| 17. | Net Defined Benefit Liabilities |
The amounts recognized in the statements of financial position are determined as follows:
| (in millions of Korean won) | 2016 | 2017 | ||||||
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Present value of defined benefit obligations |
￦ | 1,713,184 | ￦ | 1,911,166 | ||||
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Fair value of plan assets |
(1,334,780 | ) | (1,519,779 | ) | ||||
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Liabilities |
￦ | 378,404 | ￦ | 396,079 | ||||
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Assets in the statement of financial position |
￦ | — | ￦ | 3,692 | ||||
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Changes in the defined benefit obligations for the years ended December 31, 2016 and 2017, are as follows:
| (in millions of Korean won) | 2016 | 2017 | ||||||
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Beginning |
￦ | 1,601,974 | ￦ | 1,713,184 | ||||
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Current service cost |
205,114 | 210,336 | ||||||
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Interest expense |
37,378 | 38,994 | ||||||
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Benefit paid |
(127,581 | ) | (154,600 | ) | ||||
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Changes due to settlements of plan |
(424 | ) | (61 | ) | ||||
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Remeasurements: |
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Actuarial gains and losses arising from changes in demographic assumptions |
(53,407 | ) | 3,353 | |||||
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Actuarial gains and losses arising from changes in financial assumptions |
26,717 | 36,946 | ||||||
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Actuarial gains and losses arising from experience adjustments |
18,809 | 63,583 | ||||||
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Changes in scope of Consolidation |
4,604 | (569 | ) | |||||
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Ending |
￦ | 1,713,184 | ￦ | 1,911,166 | ||||
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Changes in the fair value of plan assets for the years ended December 31, 2016 and 2017, are as follows:
| (in millions of Korean won) | 2016 | 2017 | ||||||
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Beginning |
￦ | 1,077,891 | ￦ | 1,334,780 | ||||
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Interest income |
25,237 | 30,303 | ||||||
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Remeasurements: |
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Return on plan assets (excluding amounts included in interest income) |
(2,323 | ) | (5,557 | ) | ||||
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Benefits paid |
(88,876 | ) | (130,510 | ) | ||||
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Employer contributions |
322,851 | 290,895 | ||||||
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Changes in scope of consolidation |
— | (132 | ) | |||||
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Ending |
￦ | 1,334,780 | ￦ | 1,519,779 | ||||
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For the year ended December 31, 2018, reasonable estimation for expected employer contributions is ￦197,942 million.
Amounts recognized in the statement of profit or loss for the years ended December 31, 2016 and 2017, are as follows:
| (In millions of Korean won) | 2015 | 2016 | 2017 | |||||||||
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Current service cost |
￦ | 200,994 | ￦ | 205,114 | ￦ | 210,336 | ||||||
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Net Interest cost |
16,793 | 12,141 | 8,691 | |||||||||
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Past service cost |
— | 424 | (61 | ) | ||||||||
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Transfer out |
(11,942 | ) | (8,737 | ) | (9,196 | ) | ||||||
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Transfer to discontinued operation |
(3,031 | ) | — | — | ||||||||
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Total expenses |
￦ | 202,814 | ￦ | 208,942 | ￦ | 209,770 | ||||||
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Principal actuarial assumptions used are as follows:
| 2015.12.31 | 2016.12.31 | 2017.12.31 | ||||||||||
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Discount rate |
2.43 | % | 2.43 | % | 2.76 | % | ||||||
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Future salary increase |
4.06 | % | 4.10 | % | 4.51 | % | ||||||
The sensitivity of the defined benefit obligations as of December 31, 2017, to changes in the principal assumptions is:
| (in percentage, in millions of Korean won ) | Effect on defined benefit obligation | |||||||||
| Changes in assumption |
Increase in assumption |
Decrease in assumption |
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Discount rate |
0.5% point | ￦ | (62,000 | ) | ￦ | 76,560 | ||||
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Salary growth rate |
0.5% point | 71,273 | (57,848 | ) | ||||||
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.
The above sensitivity analyses are based on an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to changes in principal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating the defined benefit obligations recognized on the statement of financial position.
The Group actively monitors how the duration and the expected yield of the investments match the expected cash outflows arising from the pension obligations. Expected contributions to post-employment benefit plans for the year ending December 31, 2018, are ￦197,942 million.
The expected maturity analysis of undiscounted pension benefits as at December 31, 2017, is as follows:
| (in millions of Korean won) |
Less than 1 year |
Between 1-2 years |
Between 2-5 years |
Over 5 years | Total | |||||||||||||||
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Pension benefits |
￦ | 142,963 | ￦ | 179,612 | ￦ | 627,302 | ￦ | 3,763,601 | ￦ | 4,713,478 | ||||||||||
The weighted average duration of the defined benefit obligations is 7.6 years.