Bank of Montreal 2013 Annual Report Download - page 156

For the remaining obligations related to plans for which we have
not entered into agreements with third parties, the fair value of the
amount of compensation expense is recognized as an expense and a
liability over the period from the grant date to payment date to
employees. This liability is re-measured to fair value each reporting
period. Amounts related to employees who are eligible to retire are
expensed at the time of grant. Mid-term incentive plan units granted
under these plans during the years ended October 31, 2013, 2012 and
2011 totalled 981,242, 1,133,980 and 769,933, respectively. The
weighted-average grant date fair value of the units granted during the
years ended October 31, 2013, 2012 and 2011 was $50 million,
$65 million and $46 million, respectively. Payments made under these
plans for the years ended October 31, 2013, 2012 and 2011 were
$37 million, $44 million and $22 million, respectively. The intrinsic value
of the vested plan units recorded in other liabilities in our Consolidated
Balance Sheet as at October 31, 2013, 2012 and 2011 was $126 million,
$85 million and $71 million, respectively.
Employee compensation expense related to plans for which we
have not entered into agreements with third parties for the years ended
October 31, 2013, 2012 and 2011 was $63 million, $48 million and
$40 million before tax, respectively ($47 million, $35 million and
$29 million after tax, respectively). We economically hedge the impact
of the change in the market value of our common shares by entering
into total return swaps. Hedging gains recognized for the years ended
October 31, 2013, 2012 and 2011 were $32 million, $3 million and $1
million, respectively, resulting in net employee compensation expense
of $31 million, $45 million and $39 million before tax, respectively ($23
million, $33 million and $28 million after tax, respectively).
A total of 15,278,975, 14,695,481 and 14,586,051 mid-term
incentive plan units were outstanding for the years ended October 31,
2013, 2012 and 2011, respectively.
Deferred Incentive Plans
We offer deferred incentive plans for members of our Board of Directors,
executives and key employees in BMO Capital Markets and Wealth
Management. Under these plans, fees, annual incentive payments and/or
commissions can be deferred as stock units of our common shares. These
stock units are either fully vested on the grant date or vest at the end of
three years. The value of these stock units is adjusted to reflect reinvested
dividends and changes in the market value of our common shares.
Deferred incentive payments are paid upon the participant’s
departure from the bank. As a result of changes to the deferred share
unit plan terms effective September 30, 2013, the deferred incentive
payments can now only be made in cash.
Employee compensation expense for these plans is recorded in the
year the fees, incentive payments and/or commissions are earned.
Changes in the amount of the incentive payments as a result of
dividends and share price movements are recorded as employee
compensation expense in the period of the change.
Deferred incentive plan units granted during the years ended
October 31, 2013, 2012 and 2011 totalled 364,193, 360,596 and
298,256, respectively. The weighted-average grant date fair value of the
units granted during the years ended October 31, 2013, 2012 and 2011
was $22 million, $21 million and $18 million, respectively.
Liabilities related to these plans are recorded in other liabilities in
our Consolidated Balance Sheet and totalled $349 million and
$262 million as at October 31, 2013 and 2012, respectively. Payments
made under these plans for the years ended October 31, 2013, 2012 and
2011 were $16 million, $19 million and $13 million, respectively.
Employee compensation expense related to these plans for the
years ended October 31, 2013, 2012 and 2011 was $85 million,
$22 million and $7 million before tax, respectively ($63 million,
$16 million and $5 million after tax, respectively). We have entered into
derivative instruments to hedge our exposure related to these plans.
Changes in the fair value of these derivatives are recorded as employee
compensation expense in the period in which they arise. Hedging gains
(losses) for the years ended October 31, 2013, 2012 and 2011 of
$75 million, $9 million and $(2) million before tax, respectively, were
also recognized, resulting in net employee compensation expense of
$10 million, $13 million and $9 million before tax, respectively
($7 million, $9 million and $6 million after tax, respectively).
A total of 4,339,207, 4,026,338 and 3,930,175 deferred incentive
plan units were outstanding for the years ended October 31, 2013, 2012
and 2011, respectively.
Note 23: Employee Compensation – Pension and
Other Employee Future Benefits
Pension and Other Employee Future Benefit Plans
We have a number of arrangements in Canada, the United States and
the United Kingdom that provide pension and other employee future
benefits to our retired and current employees.
Pension arrangements include defined benefit pension plans, as well
as supplemental arrangements that provide pension benefits in excess of
statutory limits. Generally, under these plans we provide retirement
benefits based on an employee’s years of service and average annual
earnings over a period of time prior to retirement. We are responsible for
meeting our statutory obligations for funding of the pension plans. Some
groups of employees are eligible to make voluntary contributions in order
to receive enhanced benefits. Our pension and other employee future
benefit expenses, recorded in employee compensation expense, mainly
comprise the current service cost plus the interest cost on plan liabilities
less the expected return on plan assets.
We also provide defined contribution pension plans to employees in
some of our subsidiaries. Under these plans, we are responsible for
contributing a predetermined amount to a participant’s retirement
savings, based on a percentage of that employee’s salary. The costs of
these plans, recorded in employee compensation expense, are equal to
our contributions to the plans.
We also provide other employee future benefits, including health
and dental care benefits and life insurance, for current and retired
employees.
Short-term employee benefits, such as salaries, paid absences,
bonuses and other benefits, are accounted for on an accrual basis over
the period in which the employees provide the related services.
Pension and Other Employee Future Benefit Liabilities
We have the following types of benefit liabilities: defined benefit and
other employee future benefit liabilities. These benefit liabilities
represent the amount of pension and other employee future benefits
that our employees and retirees have earned as at year end.
Our actuaries perform valuations of our benefit liabilities for
pension and other employee future benefits as at October 31 of each
year using the projected unit credit method based on management’s
assumptions about discount rates, rate of compensation increase,
retirement age, mortality and health care cost trend rates.
The discount rates for the main Canadian and U.S. pension and
other employee future benefit plans were selected using high-quality
corporate bonds with terms matching the plans’ cash flows.
Notes
BMO Financial Group 196th Annual Report 2013 167