Unum 2013 Annual Report Download - page 142

140 / UNUM 2013 ANNUAL REPORT
Notes To Consolidated Financial Statements
Amendments to U.S. Pension Plans
In 2013, we adopted plan amendments which freeze participation and benefit accruals in our U.S. qualified and non-qualified
defined benefit pension plans, effective December 31, 2013. Because the amendments eliminate all future service accruals subsequent to
December 31, 2013 for active participants in these plans, we were required to remeasure the benefit obligations during 2013. The discount
rate assumption increased from 4.50 percent at December 31, 2012 to 5.00 percent at the remeasurement date, reflecting the change in
market interest rates during that period. The expected long-term rate of return on plan assets of 7.50 percent remained unchanged from
December 31, 2012. The remeasurement resulted in a decrease in our net pension liability of $327.4 million at the remeasurement date,
with a corresponding increase in other comprehensive income, less applicable income tax of $114.6 million. The decrease in the net pension
liability resulted primarily from the curtailment of benefits under the plan amendments as well as the increase in the discount rate
assumption used to remeasure the benefit obligations.
As a result of these plan amendments, we recognized a before-tax curtailment loss of $0.7 million in earnings during 2013, with a
corresponding reduction in the prior service cost included in accumulated other comprehensive income and associated with years of service
no longer expected to be rendered.
Amendments to U.K. Pension Plan
In 2013, we adopted amendments to our U.K. pension plan which freeze participation in our plan and which reduce the maximum rate
of inflation indexation from 5.0 percent to 2.5 percent for pension benefits which were earned prior to April 1997. The amendment to reduce
the maximum rate of inflation indexation was effective September 12, 2013, and the amendment to freeze participation will become
effective June 30, 2014. Although all future service accruals will be eliminated for active participants, pension payments to participants
currently employed will be based on the higher of (i) pensionable earnings at a participant’s retirement age or the date a participant’s
employment ceases, subject to the inflation indexation provisions in the plan, or (ii) pensionable earnings as of June 30, 2014, also subject
to the inflation indexation provisions. Because the amendments eliminate all future service accruals subsequent to June 30, 2014 for active
participants in the plan, we were required to remeasure the benefit obligation of the plan during 2013. The discount rate assumption
increased from 4.50 percent at December 31, 2012 to 4.60 percent at the remeasurement date, reflecting the change in market interest rates
during that period. The expected long-term rate of return on plan assets changed from 6.20 percent at December 31, 2012 to 6.35 percent
at the remeasurement date. The remeasurement resulted in a $2.3 million, or £1.5 million, increase in our net pension asset at the
remeasurement date.
As a result of these plan amendments, we recognized a before-tax curtailment gain of $3.7 million, or £2.3 million, in earnings during
2013, with a corresponding decrease in the prior service credit included in accumulated other comprehensive income and associated with
years of service no longer expected to be rendered. The majority of the prior service credit was related to the amendment to reduce the
rate of inflation indexation.
Amendments to OPEB Plan
We discontinued offering retiree life insurance to future retirees effective December 31, 2012 but continue to provide this benefit to
employees who retired prior to that date. As a result of this plan amendment, we recognized a curtailment gain of $4.2 million and a prior
service credit of $5.0 million in accumulated other comprehensive income during 2012.
Amortization Period of Actuarial Gain or Loss
Because all participants in the U.S. and U.K. pension plans are considered inactive as a result of these amendments, we are required
to amortize the net actuarial loss for these plans over the average remaining life expectancy of the plan participants. The net actuarial loss
was previously amortized over the average future working life of pension plan participants, or approximately 11 years, for both U.S. and
U.K. participants up to the dates of remeasurement. As of December 31, 2013, the estimate of the average remaining life expectancy of plan
participants is approximately 33 years for U.S. participants and 34 years for U.K. participants.