NOTE 29 — POST-EMPLOYMENT BENEFITS
The companies in the Eletrobras System sponsor pension plans for their employees, as well as post-employment medical assistance plans and life insurance in certain cases. Those benefits are classified as defined benefits (DB) and defined contributions (CD).
Due to the decentralized structure of the Eletrobras system, each segment sponsors its own package of employee benefits. In general, the Group offers its current and future retirees and its dependents pension benefits, and post-employment medical assistance and life insurance, as presented in the following chart:
Types of post-employment benefits sponsored by Eletrobras System companies
|
|
|
Social security benefit plans |
|
Other benefits post |
|
||||||
|
Company |
|
BD Plan |
|
Balance Plan |
|
CD Plan |
|
Life Insurance |
|
Health Plan |
|
|
Eletrobras |
|
X |
|
|
|
X |
|
X |
|
X |
|
|
Amazonas |
|
X |
|
|
|
X |
|
|
|
|
|
|
Boa Vista |
|
X |
|
|
|
X |
|
|
|
X |
|
|
Ceal |
|
X |
|
|
|
X |
|
|
|
X |
|
|
Ceron |
|
|
|
|
|
X |
|
|
|
|
|
|
Cepisa |
|
X |
|
|
|
X |
|
|
|
|
|
|
CGTEE |
|
X |
|
|
|
|
|
|
|
|
|
|
Chesf |
|
X |
|
X |
|
X |
|
X |
|
|
|
|
Eletroacre |
|
|
|
|
|
X |
|
|
|
|
|
|
Eletronorte |
|
X |
|
|
|
X |
|
X |
|
X |
|
|
Eletronuclear |
|
X |
|
|
|
|
|
|
|
X |
|
|
Eletrosul |
|
X |
|
|
|
X |
|
|
|
X |
|
|
Furnas |
|
X |
|
|
|
X |
|
X |
|
X |
|
The retirement benefit plan normally exposes the Group to actuarial risks, such as investment risk, interest rate risk, longevity risk, and salary risk.
|
Investment Risk |
|
The current value of the liability of the defined pension benefit plan is calculated using a set discount rate due to the remuneration of high quality private securities; if the return on the assets of the plan is under that rate, the plan will run a deficit. At the moment, the plan’s investment is relatively balanced in stocks, debt instruments and real estate. Due to the long-term nature of plan liabilities, the pension fund’s board considers it appropriate that a reasonable portion of the plan’s assets should be invested in shares and real estate, to leverage the return generated by the fund. |
|
|
|
|
|
Interest rate risk |
|
A reduction in the interest rate of the securities will increase the plan’s liability. However, this will be partially compensated by an increased return on the plan’s debt securities. |
|
|
|
|
|
Longevity risk |
|
The current value of the defined benefit plan’s liability is calculated by referencing the best estimate of the mortality of plan participants during and after employment. An increase in the life expectation of plan participants will increase the plan’s liability. |
|
|
|
|
|
Salary risk |
|
The current value of the defined benefit plan’s liability is calculated by referencing the future salaries of plan participants. Therefore, an increase in the salary of plan participants would increase the plan’s liability. |
The charts below present a reconciliation of the present value of the defined benefit obligations and the fair value of assets whose values are recorded on the balance sheets for pension benefits and for all other post-employment benefits. Next we will present the consolidated results of the Eletrobras group. The most recent actuarial valuation of plan assets and of the present value of the defined benefits obligation was conducted on December 31, 2017.
a) Reconciliation of the liabilities of the pension plans and other benefits
|
Social security defined benefit plans - Amounts recognized in |
|
|
|
|
|
|
balance sheet and statement of income for the year |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Present value of actuarial obligations partially or totally hedged |
|
23,084,912 |
|
21,682,893 |
|
|
Fair value of plan assets (-) |
|
(23,153,018 |
) |
(22,025,946 |
) |
|
|
|
|
|
|
|
|
Net Liabilities/(Assets) |
|
(68,107 |
) |
(343,054 |
) |
|
|
|
|
|
|
|
|
Effect of restriction on the asset |
|
1,797,066 |
|
2,077,026 |
|
|
Contractual debt contracted between sponsor and plan |
|
1,380,914 |
|
1,397,984 |
|
|
Financial debt contracted between sponsor and plan |
|
— |
|
15,479 |
|
|
Other social security benefits |
|
26,683 |
|
171,525 |
|
|
|
|
|
|
|
|
|
Value of liabilities/(assets) of post-employment benefits |
|
1,870,577 |
|
2,214,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current service cost |
|
(50,269 |
) |
(71,682 |
) |
|
Net interest cost |
|
180,742 |
|
103,593 |
|
|
|
|
|
|
|
|
|
Actuarial Expense/(Revenue) recognized in the year |
|
130,473 |
|
31,911 |
|
|
|
|
|
|
|
|
|
Other post-employment benefits - Amounts recognized in the balance sheet |
|
|
|
|
|
|
and statement of income for the year |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Present value of actuarial obligations partially or totally hedged |
|
315,428 |
|
253,212 |
|
|
Fair value of plan assets (-) |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
Net Liabilities/(Assets) |
|
315,428 |
|
253,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of liabilities/(assets) of post-employment benefits |
|
315,428 |
|
253,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
|
10,479 |
|
13,711 |
|
|
Net interest cost |
|
26,566 |
|
35,601 |
|
|
|
|
|
|
|
|
|
Actuarial Expense/(Revenue) recognized in the year |
|
37,045 |
|
49,312 |
|
|
|
|
|
|
|
|
b) Disclosure of Defined Pension Benefits
Consolidated results of defined pension benefits — reconciliation of present value of the obligations of the defined benefit:
Consolidated results of defined pension benefits — reconciliation of the value of the plan assets:
|
Social security defined benefit plans - Changes and |
|
|
|
|
|
|
composition of the fair value of the assets |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Fair value of assets at the beginning of the year |
|
22,025,946 |
|
18,905,009 |
|
|
Subsidiary held for sale (*) |
|
(311,680 |
) |
— |
|
|
Benefits paid during the year (-) |
|
(1,821,537 |
) |
(1,576,185 |
) |
|
Participant contributions disbursed during the year |
|
153,884 |
|
147,157 |
|
|
Employee contributions disbursed during the year |
|
328,526 |
|
281,376 |
|
|
Expected return on assets in the year |
|
2,334,352 |
|
2,423,501 |
|
|
Gain/(Loss) on plan assets (excluding interest revenue) |
|
443,525 |
|
1,845,088 |
|
|
|
|
|
|
|
|
|
Fair value of assets at the end of the year |
|
23,153,018 |
|
22,025,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective return of assets in the year |
|
2,777,878 |
|
4,268,589 |
|
|
|
|
|
|
|
|
Consolidated results of defined pension benefits — Amounts recognized in Other Comprehensive Results
|
|
|
2017 |
|
2016 |
|
|
Other Comprehensive Income (ORA) accumulated in the Social Security Program |
|
3,641,454 |
|
3,482,507 |
|
|
|
|
2017 |
|
2016 |
|
|
Actuarial gains (losses) recognized in ORA in the year net of deferred taxes - Social Security Program |
|
(158,947 |
) |
(1,160,545 |
) |
c) Disclosure of Other Post-Employments
Consolidated results of other post-employment benefits — reconciliation of the present value of the defined benefit obligations:
d) Actuarial and economic assumptions
The actuarial assumptions presented below are used to determine the defined benefit obligation and expenses for the year.
|
|
|
2017 |
|
2016 |
|
Annual actuarial discount interest rate (i) |
|
9.38% to 9.73% |
|
10.95% to 11.17% |
|
Annual actuarial discount real interest rate |
|
5.13% to 5.45% |
|
5.70% to 5.91% |
|
Projection of average wage increase |
|
4.06% to 6.59% |
|
4.97% to 9.02% |
|
Projection of average benefit increase |
|
4.06% |
|
4.97% |
|
Real annual rate of evolution of medical costs |
|
0% to 3.25% |
|
0% to 4.43% |
|
Average annual inflation rate |
|
4.06% |
|
4.97% |
|
Expected return on plan assets (ii) |
|
9.38% to 9.73% |
|
10.95% to 11.17% |
Demographic Assumptions
|
|
|
|
|
2016 |
|
Rate of turnover |
|
0%; N/A; CORES - 2015; Attenuated by 20%; T1 Service Table SUAV 20% |
|
0%; GAMA - Exp. Turnover; T1 Service Table Suav, 20%; 80% T1 Service Table |
|
Table of active and inactive mortality |
|
AT-83 Basic FEMALE; AT-83 Basic FEMALE; AT- 2000 M&F SUAV 10%; AT-2000 BASIC M; AT- 2000 BASIC DES 5% and Segregated by Gender; AT- 2000 BASIC (D30%) M&F; AT-2000 (UNISEX) DES 10%; AT-2000 (Suav, 10%) M&F; AT-2000 Basic M&F; |
|
AT-2000 BASIC;AT-83 BASIC F;AT-2000 (D10%/D5%/D30%);AT-2000 (attenuated by 10%); |
|
Table of mortality of disabled people |
|
AT-49 DES; AT-49 DES 2 ANOS; AT-83 M&F SUAV 10%; MI-85 Segregated by Gender; AT-83 M; AT 49 Segregated by Gende; AT- 49 M&F; AT-49 AGRAV 100% M&F; AT - 83M (decreased by 5%); RP 2000 DISABLED M&F; RRB - 1983 |
|
AT- 83;AT-83 (decreased, 10%);AT-49 DES 2 years;MI-85;AT-49 M;AT- 49 M&F;AT-49 (M&F) AGR 100%;RP - 2000 Disable;AT - 83M (decreased by 5%);RP 2000 Disable M&F;RRB - 1983 |
|
Table of disability |
|
Alvaro Vindas; Medium Light |
|
Light Weak, Medium and Strong; Alvaro Vindas |
|
% married on the date of retirement |
|
95% |
|
95% |
|
Age difference between men and women |
|
4 years |
|
4 years |
(i) Long-term interest rate
(ii) Represents the maximum and minimum return rates of asset plans.
The definition of this rate took into account the market practice of Federal government bonds, according to the criteria recommended by national and international standards, for terms similar to those of the flow of obligations of the benefits program, for the duration.
The global expected return rate is the weighted average of expected returns from the various categories of plan assets. The Management’s valuation of expected return is based on historical return trends and market analysts’ forecasts for the assets during the life of the respective obligation. The current return of BD plan assets as of December 31, 2017 was R$ 2,777,878 (R$ 4,268,589 in 2016).
e) Employer contributions
Contributions under the CD plan for the year ended December 31, 2017 were R$ 163,857 (R$ 214,783 in 2016).
Contributions under the BD plan for the year ended December 31, 2017 were R$ 328,526 (R$ 281,376 in 2016).
The Company expects to contribute R$ 50,384 to the defined benefit plan in the next year.
The average weighted duration of the defined benefit obligation of the Company is 10.87 years.
An analysis of the expected maturity of non-discounted benefits of post-employment defined benefit plans for the next 10 years:
|
Social Security Program |
|
Year 1 |
|
Year 2 |
|
Year 3 |
|
Year 4 |
|
Year 5 |
|
Next 5 Years |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On December 31, 2017 |
|
1,728,431 |
|
1,731,547 |
|
1,730,953 |
|
1,722,171 |
|
1,710,042 |
|
8,279,491 |
|
16,902,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
f) The actuarial assumptions relevant to determining the defined obligation are: discount rate, medical cost, and mortality. The following sensitivity analyses were determined based on reasonably possible changes to the respective assumptions which occurred at the end of the reporting period, all other assumptions remaining constant.
Consolidated group
|
· |
If the discount rate were 0.25% higher (lower), the defined benefit obligation would be reduced by R$ 551,847 (increased by R$ 579,980). |
|
· |
If the medical costs were 0.25% higher (lower), the defined benefit obligation would have an increase of R$ 5,947 (reduction of R$ 7,502). |
|
· |
If life expectancy increased (decreased) in a year for men and women, the defined benefit obligation would increase by R$ 490,696 (decrease by R$ 497,409). |
The sensitivity analysis presented may not be representative of the real change in the defined benefit obligation, since it is not likely that the change would occur in isolated assumptions, considering that some assumptions may be correlated.
Additionally, when presenting the sensitivity analysis, the present value of the defined benefit obligation was calculated by the projected unit credit method at the end of the reporting period, which is equal to that used to calculate the liability of the defined benefit obligation recognized on the balance sheet.
There was no change in relation to previous years in the methods and assumptions used to prepare the sensitivity analysis.
g)Sums included in the fair value of plan assets
|
Asset Class |
|
2017 |
|
2016 |
|
|
Available Immediate Values |
|
797 |
|
10,361 |
|
|
Realizable |
|
834,606 |
|
913,902 |
|
|
Private Deposits Credit |
|
1,171,009 |
|
364,800 |
|
|
Investments in Fixed Income |
|
16,359,920 |
|
16,409,421 |
|
|
Investments in Variable Income |
|
2,088,593 |
|
2,545,552 |
|
|
Investment in Funds |
|
1,853,234 |
|
1,231,716 |
|
|
Real Estate Investments |
|
793,797 |
|
823,129 |
|
|
Structured Investments |
|
545,444 |
|
451,874 |
|
|
Loans and Financing |
|
562,396 |
|
563,357 |
|
|
Other |
|
2,186 |
|
76,172 |
|
|
(-) Funds receivable from the sponsor |
|
(319,896 |
) |
(421,767 |
) |
|
(-) Operating Liabilities |
|
(130,987 |
) |
(111,563 |
) |
|
(-) Contingency Liabilities |
|
(305,669 |
) |
(503,233 |
) |
|
(-) Investment Funds |
|
(82,271 |
) |
(117,356 |
) |
|
(-) Administrative Funds |
|
(200,293 |
) |
(192,172 |
) |
|
(-) Social Security Funds |
|
(19,8490 |
|
(18,249 |
) |
|
|
|
|
|
|
|
|
Total Assets |
|
23,153,018 |
|
22,025,946 |
|
|
|
|
|
|
|
|
The fair value of capital and debt instruments is determined based on market prices quoted in active markets, while the fair value of securities investments are not based on market prices quoted in active markets. The amounts reducing the assets reffered to liabilities of the funds that are not related to the employees benefits payments.