SunTrust 2014 Annual Report Download - page 145

Notes to Consolidated Financial Statements, continued
122
and the life insurance plans are noncontributory. Certain retiree
health benefits are funded in a Retiree Health Trust. Additionally,
certain retiree life insurance benefits are funded in a VEBA. The
Company reserves the right to amend or terminate any of the
benefits at any time. Effective April 1, 2014, the Company
amended the plan which now requires retirees age 65 and older
to enroll in individual Medicare supplemental plans. In addition,
the Company will fund a tax-advantaged HRA to assist some
retirees with medical expenses. The plan amendment was
measured as of December 31, 2013 and resulted in a decrease of
$76 million in the liability and AOCI for the postretirement
benefits plan. The Company contributed less than $1 million to
the Postretirement Welfare Plan during the year ended December
31, 2014. The expected pre-tax long-term rate of return on plan
assets for the Postretirement Welfare Plan is 5.00% for 2015.
Assumptions
Each year, the SBFC, which includes several members of senior
management, reviews and approves the assumptions used in the
year-end measurement calculations for each plan. The discount
rate for each plan, used to determine the present value of future
benefit obligations, is determined by matching the expected cash
flows of each plan to a yield curve based on long-term, high
quality fixed income debt instruments available as of the
measurement date. A series of benefit payments projected to be
paid by the plan is developed based on the most recent census
data, plan provisions, and assumptions. The benefit payments at
each future maturity date are discounted by the year-appropriate
spot interest rates. The model then solves for the discount rate
that produces the same present value of the projected benefit
payments as generated by discounting each year’s payments by
the spot interest rate.
Actuarial gains and losses are created when actual
experience deviates from assumptions. The actuarial losses on
obligations generated within the pension plans during 2014
resulted primarily from lower interest rates. The actuarial gains
during 2013 resulted primarily from higher interest rates and
better than expected asset returns.
The following table presents the change in benefit
obligations, change in fair value of plan assets, funded status,
and accumulated benefit obligation for the years ended
December 31.
Pension Benefits 1Other Postretirement Benefits 2
(Dollars in millions) 2014 2013 2014 2013
Benefit obligation, beginning of year $2,575 $2,838 $81 $167
Service cost 55——
Interest cost 124 113 36
Plan participants’ contributions ——11 21
Actuarial loss/(gain) 401 (195) (10) 1
Benefits paid (165) (181) (16) (38)
Administrative expenses paid from pension trust (5) (5) ——
Plan amendments ———(76)
Benefit obligation, end of year 3$2,935 $2,575 $69 $81
Change in plan assets:
Fair value of plan assets, beginning of year $2,873 $2,742 $158 $164
Actual return on plan assets 371 309 814
Employer contributions 68——
Plan participants’ contributions ——11 21
Benefits paid (165) (181) (17) (41)
Administrative expenses paid from pension trust (5) (5) ——
Fair value of plan assets, end of year 4$3,080 $2,873 $160 $158
Funded status at end of year $145 $298 $91 $77
Funded status at end of year (%) 105% 112%
Accumulated benefit obligation $2,935 $2,575
1 Employer contributions represent the benefits that were paid to nonqualified plan participants. SERPs are not funded through plan assets.
2 Plan remeasured at December 31, 2013 due to plan amendment.
3 Includes $85 million and $80 million of benefit obligations for the unfunded nonqualified supplemental pension plans at December 31, 2014 and 2013, respectively.
4 Includes $1 million and $0, of the Company's common stock acquired by the asset manager and held as part of the equity portfolio for pension benefits at December
31, 2014 and 2013, respectively.
Pension Benefits Other Postretirement Benefits
(Weighted average assumptions used to determine benefit obligations, end of year) 2014 2013 2014 2013
Discount rate 4.09% 4.98% 3.60% 4.15%