Mega Bank Annual Report 2017

63 Annual Report 2017 -63- Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability (In US Thousand Dollars) 2017 Balance at January 1 $ 525,674 ( $ 332,801 ) $ 192,873 Current service cost 15,266 - 15,266 Interest expense (income) 5,135 ( 3,294 ) 1,841 546,075 ( 336,095 ) 209,980 Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - 129 129 Change in financial assumptions 49,287 - 49,287 Experience adjustments 9,260 - 9,260 58,547 129 58,676 Pension fund contribution - ( 27,180 ) ( 27,180 ) Paid Pension ( 49,078 ) 49,078 - Balance at December 31 $ 555,544 ( $ 314,068 ) $ 241,476 Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability (In NT Thousand Dollars) 2016 Balance at January 1 $ 15,759,783 ( $ 10,180,066 ) $ 5,579,717 Current service cost 451,430 - 451,430 Interest expense (income) 192,304 ( 125,818 ) 66,486 16,403,517 ( 10,305,884 ) 6,097,633 Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - 55,644 55,644 Change in financial assumptions 396,082 - 396,082 Experience adjustments 82,611 - 82,611 478,693 55,644 534,337 Pension fund contribution - ( 913,659 ) ( 913,659 ) Paid Pension ( 1,297,034 ) 1,297,034 - Balance at December 31 $ 15,585,176 ( $ 9,866,865 ) $ 5,718,311 (D) The Bank of Taiwan was commissioned to manage the Fund of the Bank’s defined benefit pension plan in accordance with the Fund’s annual investment and utilization plan and the “Regulations for Revenues, Expenditures, Safeguard and Ut ilization of the Labor Retirement Fund” (Article 6: The scope of utilization for the Fund includes deposit in domestic or foreign financial institut ions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.), and the performance of fund utilization is supervised by the Labor Funds Supervisory Committee. With regard to the utilization of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The Bank has no right to participate in managing and operating that fund and hence the Bank is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2017 and 2016 is given in the Annual Labor Retirement Fund Utilization Report announced by the government. (E) The principal actuarial assumptions used were as follows: For the years ended December 31, 2017 2016 Discount rate 1.00% 1.00% Rate of future salary increases 3.00% 2.00% Assumptions regarding future mortality rate are set based on the 5th Chart of Life Span Estimate Used by the Taiwan Life Insurance Enterprises. Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows: Discount rate Rate of future salary increases Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25% (In NT Thousand Dollars) December 31, 2017 Effect on present value of defined benefit obligation ( $ 389,470 ) $ 404,438 $ 395,460 ( $ 382,958 )