Citibank 2014 Annual Report Download - page 196

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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 non-U.S. Significant 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
2015 $ 835 $ 368 $ 73 $ 65
2016 860 339 72 70
2017 868 366 71 75
2018 882 383 70 81
2019 900 413 68 88
2020—2024 4,731 2,452 317 574
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 subsidy reduced the accumulated postretirement benefit obligation
(APBO) by approximately $5 million as of December 31, 2014 and $4 million
as of December 31, 2013 and the postretirement expense by approximately
$0.2 million and $3 million for 2014 and 2013, respectively. The reduction in
the impact on expense was due to the Company’s adoption of the Employee
Group Waiver Plan during 2013, 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
2015 $ 73 $— $ 73
2016 72 — 72
2017 71 — 71
2018 70 — 70
2019 68 — 68
2020—2024 319 2 317
Certain provisions of the Patient Protection and Affordable Care 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 Company subsidy received under EGWP during 2014 and 2013
was $11.0 million and $10.5 million, respectively.
The other provisions of the Act of 2010 are not expected to have a
significant impact on Citigroup’s pension and postretirement plans.