Voya 2014 Annual Report Download - page 217

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 other actuarial changes, which could be significant, are
immediately recognized in the Consolidated Statements of Operations, generally in the fourth quarter.
During the years ended December 31, 2014, 2013 and 2012, we recognized net actuarial losses (gains)
related to pension and other postretirement benefit obligations of $372.7 million, $(405.1) million and $171.9
million, respectively. Changes in discount rates as well as actual versus expected experience impacted all years.
Changes in mortality assumptions in 2014, described below, contributed approximately $200.0 million to the
losses.
The Society of Actuaries (“SOA”) recently finalized new mortality tables (RP-2014) which reflect
improving life expectancies, which can be used in the valuations of pension and postretirement plans. In
reviewing our own plans’ mortality experience and the new tables produced by the SOA, we changed our
assumption at December 31, 2014 from the RP-2000 blended table utilizing Scale AA to project mortality
improvements to the recently adopted RP-2014 White Collar table utilizing MP-2014 to project mortality
improvements. The effect of this change increased our total benefit plan liability by approximately 9%. We do
not expect the changes in mortality or other assumptions to have a material effect on expected pension
contributions as the mortality table used to determine minimum and maximum contribution levels is unchanged
from what is mandated by ERISA.
Effective September 8, 2014, the Compensation and Benefits Committee of the Board of Directors of the
Company, approved changing the Plan’s name from the ING U.S. Retirement Plan to the Voya Retirement Plan
(the “Retirement Plan”). The Retirement Plan is a tax qualified defined benefit plan, the benefits of which are
guaranteed (within certain specified legal limits) by the Pension Benefit Guaranty Corporation (“PBGC”).
Beginning January 1, 2012, the Retirement Plan adopted 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. Interest is credited monthly based on a 30-year
U.S. Treasury securities bond rate published by the Internal Revenue Service in the preceding August of each
year. The accrued vested cash pension balance benefit is portable; participants can take it if they leave the
Company. 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 which ended
December 31, 2013.
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 2014 for the net periodic benefit cost and benefit
obligation was 4.95% and 4.36%, respectively.
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