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Post-employment Benefits | 12 Months Ended
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Dec. 31, 2021
Post-employment Benefits |
Post-employment Benefits |
16. | Post-employment Benefits
Certain companies in the Group have collective bargaining contracts which include defined benefit pension plans and other retirement benefits for substantially all of their employees. Additionally, the Group has defined benefit pension plans for certain eligible executives and employees. All pension benefits are based on salary and years of service rendered. Under the provisions of the Mexican Labor Law, seniority premiums are payable based on salary and years of service to employees who resign or are terminated prior to reaching retirement age. Some companies in the Group have seniority premium benefits which are greater than the legal requirement. After retirement age employees are no longer eligible for seniority premiums. Post-employment benefits are actuarially determined by using nominal assumptions and attributing the present value of all future expected benefits proportionately over each year from date of hire to age 65. The Group used actuarial assumptions to determine the present value of defined benefit obligations, as follows: ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |
Discount rate |  | 7.8 | % | 6.6 | %
Salary increase |  | 5.0 | % | 5.0 | %
Inflation rate |  | 3.5 | % | 3.5 | %
​ Had the discount rate of 7.8% used by the Group in 2021 been decreased by 50 basis points, the impact on defined benefit obligation would have been an increase to Ps.3,308,348 as of December 31, 2021. Had the discount rate of 6.6% used by the Group in 2020 been decreased by 50 basis points, the impact on defined benefit obligation would have been an increase to Ps.3,382,711 as of December 31, 2020. The reconciliation between defined benefit obligations and post-employment benefit liability in the consolidated statements of financial position as of December 31, 2021 and 2020, is presented as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Seniority | ​ | ​ | ​
​ |  | Pensions |  | Premiums |  | 2021
Vested benefit obligations | ​ | Ps. | 560,723 | ​ | Ps. | 335,294 | ​ | Ps. | 896,017
Unvested benefit obligations | ​ | ​ | 1,881,974 | ​ | ​ | 406,374 | ​ | ​ | 2,288,348
Defined benefit obligations | ​ | ​ | 2,442,697 | ​ | ​ | 741,668 | ​ | ​ | 3,184,365
Fair value of plan assets | ​ | ​ | 978,892 | ​ | ​ | 291,793 | ​ | ​ | 1,270,685
Underfunded status of the plans | ​ | Ps. | 1,463,805 | ​ | Ps. | 449,875 | ​ | Ps. | 1,913,680
Post-employment benefit liability | ​ | Ps. | 1,463,805 | ​ | Ps. | 449,875 | ​ | Ps. | 1,913,680
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Seniority | ​ | ​ | ​
​ |  | Pensions |  | Premiums |  | 2020
Vested benefit obligations | ​ | Ps. | 556,619 | ​ | Ps. | 376,122 | ​ | Ps. | 932,741
Unvested benefit obligations | ​ | ​ | 2,077,506 | ​ | ​ | 266,153 | ​ | ​ | 2,343,659
Defined benefit obligations | ​ | ​ | 2,634,125 | ​ | ​ | 642,275 | ​ | ​ | 3,276,400
Fair value of plan assets | ​ | ​ | 909,324 | ​ | ​ | 286,425 | ​ | ​ | 1,195,749
Underfunded status of the plans | ​ | Ps. | 1,724,801 | ​ | Ps. | 355,850 | ​ | Ps. | 2,080,651
Post-employment benefit liability | ​ | Ps. | 1,724,801 | ​ | Ps. | 355,850 | ​ | Ps. | 2,080,651
​ The components of net periodic pensions and seniority premiums cost for the years ended December 31, consisted of the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020
Service cost | ​ | Ps. | 175,648 |  | Ps. | 148,987
Interest cost |  | ​ | 193,313 |  | ​ | 187,470
Prior service cost for plan amendments |  | ​ | (40,124) |  | ​ | 40,542
Interest on plan assets |  | ​ | (69,546) |  | ​ | (84,973)
Net periodic cost |  | Ps. | 259,291 |  | Ps. | 292,026
​ The Group’s defined benefit obligations, plan assets, funded status and balances in the consolidated statements of financial position as of December 31, 2021 and 2020, associated with post-employment benefits, are presented as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Seniority | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Pensions |  | Premiums |  | 2021 |  | 2020
Defined benefit obligations: |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Beginning of year | ​ | Ps. | 2,634,125 | ​ | Ps. | 642,275 | ​ | Ps. | 3,276,400 | ​ | Ps. | 2,847,608
Service cost | ​ | ​ | 101,550 | ​ | ​ | 74,098 | ​ | ​ | 175,648 | ​ | ​ | 148,987
Interest cost | ​ | ​ | 146,941 | ​ | ​ | 46,372 | ​ | ​ | 193,313 | ​ | ​ | 187,470
Benefits paid | ​ | ​ | (157,261) | ​ | ​ | (64,774) | ​ | ​ | (222,035) | ​ | ​ | (221,184)
Remeasurement of post-employment benefit obligations | ​ | ​ | (243,332) | ​ | ​ | 44,495 | ​ | ​ | (198,837) | ​ | ​ | 272,977
Past service cost | ​ | ​ | (39,326) | ​ | ​ | (798) | ​ | ​ | (40,124) | ​ | ​ | 40,542
End of year | ​ | ​ | 2,442,697 | ​ | ​ | 741,668 | ​ | ​ | 3,184,365 | ​ | ​ | 3,276,400
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value of plan assets: | ​ | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​
Beginning of year | ​ | ​ | 909,324 | ​ | ​ | 286,425 | ​ | ​ | 1,195,749 | ​ | ​ | 1,379,496
Return on plan assets | ​ | ​ | 52,506 | ​ | ​ | 17,040 | ​ | ​ | 69,546 | ​ | ​ | 84,973
Contributions | ​ | ​ | — | ​ | ​ | 6,972 | ​ | ​ | 6,972 | ​ | ​ | 600
Remeasurement on plan assets | ​ | ​ | 84,566 | ​ | ​ | (3,578) | ​ | ​ | 80,988 | ​ | ​ | (71,336)
Benefits paid | ​ | ​ | (67,504) | ​ | ​ | (15,066) | ​ | ​ | (82,570) | ​ | ​ | (197,984)
End of year | ​ | ​ | 978,892 | ​ | ​ | 291,793 | ​ | ​ | 1,270,685 | ​ | ​ | 1,195,749
Unfunded status of the plans | ​ | Ps. | 1,463,805 | ​ | Ps. | 449,875 | ​ | Ps. | 1,913,680 | ​ | Ps. | 2,080,651
​ The changes in the net post-employment liability in the consolidated statements of financial position as of December 31, 2021 and 2020, are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Seniority | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Pensions |  | Premiums |  | 2021 |  | 2020
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net post-employment liability at beginning of year | ​ | Ps. | 1,724,801 | ​ | Ps. | 355,850 | ​ | Ps. | 2,080,651 | ​ | Ps. | 1,468,112
Net periodic cost | ​ | ​ | 156,659 | ​ | ​ | 102,632 | ​ | ​ | 259,291 | ​ | ​ | 292,026
Contributions | ​ | ​ | — | ​ | ​ | (6,972) | ​ | ​ | (6,972) | ​ | ​ | (600)
Remeasurement of post-employment benefits | ​ | ​ | (327,898) | ​ | ​ | 48,073 | ​ | ​ | (279,825) | ​ | ​ | 344,313
Benefits paid | ​ | ​ | (89,757) | ​ | ​ | (49,708) | ​ | ​ | (139,465) | ​ | ​ | (23,200)
Net post-employment liability at end of year | ​ | Ps. | 1,463,805 | ​ | Ps. | 449,875 | ​ | Ps. | 1,913,680 | ​ | Ps. | 2,080,651
​ The post-employment benefits as of December 31, 2021 and 2020, and remeasurements adjustments for the years ended December 31, 2021 and 2020, are summarized as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020
Pensions: |  |  | ​ |  |  | ​
Defined benefit obligations | ​ | Ps. | 2,442,697 | ​ | Ps. | 2,634,125
Plan assets | ​ | ​ | 978,892 | ​ | ​ | 909,324
Unfunded status of plans | ​ | ​ | 1,463,805 | ​ | ​ | 1,724,801
Remeasurements adjustments (1) | ​ | ​ | (327,898) | ​ | ​ | 250,283
​ | ​ | ​ | ​ | ​ | ​ | ​
Seniority premiums: | ​ |  | ​ | ​ | ​ | ​
Defined benefit obligations | ​ | Ps. | 741,668 | ​ | Ps. | 642,275
Plan assets | ​ | ​ | 291,793 | ​ | ​ | 286,425
Unfunded status of plans | ​ | ​ | 449,875 | ​ | ​ | 355,850
Remeasurements adjustments (1) | ​ | ​ | 48,073 | ​ | ​ | 94,030
​
(1) | On defined benefit obligations and plan assets.
Pensions and Seniority Premiums Plan Assets The plan assets are invested according to specific investment guidelines determined by the technical committees of the pension plan and seniority premiums trusts and in accordance with actuarial computations of funding requirements. These investment guidelines require a minimum investment of 30% of the plan assets in fixed rate instruments, or mutual funds comprised of fixed rate instruments. The plan assets that are invested in mutual funds are all rated “AA” or “AAA” by at least one of the main rating agencies. These mutual funds vary in liquidity characteristics ranging from one day to one month. The investment goals of the plan assets are to preserve principal, diversify the portfolio, maintain a high degree of liquidity and credit quality, and deliver competitive returns subject to prevailing market conditions. Currently, the plan assets do not engage in the use of financial derivative instruments. The Group’s target allocation in the foreseeable future is to maintain approximately 30% in equity securities and 70% in fixed rate instruments. The weighted average asset allocation by asset category as of December 31, 2021 and 2020, was as follows: ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |
Equity securities (1) |  | 32.7 | % | 28.8 | %
Fixed rate instruments |  | 67.3 | % | 71.2 | %
Total |  | 100.0 | % | 100.0 | %
​
(1) | Included within plan assets at December 31, 2021 and 2020, are shares of the Company held by the trust with a fair value of Ps.119,851 and Ps.101,690, respectively.
The weighted average expected long-term rate of return of plan assets of 7.79% and 6.59% were used in determining net periodic pension cost in 2021 and 2020, respectively. The rate used reflected an estimate of long-term future returns for the plan assets. This estimate was primarily a function of the asset classes (equities versus fixed income) in which the plan assets were invested and the analysis of past performance of these asset classes over a long period of time. This analysis included expected long-term inflation and the risk premiums associated with equity investments and fixed income investments. The following table summarizes the Group’s plan assets measured at fair value on a recurring basis as of December 31, 2021 and 2020: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Quoted Prices in | ​ | Internal Models | ​ | Internal Models
​ | ​ | Balance as of | ​ | Active Markets | ​ | with Significant | ​ | with Significant
​ | ​ | December 31, | ​ | for Identical | ​ | Observable | ​ | Unobservable
​ |  | 2021 |  | Assets (Level 1) |  | Inputs (Level 2) |  | Inputs (Level 3)
Common Stocks (1) | ​ | Ps. | 119,851 | ​ | Ps. | 119,851 | ​ | Ps. | — | ​ | Ps. | —
Mutual funds (fixed rate instruments) (2) | ​ | ​ | 115,185 | ​ | ​ | 115,185 | ​ | ​ | — | ​ | ​ | —
Money market securities (3) | ​ | ​ | 726,781 | ​ | ​ | 726,781 | ​ | ​ | — | ​ | ​ | —
Other equity securities | ​ | ​ | 308,868 | ​ | ​ | 308,868 | ​ | ​ | — | ​ | ​ | —
Total investment assets | ​ | Ps. | 1,270,685 | ​ | Ps. | 1,270,685 | ​ | Ps. | — | ​ | Ps. | —
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Quoted Prices in | ​ | Internal Models | ​ | Internal Models
​ | ​ | Balance as of | ​ | Active Markets | ​ | with Significant | ​ | with Significant
​ | ​ | December 31, | ​ | for Identical | ​ | Observable | ​ | Unobservable
​ |  | 2020 |  | Assets (Level 1) |  | Inputs (Level 2) |  | Inputs (Level 3)
Common Stocks (1) | ​ | Ps. | 101,690 | ​ | Ps. | 101,690 | ​ | Ps. | — | ​ | Ps. | —
Mutual funds (fixed rate instruments) (2) | ​ | ​ | 231,837 | ​ | ​ | 231,837 | ​ | ​ | — | ​ | ​ | —
Money market securities (3) | ​ | ​ | 607,658 | ​ | ​ | 607,658 | ​ | ​ | — | ​ | ​ | —
Other equity securities | ​ | ​ | 254,564 | ​ | ​ | 254,564 | ​ | ​ | — | ​ | ​ | —
Total investment assets | ​ | Ps. | 1,195,749 | ​ | Ps. | 1,195,749 | ​ | Ps. | — | ​ | Ps. | —
​
(1) | Common stocks are valued at the closing price reported on the active market on which the individual securities are traded. All common stock included in this line item relate to the Company’s CPOs.
(2) | Mutual funds consist of fixed rate instruments. These are valued at the net asset value provided by the administrator of the fund.
(3) | Money market securities consist of government debt securities, which are valued based on observable prices from the new issue market, benchmark quotes, secondary trading and dealer quotes.
The Group did not make significant contributions to its plan assets in 2021 and 2020, and does not expect to make significant contributions to its plan assets in 2022. The weighted average duration of the defined benefit plans as of December 31, 2021 and 2020, were as follows: ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |
Seniority Premiums |  | 9.0 years | ​ | 8.6 years | ​
Pensions |  | 5.1 years | ​ | 5.7 years | ​
​

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