Sun Life 2010 Annual Report Download - page 125

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Pension Post-Retirement
2010 2009 2008 2010 2009 2008
Components of defined benefit cost recognized:
Service cost, curtailments and settlements $34 $35$50$5 $4 $ 5
Plan amendments ––––(1) (1)
Interest cost 130 132 129 15 15 14
Actual return on plan assets (197) (252) 307 –––
Actuarial losses (gains) 37 181 (331) –34 (34)
Benefit cost before adjustments to recognize the long-term nature of
defined benefit plans 496 155 20 52 (16)
Adjustments to recognize the long-term nature of defined benefit
plans:
Difference between expected and actual return on plan assets for
year 65 118 (462) –––
Difference between actuarial losses (gains) recognized and actual
actuarial losses (gains) on accrued benefit obligation for year (7) (155) 363 1(38) 35
Difference between amortization of past service costs for year and
actual plan amendments for year 111(9) (13) (23)
Amortization of transition obligation (asset) (17) (18) (18) (2) (2) (2)
Total adjustments to defer costs to future periods $42 $ (54) $ (116) $ (10) $ (53) $ 10
Total benefit cost recognized for the years ended December 31 $46 $42$39$10 $ (1) $ (6)
Key weighted average assumptions:
Pensions Post-Retirement
2010 2009 2010 2009
To measure benefit obligation at end of year
Discount rate 5.2% 6.0% 5.2% 5.8%
Rate of compensation increase 3.4% 3.8% ––
Initial health care cost trend rate(3) ––7.7% 8.1%
To determine benefit costs or income for the period
Discount rate 6.0% 6.5% 5.8% 6.5%
Expected long-term rate of return on plan assets 6.8% 6.8% ––
Rate of compensation increase 3.8% 3.6% ––
Initial health care cost trend rate(3) ––8.1% 9.4%
(1) The date of the most recent actuarial valuation for funding purposes was January 1, 2009 for the United Kingdom and January 1, 2010 for all other plans. The next required
funding valuation is January 1, 2013 for the plans in Canada, January 1, 2012 for the United Kingdom, and January 1, 2011 for all other plans.
(2) The accumulated benefit obligation is smaller than the projected benefit obligation since it does not recognize projected future compensation increases.
(3) The assumed medical cost trend rate used in measuring the accumulated post-retirement benefits obligation at the end of the year for Canada in 2010 was 7.5% per year until
2015, then decreasing gradually to an ultimate rate of 4.5% per year in 2030 (in 2009 was 8.0% per year until 2015, then decreasing gradually to an ultimate rate of 5.0% per
year in 2030). For the United States in both 2010 and 2009, the assumed rate was 8.5%, decreasing gradually to an ultimate rate of 5.0% in 2017. The assumed dental cost
trend rate was 4.0% for Canada and 5% for the United States (in 2009 it was 4.5% for Canada and 5.0% for the United States).
Discount rate, return on plan assets and rate of compensation increase:
The major economic assumptions which are used in determining the actuarial present value of the accrued benefit obligations vary by
country. In determining the discount rate for the Canadian plans, a yield curve for long-term Corporate “AA” bonds is developed from
the Government of Canada yield curve by adding an appropriate adjustment to reflect the risk characteristics of high-quality Corporate
bonds. This curve is then used to calculate a level discount rate by reference to the spot yields on high-quality, non-callable, zero-
coupon Corporate bonds with maturities that match the estimated benefit cash flows for the plan.
In determining the discount rate for the plans in the United States a portfolio of Corporate “AA” bonds is selected that matches the
projected benefit payments of the plans. The discount rate assumption is a single rate that equates the market value of the matching
bond portfolio to the discounted value of the projected benefit payments.
The assumed rate of return on assets for pension cost purposes is the weighted average of expected long-term asset return
assumptions by asset class and is selected from a range of possible future asset returns.
Health care cost calculations are based on trend rate assumptions which may differ from actual results. Changes in trend rate
assumptions by 1% in either direction will change the health care cost as follows:
1%
Increase Decrease
Effect on post-retirement benefit obligations $ 23 $ (21)
Effect on aggregated service and interest costs $2 $(2)
Notes to the Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2010 121