals for active members has been limited and will decline over time.

The major risks remaining in relation to past service obligations are increases in liabilities due to a decline in discount rates, greater life expectancy than assumed and adverse asset returns. We have significantly de-risked the investments of our significant defined benefit pension plans Company-wide by shifting the pension asset mix away from equities and into more fixed income and liability-matching investments. In 2023, all assets and liabilities associated with the UK pension plans were transferred to the buyer as part of the sale of Sun Life's UK business. The target for our significant funded defined benefit pension plans is to minimize volatility in funded status arising from changes in discount rates and exposure to equity markets.

24.B Defined Benefit Pension and Other Post-Retirement Benefit Plans

The following tables set forth the status of the defined benefit pension and other post-retirement benefit plans:


	2024								2023
	Pension			Other post-retirement			Total			Pension		Other post-retirement			Total
Change in defined benefit obligations:
Defined benefit obligation, January 1		$	2,483		$	215	$	2,698		$	2,763		$	206	$	2,969
Current service cost		35			8		43			32			6		38
Interest cost		116			11		127			121			11		132
Actuarial losses (gains)		(35)			(4)		(39)			187			8		195
Benefits paid		(134)			(14)		(148)			(138)			(15)		(153)

Divestiture		—			—		—			(483)			—		(483)


Foreign exchange rate movements		34			5		39			1			(1)		—
Defined benefit obligation, December 31		$	2,499		$	221	$	2,720		$	2,483		$	215	$	2,698
Change in plan assets:
Fair value of plan assets, January 1		$	2,393		$	—	$	2,393		$	2,799		$	—	$	2,799
Administrative expense		(1)			—		(1)			(1)			—		(1)
Interest income on plan assets		114			—		114			125			—		125
Return on plan assets (excluding amounts included in net interest expense)		(13)			—		(13)			48			—		48
Employer contributions		34			14		48			69			15		84
Benefits paid		(134)			(14)		(148)			(138)			(15)		(153)

Divestiture		—			—		—			(510)			—		(510)
Foreign exchange rate movements		34			—		34			1			—		1
Fair value of plan assets, December 31		$	2,427		$	—	$	2,427		$	2,393		$	—	$	2,393
Amounts recognized on Statement of Financial Position:
Fair value of plan assets		$	2,427		$	—	$	2,427		$	2,393		$	—	$	2,393
Defined benefit (obligation)		(2,499)			(221)		(2,720)			(2,483)			(215)		(2,698)
Net recognized (liability) asset, December 31		$	(72)		$	(221)	$	(293)		$	(90)		$	(215)	$	(305)
Components of net benefit expense recognized:
Current service cost		$	35		$	8	$	43		$	32		$	6	$	38
Administrative expense		1			—		1			1			—		1
Net interest expense (income)		2			11		13			(4)			11		7




Other long-term employee benefit losses (gains)		—			5		5			—			3		3
Net benefit expense		$	38		$	24	$	62		$	29		$	20	$	49
Remeasurement of net recognized (liability) asset:
Return on plan assets (excluding amounts included in net interest expense)		$	(13)		$	—	$	(13)		$	48		$	—	$	48
Actuarial gains (losses) arising from changes in demographic assumptions		—			—		—			(4)			—		(4)
Actuarial gains (losses) arising from changes in financial assumptions		36			2		38			(131)			(7)		(138)
Actuarial gains (losses) arising from experience adjustments		(1)			7		6			(52)			2		(50)
Foreign exchange rate movements		—			(5)		(5)			—			1		1
Components of defined benefit costs recognized in Other comprehensive income (loss)		$	22		$	4	$	26		$	(139)		$	(4)	$	(143)

24.C Principal Assumptions for Significant Plans


	2024	2023
	Canada %	U.S. %	Canada %		UK %	(1)	U.S. %
To determine defined benefit obligation at end of year:
Discount rate for pension plans	4.70	5.70		4.60	n/a		5.35
Rate of compensation increase	2.80	n/a		2.70	n/a		n/a
Pension increases	0.00-0.20	n/a		0.00-0.20	n/a		n/a
To determine net benefit expense for year:
Discount rate for pension plans	4.60	5.35		5.00	4.75		5.55
Rate of compensation increase	2.70	n/a		2.75	n/a		n/a
Pension increases	0.00-0.20	n/a		0.00-0.05	3.05		n/a
Health care trend rates:
Initial health care trend rate	5.02	7.00		5.08	n/a		6.75
Ultimate health care trend rate	4.00	5.00		4.00	n/a		5.00
Year ultimate health care trend rate reached	2040	2033		2040	n/a		2031
	2024	2023
	Canada	U.S.	Canada		UK	(1)	U.S.
Mortality rates:
Life expectancy (in years) for individuals currently at age 65:
Male	24	22		24	n/a		22
Female	25	23		25	n/a		23
Life expectancy (in years) at 65 for individuals currently at age 45:
Male	25	23		25	n/a		23
Female	26	25		26	n/a		25
Average duration (in years) of pension obligation	13.6	9.6		13.8	n/a		9.8

(1) In 2023, all assets and liabilities associated with the UK pension plans were transferred to the buyer as part of the sale of Sun Life's UK business.

Discount Rate, Rate of Compensation Increase and Health Care Cost

The major economic assumptions which are used in determining the actuarial present value of the accrued benefit obligations vary by country.

The discount rate assumption used for significant plans is determined by reference to the market yields, as of December 31, of high-quality corporate bonds that have terms to maturity approximating the terms of the related obligation. In countries where a deep corporate market does not exist, government bonds are used. Compensation and health care trend assumptions are based on expected long-term trend assumptions which may differ from actual results.

24.D Sensitivity of Key Assumptions

The following table provides the potential impact of changes in key assumptions on the defined benefit obligation for pension and other post-retirement benefit plans as at December 31, 2024. These sensitivities are hypothetical and should be used with caution. The impact of changes in each key assumption may result in greater than proportional changes in sensitivities.


	Pension			Post-retirement benefits
Interest/discount rate sensitivity:(1)
1% decrease		$	360		$	20
1% increase		$	(286)		$	(18)
Rate of compensation increase assumption:
1% decrease		$	(45)		n/a
1% increase		$	51		n/a
Health care trend rate assumption:
1% decrease		n/a			$	(9)
1% increase		n/a			$	10
Mortality rates:(2)
10% decrease		$	52		$	2

(1) Represents a parallel shift in interest rates across the entire yield curve, resulting in a change in the discount rate assumption.

(2) Represents 10% decrease in mortality rates at each age.

24.E Fair Value of Plan Assets

The composition of fair value of plan assets is as follows:


As at December 31,	2024		2023
Equity investments	4	%	4	%
Fixed income investments	76	%	77	%
Real estate investments	12	%	12	%
Other	8	%	7	%
Total composition of fair value of plan assets	100	%	100	%

The fair value of our equity investments in 2024 and 2023 are consistent with Level 1 or Level 2 fair value hierarchy. In 2024, 3% of our fixed income investments (2023 — 4%) are determined based on valuation techniques consistent with Level 1 of the fair value hierarchy.

The assets of the defined benefit pension plans are primarily held in trust for plan members and are managed within the provisions of each plan’s investment policies and procedures. Diversification of the investments is used to limit credit, market, and foreign currency risks. We have significantly de-risked the investments of our significant defined benefit pension plans by shifting the pension asset mix away from equities and into more fixed income and liability-matching investments. The long-term investment objectives of the defined benefit pension plans are to equal or exceed the rate of growth of the liabilities. Over shorter periods, the objective of the defined benefit pension plan investment strategy is to minimize volatility in the funded status. Liquidity is managed with consideration to the cash flow requirements of the liabilities.

24.F Future Cash Flows

The following tables set forth the expected contributions and expected future benefit payments of the defined benefit pension and other post-retirement benefit plans:


	Pension			Post-retirement			Total
Expected contributions for the next 12 months		$	38		$	18	$	56

Expected Future Benefit Payments


	2025		2026		2027		2028		2029		2030 to 2034
Pension	$	135	$	140	$	145	$	151	$	150		$	806
Post-retirement	18		19		19		20		21			114
Total	$	153	$	159	$	164	$	171	$	171		$	920

24.G Defined Contribution Plans

We expensed $206 in 2024 (2023 — $199) with respect to defined contribution plans.