Bank of Montreal 2014 Annual Report Download - page 157

Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The bank’s pension and other employee future benefit plan assets are
measured at fair value on a recurring basis.
The fair value of plan assets as at October 31 are as follows:
(Canadian $ in millions, except as noted) Canadian plans (1) U.S. plans (2)
2014 2013 2014 2013
Cash and money market funds 55 178 39 24
Securities issued or guaranteed by:
Canadian federal government 179 131 ––
Canadian provincial and municipal
governments 785 613 ––
U.S. federal government 4–87 47
U.S. states, municipalities and
agencies 214 18 15
Other governments 54––
Pooled funds 2,780 2,428 85 104
Derivative instruments (17) 6–1
Corporate debt 737 556 401 336
Corporate equity 834 851 535 495
5,364 4,781 1,165 1,022
(1) All of the Canadian plans’ assets have quoted prices in active markets, except securities
issued or guaranteed by other governments, certain of the assets invested in corporate debt
($27 million as at October 31, 2014 and $nil as at October 31, 2013) and certain of the
assets invested in pooled funds ($1,452 million as at October 31, 2014 and $1,186 million as
at October 31, 2013).
(2) All of the U.S. plans’ assets have quoted prices in active markets, except corporate debt and
pooled funds.
No plan assets are directly invested in the bank’s or related parties’
securities as at October 31, 2014 and 2013. As at October 31, 2014, our
primary Canadian plan indirectly held approximately $11 million
($8 million in 2013) of the bank’s common shares. The plans do not hold
any property occupied or other assets used by the bank.
The plans paid $4 million in the year ended October 31, 2014 ($3 million in
2013) to us and certain of our subsidiaries for investment management,
record-keeping, custodial and administrative services rendered.
Sensitivity of Assumptions
Key weighted-average assumptions used in measuring the defined
benefit obligations for our primary plans are outlined in the following
table. The sensitivity analysis provided in the table should be used with
caution as it is hypothetical and the impact of changes in each key
assumption may not be linear. The sensitivities to changes in each key
variable have been calculated independently of the impact of changes in
other key variables. Actual experience may result in simultaneous
changes in a number of key assumptions. Changes in one factor may
result in changes in another, which would amplify or reduce certain
sensitivities.
Defined benefit obligation
(Canadian $ in millions, except as noted)
Pension
benefit plans
Other employee
future benefit plans
Discount rate (%) 4.1 4.3
Impact of: 1% increase ($) (790) (152)
1% decrease ($) 999 196
Rate of compensation increase (%) 2.8 2.6
Impact of: 0.25% increase ($) 45 2
0.25% decrease ($) (43) (1)
Mortality
Impact of: 1 year increase ($) (115) (28)
1 year decrease ($) 112 29
Assumed overall health care cost trend
rate (%) na 5.2 (1)
Impact of: 1% increase ($) na 6
1% decrease ($) na (81)
(1) Trending to 4.5% in 2030 and remaining at that level thereafter.
na – not applicable
Disaggregation of Defined Benefit Obligation
Disaggregation of the defined benefit obligation for our primary plans is as follows:
2014 2013
Canadian pension plans
Active members 46% 46%
Inactive and retired members 54% 54%
100% 100%
U.S. pension plans
Active members 62% 62%
Inactive and retired members 38% 38%
100% 100%
Canadian other employee future benefit plans
Active members 45% 45%
Inactive and retired members 55% 55%
100% 100%
Maturity Profile
The duration of the defined benefit obligation for our primary plans is as follows:
(In years)
2014 2013
Canadian pension plans 13.6 12.8
U.S. pension plans 11.2 10.5
Canadian other employee future benefit plans 16.5 14.3
170 BMO Financial Group 197th Annual Report 2014