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Post-Retirement Obligation | 12 Months Ended
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Dec. 31, 2017
Text block1 [abstract] |
Post-Retirement Obligation |
23. | POST-RETIREMENT OBLIGATION
The Forluz Pension plan (a Supplementary retirement pension plan) Cemig is a sponsor of Forluz – Forluminas Social Security Foundation, a non-profit legal entity whose object is to provide its associates and participants and their dependents with a finance income to complement retirement and pension, in accordance with the pension plan that they are subscribed in. Forluz makes the following supplementary pension benefit plans available to its participants: Mixed Benefit Plan (‘Plan B’): This plan operates as a defined-contribution plan in the fund accumulation phase for retirement benefits for normal time of service, and as a defined-benefit plan for disability or death of participants still in active employment, and for receipt of benefits for time of contribution. The Sponsors match the basic monthly contributions of the participants. This is the only plan open for joining by new participants. Funded Benefit Plan (‘Plan A’): This plan includes all currently employed and assisted participants who opted to migrate from the Company’s previously sponsored defined benefit plan, and are entitled to a benefit proportional to those balances. For participants who are still working, this benefit has been deferred to the retirement date. Cemig, Cemig GT and Cemig D also maintain, independently of the plans made available by Forluz, payments of part of the life insurance premium for the retirees, and contribute to a health plan and a dental plan for the active employees, retired employees and dependents, administered by Cemig Saúde. Amortization of the actuarial obligations and recognition in the financial statements In this Note the Company states its obligations and expenses incurred for purposes of the Retirement Plan, Health Plan, Dental Plan and the Life Insurance Plan in accordance with the terms of IAS 19—Employee Benefits, and the independent actuarial opinion issued as of December 31, 2017. The Company have recognized an obligation for past actuarial deficits relating to the pension fund in the amount of R$ 721 on December 31, 2017 (R$ 787 on December 31, 2016). This amount has been recognized as an obligation payable by Cemig and its subsidiaries, and is being amortized by June 2024, through monthly installments calculated by the system of constant installments (known as the ‘Price’ table), and adjusted by the IPCA (Expanded National Customer Price) inflation index (published by the Brazilian Geography and Statistics Institute – IBGE) plus 6% per year. The Company is required to pay this debt even if Forluz has a surplus, the Company maintain recorded the debt in full, and record the effects of monetary updating and interest in finance income (expenses) in the Statement of income. Agreement to cover the deficit on Forluz Pension Plan ‘A’ In May 2017 Forluz and the sponsors Cemig, Cemig GT and Cemig D signed an Instrument of Assumption of Debt for Coverage of Deficit in accordance with the deficit solution plan for Plan A (the Retirement Benefits Balances Plan) approved by the Governing Council of Forluz on December 15, 2016. On December 31, 2017 the total amount payable by Cemig and its subsidiaries Cemig D and Cemig GT as a result of the deficit found in Plan A is R$ 283 with monthly amortizations up to June 2031, calculated by the system of constant installments (known as the ‘Price Table’). Remuneratory interest applicable to the outstanding balance is 6% p.a., plus the effect of the IPCA (Expanded National Customer Price) index published by the IBGE. In February 2018 the Board of Directors of Cemig authorized signature of a new Debt Assumption Instrument between Forluz and the sponsors Cemig, Cemig GT and Cemig D, in accordance with a plan for coverage of the deficit of Plan A of Forluz. The total amount to be paid by Cemig and its subsidiaries as a result of the deficit found in Plan A is R$ 99, through 167 monthly installments. Remuneratory interest applicable to the outstanding balance is 6% p.a., plus the effect of the IPCA (Expanded National Customer Price) index published by the IBGE. If the plan reaches actuarial surplus before the full period of amortization of the contract, The Company will not be required to pay the remaining installments and the contract will be extinguished. Actuarial information The actuarial information is as follows:
2017 |  | Pension plans and retirement supplement plans |  |  | Health Plan |  |  | Dental Plan |  |  | Life insurance |  |  | Total |
Present value of funded obligations |  |  | 10,545 |  |  |  | 1,809 |  |  |  | 39 |  |  |  | 270 |  |  |  | 12,663 |
Fair value of plan assets |  |  | (8,546 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (8,546 | )
Initial net liabilities |  |  | 1,999 |  |  |  | 1,809 |  |  |  | 39 |  |  |  | 270 |  |  |  | 4,117 |
Adjustment to asset ceiling |  |  | 69 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 69 |
Net liabilities in the statement of financial position |  |  | 2,068 |  |  |  | 1,809 |  |  |  | 39 |  |  |  | 270 |  |  |  | 4,186 |
2016 |  | Pension plans and retirement supplement plans |  |  | Health Plan |  |  | Dental Plan |  |  | Life insurance |  |  | Total |
Present value of funded obligations |  |  | 9,743 |  |  |  | 1,711 |  |  |  | 38 |  |  |  | 814 |  |  |  | 12,306 |
Fair value of plan assets |  |  | (8,128 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (8,128 | )
Initial net liabilities |  |  | 1,615 |  |  |  | 1,711 |  |  |  | 38 |  |  |  | 814 |  |  |  | 4,178 |
Adjustment to asset ceiling |  |  | 64 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 64 |
Net liabilities in the statement of financial position |  |  | 1,679 |  |  |  | 1,711 |  |  |  | 38 |  |  |  | 814 |  |  |  | 4,242 |
The asset ceiling is the present value of any economic benefits available in the form of restitutions coming from the plan or reductions in future contributions to the plan. The present value of the liabilities of the pension plan is adjusted to the asset ceiling, which corresponds to the surplus result of Plan B, which has a specific destination allocation under the regulations of the National Private Pension Plans Council (CNPC). The changes in the present value of the defined benefit obligation are as follows:
|  | Pension plans and retirement supplement plans |  |  | Health Plan |  |  | Dental Plan |  |  | Life insurance |  |  | Total |
Defined-benefit obligation on December 31, 2014 |  |  | 8,124 |  |  |  | 1,120 |  |  |  | 32 |  |  |  | 680 |  |  |  | 9,956 |
Cost of current service |  |  | 6 |  |  |  | 7 |  |  |  | 1 |  |  |  | 3 |  |  |  | 17 |
Interest on the actuarial obligation |  |  | 934 |  |  |  | 135 |  |  |  | 3 |  |  |  | 81 |  |  |  | 1,153 |
Actuarial losses (gains): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Due to changes in demographic assumptions |  |  | 8 |  |  |  | 43 |  |  |  | 1 |  |  |  | (71 | ) |  |  | (19 | )
Due to changes in financial assumptions |  |  | (822 | ) |  |  | 128 |  |  |  | (1 | ) |  |  | (122 | ) |  |  | (817 | )
Due to adjustments based on experience |  |  | 533 |  |  |  | (33 | ) |  |  | (4 | ) |  |  | 69 |  |  |  | 565 |
|  |  | (281 | ) |  |  | 138 |  |  |  | (4 | ) |  |  | (124 | ) |  |  | (271 | )
Plan amendment—Past service |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (74 | ) |  |  | (74 | )
Benefits paid |  |  | (734 | ) |  |  | (77 | ) |  |  | (2 | ) |  |  | (12 | ) |  |  | (825 | )
Defined-benefit obligation on December 31, 2015 |  |  | 8,049 |  |  |  | 1,323 |  |  |  | 30 |  |  |  | 554 |  |  |  | 9,956 |
Cost of current service |  |  | 5 |  |  |  | 9 |  |  |  | — |  |  |  | 3 |  |  |  | 17 |
Interest on the actuarial obligation |  |  | 1,013 |  |  |  | 174 |  |  |  | 4 |  |  |  | 72 |  |  |  | 1,263 |
Actuarial losses (gains): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Due to changes in demographic assumptions |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1 | )
Due to changes in financial assumptions |  |  | 1,253 |  |  |  | 391 |  |  |  | 9 |  |  |  | 175 |  |  |  | 1,828 |
Due to adjustments based on experience |  |  | 231 |  |  |  | (87 | ) |  |  | (3 | ) |  |  | 21 |  |  |  | 162 |
|  |  | 1,483 |  |  |  | 304 |  |  |  | 6 |  |  |  | 196 |  |  |  | 1,989 |
Benefits paid |  |  | (807 | ) |  |  | (99 | ) |  |  | (2 | ) |  |  | (11 | ) |  |  | (919 | )
Defined-benefit obligation on December 31, 2016 |  |  | 9,743 |  |  |  | 1,711 |  |  |  | 38 |  |  |  | 814 |  |  |  | 12,306 |
Cost of current service |  |  | 5 |  |  |  | 11 |  |  |  | — |  |  |  | 3 |  |  |  | 19 |
Interest on the actuarial obligation |  |  | 980 |  |  |  | 178 |  |  |  | 3 |  |  |  | 85 |  |  |  | 1,246 |
Actuarial losses (gains): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Due to changes in demographic assumptions |  |  | 191 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 191 |
Due to changes in financial assumptions |  |  | 414 |  |  |  | 66 |  |  |  | 2 |  |  |  | 55 |  |  |  | 537 |
Due to adjustments based on experience |  |  | 53 |  |  |  | (44 | ) |  |  | (2 | ) |  |  | (60 | ) |  |  | (53 | )
|  |  | 658 |  |  |  | 22 |  |  |  | — |  |  |  | (5 | ) |  |  | 675 |
Plan amendment – Past service |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (619 | ) |  |  | (619 | )
Benefits paid |  |  | (841 | ) |  |  | (113 | ) |  |  | (2 | ) |  |  | (8 | ) |  |  | (964 | )
Defined-benefit obligation on December 31, 2017 |  |  | 10,545 |  |  |  | 1,809 |  |  |  | 39 |  |  |  | 270 |  |  |  | 12,663 |
The Company have made changes to life insurance, resulting in reduction of the capital insured of retirees by 20% at each 5-year interval, from aged 60, down to a minimum of 20%. These changes resulted in a reduction of R$ 619 in the post-retirement obligation reported on December 31, 2017, with counterpart in the Statement of income in 2017. Changes in the fair values of the plan assets were as follows:
|  | Pension plans and retirement supplement plans
Fair value at December 31, 2014 |  |  |  | 8,051 |
Real return on the investments |  |  |  | (730 | )
Contributions from the Employer |  |  |  | 116 |
Benefits paid |  |  |  | (734 | )
Fair value of the plan assets at December 31, 2015 |  |  |  | 6,703 |
Real return on the investments |  |  |  | 2,105 |
Contributions from the employer |  |  |  | 127 |
Benefits paid |  |  |  | (807 | )
Fair value of the plan assets at December 31, 2016 |  |  |  | 8,128 |
Real return on the investments |  |  |  | 1,100 |
Contributions from the employer |  |  |  | 159 |
Benefits paid |  |  |  | (841 | )
Fair value of the plan assets at December 31, 2017 |  |  |  | 8,546 |
The amounts recognized in the 2017, 2016 and 2015 Statement of income are as follows:
2017 |  | Pension plans and retirement supplement plans |  | Health Plan |  | Dental Plan |  | Life insurance |  | Total
Cost of current service |  |  |  | 5 |  |  |  |  | 11 |  |  |  |  | — |  |  |  |  | 3 |  |  |  |  | 19 |
Interest on the actuarial obligation |  |  |  | 980 |  |  |  |  | 178 |  |  |  |  | 3 |  |  |  |  | 85 |  |  |  |  | 1,246 |
Expected return on the assets of the Plan |  |  |  | (810 | ) |  |  |  | — |  |  |  |  | — |  |  |  |  | — |  |  |  |  | (810 | )
Past service cost |  |  |  | — |  |  |  |  | — |  |  |  |  | — |  |  |  |  | (619 | ) |  |  |  | (619 | )
Expense (recovery of expense) in 2017 according to actuarial calculation |  |  |  | 175 |  |  |  |  | 189 |  |  |  |  | 3 |  |  |  |  | (531 | ) |  |  |  | (164 | )
2016 |  | Pension plans and retirement supplement plans |  | Health Plan |  | Dental Plan |  | Life insurance |  | Total
Cost of current service |  |  |  | 5 |  |  |  |  | 9 |  |  |  |  | — |  |  |  |  | 3 |  |  |  |  | 17 |
Interest on the actuarial obligation |  |  |  | 1,014 |  |  |  |  | 173 |  |  |  |  | 4 |  |  |  |  | 72 |  |  |  |  | 1,263 |
Expected return on the assets of the Plan |  |  |  | (833 | ) |  |  |  | — |  |  |  |  | — |  |  |  |  | — |  |  |  |  | (833 | )
Total expense in 2016 according to actuarial calculation |  |  |  | 186 |  |  |  |  | 182 |  |  |  |  | 4 |  |  |  |  | 75 |  |  |  |  | 447 |
2015 |  | Pension plans and retirement supplement plans |  | Health Plan |  | Dental Plan |  | Life insurance |  | Total
Cost of current service |  |  |  | 6 |  |  |  |  | 7 |  |  |  |  | 1 |  |  |  |  | 3 |  |  |  |  | 17 |
Interest on the actuarial obligation |  |  |  | 934 |  |  |  |  | 135 |  |  |  |  | 3 |  |  |  |  | 81 |  |  |  |  | 1,153 |
Expected return on the assets of the Plan |  |  |  | (933 | ) |  |  |  | — |  |  |  |  | — |  |  |  |  | — |  |  |  |  | (933 | )
Past service cost |  |  |  | — |  |  |  |  | — |  |  |  |  | — |  |  |  |  | (74 | ) |  |  |  | (74 | )
Expense as per actuarial opinion |  |  |  | 7 |  |  |  |  | 142 |  |  |  |  | 4 |  |  |  |  | 10 |  |  |  |  | 163 |
Adjustment relating to debt to Forluz |  |  |  | 122 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 122 |
Expense in 2015 |  |  |  | 129 |  |  |  |  | 142 |  |  |  |  | 4 |  |  |  |  | 10 |  |  |  |  | 285 |
Changes in net liabilities were as follows:
|  | Pension plans and retirement supplement plans |  | Health Plan |  | Dental Plan |  | Life insurance |  | Total
Net liabilities on December 31, 2014 |  |  |  | 798 |  |  |  |  | 1,120 |  |  |  |  | 33 |  |  |  |  | 680 |  |  |  |  | 2,631 |
Expense Recognized in Statement of income |  |  |  | 129 |  |  |  |  | 142 |  |  |  |  | 4 |  |  |  |  | 84 |  |  |  |  | 359 |
Contributions paid |  |  |  | (116 | ) |  |  |  | (77 | ) |  |  |  | (3 | ) |  |  |  | (12 | ) |  |  |  | (208 | )
Plan amendment—Past service |  |  |  | — |  |  |  |  | — |  |  |  |  | — |  |  |  |  | (74 | ) |  |  |  | (74 | )
Actuarial losses (gains) |  |  |  | 535 |  |  |  |  | 138 |  |  |  |  | (4 | ) |  |  |  | (124 | ) |  |  |  | 545 |
Net liabilities on December 31, 2015 |  |  |  | 1,346 |  |  |  |  | 1,323 |  |  |  |  | 30 |  |  |  |  | 554 |  |  |  |  | 3,253 |
Expense recognized in Statement of income |  |  |  | 187 |  |  |  |  | 182 |  |  |  |  | 4 |  |  |  |  | 75 |  |  |  |  | 448 |
Contributions paid |  |  |  | (128 | ) |  |  |  | (99 | ) |  |  |  | (2 | ) |  |  |  | (11 | ) |  |  |  | (240 | )
Actuarial losses (gains) ( * ) |  |  |  | 274 |  |  |  |  | 305 |  |  |  |  | 6 |  |  |  |  | 196 |  |  |  |  | 781 |
Net liabilities on December 31, 2016 |  |  |  | 1,679 |  |  |  |  | 1,711 |  |  |  |  | 38 |  |  |  |  | 814 |  |  |  |  | 4,242 |
Expense recognized in Statement of income |  |  |  | 175 |  |  |  |  | 189 |  |  |  |  | 3 |  |  |  |  | 88 |  |  |  |  | 455 |
Contributions paid |  |  |  | (160 | ) |  |  |  | (113 | ) |  |  |  | (2 | ) |  |  |  | (7 | ) |  |  |  | (282 | )
Plan amendment – Past service |  |  |  | — |  |  |  |  | — |  |  |  |  | — |  |  |  |  | (619 | ) |  |  |  | (619 | )
Actuarial losses (gains) ( * ) |  |  |  | 374 |  |  |  |  | 22 |  |  |  |  | (1 | ) |  |  |  | (5 | ) |  |  |  | 390 |
Net liabilities on December 31, 2017 |  |  |  | 2,068 |  |  |  |  | 1,809 |  |  |  |  | 38 |  |  |  |  | 271 |  |  |  |  | 4,186 |
|  |  |  |  |  |  |  | 2017 |  | 2016
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 232 |  |  |  |  | 199 |
Non-current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 3,954 |  |  |  |  | 4,043 |
(*) | Recognized directly in Comprehensive income.
The amounts reported as ‘Expense recognized in the Statement of income’ refer to the costs of post-retirement obligations, totaling R$ 391 in 2017 (R$ 345 in 2016 and R$230 in 2015), plus the finance expenses and monetary updating on the debt with Forluz, in the amounts of R$ 65 in 2017, R$103 in 2016, and R$129 in 2015. Further, due to the alterations in the life insurance in 2017 and 2015, a recovery of expense, of R$ 619, was posted in the Statement of income in 2017 (R$74 in 2015). The independent actuary’s estimation for the expense to be recognized for 2018 is as follows:
|  | Pension plans and retirement supplement plans |  | Health Plan |  | Dental Plan |  | Life insurance |  | Total
Cost of current service |  |  |  | 3 |  |  |  |  | 10 |  |  |  |  | — |  |  |  |  | 2 |  |  |  |  | 15 |
Interest on the actuarial obligation |  |  |  | 959 |  |  |  |  | 173 |  |  |  |  | 4 |  |  |  |  | 25 |  |  |  |  | 1,161 |
Expected return on the assets of the Plan |  |  |  | (771 | ) |  |  |  | — |  |  |  |  | — |  |  |  |  | — |  |  |  |  | (771 | )
Total expense in 2018 as per actuarial opinion |  |  |  | 191 |  |  |  |  | 183 |  |  |  |  | 4 |  |  |  |  | 27 |  |  |  |  | 405 |
The expectation for payment of benefits for 2018 is as follows:
|  | Pension plans and retirement supplement plans – Forluz |  | Health Plan |  | Dental Plan |  | Life insurance |  | Total
Estimate of payment of benefits |  |  |  | 875 |  |  |  |  | 117 |  |  |  |  | 3 |  |  |  |  | 8 |  |  |  |  | 1,003 |
The Company Cemig GT and Cemig D have expectation of making contributions to the pension plan in 2018 of R$ 166 for amortization of the deficit of Plan A, and R$ 90 for the Defined Contribution Plan (recorded directly in the Statement of income for the year). The average maturity periods of the obligations of the benefit plans, in years, are as follows:
Pension plans and retirement supplement plans |  | Health Plan |  | Dental Plan |  | Life insurance
Plan A |  | Plan B |  |  |
9.28 |  |  |  | 11.55 |  |  |  |  | 13.68 |  |  |  |  | 13.68 |  |  |  |  | 11.55 |
The main categories of assets of the plan, as a percentage of the total of the plan’s assets, are as follows:
|  | 2017 |  |  | 2016 |
Shares in Brazilian companies |  |  | 6.63 | % |  |  | 3.84 | %
Fixed income securities |  |  | 74.12 | % |  |  | 74.96 | %
Real estate property |  |  | 8.05 | % |  |  | 8.14 | %
Others |  |  | 11.20 | % |  |  | 13.06 | %
Total |  |  | 100.00 | % |  |  | 100.00 | %
The following assets of the pension plan, valued at fair value, are related to the Company:
|  | 2017 |  |  | 2016 |
Non-convertible debentures issued by the Company and subsidiaries |  |  | 363 |  |  |  | 397 |
Shares issued by the Company |  |  | 10 |  |  |  | 7 |
Real estate properties of the Foundation, occupied by the Company and subsidiaries |  |  | 725 |  |  |  | 710 |
|  |  | 1,098 |  |  |  | 1,114 |
This table gives the main actuarial assumptions:
|  | 2017 |  | 2016 |  | 2015
Annual discount rate for present value of the actuarial obligation |  | 9.48% |  | 10.50% |  | 13.20%
Annual expected return on plan assets |  | 9.48% |  | 10.50% |  | 13.20%
Long-term annual inflation rate |  | 4.00% |  | 4.50% |  | 5.50%
Estimated future annual salary increases |  | 6.08% |  | 6.59% |  | 7.61%
General mortality table |  | AT-2000 D10% |  | AT-2000 |  | AT-2000
Disability table |  | Not adopted |  | Álvaro Vindas |  | Álvaro vindas
Disabled mortality table |  | AT 49 |  | AT 49 |  | AT 49
Below is a sensitivity analysis of the effects of changes in the main actuarial assumptions used to determine the defined-benefit obligation on December 31, 2017:
Effects on the defined-benefit obligation |  | Pension plans and retirement supplement plans |  |  | Health Plan |  |  | Dental Plan |  |  | Life insurance |  |  | Total |
Reduction of one year in the mortality table |  |  | 273 |  |  |  | 36 |  |  |  | 1 |  |  |  | (16 | ) |  |  | 294 |
Increase of one year in the mortality table |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 15 |  |  |  | 15 |
Reduction of 1% in the discount rate |  |  | 1,103 |  |  |  | 244 |  |  |  | 5 |  |  |  | 43 |  |  |  | 1,395 |
In the presentation of the sensitivity analysis, the present value of the defined-benefit obligation was calculated using the Unit Projected Credit method, the same method used to calculate the defined-benefit obligation recognized in the Statement of financial position. The Company has not made changes in the methods used to calculate its post-retirement obligations for the business years ended December 31, 2017 and 2016.

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- Definition The disclosure of defined benefit plans. [Refer: Defined benefit plans [member]] + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Name IAS -Number 19 -IssueDate 2017-01-01 -Paragraph 138 -URI http://eifrs.ifrs.org/eifrs/XBRL?type=IAS&num=19&date=2017-03-01&anchor=para_138&doctype=Standard -URIDate 2017-03-09 + Details
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- Definition Text block1 [abstract] + References No definition available. + Details
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