Unum 2014 Annual Report Download - page 139

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UNUM • 2014 ANNUAL REPORT 137
Amendments to U.S. Pension Plans
In 2014, we amended our U.S. qualified defined benefit pension plan to allow a limited-time offer of benefit payouts to eligible former
employees with a vested right to a pension benefit. The offer provided eligible former employees, regardless of age, with an option to elect
to receive a lump-sum settlement of his or her entire accrued pension benefit in December 2014 or to elect receipt of monthly pension
benefits commencing in January 2015. For those who elected to receive lump-sum settlements, we made payments totaling $214.5 million
from plan assets in December 2014. We recognized a before-tax settlement loss of $64.4 million in earnings during 2014, with a
corresponding reduction in the unrecognized actuarial loss included in accumulated other comprehensive income that pertained to the
settled benefit obligation.
In 2013, we adopted plan amendments which froze participation and benefit accruals in our U.S. qualified and non-qualified defined
benefit pension plans, effective December 31, 2013. Because the amendments eliminated all future service accruals subsequent to
December 31, 2013 for active participants in these plans, we were required to remeasure the benefit obligations during 2013. The discount
rate assumption increased from 4.50 percent at December 31, 2012 to 5.00 percent at the remeasurement date, reflecting the change in
market interest rates during that period. The expected long-term rate of return on plan assets of 7.50 percent remained unchanged from
December 31, 2012. The remeasurement resulted in a decrease in our net pension liability of $327.4 million at the remeasurement date,
with a corresponding increase in other comprehensive income, less applicable income tax of $114.6 million. The decrease in the net pension
liability resulted primarily from the curtailment of benefits under the plan amendments as well as the increase in the discount rate
assumption used to remeasure the benefit obligations. As a result of the 2013 plan amendments, we recognized a before-tax curtailment
loss of $0.7 million in earnings during 2013, with a corresponding reduction in the prior service cost included in accumulated other
comprehensive income and associated with years of service no longer expected to be rendered.
Amendments to U.K. Pension Plan
In 2013, we adopted amendments to our U.K. pension plan which froze participation in our plan and which reduced the maximum
rate of inflation indexation from 5.0 percent to 2.5 percent for pension benefits which were earned prior to April 1997. The amendment to
reduce the maximum rate of inflation indexation was effective September 12, 2013, and the amendment to freeze participation became
effective June 30, 2014. Although all future service accruals were eliminated for active participants, pension payments to participants
currently employed are based on the higher of (i) pensionable earnings at a participant’s retirement age or the date a participant’s
employment ceases, subject to the inflation indexation provisions in the plan, or (ii) pensionable earnings as of June 30, 2014, also subject
to the inflation indexation provisions. Because the amendments eliminated all future service accruals subsequent to June 30, 2014 for
active participants in the plan, we were required to remeasure the benefit obligation of the plan during 2013. The discount rate assumption
increased from 4.50 percent at December 31, 2012 to 4.60 percent at the remeasurement date, reflecting the change in market interest
rates during that period. The expected long-term rate of return on plan assets changed from 6.20 percent at December 31, 2012 to
6.35 percent at the remeasurement date. The remeasurement resulted in a $2.3 million, or £1.5 million, increase in our net pension asset
at the remeasurement date. As a result of these plan amendments, we recognized a before-tax curtailment gain of $3.7 million, or
£2.3 million, in earnings during 2013, with a corresponding decrease in the prior service credit included in accumulated other comprehensive
income and associated with years of service no longer expected to be rendered. The majority of the prior service credit was related to the
amendment to reduce the rate of inflation indexation.