Bank of Montreal 2015 Annual Report Download - page 175

Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our pension and other employee future benefit plan assets are measured at fair value on a recurring basis. The fair values of plan assets held by our
primary plans as at October 31 are as follows:
(Canadian $ in millions) Canadian plans U.S. plans (1)
2015 2014 2015 2014
Cash and money market funds (2) 44 55 62 39
Securities issued or guaranteed by: (3)
Canadian federal government 188 151 ––
Canadian provincial and municipal governments 603 584 ––
U.S. federal government –491 87
U.S. states, municipalities and agencies –214 18
Other governments 95––
Pooled funds (4) 3,166 2,780 86 85
Derivative instruments (5) (5) (17) ––
Corporate debt (6) 892 966 458 401
Corporate equity (2) 792 834 511 535
5,689 5,364 1,222 1,165
(1) All of the U.S. plans’ assets have quoted prices in active markets, except pooled funds, corporate debt and securities issued or guaranteed by U.S. states, municipalities and agencies.
(2) All of the cash and money market funds and corporate equity held by Canadian plans as at October 31, 2015 and 2014 have quoted prices in active markets.
(3) $307 million ($294 million in 2014) of securities issued or guaranteed by governments held by Canadian plans have quoted prices in active markets.
(4) $1,495 million ($1,328 million in 2014) of pooled funds held by Canadian plans have quoted prices in active markets.
(5) $Nil ($1 million in 2014) of derivatives held by Canadian plans have quoted prices in active markets.
(6) $36 million ($69 million in 2014) of corporate debt held by Canadian plans have quoted prices in active markets.
Certain comparative figures have been reclassified to conform with the current year’s presentation.
No plan assets are directly invested in the bank’s or related parties’ securities as at October 31, 2015 and 2014. As at October 31, 2015, our primary
Canadian plan indirectly held, through a BMO managed pooled fund, approximately $9 million ($11 million in 2014) of our common shares. The plans
do not hold any property we occupy or other assets we use.
The plans paid $4 million in the year ended October 31, 2015 ($4 million in 2014) to us and certain of our subsidiaries for investment
management, record-keeping, custodial and administrative services rendered.
Sensitivity of Assumptions
Key weighted-average assumptions used in measuring the defined benefit obligations for our primary plans are outlined in the following table. The
sensitivity analysis provided in the table should be used with caution as it is hypothetical and the impact of changes in each key assumption may not
be linear. The sensitivities to changes in each key variable have been calculated independently of the impact of changes in other key variables. Actual
experience may result in simultaneous changes in a number of key assumptions. Changes in one factor may result in changes in another, which
would amplify or reduce certain sensitivities.
Defined benefit obligation
(Canadian $ in millions, except as noted) Pension benefit plans Other employee future benefit plans
Discount rate (%) 4.2 4.4
Impact: 1% increase ($) (817) (144)
1% decrease ($) 1,033 183
Rate of compensation increase (%) 2.7 2.4
Impact: 0.25% increase ($) 43 1
0.25% decrease ($) (42) (1)
Mortality
Impact: 1 year shorter life expectancy ($) (119) (26)
1 year longer life expectancy ($) 116 26
Assumed overall health care cost trend rate (%) na 5.5 (1)
Impact: 1% increase ($) na 73
1% decrease ($) na (76)
(1) Trending to 4.5% in 2030 and remaining at that level thereafter.
na – not applicable
Disaggregation of Defined Benefit Obligation
Disaggregation of the defined benefit obligation for our primary plans is as follows:
2015 2014
Canadian pension plans
Active members 44% 46%
Inactive and retired members 56% 54%
100% 100%
U.S. pension plans
Active members 68% 62%
Inactive and retired members 32% 38%
100% 100%
Canadian other employee future benefit plans
Active members 43% 45%
Inactive and retired members 57% 55%
100% 100%
188 BMO Financial Group 198th Annual Report 2015