Air Canada 2014 Annual Report Download - page 113

113
2014 Consolidated Financial Statements and Notes
Actuarial assumptions
Mortality rates
The cost and related liabilities of the Corporation’s
pension plans, and other post-retirement and post-
employment benefit programs are determined using
actuarial valuations. The actuarial valuations include
several economic and demographic assumptions
including mortality rates. For the December 31, 2013
accounting valuations, the mortality assumption was
updated to reflect the results of a mortality study
specific to Air Canada pension plan membership. The
change in mortality rate assumptions resulted in an
actuarial remeasurement of the accounting liabilities
with the impact being recorded in other comprehensive
income. The improvements in assumed mortality rates
were consistent with those presented by the Canadian
Institute of Actuaries (“CIA”) which issued new
mortality tables for use in the valuation of Canadian
pension and benefit plans in early 2014.
SENSITIVITY ANALYSIS
Sensitivity analysis is based on changing one
assumption while holding all other assumptions
constant. In practice, this may be unlikely to occur,
and changes in some of the assumptions may be
correlated. When calculating the sensitivity of the
defined benefit obligation to variations in significant
actuarial assumptions, the same method (present
value of the defined benefit obligation calculated with
the projected unit credit method at the end of the
reporting period) has been applied as for calculating
the liability recognized in the consolidated statement
of financial position.
Sensitivity analysis on 2014 pension expense and
net financing expense relating to pension benefit
liabilities, based on different actuarial assumptions
with respect to discount rate is set out below. The
effects on each pension plan of a change in an
assumption are weighted proportionately to the total
plan obligation to determine the total impact for each
assumption presented.
0.25 PERCENTAGE POINT
DECREASE INCREASE
DISCOUNT RATE ON OBLIGATION ASSUMPTION
Pension expense $ 17 $ (16)
Net financing expense relating to pension benefit liabilities 18 (8)
$ 35 $ (24)
Increase (decrease) in pension obligation $ 652 $ (630)
An increase of one year in life expectancy would
increase the pension benefit obligation by $447.
Assumed health care cost trend rates have a
significant effect on the amounts reported for the
health care plans. A 5.5% annual rate of increase in
the per capita cost of covered health care benefits
was assumed for 2014 (2013 – 6%). The rate is
assumed to decrease gradually to 5% by 2019. A one
percentage point increase in assumed health care
trend rates would have increased the total of current
service and interest costs by $5 and the obligation
by $61. A one percentage point decrease in assumed
health care trend rates would have decreased the
total of current service and interest costs by $4 and
the obligation by $60.
A 0.25 percentage point decrease in discount rate
would have increased the total of current and interest
costs by $1 and the obligation by $52.
A 0.25 percentage point increase in discount rate
would have decreased the total of current and interest
costs by $1 and the obligation by $41.
DEFINED CONTRIBUTION PENSION
PLANS
Certain of the Corporation’s management,
administrative and unionized employees participate
in a defined contribution pension plan or a multi-
employer plan which are accounted for as defined
contribution plans. The Corporation contributes an
amount expressed as a percentage of employees’
contributions with such percentage varying by group
and for some groups, based on the number of years of
service.
The Corporation’s expense for these pension plans
amounted to $6 for the year ended December 31,
2014 (2013 – $5). Expected total employer
contributions for 2015 are $7.