Citibank 2013 Annual Report Download - page 211

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Oversight and Risk Management Practices
The framework for the Company’s pensions oversight process includes
monitoring of retirement plans by plan fiduciaries and/or management
at the global, regional or country level, as appropriate. Independent risk
management contributes to the risk oversight and monitoring for the
Company’s U.S. qualified pension plan and largest non-U.S. pension plans.
Although the specific components of the oversight process are tailored to the
requirements of each region, country and plan, the following elements are
common to the Company’s monitoring and risk management process:
•฀ periodic฀asset/liability฀management฀studies฀and฀strategic฀asset฀
allocation reviews;
•฀ periodic monitoring of funding levels and funding ratios;
•฀ periodic monitoring of compliance with asset allocation guidelines;
•฀ periodic monitoring of asset class and/or investment manager
performance against benchmarks; and
•฀ periodic risk capital analysis and stress testing.
Estimated Future Benefit Payments
The Company expects to pay the following estimated benefit payments in future years:
Pension plans Postretirement benefit plans
In millions of dollars U.S. plans Non-U.S. plans U.S. plans Non-U.S. plans
2014 $ 804 $ 382 $ 79 $ 64
2015 828 359 76 69
2016 830 390 73 74
2017 842 411 70 80
2018 853 437 67 87
2019—2023 4,473 2,699 286 580
Prescription Drugs
In December 2003, the Medicare Prescription Drug Improvement and
Modernization Act of 2003 (Act of 2003) was enacted. The Act of 2003
established a prescription drug benefit under Medicare known as “Medicare
Part D,” and a federal subsidy to sponsors of U.S. retiree health care benefit
plans that provide a benefit that is at least actuarially equivalent to Medicare
Part D. The benefits provided to certain participants are at least actuarially
equivalent to Medicare Part D and, accordingly, the Company is entitled to
a subsidy.
The expected subsidy reduced the accumulated postretirement benefit
obligation (APBO) by approximately $4 million and $93 million as of
December 31, 2013 and 2012, respectively, and the postretirement expense
by approximately $3 million and $9 million for 2013 and 2012, respectively.
The reduction in the expected subsidy was due to the Company’s adoption of
the Employee Group Waiver Plan, as described below.
The following table shows the estimated future benefit payments
without the effect of the subsidy and the amounts of the expected subsidy in
future years:
Expected U.S.
postretirement benefit payments
In millions of dollars
Before Medicare
Part D subsidy
Medicare
Part D subsidy
After Medicare
Part D subsidy
2014 $ 79 $— $ 79
2015 76 — 76
2016 73 — 73
2017 70 — 70
2018 67 — 67
2019—2023 288 2 286
The Patient Protection and Affordable Care Act and the Health Care and
Education Reconciliation Act of 2010 (collectively, the Act of 2010) were
signed into law in the U.S. in March 2010. One provision that impacted
Citigroup was the elimination of the tax deductibility for benefits paid
that are related to the Medicare Part D subsidy, starting in 2013. Citigroup
was required to recognize the full accounting impact in 2010, the period
in which the Act of 2010 was signed. As a result, there was a $45 million
reduction in deferred tax assets with a corresponding charge to earnings from
continuing operations.
Certain provisions of the Act of 2010 improved the Medicare Part D option
known as the Employer Group Waiver Plan (EGWP) with respect to the
Medicare Part D subsidy. The EGWP provides prescription drug benefits that
are more cost effective for Medicare-eligible participants and large employers.
Effective April 1, 2013, the Company began sponsoring and implementing
an EGWP for eligible retirees. The expected Company subsidy received under
EGWP during 2013 was $10.5 million.
The other provisions of the Act of 2010 are not expected to have a
significant impact on Citigroup’s pension and postretirement plans.