24. POST-EMPLOYMENT OBLIGATIONS

Forluz Pension plan (a Supplementary retirement pension plan)

Cemig and its subsidiaries are sponsors 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 provides 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.

Actuarial obligations and recognition in the financial statements

On this Note the Company discloses 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, 2018.

Debt with the pension fund (Forluz)

The Company has recognized an obligation for past actuarial deficits relating to the pension fund in the amount of R$652 on December 31, 2018 (R$721 on December 31, 2017). This amount has been recognized as an obligation payable by Cemig and its subsidiaries, and will be amortized until June of 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, thus, 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’

Forluz and the sponsors Cemig, Cemig GT and Cemig D have signed a Debt Assumption Instrument to cover the deficit of Plan A for the years of 2015 and 2016. On December 31, 2018 the total amount payable by Cemig and its subsidiaries as a result of the Plan A deficit is R$ 378 (R$283 on December, 31, 2017) with monthly amortizations up to June 2031.

On March 28, 2019, Cemig’s Board of Directors authorized the 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 related to 2017. The total amount to be paid by Cemig and its subsidiaries as a result of the 2017 Plan A deficit is R$178, through 167 monthly installments.

Remuneratory interest applicable to the outstanding balance is 6% p.a., plus the effect of the IPCA. If the plan reaches actuarial surplus before the full period of amortization of the debt, also Company will not be required to pay the remaining installments and the contract will be extinguished.

Actuarial information


2018	Pension plans and retirement supplement plans			Health plan		Dental plan		Life insurance		Total
Present value of obligations		11,073			2,344		48		427		13,892
Fair value of plan assets		(9,062	)		—		—		—		(9,062	)

Initial net liabilities		2,011			2,344		48		427		4,830
Adjustment to asset ceiling		159			—		—		—		159

Net liabilities in the statement of financial position		2,170			2,344		48		427		4,989


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

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 at December 31. 2015		8,049			1,323			30			554			9,956
Cost of current service		5			9			—			3			17
Interest on 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 at December 31. 2016		9,743			1,711			38			814			12,306
Cost of current service		5			11			—			3			19
Interest on 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 at December 31. 2017		10,545			1,809			39			270			12,663

Cost of current service		3			10			—			2			15
Interest on actuarial obligation		959			173			4			25			1,161
Actuarial losses (gains):
Due to changes in demographic assumptions
Due to changes in financial assumptions		467			402			8			26			903
Due to adjustments based on experience		(20	)		68			—			113			161

		447			470			8			139			1,064
Benefits paid		(881	)		(118	)		(3	)		(9	)		(1,011	)

Defined-benefit obligation at December 31. 2018		11,073			2,344			48			427			13,892

On 2017, the Company changed its life insurance policy, resulting in reduction of the retirees’ capital insured 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-employment obligations reported on December 31, 2017, with counterpart in the Statement of income in 2017.

Changes in the fair values of the plan assets are as follows:


	Pension plans and retirement supplement plans
Fair value of plan assets at December 31, 2015		6,703
Return on investments		2,105
Contributions from employer		127
Benefits paid		(807	)

Fair value of plan assets at December 31, 2016		8,128
Return on investments		1,100
Contributions from employer		159
Benefits paid		(841	)

Fair value of plan assets at December 31, 2017		8,546

Return on investments		1,220
Contributions from employer		178
Benefits paid		(881	)

Fair value of the plan assets at December 31, 2018		9,063

The amounts recognized in 2018, 2017 and 2016 statement of income are as follows:


2018	Pension plans and retirement supplement plans			Health plan		Dental plan		Life insurance		Total
Current service cost		4			10		0		1		15
Interest on the actuarial obligation		959			172		4		26		1,161
Expected return on the assets of the Plan		(771	)		—		—		—		(771	)

Expense (recovery of expense) in 2018 according to actuarial calculation		192			182		4		27		405


2017	Pension plans and retirement supplement plans			Health plan		Dental plan		Life insurance			Total
Current service cost		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
Current service cost		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

Changes in net liabilities were as follows:


	Pension plans and retirement supplement plans			Health plan			Dental plan			Life insurance			Total
Net liabilities at 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 ( 1 )		274			305			6			196			781

Net liabilities at 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) ( 1 )		374			22			(1	)		(5	)		390

Net liabilities at December 31, 2017		2,068			1,809			38			271			4,186

Expense recognized in Statement of income		193			183			4			25			405
Contributions paid		(178	)		(118	)		(2	)		(9	)		(307	)
Actuarial losses ( 1 )		87			470			8			140			705

Net liabilities at December 31, 2018		2,170			2,344			48			427			4,989


	2018		2017
Current liabilities		253		232
Non-current liabilities		4,736		3,954

(1)	Recognized directly in Comprehensive income.

Amounts recorded as current liabilities refer to contributions to be made by Cemig and its subsidiaries in the next 12 months for the amortization of the actuarial liabilities.

The amounts reported as ‘Expense recognized in the Statement of income’ refer to the costs of post-employment obligations, totaling R$ 337 in 2018 (R$ 391 in 2017 and R$ 345 in 2016), plus the finance expenses and monetary updating on the debt with Forluz, in the amounts of R$ 68 in 2018 (R$ 65 in 2017 and R$103 in 2016).

The independent actuary’s estimation for the expense to be recognized for 2019 is as follows:


	Pension plans and retirement supplement plans			Health plan		Dental plan		Life insurance		Total
Current service cost		1			14		—		3		18
Interest on the actuarial obligation		978			208		4		38		1,228
Expected return on the assets of the Plan		(782	)		—		—		—		(782	)

Estimated total expense in 2019 as per actuarial report		197			222		4		41		464

The expectation for payment of benefits for 2019 is as follows:


	Pension plans and retirement supplement plans – Forluz		Health plan		Dental plan		Life insurance		Total
Estimated payment of benefits		863		127		3		17		1,010

The Company and its subsidiaries Cemig GT and Cemig D have expectation of making contributions to the pension plan in 2019 of R$ 184 for amortization of the deficit of Plan A, and R$ 82 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

9.59

11.31

12.72

12.67

16.50

The main categories plan’s assets, as a percentage of total plan’s assets are as follows:


	2018			2017
Shares of Brazilian companies		7.11	%		6.63	%
Fixed income securities		71.92	%		74.12	%
Real estate property		4.69	%		8.05	%
Others		16.28	%		11.20	%

Total		100.00	%		100.00	%

The following assets of the pension plan, measured at fair value, are related to the Company:


	2018		2017
Non-convertible debentures issued by the Company and subsidiaries		380		363
Shares issued by the Company		35		10
Real estate properties of the Foundation, occupied by the Company and subsidiaries		662		725

		1,077		1,098

This table provides the main actuarial assumptions:

2018

Pension plans and retirement
supplement plans

Health plan and
Dental plan

Life insurance

Annual discount rate for present value of the actuarial obligation

9.02%

9.13%

9.16%

Annual expected return on plan assets

9.02%

9.13%

9.16%

Long-term annual inflation rate

4.01%

Estimated future annual salary increases

4.01%

Not applicable

5.26%

General mortality table

AT-2000 M S10% D10%

AT-2000 M S10% D20%

Disability table

Not applicable

Álvaro Vindas D30%

Disabled mortality table

AT 49 M

Winklevoss D30%

Real growth of contributions above inflation (1)

—

1.00%

—

(1)	Starting in 2018, Company adopted the assumption of real growth of the contributions above inflation at the rate of 1% p.a.

2017

Pension plans and retirement
supplement plans

Health and
Dental plans

Life insurance

Annual discount rate for present value of the actuarial obligation

9.48%

9.60%

9.57%

Annual expected return on plan assets

9.48%

9.60%

9.57%

Long-term annual inflation rate

4.00%

Estimated future annual salary increases

4.00%

Not applicable

6.08%

General mortality table

AT-2000 M S10% D10%

AT-2000 M S10% D20%

Disability table

Not applicable

Álvaro Vindas D30%

Disabled mortality table

AT 49 M

Winklevoss D30%

2016

Pension plans and retirement
supplement plans

Health and
Dental plans

Life insurance

Annual discount rate for present value of the actuarial obligation

10.47%

10.40%

10.50%

Annual expected return on plan assets

10.47%

10.40%

10.50%

Long-term annual inflation rate

4.50%

Estimated future annual salary increases

4.50%

Not applicable

6.59%

General mortality table

AT-2000 M S10% D10%

AT-2000 M S10% D20%

Disability table

Álvaro Vindas

Álvaro Vindas D10%

Disabled mortality table

AT 49 M

Winklevoss D30%

Below is a sensitivity analysis of the effects of changes in the main actuarial assumptions used to determine the defined-benefit obligation at December 31, 2018:


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		229			45			1			(15	)		260
Increase of one year in the mortality table		(233	)		(45	)		(1	)		16			(263	)
Reduction of 1% in the discount rate		1,183			327			7			78			1,595

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-employment obligations for the business years ended December 31, 2018 and 2017.