20.Pension and Other Post-Employment Benefits

The Company sponsors defined benefit and defined contribution plans and provides pension and other post-employment benefits (“OPEB”) to its employees in Canada and the U.S. As of January 1, 2003, the defined benefit pension plan was closed to new entrants. The average remaining service period of active employees participating in the defined benefit pension plan is seven years and the average remaining life expectancy of inactive employees is 15 years. The average remaining service period of the active employees participating in the OPEB plan is 13 years.

The Company is required to file an actuarial valuation of its pension plans with the provincial regulator at least every three years, or more frequently if directed by the regulator. The most recent filing was dated December 31, 2016 and the next required filing is expected to be as at December 31, 2019.

The following tables set forth changes in the benefit obligations and fair value of plan assets for the Company’s defined benefit pension and other post-employment benefit plans for the years ended December 31, 2017 and 2016, as well as the funded status of the plans and amounts recognized in the Consolidated Financial Statements as at December 31, 2017 and 2016.


		Pension Benefits				OPEB
As at December 31		2017		2016		2017		2016

Change in Benefit Obligations
Projected Benefit Obligation, Beginning of Year	$	211	$	212	$	92	$	96
Service Cost		1		2		8		10
Interest Cost		7		8		3		4
Actuarial (Gains) Losses		7		6		(8)		(14)
Exchange Differences		15		6		-		2
Employee Contributions		-		-		1		1
Benefits Paid		(15)		(23)		(6)		(7)
Curtailment		-		-		(5)		-
Projected Benefit Obligation, End of Year	$	226	$	211	$	85	$	92

Change in Plan Assets
Fair Value of Plan Assets, Beginning of Year	$	194	$	208	$	-	$	-
Actual Return on Plan Assets		15		9		-		-
Exchange Differences		14		7		-		-
Employee Contributions		-		-		1		1
Employer Contributions		2		-		5		6
Benefits Paid		(15)		(23)		(6)		(7)
Transfers to Defined Contribution Plan		-		(7)		-		-
Fair Value of Plan Assets, End of Year	$	210	$	194	$	-	$	-
Funded Status of Plan Assets, End of Year	$	(16)	$	(17)	$	(85)	$	(92)

Total Recognized Amounts in the
Consolidated Balance Sheet Consist of:
Other Assets	$	4	$	1	$	-	$	-
Current Liabilities		-		-		(7)		(7)
Non-Current Liabilities		(20)		(18)		(78)		(85)
Total	$	(16)	$	(17)	$	(85)	$	(92)

Total Recognized Amounts in Accumulated
Other Comprehensive Income Consist of:
Net Actuarial (Gains) Losses	$	28	$	28	$	(35)	$	(28)
Net Prior Service Costs		(5)		(5)		(5)		(7)
Total Recognized in Accumulated Other Comprehensive
Income, Before Tax	$	23	$	23	$	(40)	$	(35)

The accumulated defined benefit obligation for all defined benefit plans was $310 million as at December 31, 2017 (2016 - $300 million).

The following table sets forth the defined benefit plans with accumulated benefit obligation and projected benefit obligation in excess of the fair value of the plan assets:


		Pension Benefits				OPEB
As at December 31		2017		2016		2017		2016

Projected Benefit Obligation	$	(77)	$	(211)	$	(85)	$	(92)
Accumulated Benefit Obligation		(76)		(208)		(85)		(92)
Fair Value of Plan Assets		57		194		-		-

Following are the weighted average assumptions used by the Company in determining the defined benefit pension and other post-employment benefit obligations:


	Pension Benefits		OPEB
As at December 31	2017	2016	2017	2016

Discount Rate	3.25%	3.50%	3.44%	3.80%
Rates of Increase in Compensation Levels	3.49%	3.49%	5.04%	5.04%

The following sets forth total benefit plans expense recognized by the Company:


	Pension Benefits						OPEB
For the years ended December 31		2017		2016		2015		2017		2016		2015

Net Defined Periodic Benefit Cost	$	-	$	(1)	$	1	$	3	$	13	$	14
Defined Contribution Plan Expense		24		25		33		-		-		-
Total Benefit Plans Expense	$	24	$	24	$	34	$	3	$	13	$	14

Of the total benefit plans expense, $25 million (2016 - $28 million; 2015 - $39 million) was included in operating expense, $8 million (2016 - $9 million; 2015 - $9 million) was included in administrative expense and a gain of $6 million (2016 - nil; 2015 - nil) was included in other (gains) losses, net.

The net defined periodic benefit cost is as follows:


	Pension Benefits						OPEB
For the years ended December 31		2017		2016		2015		2017		2016		2015

Service Cost	$	1	$	2	$	2	$	8	$	10	$	10
Interest Cost		7		8		9		3		4		4
Expected Return on Plan Assets		(9)		(11)		(12)		-		-		-
Amounts Reclassified from Accumulated
Other Comprehensive Income:
Amortization of net actuarial
(gains) and losses		1		-		2		(1)		(1)		-
Amortization of net prior service costs		-		-		-		(1)		-		-
Curtailment		-		-		-		(1)		-		-
Curtailment		-		-		-		(5)		-		-
Total Net Defined Periodic Benefit Cost	$	-	$	(1)	$	1	$	3	$	13	$	14

The amounts recognized in other comprehensive income are as follows:


	Pension Benefits						OPEB
For the years ended December 31		2017		2016		2015		2017		2016		2015

Net Actuarial (Gains) Losses	$	1	$	8	$	(22)	$	(8)	$	(14)	$	(24)
Amortization of Net Actuarial Gains and (Losses)		(1)		-		(2)		1		1		-
Amortization of Net Prior Service Costs		-		-		-		1		-		-
Curtailment		-		-		-		1		-		-
Total Amounts Recognized in Other
Comprehensive (Income) Loss, Before Tax	$	-	$	8	$	(24)	$	(5)	$	(13)	$	(24)
Total Amounts Recognized in Other
Comprehensive (Income) Loss, After Tax	$	-	$	6	$	(17)	$	(3)	$	(9)	$	(16)

The estimated net actuarial loss and net prior service costs for the pension and other post-retirement plans that will be amortized from accumulated other comprehensive income into the defined periodic benefit plan expense in 2018 is $2 million.

Following are the weighted average assumptions used by the Company in determining the net periodic pension and other post-retirement benefit costs:


	Pension Benefits			OPEB
For the years ended December 31	2017	2016	2015	2017	2016	2015

Discount Rate	3.50%	3.75%	3.75%	3.76%	4.05%	3.66%
Long-Term Rate of Return on Plan Assets	5.25%	6.25%	6.25%	-	-	-
Rates of Increase in Compensation Levels	3.49%	3.49%	3.99%	6.10%	6.43%	6.47%

The Company’s assumed health care cost trend rates are as follows:


For the years ended December 31	2017	2016	2015

Health Care Cost Trend Rate for Next Year	6.98%	7.30%	7.41%
Rate to Which the Cost Trend Rate is Assumed to Decline (Ultimate Trend Rate)	5.00%	5.00%	5.00%
Year that the Rate Reaches the Ultimate Trend Rate	2025	2026	2026

A one percent change in the assumed health care cost trend rate over the projected period would have the following effects:


		1% Increase		1% Decrease

Effect on Total of Service and Interest Cost Components	$	1	$	(1)
Effect on Other Post-Retirement Benefit Obligations	$	6	$	(5)

The Company expects to contribute $2 million to its defined benefit pension plans in 2018. The Company’s OPEB plans are funded on an as required basis.

The following provides an estimate of benefit payments for the next 10 years. These estimates reflect benefit increases due to continuing employee service.


	Defined Benefit Pension Payments				Other Benefit Payments

2018		$	15	$	6
2019			15		7
2020			15		7
2021			14		7
2022			14		7
2023 - 2027			66		27

The Company’s registered and other defined benefit pension plan assets are presented by investment asset category and input level within the fair value hierarchy as follows:


As at December 31		2017
		Level 1		Level 2		Level 3		Total

Investments:
Cash and Cash Equivalents	$	27	$	1	$	-	$	28
Fixed Income - Canadian Bond Funds		-		67		-		67
Equity - Domestic		13		41		-		54
Equity - International		-		50		-		50
Real Estate and Other		-		-		11		11
Fair Value of Plan Assets, End of Year	$	40	$	159	$	11	$	210

As at December 31		2016
		Level 1		Level 2		Level 3		Total

Investments:
Cash and Cash Equivalents	$	27	$	1	$	-	$	28
Fixed Income - Canadian Bond Funds		-		61		-		61
Equity - Domestic		12		38		-		50
Equity - International		-		45		-		45
Real Estate and Other		-		-		10		10
Fair Value of Plan Assets, End of Year	$	39	$	145	$	10	$	194

Fixed Income investments consist of Canadian bonds issued by investment grade companies. Equity investments consist of both domestic and international securities. The fair values of these securities are based on dealer quotes, quoted market prices and net asset values. Real Estate and Other consists mainly of commercial properties and is valued based on a discounted cash flow model.

A summary in changes in Level 3 fair value measurements is presented below:


	Real Estate and Other
As at December 31		2017		2016

Balance, Beginning of Year	$	10	$	10
Purchases, Sales and Settlements
Purchases and sales		-		-
Settlements		-		-
Actual Return on Plan Assets
Relating to assets sold during the reporting period		-		-
Relating to assets still held at the reporting date		1		-
Transfers In and Out of Level 3		-		-
Balance, End of Year	$	11	$	10

Encana’s registered pension plan assets were invested by the Company in the following as at December 31, 2017: 27 percent Domestic Equity (2016 - 26 percent), 23 percent Foreign Equity (2016 - 23 percent), 43 percent Bonds (2016 - 44 percent), and 7 percent Real Estate and Other (2016 - 7 percent). The expected long-term rate of return is 4.25 percent. The expected rate of return on pension plan assets is based on historical and projected rates of return for each asset class in the plan investment portfolio. The actual return on plan assets was $15 million (2016 - $9 million). The asset allocation structure is subject to diversification requirements and constraints, which reduce risk by limiting exposure to individual equity investment, credit rating categories and foreign currency exposure.