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Employee Future Benefits | 12 Months Ended
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Dec. 31, 2017
Employee Benefits [Abstract] |
Employee Future Benefits | Employee Future Benefits A. Description The Corporation sponsors registered pension plans in Canada and the US covering substantially all employees of the Corporation in these countries and specific named employees working internationally. These plans have defined benefit and defined contribution options, and in Canada there is an additional non-registered supplemental plan for eligible employees whose annual earnings exceed the Canadian income tax limit. Except for the Highvale pension plan acquired in 2013, the Canadian and US defined benefit pension plans are closed to new entrants. The US defined benefit pension plan was frozen effective Dec. 31, 2010, resulting in no future benefits being earned. The supplemental pension plan was closed as of Dec. 31, 2015 and a new defined contribution supplemental pension plan commenced for executive members effective Jan. 1, 2016. Current executives as of Dec .31, 2015, were grandfathered into the old supplemental plan. The latest actuarial valuation for accounting purposes of the US pension plan was at Jan. 1, 2017. The latest actuarial valuation for accounting purposes of the Highvale and Canadian pension plans was at Dec. 31, 2016. The measurement date used for all plans to determine the fair value of plan assets and the present value of the defined benefit obligation was Dec. 31, 2017. Funding of the registered pension plans complies with applicable regulations that require actuarial valuations of the pension funds at least once every three years in Canada, or more, depending on funding status, and every year in the US The supplemental pension plan is solely the obligation of the Corporation. The Corporation is not obligated to fund the supplemental plan but is obligated to pay benefits under the terms of the plan as they come due. The Corporation posted a letter of credit in March 2017 for the amount of $77 million to secure the obligations under the supplemental plan. The Corporation provides other health and dental benefits to the age of 65 for both disabled members and retired members through its other post-employment benefits plans. The latest actuarial valuations for accounting purposes of the Canadian and US plans were as at Dec. 31, 2016, and Jan. 1, 2017, respectively. The measurement date used to determine the present value obligation for both plans was Dec. 31, 2017. The Corporation provides several defined contribution plans, including an Australian superannuation plan and a US 401(k) savings plan, that provide for company contributions from 5 per cent to 10 per cent, depending on the plan. Optional employee contributions are allowed for all the defined contribution plans. B. Costs Recognized The costs recognized in net earnings during the year on the defined benefit, defined contribution, and other post-employment benefits plans are as follows:
Year ended Dec. 31, 2017 | Registered |  | Supplemental |  | Other |  | Total |
Current service cost | 7 |  | 2 |  | 1 |  | 10 |
Administration expenses | 2 |  | — |  | — |  | 2 |
Interest cost on defined benefit obligation | 20 |  | 3 |  | 1 |  | 24 |
Interest on plan assets | (15 | ) | — |  | — |  | (15 | )
Defined benefit expense | 14 |  | 5 |  | 2 |  | 21 |
Defined contribution expense | 11 |  | — |  | — |  | 11 |
Net expense | 25 |  | 5 |  | 2 |  | 32 |
Year ended Dec. 31, 2016 | Registered |  | Supplemental |  | Other |  | Total |
Current service cost | 7 |  | 2 |  | 2 |  | 11 |
Administration expenses | 2 |  | — |  | — |  | 2 |
Interest cost on defined benefit obligation | 21 |  | 3 |  | 1 |  | 25 |
Interest on plan assets | (16 | ) | — |  | — |  | (16 | )
Defined benefit expense | 14 |  | 5 |  | 3 |  | 22 |
Defined contribution expense | 15 |  | — |  | — |  | 15 |
Net expense | 29 |  | 5 |  | 3 |  | 37 |
Year ended Dec. 31, 2015 | Registered |  | Supplemental |  | Other |  | Total |
Current service cost | 7 |  | 2 |  | 2 |  | 11 |
Administration expenses | 2 |  | — |  | — |  | 2 |
Interest cost on defined benefit obligation | 21 |  | 3 |  | 1 |  | 25 |
Interest on plan assets | (16 | ) | — |  | — |  | (16 | )
Curtailment and amendment gain(1) | — |  | (5 | ) | (3 | ) | (8 | )
Defined benefit expense | 14 |  | — |  | — |  | 14 |
Defined contribution expense | 21 |  | — |  | — |  | 21 |
Net expense | 35 |  | — |  | — |  | 35 |
(1) Relates to the reduction in the number of employees associated with the restructuring initiative described in Note 4(S). C. Status of Plans The status of the defined benefit pension and other post-employment benefit plans is as follows:
As at Dec. 31, 2017 | Registered |  | Supplemental |  | Other |  | Total |
Fair value of plan assets | 416 |  | 12 |  | — |  | 428 |
Present value of defined benefit obligation | (561 | ) | (87 | ) | (27 | ) | (675 | )
Funded status - plan deficit | (145 | ) | (75 | ) | (27 | ) | (247 | )
Amount recognized in the consolidated financial statements: |  |  |  |  |  |  |  |
Accrued current liabilities | (4 | ) | (6 | ) | (2 | ) | (12 | )
Other long-term liabilities | (141 | ) | (69 | ) | (25 | ) | (235 | )
Total amount recognized | (145 | ) | (75 | ) | (27 | ) | (247 | )
As at Dec. 31, 2016 | Registered |  | Supplemental |  | Other |  | Total |
Fair value of plan assets | 423 |  | 10 |  | — |  | 433 |
Present value of defined benefit obligation | (554 | ) | (82 | ) | (27 | ) | (663 | )
Funded status - plan deficit | (131 | ) | (72 | ) | (27 | ) | (230 | )
Amount recognized in the consolidated financial statements: |  |  |  |  |  |  |  |
Accrued current liabilities | (15 | ) | (6 | ) | (1 | ) | (22 | )
Other long-term liabilities | (116 | ) | (66 | ) | (26 | ) | (208 | )
Total amount recognized | (131 | ) | (72 | ) | (27 | ) | (230 | )
D. Plan Assets The fair value of the plan assets of the defined benefit pension and other post-employment benefit plans is as follows:
| Registered |  | Supplemental |  | Other |  | Total |
As at Dec. 31, 2015 | 429 |  | 9 |  | — |  | 438 |
Interest on plan assets | 16 |  | — |  | — |  | 16 |
Net return on plan assets | 10 |  | — |  | — |  | 10 |
Contributions | 11 |  | 6 |  | 1 |  | 18 |
Benefits paid | (40 | ) | (5 | ) | (1 | ) | (46 | )
Administration expenses | (2 | ) | — |  | — |  | (2 | )
Effect of translation on US plans | (1 | ) | — |  | — |  | (1 | )
As at Dec. 31, 2016 | 423 |  | 10 |  | — |  | 433 |
Interest on plan assets | 15 |  | — |  | — |  | 15 |
Net return on plan assets | 26 |  | — |  | — |  | 26 |
Contributions | 6 |  | 6 |  | — |  | 12 |
Benefits paid | (51 | ) | (4 | ) | — |  | (55 | )
Administration expenses | (2 | ) | — |  | — |  | (2 | )
Effect of translation on US plans | (1 | ) | — |  | — |  | (1 | )
As at Dec. 31, 2017 | 416 |  | 12 |  | — |  | 428 |
The fair value of the Corporation’s defined benefit plan assets by major category is as follows:
Year ended Dec. 31, 2017 | Level I |  | Level II |  | Level III |  | Total |
Equity securities |  |  |  |  |  |  |  |
Canadian | — |  | 76 |  | — |  | 76 |
US | — |  | 31 |  | — |  | 31 |
International | — |  | 118 |  | — |  | 118 |
Private | — |  | — |  | 1 |  | 1 |
Bonds |  |  |  |  |  |  |  |
AAA | — |  | 43 |  | — |  | 43 |
AA | — |  | 71 |  | — |  | 71 |
A | — |  | 44 |  | — |  | 44 |
BBB | 1 |  | 25 |  | — |  | 26 |
Below BBB | — |  | 5 |  | — |  | 5 |
Money market and cash and cash equivalents | (1 | ) | 14 |  | — |  | 13 |
Total | — |  | 427 |  | 1 |  | 428 |
Year ended Dec. 31, 2016 | Level I |  | Level II |  | Level III |  | Total |
Equity securities |  |  |  |  |  |  |  |
Canadian | — |  | 76 |  | — |  | 76 |
US | — |  | 30 |  | — |  | 30 |
International | — |  | 120 |  | — |  | 120 |
Private | — |  | — |  | 2 |  | 2 |
Bonds |  |  |  |  |  |  |  |
AAA | — |  | 47 |  | — |  | 47 |
AA | — |  | 58 |  | — |  | 58 |
A | — |  | 55 |  | — |  | 55 |
BBB | 1 |  | 22 |  | — |  | 23 |
Below BBB | — |  | 5 |  | — |  | 5 |
Money market and cash and cash equivalents | 3 |  | 14 |  | — |  | 17 |
Total | 4 |  | 427 |  | 2 |  | 433 |
Plan assets do not include any common shares of the Corporation at Dec. 31, 2017, and Dec. 31, 2016. The Corporation charged the registered plan $0.1 million for administrative services provided for the year ended Dec. 31, 2017 (2016 - $0.1 million). E. Defined Benefit Obligation The present value of the obligation for the defined benefit pension and other post-employment benefit plans is as follows:
| Registered |  | Supplemental |  | Other |  | Total |
Present value of defined benefit obligation as at Dec. 31, 2015 | 566 |  | 80 |  | 32 |  | 678 |
Current service cost | 7 |  | 2 |  | 2 |  | 11 |
Interest cost | 21 |  | 3 |  | 1 |  | 25 |
Benefits paid | (40 | ) | (5 | ) | (1 | ) | (46 | )
Actuarial gain arising from demographic assumptions | (1 | ) | — |  | (4 | ) | (5 | )
Actuarial loss arising from financial assumptions | 2 |  | — |  | — |  | 2 |
Actuarial gain (loss) arising from experience adjustments | — |  | 2 |  | (2 | ) | — |
Effect of translation on US plans | (1 | ) | — |  | (1 | ) | (2 | )
Present value of defined benefit obligation as at Dec. 31, 2016 | 554 |  | 82 |  | 27 |  | 663 |
Current service cost | 7 |  | 2 |  | 1 |  | 10 |
Interest cost | 20 |  | 3 |  | 1 |  | 24 |
Benefits paid | (51 | ) | (4 | ) | — |  | (55 | )
Actuarial loss arising from demographic assumptions | 4 |  | 1 |  | — |  | 5 |
Actuarial loss arising from financial assumptions | 26 |  | 3 |  | — |  | 29 |
Actuarial (gain) loss arising from experience adjustments | 3 |  | — |  | (1 | ) | 2 |
Effect of translation on US plans | (2 | ) | — |  | (1 | ) | (3 | )
Present value of defined benefit obligations as at Dec. 31, 2017 | 561 |  | 87 |  | 27 |  | 675 |
The weighted average duration of the defined benefit plan obligation as at Dec. 31, 2017 is 14.6. F. Contributions The expected employer contributions for 2018 for the defined benefit pension and other post-employment benefit plans are as follows:
| Registered |  | Supplemental |  | Other |  | Total |
Expected employer contributions | 4 |  | 6 |  | 2 |  | 12 |
G. Assumptions The significant actuarial assumptions used in measuring the Corporation’s defined benefit obligation for the defined benefit pension and other post-employment benefit plans are as follows:
| As at Dec. 31, 2017 |  | As at Dec. 31, 2016
(per cent) | Registered |  | Supplemental |  | Other |  |  | Registered |  | Supplemental |  | Other |
Accrued benefit obligation |  |  |  |  |  |  |  |
Discount rate | 3.3 |  | 3.3 |  | 3.4 |  |  | 3.7 |  | 3.6 |  | 3.7 |
Rate of compensation increase | 2.9 |  | 3.0 |  | — |  |  | 2.9 |  | 3.0 |  | — |
Assumed health care cost trend rate |  |  |  |  |  |  |  |  |  |  |  |  |
Health care cost escalation | — |  | — |  | 7.8(1) |  |  | — |  | — |  | 7.9(3) |
Dental care cost escalation | — |  | — |  | 4.0 |  |  | — |  | — |  | 4.0 |
Benefit cost for the year |  |  |  |  |  |  |  |  |  |  |  |  |
Discount rate | 3.7 |  | 3.6 |  | 3.7 |  |  | 3.8 |  | 3.8 |  | 3.8 |
Rate of compensation increase | 2.6 |  | 3.0 |  | — |  |  | 3.0 |  | 3.0 |  | — |
Assumed health care cost trend rate |  |  |  |  |  |  |  |  |  |  |  |  |
Health care cost escalation | — |  | — |  | 7.9(2) |  |  | — |  | — |  | 7.8(4) |
Dental care cost escalation | — |  | — |  | 4.0 |  |  | — |  | — |  | 4.0 |
Provincial health care premium escalation | — |  | — |  | — |  |  | — |  | — |  | 5.0 |
(1) Post- and Pre 65 rates: decreasing gradually to 4.5% by 2027 and remaining at that level thereafter for the U.S. and decreasing gradually by 0.3% per year to 4.5% in 2027 for Canada. (2) Post- and Pre 65 rates: decreasing gradually to 4.5% by 2026 and remaining at that level thereafter for the U.S. and decreasing gradually by 0.30% per year to 5% in 2024 for Canada. (3) Post- and Pre 65 rates: decreasing gradually to 4.5% by 2026 and remaining at that level thereafter for the U.S. and decreasing gradually by 0.30% per year to 5% in 2024 for Canada. (4) Post- and Pre 65 rates: decreasing gradually to 5% by 2024 and remaining at that level thereafter for the U.S. and decreasing gradually by 0.35% per year to 5% in 2024 for Canada. H. Sensitivity Analysis The following table outlines the estimated increase in the net defined benefit obligation assuming certain changes in key assumptions:
| Canadian plans |  | US plans
Year ended Dec. 31, 2017 | Registered |  | Supplemental |  | Other |  |  | Pension |  | Other |
1% decrease in the discount rate | 79 |  | 12 |  | 3 |  |  | 3 |  | 1 |
1% increase in the salary scale | 10 |  | 1 |  | — |  |  | — |  | — |
1% increase in the health care cost trend rate | — |  | — |  | 2 |  |  | — |  | — |
10% improvement in mortality rates | 20 |  | 2 |  | — |  |  | 1 |  | — |

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