3.18. Post-employment benefits
3.18.1. Retirement obligations
The Company and its subsidiaries sponsor various pension plans, which are generally funded by payments to these pension funds, determined by periodic actuarial calculations. The Company has defined benefit plans and also defined and variable contribution plans. In defined contribution plans, the Company makes fixed contributions into a separate entity. Additionally, it does not have any legal obligations to make contributions, if the fund does not have sufficient assets to pay all employees the benefits relating to the services provided in the current and previous periods tied to this kind of plan. A defined benefit plan is different from a defined contribution plan, since, in these defined benefit plans, a retirement benefit amount that an employee will receive on retirement is established, usually dependent on one or more factors such as age, length of service and remuneration. In this type of plan, the Company has an obligation to honor the commitment, if the fund does not have sufficient assets to pay all employees the benefits relating to the services provided in the current and previous periods connected with this kind of plan.
The liability recognized in the Balance Sheet with respect to defined benefit plans is the present value of the defined benefit obligation on the date of the balance sheet, less the fair value of the assets of the plan. The defined benefit obligation is calculated annually by independent actuaries and reviewed by management using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows. Interest rates used in this discount are consistent with market securities, which are denominated in the currency in which the benefits will be paid and that have upcoming maturities of those of the respective obligation of the pension plan.
Actuarial gains and losses arising from adjustments based on experience, in changes in actuarial assumptions and the income of the assets of the plan, are debited or credited in other comprehensive income.
Service costs passed on are recognized immediately in income in the period of occurrence of a change of the plan.
With regard to defined contribution plans, the Company makes the payment of contributions in a mandatory, contractual or voluntary manner. The Company has no additional payment obligations once the contribution is made. The contributions are recognized as employee benefit expense when due. Contributions made in advance are recognized as an asset in the proportion in which a cash refund or a reduction in the future payments may be available.
3.18.2. Other post-employment obligations
Some companies of the Company offer post-retirement health care benefits to their employees, in addition to life insurance for active and inactive employees. The entitlement to these benefits is usually conditional upon the employee staying in the job until retirement age and the completion of a minimum time of service, or the disability of the employee in relation to being an active employee.
The expected costs of these benefits are accrued over the period of employment, employing the same accounting methodology that is used for the defined benefit pension plans. Actuarial gains and losses arising from adjustments based on experience, in changes in actuarial assumptions, are debited or credited in other comprehensive income, in the period expected for remaining service of the employees. These obligations are evaluated annually by qualified, independent actuaries and reviewed by management.
3.18.3 Termination Benefits
Termination benefits are payable when employment is terminated by the Eletrobras system before the normal retirement date, or whenever an employee accepts voluntary termination in exchange for these benefits. The Eletrobras System recognizes termination benefits on the first of the following dates: (i) when the Eletrobras System no longer can withdraw the offer of these benefits; and (ii) when the entity recognizes the restructuring costs that are within the scope of the IAS 37 and involve the payment of termination benefits. In the case of an offer made to encourage voluntary termination, termination benefits are measured based on the number of employees who, hopefully, will accept the offer. The benefits that expire after 12 months from the balance sheet date are discounted to present value.