TD Bank 2014 Annual Report Download - page 195

TD BANK GROUP ANNUAL REPORT 2014 FINANCIAL RESULTS 193
The equity portfolio is broadly diversified primarily across medium
to large capitalization quality companies and income trusts with no
individual holding exceeding 10% of the equity portfolio or 10% of
the outstanding securities of any one company at any time. Foreign
equities are also included to further diversify the portfolio. A maximum
of 5% of the total fund may be invested in emerging market equities.
Derivatives can be used provided they are not used for speculative
purposes or to create financial leverage for the TDPP.
The TDPP was in compliance with its investment policy throughout
the year.
RISK MANAGEMENT PRACTICES
The principal pension plans’ investments include financial instruments
which are exposed to various risks. These risks include market risk
(including foreign currency, interest rate, inflation, and price risks),
credit risk, longevity risk and liquidity risk. Key material risks faced by
all plans are a decline in interest rates or credit spreads, which could
increase the defined benefit obligation by more than the change in the
value of plan assets, or from longevity risk (that is, lower mortality rates).
Asset-liability matching strategies are focused on obtaining an
appropriate balance between earning an adequate return and having
changes in liability values being hedged by changes in asset values.
The principal pension plans manage these financial risks in accordance
with the Pension Benefits Standards Act, 1985, applicable regulations,
and the principal pension plans’ Statement of Investment Policies and
Procedures. The following are some specific risk management practices
employed by the principal pension plans:
• Monitoring credit exposure of counterparties
• Monitoring adherence to asset allocation guidelines
• Monitoring asset class performance against benchmarks
The Bank’s principal pension plans are overseen by a single retirement
governance structure established by the Human Resources Committee
of the Bank’s Board of Directors. The governance structure utilizes
retirement governance committees who have responsibility to oversee
plan operations and investments, acting in a fiduciary capacity. Where
required, approvals will also be sought from the applicable local body
to comply with local regulatory requirements. Strategic, material plan
changes require the approval of the Bank’s Board of Directors.
OTHER PENSION AND RETIREMENT PLANS
CT Pension Plan
As a result of the acquisition of CT Financial Services Inc. (CT), the
Bank sponsors a pension plan consisting of a defined benefit portion
and a defined contribution portion. The defined benefit portion was
closed to new members after May 31, 1987, and newly eligible
employees joined the defined contribution portion of the plan. Effective
August 18, 2002, the defined contribution portion of the plan was
closed to new contributions from the Bank or active employees, except
for employees on salary continuance and long-term disability, and
employees eligible for that plan became eligible to join the Society
or the TDPP for future service. Funding for the defined benefit portion
is provided by contributions from the Bank and members of the plan.
The Bank received regulatory approval to wind-up the defined
contribution portion of the plan effective April 1, 2011. After that
date, the Bank’s contributions to the defined contribution portion
of the plan ceased. The wind-up was completed on May 31, 2012.
TD Bank, N.A. Retirement Plans
TD Bank, N.A. and its subsidiaries maintain a defined contribution
401(k) plan covering all employees. Effective January 1, 2009 the plan
was amended to include annual core contributions from TD Bank, N.A.
for all employees and a transition contribution for certain employees.
The core and transition contributions to the plan for fiscal 2014 were
$45 million (2013 – $42 million; 2012 – $41 million). In addition, on
an ongoing basis, TD Bank, N.A., makes matching contributions to the
401(k) plan. The amount of the matching contribution for fiscal 2014
was $47 million (2013 – $39 million; 2012 – $37 million). Annual
expense is equal to the Bank’s contributions to the plan.
In addition, TD Bank, N.A. has a closed non-contributory defined
benefit retirement plan covering certain legacy TD Banknorth employ-
ees. Supplemental retirement plans covering certain key officers and
limited post-retirement benefit programs provide medical coverage
and life insurance benefits to a closed group of employees and direc-
tors who meet minimum age and service requirements. Effective
December 31, 2008, benefits under the retirement and supplemental
retirement plans were frozen.
TD Auto Finance (legacy Chrysler Financial) Retirement Plans
TD Auto Finance has both contributory and non-contributory defined
benefit retirement plans covering certain permanent employees. The
non-contributory pension plan provides benefits based on a fixed rate
for each year of service. The contributory plan provides benefits to
salaried employees based on the employee’s cumulative contributions,
years of service during which employee contributions were made, and
the employee’s average salary during the consecutive five years in
which the employee’s salary was highest in the 15 years preceding
retirement. These defined benefit retirement plans were frozen as of
April 1, 2012. In addition, TD Auto Finance provides limited post-
retirement benefit programs, including medical coverage and life
insurance benefits to certain employees who meet minimum age and
service requirements.