19.

Employee Benefits and Private Pension Plan

a. ULTRAPREV- Associaçăo de Previdência Complementar

In February 2001, the Company’s Board of Directors approved the adoption of a defined contribution pension plan to be sponsored by the Company and each of its subsidiaries. Participating employees have been contributing to this plan, managed by Ultraprev—Associação de Previdência Complementar (“Ultraprev”), since August 2001. Under the terms of the plan, every year each participating employee chooses his or her basic contribution to the plan. Each sponsoring company provides a matching contribution in an amount equivalent to each basic contribution, up to a limit of 11% of the employee’s reference salary, according to the rules of the plan. As participating employees retire, they may choose to receive either (i) a monthly sum ranging between 0.5% and 1.0% of their respective accumulated fund in Ultraprev or (ii) a fixed monthly amount, which will exhaust their respective accumulated fund over a period of 5 to 25 years. The sponsoring company does not take responsibility for guaranteeing amounts or the duration of the benefits received by the retired employee. In 2018, the subsidiaries contributed R$ 24,323 (R$ 24,819 in 2017 and R$ 23,261 in 2016) to Ultraprev, which is recognized as expense in the income statement. The total number of participating employees in 2018 was 8,052 active participants and 279 retired participants. In addition, Ultraprev had 26 former employees receiving benefits under the rules of a previous plan whose reserves are fully constituted.

b. Post-employment Benefits

The subsidiaries recognized a provision for post-employment benefits mainly related to seniority bonus, payment of Government Severance Indemnity Fund (“FGTS”), and health, dental care, and life insurance plan for eligible retirees.

The amounts related to such benefits were determined based on a valuation conducted by an independent actuary and reviewed by management as of December 31, 2018.


	12/31/2018		12/31/2017
Health and dental care plan (1)		112,628		99,767
Indemnification of FGTS		83,781		81,831
Seniority bonus		37,397		40,254
Life insurance (1)		16,009		15,671

Total		249,815		237,523

Current		45,655		30,059
Non-current		204,160		207,464

⁽¹⁾	Only IPP and CBLSA.

Changes in the present value of the provision for post-employment benefits are as follows:


	12/31/2018			12/31/2017
Opening balance		237,523			144,751
Current service cost		6,092			7,664
Interest cost		21,466			15,754
Actuarial (gains) losses from changes in actuarial assumptions		7,934			36,120
Benefits paid directly by Company and its subsidiaries		(23,604	)		(11,368	)
Opening balance CBL S.A. (see Note 3.c)		—			44,478
Exchange rate from foreign subsidiaries		404			124

Ending balance		249,815			237,523

The expense of the year is presented below:


	2018		2017		2016
Health and dental care plan		9,559		164		3,065
Indemnification of FGTS		11,159		14,828		9,068
Seniority bonus		5,460		6,883		4,455
Life insurance		1,380		1,543		1,586

Total		27,558		23,418		18,174

Significant actuarial assumptions adopted include:


Economic factors	12/31/2018 % p.a.		12/31/2017 % p.a.
Discount rate for the actuarial obligation at present value		9.00		9.51
Average projected salary growth rate		7.85		8.38
Inflation rate (long term)		4.00		4.50
Growth rate of medical services		8.16		8.68

Demographic factors

•

Mortality Table for the life insurance benefit – CSO-80

•

Mortality Table for other benefits—AT 2000 Basic decreased by 10%

•

Disabled Mortality Table—RRB 1983

•

Disability Table – Weak light

Sensitivity analysis

The significant actuarial assumptions to determine the provision for post-employment benefits are: discount rate, wage and medical costs increases. The following sensitivity analyses were determined based on reasonably possible changes of assumptions occurring at the reporting date of the financial statements, keeping all other assumptions constant.

12/31/2018

Assumption

Change in
assumptions

Decrease in
liability

Change in
assumptions

Increase in
liability

Discount rate

increase by 1.0 p.p

17,500

decrease by 1.0 p.p

20,547

Wage growth rate

decrease by 1.0 p.p

2,127

increase by 1.0 p.p

2,344

Medical services growth rate

decrease by 1.0 p.p

12,002

increase by 1.0 p.p

14,201

12/31/2017

Assumption

Change in
assumptions

Decrease in
liability

Change in
assumptions

Increase in
liability

Discount rate

increase by 1.0 p.p

10,237

decrease by 1.0 p.p

11,690

Wage growth rate

decrease by 1.0 p.p

2,807

increase by 1.0 p.p

3,103

Medical services growth rate

decrease by 1.0 p.p

3,837

increase by 1.0 p.p

4,413

The sensitivity analyses presented may not represent the real change in the post-employment benefits obligation, since it is unlikely that changes occur in just one assumption alone, considering that some of these assumptions may be correlated.

Inherent risks related to post-employment benefits

Interest rate risk: a long-term interest rate is used to calculate the present value of post-employment liabilities. A reduction in this interest rate will increase the corresponding liability.

Wage growth risk: the present value of the liability is calculated using as reference the wages of the plan participants, projected with the average nominal wage growth rate. An increase in the real wages of plan participants will increase the corresponding liability.

Medical costs growth risk: the present value of the liability is calculated using as reference the medical cost by age based on actual healthcare costs, projected based on the growth rate of medical services costs. An increase in the real medical costs will increase the corresponding liability.