Voya 2013 Annual Report Download - page 198

substantial compensatory, consequential or punitive damages and other types of relief. Moreover, certain claims
are asserted as class actions, purporting to represent a group of similarly situated individuals. It is not always
possible to accurately estimate the outcome of such lawsuits/arbitrations. Therefore, changes to such estimates
could be material. As facts and circumstances change, our estimates are revised accordingly. Our reserves reflect
management’s best estimate of the ultimate resolution.
Employee Benefits Plans
We sponsor defined benefit pension and other postretirement benefit plans covering eligible employees,
sales representatives, and other individuals. The net periodic benefit cost and projected benefit obligations are
calculated based on assumptions such as the discount rate, rate of return on plan assets, rate of future
compensation increases and health care cost trend rates. These assumptions require considerable judgment, are
subject to considerable variability and are established using our best estimate. Actual results could vary
significantly from assumptions based on changes such as economic and market conditions, demographics of
participants in the plans and amendments to benefits provided under the plans. Differences between the expected
return and the actual return on plan assets and all other actuarial changes, which could be significant, are
immediately recognized in the Consolidated Statements of Operations.
Beginning January 1, 2012, the ING U.S. Retirement Plan (the “Retirement Plan”) began using a cash
balance pension formula instead of a final average pay (“FAP”) formula, allowing all eligible employees to
participate in the Retirement Plan. Participants will earn an annual credit equal to 4% of eligible compensation.
The accrued vested cash balance benefit is portable; participants can take it when they leave the Company’s
employ. For participants in the Retirement Plan as of December 31, 2011, there was a two-year transition period
from the Retirement Plan’s current FAP formula to the cash balance pension formula. The impact of the change
in the Retirement Plan was recognized upon Board approval on November 10, 2011, resulting in an $83.6 million
decrease to the benefit obligation.
Sensitivity
The discount rate and expected rate of return assumptions relating to our defined benefit pension and other
postretirement benefit plans have historically had the most significant effect on our net periodic benefit costs and
the projected and accumulated projected benefit obligations associated with these plans.
The discount rate is based upon current market information provided by plan actuaries. The discount rate
modeling process involves selecting a portfolio of high quality, non-callable bonds that will match the cash flows
of the Retirement Plan. The weighted average discount rate in 2013 for the net periodic benefit cost and benefit
obligation was 4.05% and 4.95%, respectively.
As of December 31, 2013, the sensitivities of the effect of an increase or decrease in the discount rate are as
presented below:
($ in millions)
Increase (Decrease) in
Net Periodic Benefit
Cost-Pension Plans(1)
Increase (Decrease) in
Net Periodic Benefit Cost-Other
Postretirement Benefits(1)
Increase in discount rate by 100 basis
points ......................... $(263.6) $(2.2)
Decrease in discount rate by 100 basis
points ......................... 304.2 2.5
(1) Represents the estimate of actuarial gains (losses) which would be recognized immediately through
operating expenses.
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