TD Bank 2005 Annual Report Download - page 94

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TD BANK FINANCIAL GROUP ANNUAL REPORT 2005 Financial Results
90
Plan Benefit Obligations, Assets and Funded Status
(millions of Canadian dollars) 2005 2004 2003
Accumulated benefit obligation at end of period $1,810 $1,446 $1,331
Change in projected benefit obligation
Projected benefit obligation at beginning of period 1,535 1,418 1,271
Service cost – benefits earned 46 3831
Interest cost on projected benefit obligation 101 9490
Members’ contributions 26 26 25
Benefits paid (93) (95) (92)
Actuarial (gains) losses (9) 2 7
Change in actuarial assumptions 318 44 86
Plan amendments 54 8 –
Projected benefit obligation at end of period 1,978 1,535 1,418
Change in plan assets
Plan assets at fair market value at beginning of period 1,650 1,507 1,164
Actual income on plan assets 78 61 55
Gain on disposal of investments 286 204 80
Members’ contributions 26 26 25
Employer’s contributions 64 46 291
Decrease in unrealized gains on investments (95) (86) (11)
Benefits paid (93) (95) (92)
General and administrative expenses (9) (14) (9)
Other –1 4
Plan assets at fair market value at end of period 1,907 1,650 1,507
Excess (deficit) of plan assets over projected benefit obligation (71) 115 89
Unrecognized net loss from past experience, different from that assumed,
and effects of changes in assumptions 416 265 299
Unrecognized prior service costs 62 14 7
Employer’scontributions 15 22 13
Prepaid pension expense $ 422 $ 416 $ 408
Annual expense
Net pension expense includes the following components:
Service cost – benefits earned $46 $ 38 $ 31
Interest cost on projected benefit obligation 101 94 90
Actual return on plan assets (260) (165) (115)
Actuarial losses 309 46 93
Plan amendments 54 8 –
Difference between costs arising in the period and costs recognized in the period in respect of:
Return on plan assets1149 64 30
Actuarial gains2(300) (31) (80)
Plan amendments3(48) (7) 1
Pension expense $51 $47 $50
Actuarial assumptions used to determine the annual expense
Weighted average discount rate for projected benefit obligation 6.40% 6.50%7.00%
Weighted average rate of compensation increase 3.50 3.50 3.50
Weighted average expected long term rate of returnon plan assets46.75 6.75 6.75
Actuarial assumptions used to determine the benefit obligation at end of period
Weighted average discount rate for projected benefit obligation 5.20% 6.40% 6.50%
Weighted average rate of compensation increase 3.50 3.50 3.50
Weighted average expected long term rate of return on plan assets46.75 6.75 6.75
1Includes expected return on plan assets of $111 million (2004 – $101 mil-
lion; 2003 – $85 million) less actual return on plan assets of $260 million
(2004 – $165 million; 2003 – $115 million).
2Includes loss recognized in fiscal 2005 of $9 million (2004 – $15 million;
2003 – $13 million) less actuarial losses on projected benefit obligation in
the year of $309 million (2004 – $46 million; 2003 – $93 million).
3Includes amortization of costs for plan amendments in fiscal 2005 of
$6 million (2004 – $1 million; 2003 – $1 million) less actual cost of plan
amendments in the year of $54 million (2004 – 8 million; 2003 – nil).
4Net of fees and expenses.
For 2005 the Bank’s principal pension plan’s net assets included
funded investments in the Bank and its affiliates which had a mar-
ket value of $6 million (2004 – $3 million; 2003 – $65 million).
The investments of the Bank’s principal pension plan are man-
aged utilizing a balanced approach with the primary objective of
achieving a real rate of return of 3%. Accordingly, the allowable
asset mix range are detailed in the following table:
Asset Mix
Security Acceptable range
Equity 50%-65%
Debt 33%-48%
Cash equivalents 0%-4%
The investment policy for the Bank’s principal pension plan is
detailed below. The plan was in compliance with its investment
policy throughout the year.
Futures contracts and options can be utilized provided they do
not create additional financial leverage for the plans. Substantially,
all assets must have readily ascertainable market values.
The equity portfolio will be generally fully invested and broadly
diversified primarily in medium to large capitalization quality
companies with no individual holdings exceeding 10% of the
equity portfolio at any time. Foreign equities and American
Depository Receipts of similar high quality may also be included
to further diversify the portfolio.
Debt investments of a non-government entity must not exceed
10% of the total debt portfolio. Corporate debt issues generally
must meet or exceed a credit rating of BBB at the time of pur-
chase and during the holding period. There are no limitations on
the maximum amount allocated to each credit rating within the
debt portfolio.