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Retirement Benefit Plans
12 Months Ended
Dec. 31, 2022
Disclosure Of Retirement Benefit Plans [Abstract]  
Retirement Benefit Plans
28.
RETIREMENT BENEFIT PLANS
a.
Defined contribution plans

The pension plan under the Labor Pension Act of ROC (the “LPA”) is considered as a defined contribution plan. Based on the LPA, Chunghwa and its domestic subsidiaries make monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. Its foreign subsidiaries would make monthly contributions based on the local pension requirements.

b.
Defined benefit plans

Chunghwa completed its privatization plans on August 12, 2005. Chunghwa is required to pay all accrued pension obligations including service clearance payment, lump sum payment under civil service plan, additional separation payments, etc. upon the completion of the privatization in accordance with the Statute Governing Privatization of Stated-owned Enterprises. After paying all pension obligations for privatization, the plan assets of Chunghwa should be transferred to the Fund for Privatization of Government-owned Enterprises (the “Privatization Fund”) under the Executive Yuan. On August 7, 2006, Chunghwa transferred the remaining balance of fund to the Privatization Fund. However, according to the instructions of MOTC, Chunghwa was requested to administer the distributions to employees for pension obligations including service clearance payment, lump sum payment under civil service plan, additional separation payments, etc. upon the completion of the privatization and recognized in other current monetary assets.

Chunghwa and its subsidiaries SENAO, CHIEF, CHSI, SHE, IISI and UTC with the pension mechanism under the Labor Standards Law in the ROC are considered as defined benefit plans. These pension plans provide benefits based on an employee’s length of service and average six-month salary

prior to retirement. Chunghwa and its subsidiaries contribute an amount no more than 15% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the names of the Committees in the Bank of Taiwan. The plan assets are held in a commingled fund which is operated and managed by the government’s designated authorities; as such, the Company does not have any right to intervene in the investments of the funds. According to the Article 56 of the Labor Standards Law in the ROC, entities are required to contribute the difference in one appropriation to their pension funds before the end of next March when the balance of the Funds is insufficient to pay the eligible employees who meet the retirement criteria in the following year.

The amounts included in the consolidated balance sheets arising from the Company’s obligation in respect of its defined benefit plans were as follows:

 

 

 

December 31

 

 

 

2021

 

 

2022

 

 

 

NT$

 

 

NT$

 

 

 

(In Millions)

 

Present value of funded defined benefit obligations

 

$

35,502

 

 

$

33,599

 

Fair value of plan assets

 

 

(36,605

)

 

 

(36,580

)

Funded status - surplus

 

$

(1,103

)

 

$

(2,981

)

 

 

 

 

 

 

 

Net defined benefit liabilities

 

$

2,288

 

 

$

2,285

 

Net defined benefit assets

 

 

(3,391

)

 

 

(5,266

)

 

 

$

(1,103

)

 

$

(2,981

)

 

Movements in the defined benefit obligations and the fair value of plan assets were as follows:

 

 

 

Present Value
of Funded
Defined Benefit
Obligations

 

 

Fair Value of
Plan Assets

 

 

Net Defined
Benefit
Liabilities
(Assets)

 

 

 

NT$

 

 

NT$

 

 

NT$

 

 

 

 

 

 

(In Millions)

 

 

 

 

Balance on January 1, 2020

 

$

41,197

 

 

$

39,820

 

 

$

1,377

 

Current service cost

 

 

2,052

 

 

 

 

 

 

2,052

 

Interest expense/interest income

 

 

298

 

 

 

297

 

 

 

1

 

Amounts recognized in profit or loss

 

 

2,350

 

 

 

297

 

 

 

2,053

 

Remeasurement on the net defined benefit liability

 

 

 

 

 

 

 

 

 

Return on plan assets (excluding amounts included in net interest)

 

 

 

 

 

1,308

 

 

 

(1,308

)

Actuarial losses recognized from changes in financial assumptions

 

 

590

 

 

 

 

 

 

590

 

Actuarial gains recognized from experience adjustments

 

 

(475

)

 

 

 

 

 

(475

)

Amounts recognized in other comprehensive income

 

 

115

 

 

 

1,308

 

 

 

(1,193

)

Contributions from employer

 

 

 

 

 

1,964

 

 

 

(1,964

)

Benefits paid

 

 

(3,919

)

 

 

(3,919

)

 

 

 

Benefits paid directly by the Company

 

 

(263

)

 

 

 

 

 

(263

)

Acquired by business combinations (Note 14)

 

 

56

 

 

 

24

 

 

 

32

 

Balance on December 31, 2020

 

 

39,536

 

 

 

39,494

 

 

 

42

 

Current service cost

 

 

1,253

 

 

 

 

 

 

1,253

 

Interest expense/interest income

 

 

190

 

 

 

195

 

 

 

(5

)

Amounts recognized in profit or loss

 

 

1,443

 

 

 

195

 

 

 

1,248

 

Remeasurement on the net defined benefit liability

 

 

 

 

 

 

 

 

 

Return on plan assets (excluding amounts
   included in net interest)

 

 

 

 

 

501

 

 

 

(501

)

Actuarial gain recognized from changes in
   demographic assumptions

 

 

(434

)

 

 

 

 

 

(434

)

Actuarial loss recognized from experience adjustments

 

 

545

 

 

 

 

 

 

545

 

Amounts recognized in other comprehensive income

 

 

111

 

 

 

501

 

 

 

(390

)

Contributions from employer

 

 

 

 

 

1,727

 

 

 

(1,727

)

Benefits paid

 

 

(5,312

)

 

 

(5,312

)

 

 

 

Benefits paid directly by the Company

 

 

(276

)

 

 

 

 

 

(276

)

Balance on December 31, 2021

 

 

35,502

 

 

 

36,605

 

 

 

(1,103

)

Current service cost

 

 

1,085

 

 

 

 

 

 

1,085

 

Interest expense/interest income

 

 

171

 

 

 

181

 

 

 

(10

)

Amounts recognized in profit or loss

 

 

1,256

 

 

 

181

 

 

 

1,075

 

Remeasurement on the net defined benefit liability

 

 

 

 

 

 

 

 

 

Return on plan assets (excluding amounts
   included in net interest)

 

 

 

 

 

2,968

 

 

 

(2,968

)

Actuarial loss recognized from changes in
   financial assumptions

 

 

208

 

 

 

 

 

 

208

 

Actuarial loss recognized from experience adjustments

 

 

1,606

 

 

 

 

 

 

1,606

 

Amounts recognized in other comprehensive income

 

 

1,814

 

 

 

2,968

 

 

 

(1,154

)

Contributions from employer

 

 

 

 

 

1,555

 

 

 

(1,555

)

Benefits paid

 

 

(4,729

)

 

 

(4,729

)

 

 

 

Benefits paid directly by the Company

 

 

(244

)

 

 

 

 

 

(244

)

Balance on December 31, 2022

 

$

33,599

 

 

$

36,580

 

 

$

(2,981

)

 

 

Relevant pension costs recognized in profit and loss for defined benefit plans were as follows:

 

 

 

Year Ended December 31

 

 

 

2020

 

 

2021

 

 

2022

 

 

 

NT$

 

 

NT$

 

 

NT$

 

 

 

(In Millions)

 

Operating costs

 

$

1,205

 

 

$

725

 

 

$

565

 

Marketing expenses

 

 

603

 

 

 

367

 

 

 

360

 

General and administrative expenses

 

 

121

 

 

 

80

 

 

 

86

 

Research and development expenses

 

 

72

 

 

 

44

 

 

 

37

 

 

 

$

2,001

 

 

$

1,216

 

 

$

1,048

 

 

The Company is exposed to following risks for the defined benefits plans under the Labor Standards Law in the ROC:

a.
Investment risk

Under the Labor Standards Law in the ROC, the rate of return on assets shall not be lower than the average interest rate on a two-year time deposit published by the local banks and the government is responsible for any shortfall in the event that the rate of return is less than the required rate of return. The plan assets are held in a commingled fund mainly invested in foreign and domestic equity and debt securities and bank deposits which is operated and managed by the government’s designated authorities; as such, the Company does not have any right to intervene in the investments of the funds.

b.
Interest rate risk

The decline in government bond interest rate will increase the present value of the obligation on the defined benefit plan, while the return on plan assets will increase. The net effect on the present value of the obligation on defined benefit plan is partially offset by the return on plan assets.

c.
Salary risk

The calculation of the present value of defined benefit obligations is referred to the plan participants’ future salary. Hence, the increase in plan participants’ salary will increase the present value of the defined benefit obligations.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligations were carried out by the independent actuary.

The principal assumptions used for the purpose of the actuarial valuations were as follows:

 

 

 

Measurement Date

 

 

December 31

 

 

2021

 

2022

Discount rates

 

0.50%

 

1.25%

Expected rates of salary increase

 

1.00%-2.25%

 

1.00%-2.25%

 

 

If reasonably possible changes of the respective significant actuarial assumptions occur at the end of reporting periods, while holding all other assumptions constant, the present values of the defined benefit obligations would increase (decrease) as follows:

 

 

 

December 31

 

 

 

2021

 

 

2022

 

 

 

NT$

 

 

NT$

 

 

 

(In Millions)

 

Discount rates

 

 

 

 

 

 

0.5% increase

 

$

(1,073

)

 

$

(996

)

0.5% decrease

 

$

1,139

 

 

$

1,056

 

Expected rates of salary increase

 

 

 

 

 

 

0.5% increase

 

$

1,217

 

 

$

1,130

 

0.5% decrease

 

$

(1,157

)

 

$

(1,075

)

 

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligations as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligations has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the consolidated balance sheets.
 

There is no change in the methods and assumptions used in preparing the sensitivity analysis from the previous period.

 

 

December 31

 

 

 

2021

 

 

2022

 

 

 

NT$

 

 

NT$

 

 

 

(In Millions)

 

The expected contributions to the plan for the next
   year

 

$

1,681

 

 

$

1,542

 

The average duration of the defined benefit obligations

 

6.3-12 years

 

 

6.2-11 years

 

 

As of December 31, 2022, the Company’s maturity analysis of the undiscounted benefit payments was as follows:

 

Year

 

Amount

 

 

 

NT$

 

 

 

(In Millions)

 

2023

 

$

2,673

 

2024

 

 

6,184

 

2025

 

 

9,313

 

2026

 

 

10,556

 

2027 and thereafter

 

 

36,623

 

 

 

$

65,349