The Hartford 2015 Annual Report Download - page 215

Table of Contents THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Employee Benefit Plans
F-84
Investment and Savings Plan
Substantially all U.S. employees of the Company are eligible to participate in The Hartford Investment and Savings Plan under which
designated contributions may be invested in a variety of investments, including up to 10% in common stock of The Hartford. The
Company's contributions include a non-elective contribution of 2.0% of eligible compensation and a dollar-for-dollar matching
contribution of up to 6.0% of eligible compensation contributed by the employee each pay period. The Company also maintains a non-
qualified savings plan, The Hartford Excess Savings Plan, with the same level of Company matching contributions, with respect to
employee compensation in excess of the limit that can be recognized under the tax-qualified Investment and Savings Plan. The Company
discontinued non-elective contributions to the Excess Savings Plan effective December 31, 2013. Eligible compensation includes
overtime and bonuses but is limited to a total, for the Investment and Savings Plan and Excess Savings Plan combined, of $1 annually.
The total cost to The Hartford for these plans was approximately $117, $113 and $123 for the years ended December 31, 2015, 2014 and
2013, respectively.
Additionally, The Hartford has established defined contribution pension plans for certain employees of the Company’s international
subsidiaries. The cost to The Hartford for the years ended December 31, 2015, 2014, and 2013 for these plans was immaterial.
As of December 31, 2015, Investment and Savings Plan assets totaling $376 were invested in the separate accounts of HLIC.
Defined Benefit Pension Plan
The Company maintains The Hartford Retirement Plan for U.S. Employees, a U.S. qualified defined benefit pension plan (the “Plan”)
that covers substantially all U.S. employees hired prior to January 1, 2013. The Company also maintains non-qualified pension plans to
provide retirement benefits previously accrued that are in excess of Internal Revenue Code limitations.
The Plan includes two benefit formulas, both of which are frozen: a final average pay formula (for which all accruals ceased as of
December 31, 2008) and a cash balance formula for which benefit accruals ceased as of December 31, 2012, although interest will
continue to accrue to existing cash balance formula account balances. Participants as of December 31, 2012 continue to earn vesting
credit with respect to their frozen accrued benefits if they continue to work. The Hartford Excess Pension Plan II, the Company's non-
qualified excess pension benefit plan for certain highly compensated employees, is also frozen.
The Company provides certain health care and life insurance benefits for eligible retired employees. The Company’s contribution for
health care benefits will depend upon the retiree’s date of retirement and years of service. In addition, the plan has a defined dollar cap
for certain retirees which limits average Company contributions. The Hartford has prefunded a portion of the health care obligations
through a trust fund where such prefunding can be accomplished on a tax effective basis. Effective January 1, 2002, Company-
subsidized retiree medical, retiree dental and retiree life insurance benefits were eliminated for employees with original hire dates with
the Company on or after January 1, 2002. The Company also amended its postretirement medical, dental and life insurance coverage
plans to no longer provide subsidized coverage for employees who retire on or after January 1, 2014.
Assumptions
Pursuant to accounting principles related to the Company’s pension and other postretirement obligations to employees under its various
benefit plans, the Company is required to make a significant number of assumptions in order to calculate the related liabilities and
expenses each period. The two economic assumptions that have the most impact on pension and other postretirement expense are the
discount rate and the expected long-term rate of return on plan assets. In determining the discount rate assumption, the Company utilizes
a discounted cash flow analysis of the Company’s pension and other postretirement obligations and currently available market and
industry data. The yield curve utilized in the cash flow analysis reflects high-quality fixed income investments consistent with the
maturity profile of the expected liability cash flows. Based on all available information, it was determined that 4.25% and 4.00% were
the appropriate discount rates as of December 31, 2015 to calculate the Company’s pension and other postretirement obligations,
respectively.
The Company determines the expected long-term rate of return assumption based on an analysis of actual compound rates of return
earned over various historical time periods. The Company also considers the investment volatility, duration and total returns for various
time periods related to the characteristics of the pension obligation, which are influenced by the Company's workforce demographics.In
addition, the Company considers long-term market return expectations for an investment mix that generally anticipates 60% fixed
income securities and 40% non fixed income securities (global equities, hedge funds and private market alternatives) to derive an
expected long-term rate of return. Based upon these analyses, management determined the long-term rate of return assumption to be
6.90% and 7.10% for the years ended December 31, 2015 and 2014, respectively. To determine the Company's 2016 expense, the
Company is currently assuming an expected long-term rate of return on plan assets of 6.70%.