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Employee Future Benefits (Tables)

12 Months Ended

Dec. 31, 2017

Summary of Pension and Retiree Welfare Plans

(c) Pension and retiree welfare plans


	Pension plans						Retiree welfare plans
For the years ended December 31,	2017			2016			2017			2016
Changes in defined benefit obligation:
Ending balance prior year	$	4,767		$	4,823		$	682		$	713
Plan mergers⁽¹⁾		–			143			–			–
Current service cost		48			52			1			1
Past service cost		–			(57	)		–			–
Interest cost		182			196			26			28
Plan participants’ contributions		1			1			4			5
Actuarial losses (gains) due to:
Experience		15			–			(9	)		(2	)
Demographic assumption changes		–			(94	)		–			(16	)
Economic assumption changes		214			116			41			20
Benefits paid		(315	)		(314	)		(45	)		(50	)
Impact of changes in foreign exchange rates		(206	)		(99	)		(35	)		(17	)
Defined benefit obligation, December 31	$	4,706		$	4,767		$	665		$	682


	Pension plans						Retiree welfare plans
For the years ended December 31,	2017			2016			2017			2016
Change in plan assets:
Fair value of plan assets, ending balance prior year	$	4,277		$	4,122		$	603		$	635
Plan mergers⁽¹⁾		–			129			–			–
Interest income		164			169			23			25
Employer contributions		85			106			12			–
Plan participants’ contributions		1			1			4			5
Benefits paid		(315	)		(314	)		(45	)		(50	)
Administration costs		(5	)		(7	)		(2	)		(2	)
Actuarial gains (losses)		312			158			30			8
Impact of changes in foreign exchange rates		(191	)		(87	)		(38	)		(18	)
Fair value of plan assets, December 31	$	4,328		$	4,277		$	587		$	603

⁽¹⁾	In Canada, two smaller pension plans were merged into the primary Manulife pension plan in 2016. Amounts shown represent the value of the defined benefit obligations and assets transferred from the smaller plans into the primary Manulife plan.

Summary of Amounts Recognized in Consolidated Statements of Financial Position

(d) Amounts recognized in the Consolidated Statements of Financial Position


	Pension plans						Retiree welfare plans
As at December 31,	2017			2016			2017			2016
Development of net defined benefit liability
Defined benefit obligation	$	4,706		$	4,767		$	665		$	682
Fair value of plan assets		4,328			4,277			587			603
Deficit		378			490			78			79
Effect of asset limit⁽¹⁾		–			–			–			–
Deficit and net defined benefit liability		378			490			78			79
Deficit is comprised of:
Funded or partially funded plans		(383	)		(292	)		(72	)		(63	)
Unfunded plans		761			782			150			142
Deficit and net defined benefit liability	$	378		$	490		$	78		$	79

⁽¹⁾

No reconciliation has been provided for the effect of the asset limit since there was no effect in either year. For the funded pension plans, the present value of the economic benefits available in the form of reductions in future contributions to the plans is significantly greater than the surplus that would be expected to develop.

Summary of Disaggregation of Defined Benefit Obligation

(e) Disaggregation of defined benefit obligation


	U.S. plans								Canadian plans
	Pension plans				Retiree welfare plans				Pension plans				Retiree welfare plans
As at December 31,	2017		2016		2017		2016		2017		2016		2017		2016
Active members	$	592	$	637	$	34	$	38	$	393	$	403	$	20	$	20
Inactive and retired members		2,434		2,528		481		502		1,287		1,199		130		122
Total	$	3,026	$	3,165	$	515	$	540	$	1,680	$	1,602	$	150	$	142

Summary of Major Categories of Plan Assets and Actual Per Cent Allocation to Each Category

(f) Fair value measurements

The major categories of plan assets and the actual per cent allocation to each category are as follows.



	U.S. plans⁽¹⁾								Canadian plans⁽²⁾
	Pension plans				Retiree welfare plans				Pension plans				Retiree welfare plans
As at December 31, 2017	Fair value		% of total		Fair value		% of total		Fair value		% of total		Fair value		% of total
Cash and cash equivalents	$	33		1%	$	33		6%	$	5		1%	$	–		–
Equity securities⁽³⁾		695		24%		45		8%		212		15%		–		–
Debt securities		1,979		67%		502		85%		1,165		84%		–		–
Other investments⁽⁴⁾		235		8%		7		1%		4		0%		–		–
Total	$	2,942		100%	$	587		100%	$	1,386		100%	$	–		–
	U.S. plans⁽¹⁾								Canadian plans⁽²⁾
	Pension plans				Retiree welfare plans				Pension plans				Retiree welfare plans
As at December 31, 2016	Fair value		% of total		Fair value		% of total		Fair value		% of total		Fair value		% of total
Cash and cash equivalents	$	15		1%	$	19		3%	$	21		2%	$	–		–
Equity securities⁽³⁾		825		28%		150		25%		460		34%		–		–
Debt securities		1,834		62%		427		71%		809		60%		–		–
Other investments⁽⁴⁾		259		9%		7		1%		54		4%		–		–
Total	$	2,933		100%	$	603		100%	$	1,344		100%	$	–		–

⁽¹⁾

All the U.S. pension and retiree welfare plan assets have daily quoted prices in active markets, except for the private equity, timber and agriculture assets. In the aggregate, the latter assets represent approximately 6% of all U.S. pension and retiree welfare plan assets as at December 31, 2017 (2016 – 6%).

⁽²⁾	All the Canadian pension plan assets have daily quoted prices in active markets, except for the group annuity contract assets that represent approximately 0.3% of all Canadian pension plan assets as at December 31, 2017 (2016 – 3%, including real estate and mortgage assets that were sold in 2017).

⁽³⁾	Equity securities include direct investments in MFC common shares of $1.3 (2016 – $1.1) in the U.S. retiree welfare plan and $nil (2016 – $nil) in Canada.

⁽⁴⁾	Other U.S. plan assets include investment in private equity, timberland and agriculture, and managed futures in 2017. Other Canadian pension plan assets include investment in the group annuity contract.

Summary of Components of Net Benefit Cost for Pension Plans and Retiree Welfare Plans

(g) Net benefit cost recognized in the Consolidated Statements of Income

Components of the net benefit cost for the pension plans and retiree welfare plans were as follows.


	Pension plans					Retiree welfare plans
For the years ended December 31,	2017		2016			2017		2016
Defined benefit current service cost⁽¹⁾	$	48	$	52		$	1	$	1
Defined benefit administrative expenses		5		7			2		2
Past service cost – plan amendments⁽²⁾		–		(57	)		–		–
Service cost		53		2			3		3
Interest on net defined benefit (asset) liability⁽¹⁾		18		27			3		3
Defined benefit cost		71		29			6		6
Defined contribution cost		75		69			–		–
Net benefit cost	$	146	$	98		$	6	$	6

⁽¹⁾	Includes service and interest costs for the two plans merged into the primary Manulife plan after August 1, 2016.

⁽²⁾	Past service cost in 2016 includes ($55) reflecting the removal of the advance provision made in prior years for non-contractual, ad-hoc increases in pension for Standard Life retirees.

Summary of Re-measurement Effects Recognized in Other Comprehensive Income

(h) Re-measurement effects recognized in Other Comprehensive Income


	Pension plans						Retiree welfare plans
For the years ended December 31,	2017			2016			2017			2016
Actuarial gains (losses) on defined benefit obligations:
Experience	$	(15	)	$	–		$	9		$	2
Demographic assumption changes		–			94			–			16
Economic assumption changes		(214	)		(116	)		(41	)		(20	)
Return on plan assets greater (less) than discount rate		312			158			30			8
Total re-measurement effects	$	83		$	136		$	(2	)	$	6

Summary of Key Assumptions Used by to Determine Defined Benefit Obligation and Net Benefit Cost for Defined Benefit Pension Plans and Retiree Welfare Plans

(i) Assumptions

The key assumptions used by the Company to determine the defined benefit obligation and net benefit cost for the defined benefit pension plans and retiree welfare plans were as follows.

U.S. Plans

Canadian Plans

Pension plans

Retiree welfare plans

Pension plans

Retiree welfare plans

For the years ended December 31,

2017

2016

2017

2016

2017

2016

2017

2016

To determine the defined benefit obligation at end of year⁽¹⁾:

Discount rate

3.6%

4.1%

3.6%

4.1%

3.5%

3.9%

3.6%

4.0%

Initial health care cost trend rate⁽²⁾

n/a

n/a

8.5%

8.8%

n/a

n/a

5.9%

6.0%

To determine the defined benefit cost for the year⁽¹⁾:

Discount rate

4.1%

4.4%

4.1%

4.3%

3.9%

4.1%

4.0%

4.1%

Initial health care cost trend rate⁽²⁾

n/a

n/a

8.8%

9.0%

n/a

n/a

6.0%

6.1%

⁽¹⁾	Inflation and salary increase assumptions are not shown as they do not materially affect obligations and cost.

⁽²⁾

The health care cost trend rate used to measure the U.S. based retiree welfare obligation was 8.5% grading to 5.0% for 2032 and years thereafter (2016 – 8.8% grading to 5.0% for 2032) and to measure the net benefit cost was 8.8% grading to 5.0% for 2032 and years thereafter (2016 – 9.0% grading to 5.0% for 2032). In Canada, the rate used to measure the retiree welfare obligation was 5.9% grading to 4.8% for 2026 and years thereafter (2016 – 6.0% grading to 4.8% for 2026) and to measure the net benefit cost was 6.0% grading to 4.8% for 2026 and years thereafter (2016 – 6.1% grading to 4.8% for 2026).

Summary of Life Expectancies Underlying Values of Obligations in Defined Benefit Pension and Retiree Welfare Plans

Assumptions regarding future mortality are based on published statistics and mortality tables. The current life expectancies underlying the values of the obligations in the defined benefit pension and retiree welfare plans are as follows.


As at December 31, 2017	U.S.		Canada
Life expectancy (in years) for those currently age 65
Males		22.4		22.8
Females		23.9		24.7
Life expectancy (in years) at age 65 for those currently age 45
Males		24.0		23.8
Females		25.5		25.6

Summary of Potential Impact on Obligations Arising From Changes in Key Assumptions

(j) Sensitivity of assumptions on obligation

Assumptions used can have a significant effect on the obligations reported for defined benefit pension and retiree welfare plans. The potential impact on the obligations arising from changes in the key assumptions is set out in the following table. The sensitivities assume all other assumptions are held constant. In actuality, inter-relationships with other assumptions may exist.


As at December 31, 2017	Pension plans			Retiree welfare plans
Discount rate:
Impact of a 1% increase	$	(451	)	$	(67	)
Impact of a 1% decrease		536			82
Health care cost trend rate:
Impact of a 1% increase		n/a			24
Impact of a 1% decrease		n/a			(21	)
Mortality rates⁽¹⁾
Impact of a 10% decrease		119			16

⁽¹⁾

If the actuarial estimates of mortality are adjusted in the future to reflect unexpected decreases in mortality, the effect of a 10% decrease in mortality rates at each future age would be an increase in life expectancy at age 65 of 0.9 years for U.S. males and females and 0.8 years for Canadian males and females.

Summary of Weighted Average Duration of the Defined Benefit Obligations

(k) Maturity profile

The weighted average duration (in years) of the defined benefit obligations is as follows.

Pension plans

Retiree welfare plans

As at December 31,

2017

2016

2017

2016

U.S. plans

9.5

9.2

9.8

9.1

Canadian plans

12.8

12.7

14.2

14.2

Summary of Cash Payments

(l) Cash flows – contributions

Total cash payments for all employee future benefits, comprised of cash contributed by the Company to funded defined benefit pension and retiree welfare plans, cash payments directly to beneficiaries in respect of unfunded pension and retiree welfare plans, and cash contributed to defined contribution pension plans, were as follows.


	Pension plans				Retiree welfare plans
For the years ended December 31,	2017		2016		2017		2016
Defined benefit plans	$	85	$	106	$	12	$	–
Defined contribution plans		75		69		–		–
Total	$	160	$	175	$	12	$	–