The benefit obligations and plan assets associated with the company’s defined benefit plans are measured on December 31.


	Pension benefits					Other postretirement benefits
		2019		2018			2019		2018
Assumptions used to determine benefit obligations at December 31 (percent)
Discount rate		3.10		3.90			3.10		3.90
Long-term rate of compensation increase		4.50		4.50			4.50		4.50

millions of Canadian dollars
Change in projected benefit obligation
Projected benefit obligation at January 1		8,359		8,785			582		670
Current service cost		228		239			16		17
Interest cost		324		302			20		22
Actuarial loss (gain)		1,053		(498	)		99		(101	)
Amendments		283		-			-		-
Benefits paid (a)		(461	)	(469	)		(24	)	(26	)
Projected benefit obligation at December 31		9,786		8,359			693		582

Accumulated benefit obligation at December 31		8,814		7,661

The discount rate for the purpose of calculating

year-end

postretirement benefits plan liabilities is determined by using the Canadian Institute of Actuaries recommended spot curve for high-quality, long-term Canadian corporate bonds with an average maturity (or duration) approximating that of the liabilities. For the measurement of the accumulated postretirement benefit obligation, the assumed health care cost trend rates start with

5.66

percent in 2020 and gradually decline to 3.57 percent by 20

and beyond. A 1.0 percent increase in the health care cost trend rate would increase service and interest cost by $5 million and the accumulated postretirement benefit obligation by $75 million. A 1.0 percent decrease in the health care cost trend rate would decrease service and interest cost by $4 million and the accumulated postretirement benefit obligation by $60 million.


	Pension benefits					Other postretirement benefits
millions of Canadian dollars		2019		2018			2019		2018
Change in plan assets
Fair value at January 1		7,691		7,870
Actual return (loss) on plan assets		1,114		20
Company contributions		211		203
Benefits paid (b)		(417	)	(402	)
Fair value at December 31		8,599		7,691

Plan assets in excess of (less than) projected benefit obligation at December 31
Funded plans		(590	)	(180	)
Unfunded plans		(597	)	(488	)		(693	)	(582	)
Total (c)		(1,187	)	(668	)		(693	)	(582	)

(a)	Benefit payments for funded and unfunded plans.

(b)	Benefit payments for funded plans only.

(c)	Fair value of assets less projected benefit obligation shown above.

Funding of registered retirement plans complies with federal and provincial pension regulations, and the company makes contributions to the plans based on an independent actuarial valuation. In accordance with authoritative guidance relating to the accounting for defined pension and other postretirement benefits plans, the underfunded status of the company’s defined benefit postretirement plans was recorded as a liability in the Consolidated balance sheet, and the changes in that funded status in the year in which the changes occurred was recognized through other comprehensive income.

	Pension benefits					Other postretirement benefits
millions of Canadian dollars		2019		2018			2019		2018
Amounts recorded in the Consolidated balance sheet consist of:
Current liabilities		(27	)	(27	)		(31	)	(28	)
Other long-term obligations		(1,160	)	(641	)		(662	)	(554	)
Total recorded		(1,187	)	(668	)		(693	)	(582	)

Amounts recorded in accumulated other comprehensive income consist of:
Net actuarial loss (gain)		2,256		2,117			133		33
Prior service cost		283		-			-		-
Total recorded in accumulated other comprehensive income, before tax		2,539		2,117			133		33

The company establishes the long-term expected rate of return on plan assets by developing a forward-looking long-term return assumption for each asset class, taking into account factors such as the expected real return for the specific asset class and inflation. A single, long-term rate of return is then calculated as the weighted average of the target asset allocation percentages and the long-term return assumption for each asset class. The 2019 long-term expected return of

4.5

percent used in the calculations of pension expense compares to an actual rate of return of

8.1

percent and

6.6

percent over the last

10-

and

20-year

periods respectively, ending December 31, 2019.


	Pension benefits							Other postretirement benefits
		2019		2018		2017			2019		2018		2017
Assumptions used to determine net periodic benefit cost for years ended December 31 (percent)
Discount rate		3.90		3.40		3.75			3.90		3.40		3.75
Long-term rate of return on funded assets		4.50		5.00		5.50			-		-		-
Long-term rate of compensation increase		4.50		4.50		4.50			4.50		4.50		4.50

millions of Canadian dollars
Components of net periodic benefit cost
Current service cost		228		239		217			16		17		16
Interest cost		324		302		313			20		22		23
Expected return on plan assets		(349	)	(402	)	(408	)		-		-		-
Amortization of prior service cost		-		4		10			-		-		-
Amortization of actuarial loss (gain)		149		175		176			(1	)	6		8
Net periodic benefit cost		352		318		308			35		45		47

Changes in amounts recorded in accumulated other comprehensive income
Net actuarial loss (gain)		288		(116	)	123			99		(101	)	(49	)
Amortization of net actuarial (loss) gain included in net periodic benefit cost		(149	)	(175	)	(176	)		1		(6	)	(8	)
Prior service cost		283		-		-			-		-		-
Amortization of prior service cost included in net periodic benefit cost		-		(4	)	(10	)		-		-		-
Total recorded in other comprehensive income		422		(295	)	(63	)		100		(107	)	(57	)

Total recorded in net periodic benefit cost and other comprehensive income, before tax		774		23		245			135		(62	)	(10	)

Costs for defined contribution plans, primarily the employee savings plan, were $43 million in 2019 (2018 - $41 million, 2017 - $40 million).

A summary of the change in accumulated other comprehensive income is shown in the table below:


	Total pension and other postretirement benefits
millions of Canadian dollars	2019			2018		2017
(Charge) credit to other comprehensive income, before tax		(522	)		402		120
Deferred income tax (charge) credit (note 18)		128			(104)		(38)
(Charge) credit to other comprehensive income, after tax		(394	)		298		82

The company’s investment strategy for pension plan assets reflects a long-term view, a careful assessment of the

risks inherent in various asset classes and broad diversification to reduce the risk of the portfolio. Consistent with the long-term nature of the liability, the plan assets are primarily invested in global,

market-cap-weighted

indexed equity and domestic indexed bond funds to diversify risk while minimizing costs. The equity funds hold Imperial Oil Limited stock only to the extent necessary to replicate the relevant equity index. The balance of the plan assets is largely invested in high-quality corporate and government debt securities. Studies are periodically conducted to establish the preferred target asset allocation. The target asset allocation for equity securities is 30 percent. The target allocation for debt securities is 67 percent. Plan assets for the remaining 3 percent are invested in venture capital partnerships that pursue a strategy of investment in U.S. and international early stage ventures

The 2019 fair value of the pension plan assets, including the level within the fair value hierarchy, is shown in the table below:


			Fair value measurements at December 31, 2019, using:
millions of Canadian dollars	Total		Level 1		Level 2	Level 3	Net Asset Value
Asset class
Equity securities
Canadian		210						210
Non-Canadian		2,449						2,449
Debt securities - Canadian
Corporate		1,379						1,379
Government		4,299						4,299
Asset backed		1						1
Equities – Venture capital		204						204
Cash		57		40				17
Total plan assets at fair value		8,599		40				8,559

The 2018 fair value of the pension plan assets, including the level within the fair value hierarchy, is shown in the table below:


			Fair value measurements at December 31, 2018, using:
millions of Canadian dollars	Total		Level 1		Level 2		Level 3		Net Asset Value
Asset class
Equity securities
Canadian		170								170
Non-Canadian		2,035								2,035
Debt securities - Canadian
Corporate		1,231								1,231
Government		3,987								3,987
Asset backed		3								3
Equities – Venture capital		226								226
Cash		39		33						6
Total plan assets at fair value		7,691		33		-		-		7,658

A summary of pension plans with accumulated benefit obligations in excess of plan assets is shown in the table below:


	Pension benefits
millions of Canadian dollars	2019		2018
For funded pension plans with accumulated benefit obligations in excess of plan assets: (a)
Projected benefit obligation		1,042		943
Accumulated benefit obligation		942		852
Fair value of plan assets		870		739
Accumulated benefit obligation less fair value of plan assets		72		113

For unfunded plans covered by book reserves:
Projected benefit obligation		597		488
Accumulated benefit obligation		536		451

(a)

The amounts shown for funded pension plans with accumulated benefit obligations in excess of plan assets represent the company’s proportionate share of a joint venture sponsored pension plan. For the company sponsored funded plan, plan assets exceeded the accumulated benefit obligation in both 2019 and 2018.

Estimated 2020 amortization from accumulated other comprehensive income


millions of Canadian dollars	Pension benefits		Other postretirement benefits
Net actuarial loss (gain) (a)		157		9
Prior service cost (b)		13		-

(a)	The company amortizes the net balance of actuarial loss (gain) as a component of net periodic benefit cost over the average remaining service period of active plan participants.

(b)	The company amortizes prior service cost on a straight-line basis.

Cash flows

Benefit payments expected in:

millions of Canadian dollars	Pension benefits		Other postretirement benefits
2020		460		31
2021		460		31
2022		460		32
2023		460		32
2024		460		32
2025 - 2029		2,245		160

In 2020, the company expects to make cash

contributions of about $216 million to its pension plans.