Telus 2011 Annual Report Download - page 147

TELUS 2011 ANNUAL REPORT . 143
FINANCIAL STATEMENTS & NOTES: 14
Asset allocations
Information concerning the Company’s defined benefit plans’ target asset allocations and actual asset allocations is as follows:
Pension benefit plans Other benefit plans
Target Percentage of plan assets Target Percentage of plan assets
allocation at end of year allocation at end of year
2012 2 0 11 2010 2012 2 0 11 2010
Equity securities 45–60% 56% 56% – – –
Debt securities 35–45% 37% 38% – – –
Real estate 4–8% 7% 6% – – –
Other 0–2% – – 100% 100% 100%
100% 100% 100% 100%
(e) Employer contributions
The determination of the minimum funding amounts for substantially all
of the Company’s registered defined benefit pension plans is governed
by the Pension Benefits Standards Act, 1985, which requires that, in
addition to current service costs being funded, both going-concern and
solvency valuations be performed on a specified periodic basis.
.Any excess of plan assets over plan liabilities determined in the
going-concern valuation reduces the Company’s minimum funding
requirement of current service costs, but may not reduce the
requirement to an amount less than the employees’ contributions.
The going-concern valuation generally determines the excess
(if any) of a plan’s assets over its liabilities, determined on a projected
benefit basis.
.As of the date of these consolidated financial statements, the solvency
valuation generally requires that a plan’s liabilities, determined on
the basis that the plan is terminated on the valuation date, in excess
of its assets (if any) be funded, at a minimum, in equal annual
amounts over a period not exceeding five years.
The best estimates of fiscal 2012 employer contributions to the
Company’s defined benefit plans are approximately $172 million (including
a discretionary contribution of $100 million made in January 2012) for
defined benefit pension plans and $NIL for other defined benefit plans.
These estimates (other than for the discretionary contribution of $100 mil-
lion made in January 2012) are based upon the mid-year 2011 annual
funding reports that were prepared by actuaries using December 31, 2010,
actuarial valuations. The funding reports are based on the pension plans’
fiscal years, which are calendar years. The next annual funding valuations
are expected to be prepared mid-year 2012.
(f) Assumptions
Management is required to make significant estimates about certain
actuarial and economic assumptions to be used in determining defined
benefit pension costs, accrued benefit obligations and pension plan
assets. These significant estimates are of a long-term nature, which is
consistent with the nature of employee future benefits.
Demographic assumptions
The Company uses the 1994 Uninsured Pensioner Mortality Table (UP94
Table) and with generational projection for future mortality improvements
using Mortality Table Projection Scale AA.
Financial assumptions
The discount rate, which is used to determine the accrued benefit
obligation, is based on the yield on long-term, high-quality fixed term
investments, and is set annually. The expected long-term rate of
return is based upon forecasted returns of the major asset categories
and weighted by the plans’ target asset allocations. Future increases
in compensation are based upon the current benefits policies and
economic forecasts.
The significant weighted average actuarial assumptions arising from these estimates and adopted in measuring the Company’s accrued benefit
obligations are as follows:
Pension benefit plans Other benefit plans
2 0 11 2010 2 0 11 2010
Discount rate used to determine:
Net benefit costs for the year ended December 31 5.25% 5.85%(2) 4.97% 5.67%(2)
Accrued benefit obligation as at December 31 4.50% 5.25% 4.50% 4.97%
Expected long-term rate of return(1) on plan assets used to determine:
Net benefit costs for the year ended December 31 7.00% 7.25%(2) 2.50% 2.50%(2)
Accrued benefit obligation as at December 31 6.75% 7.00% 2.50% 2.50%
Rate of future increases in compensation used to determine:
Net benefit costs for the year ended December 31 3.00% 3.00%(2) – –
Accrued benefit obligation as at December 31 3.00% 3.00% – –
(1) The expected long-term rate of return is based upon forecasted returns of the major asset categories and weighted by the plans’ target asset allocations (see (d)). Forecasted returns
arise from the Company’s ongoing review of trends, economic conditions, data provided by actuaries and updating of underlying historical information.
(2) The rates used to determine the net benefit costs for the year ended December 31, 2010, are equal to the rates used to determine the accrued benefit obligation as at January 1, 2010.