XML 71 R46.htm IDEA: XBRL DOCUMENT

Employee Future Benefits (Tables)

12 Months Ended

Dec. 31, 2018

Summary of Pension and Retiree Welfare Plans

(c) Pension and retiree welfare plans


	Pension plans						Retiree welfare plans
For the years ended December 31,	2018			2017			2018			2017
Changes in defined benefit obligation:
Opening balance	$	4,706		$	4,767		$	665		$	682
Current service cost		42			48			–			1
Past service cost – amendments		8			–			–			–
Past service cost – curtailments		10			–			12			–
Interest cost		165			182			24			26
Plan participants’ contributions		1			1			4			4
Actuarial losses (gains) due to:
Experience		–			15			(7	)		(9	)
Demographic assumption changes		35			–			(1	)		–
Economic assumption changes		(250	)		214			(56	)		41
Benefits paid		(304	)		(315	)		(45	)		(45	)
Impact of changes in foreign exchange rates		262			(206	)		44			(35	)
Defined benefit obligation, December 31	$	4,675		$	4,706		$	640		$	665


	Pension plans						Retiree welfare plans
For the years ended December 31,	2018			2017			2018			2017
Change in plan assets:
Fair value of plan assets, opening balance	$	4,328		$	4,277		$	587		$	603
Interest income		153			164			21			23
Return on plan assets (excluding interest income)		(315	)		312			(16	)		30
Employer contributions		79			85			10			12
Plan participants’ contributions		1			1			4			4
Benefits paid		(304	)		(315	)		(45	)		(45	)
Administration costs		(6	)		(5	)		(2	)		(2	)
Impact of changes in foreign exchange rates		254			(191	)		51			(38	)
Fair value of plan assets, December 31	$	4,190		$	4,328		$	610		$	587

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,	2018			2017			2018			2017
Development of net defined benefit liability
Defined benefit obligation	$	4,675		$	4,706		$	640		$	665
Fair value of plan assets		4,190			4,328			610			587
Deficit		485			378			30			78
Effect of asset limit⁽¹⁾		9			–			–			–
Deficit and net defined benefit liability		494			378			30			78
Deficit is comprised of:
Funded or partially funded plans		(248	)		(383	)		(121	)		(72	)
Unfunded plans		742			761			151			150
Deficit and net defined benefit liability	$	494		$	378		$	30		$	78

⁽¹⁾

In 2018, the Company recognized an impairment of $9 on the net defined benefit asset for one of its registered pension plans in Canada. This was due to the conversion of most plan benefits for future service from defined benefit to defined contribution which reduced the economic benefit that can be derived by the Company from the plan’s surplus. For the other funded pension plans, the present value of the economic benefits available in the form of reductions in future contributions to the plans remains greater than the surplus that is 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,	2018		2017		2018		2017		2018		2017		2018		2017
Active members	$	621	$	592	$	32	$	34	$	332	$	393	$	22	$	20
Inactive and retired members		2,431		2,434		457		481		1,291		1,287		129		130
Total	$	3,052	$	3,026	$	489	$	515	$	1,623	$	1,680	$	151	$	150

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, 2018

Fair value

% of total

Fair value

% of total

Fair value

% of total

Fair value

% of total

Cash and cash equivalents

–

Equity securities⁽³⁾

500

17%

269

20%

–

Debt securities

2,088

73%

514

85%

1,033

79%

–

Other investments⁽⁴⁾

252

–

Total

2,866

100%

610

100%

1,324

100%

–



	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%	$	–		–

⁽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 7% of all U.S. pension and retiree welfare plan assets as at December 31, 2018 (2017 – 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 0.2% of all Canadian pension plan assets as at December 31, 2018 (2017 – 0.3%).

⁽³⁾	Equity securities include direct investments in MFC common shares of $0.9 (2017 – $1.3) in the U.S. retiree welfare plan and $nil (2017 – $nil) in Canada.

⁽⁴⁾	Other U.S. plan assets include investment in private equity, timberland and agriculture, and managed futures. 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,	2018		2017		2018		2017
Defined benefit current service cost	$	42	$	48	$	–	$	1
Defined benefit administrative expenses		6		5		2		2
Past service cost – plan amendments⁽¹⁾		8		–		–		–
Past service cost – curtailments⁽²⁾		10		–		12		–
Service cost		66		53		14		3
Interest on net defined benefit (asset) liability		12		18		3		3
Defined benefit cost		78		71		17		6
Defined contribution cost		78		75		–		–
Net benefit cost	$	156	$	146	$	17	$	6

⁽¹⁾	Past service cost – plan amendments includes $8, reflecting a surplus sharing agreement between the Company and certain legacy employees in Canada, which received regulatory approval in 2018.

⁽²⁾	Past service cost – curtailments includes $22 in total, reflecting the cost of the voluntary exit and voluntary retirement programs described in section (a) of this note.

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,	2018			2017			2018			2017
Actuarial gains (losses) on defined benefit obligations due to:
Experience		$ –		$	(15	)	$	7		$	9
Demographic assumption changes		(35	)		–			1			–
Economic assumption changes		250			(214	)		56			(41	)
Return on plan assets (excluding interest income)		(315	)		312			(16	)		30
Change in effect of asset limit		(9	)		–			–			–
Total re-measurement effects		$ (109	)	$	83		$	48		$	(2	)

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,

2018

2017

2018

2017

2018

2017

2018

2017

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

Discount rate

4.3%

3.6%

4.3%

3.6%

3.8%

3.5%

3.8%

3.6%

Initial health care cost trend rate⁽²⁾

n/a

n/a

7.8%

8.5%

n/a

n/a

5.7%

5.9%

To determine the defined benefit cost for the 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%

⁽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 7.8% grading to 5.0% for 2030 and years thereafter (2017 – 8.5% grading to 5.0% for 2032) and to measure the net benefit cost was 8.5% grading to 5.0% for 2032 and years thereafter (2017 – 8.8% grading to 5.0% for 2032). In Canada, the rate used to measure the retiree welfare obligation was 5.7% grading to 4.8% for 2026 and years thereafter (2017 – 5.9% grading to 4.8% for 2026) and to measure the net benefit cost was 5.9% grading to 4.8% for 2026 and years thereafter (2017 – 6.0% 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, 2018	U.S.		Canada
Life expectancy (in years) for those currently age 65
Males		22.5		23.6
Females		24.0		25.5
Life expectancy (in years) at age 65 for those currently age 45
Males		24.1		24.6
Females		25.6		26.4

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

(j) Sensitivity of assumptions on obligations

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, 2018	Pension plans			Retiree welfare plans
Discount rate:
Impact of a 1% increase	$	(423	)	$	(62	)
Impact of a 1% decrease		500			74
Health care cost trend rate:
Impact of a 1% increase		n/a			21
Impact of a 1% decrease		n/a			(18	)
Mortality rates⁽¹⁾
Impact of a 10% decrease		114			14

⁽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,

2018

2017

2018

2017

U.S. plans

8.8

9.5

9.0

9.8

Canadian plans

12.4

12.8

14.3

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, are as follows.


	Pension plans				Retiree welfare plans
For the years ended December 31,	2018		2017		2018		2017
Defined benefit plans	$	79	$	85	$	10	$	12
Defined contribution plans		78		77		–		–
Total	$	157	$	162	$	10	$	12