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Pension and other employee benefit plans
 12 Months Ended
Mar. 31, 2020
Pension and other employee benefit plans
20. Pension and other employee benefit plans
Severance indemnities and pension plans
MHFG and certain subsidiaries sponsor and offer their employees, other than directors and corporate auditors, contributory and
non-contributory
defined benefit plans. Under these plans, employees are provided with
lump-sum
cash payments upon leaving the company. The amount of benefits under each plan is principally determined based on the positions in career, the length of service and the reason for severance. When employees meet certain conditions including the length of service, they may opt to receive annuity payments instead of
lump-sum
payments. MHFG and certain subsidiaries also offer special termination benefits to former employees whose contributions during their careers were deemed meritorious and to those with particular circumstances.
Certain foreign offices and subsidiaries have defined contribution plans and/or defined benefit plans, of which disclosures are combined with those for domestic benefit plans, as they are not significant and those plans don’t use significantly different assumptions.
MHFG and certain subsidiaries have several defined contribution plans. The costs recognized in respect of contributions to the plans for the fiscal years ended March 31, 2018, 2019 and 2020 were ¥2,511 million, ¥3,217 million and ¥3,142 million, respectively.
Pension plans are not fully integrated among subsidiaries of MHFG and plan assets are managed separately by each plan.
Net periodic benefit cost and funded status
The following table presents the components of net periodic cost of the severance indemnities and pension plans for the fiscal years ended March 31, 2018, 2019 and 2020:
             
 
2018
 
 
2019
 
 
2020
 
 
(in millions of yen)
 
Service cost-benefits earned during the fiscal year
  
43,649
   
43,698
   
45,697
 
Interest costs on projected benefit obligations
  
7,471
   
6,933
   
5,590
 
Expected return on plan assets
  
(34,916
)  
(38,518
)  
(40,551
)
Amortization of prior service cost (benefits)
  
214
   
152
   
121
 
Amortization of net actuarial loss (gain)
  
411
   
(7,886
)  
(5,873
)
Special termination benefits
  
3,960
   
2,929
   
9,793
 
             
Net periodic benefit cost
  
20,789
   
7,308
   
   14,777
 
             
 
 
 
 
 
 
 
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss)
before-tax
for the fiscal years ended March 31, 2019 and 2020 are summarized as follows:
         
 
2019
 
 
2020
 
 
(in millions of yen)
 
Net actuarial gain (loss)
  
(21,300
)  
(169,963
)
Amortization of net actuarial loss (gain)
  
(7,886
)  
(5,873
)
Prior service benefits (cost)
  
(109
)  
(2,734
)
Amortization of prior service cost (benefits)
  
152
   
121
 
         
Total recognized in other comprehensive income (loss)
before-tax
  
(29,143
)  
(178,449
)
         
 
 
 
 
 
 
As of March 31, 2020, the amounts in Accumulated other comprehensive income (loss), which will be amortized as prior service costs and actuarial loss over the next fiscal year, are estimated to be ¥409 million and ¥1,642 million, respectively.
Weighted-average assumptions used to determine benefit obligations and net periodic benefit cost are as follows:
             
 
2018
 
 
2019
 
 
2020
 
Weighted-average assumptions used to determine benefit obligations at fiscal year end:
  
   
   
 
Discount rates
  
0.43
%  
0.34
%  
0.37
%
Rates of increase in future compensation levels
  
1.80-4.80
%  
1.80-4.80
%  
1.80-4.80
%
Weighted-average assumptions used to determine net periodic benefit cost during the year:
  
   
   
 
Discount rates
  
0.47
%  
0.43
%  
0.34
%
Rates of increase in future compensation levels
  
1.80-4.80
%  
1.80-4.80
%  
1.80-4.80
%
Expected rates of return on plan assets
  
1.58
%  
1.60
%  
1.68
%
 
 
 
In estimating the discount rates, the MHFG Group uses interest rates on high-quality fixed-income government and corporate bonds. The durations of these bonds closely match those of the benefit obligations. Assumed discount rates are reevaluated at each measurement date. The expected rate of return for each asset category is based primarily on various aspects of the long-term prospects for the economy that include historical performance and the
market
environment.
The following table sets forth the combined funded status and amounts recognized in the accompanying consolidated balance sheets at March 31, 2019 and 2020 for the plans of MHFG and its subsidiaries:
         
 
2019
 
 
2020
 
 
(in millions of yen)
 
Change in benefit obligations:
  
   
 
Benefit obligations at beginning of fiscal year
  
1,559,356
   
1,590,818
 
Service cost
  
43,698
   
45,697
 
Interest cost
  
6,933
   
5,590
 
Plan participants’ contributions
  
1,229
   
1,200
 
Amendments
  
109
   
2,734
 
Actuarial loss (gain)
  
49,085
   
4,507
 
Foreign exchange translation
  
(817
)  
(5,605
)
Benefits paid
  
(52,618
)  
(52,902
)
Lump-sum
payments
  
(16,157
)  
(20,743
)
         
Benefit obligations at end of fiscal year
  
1,590,818
   
1,571,296
 
         
Change in plan assets:
  
   
 
Fair value of plan assets at beginning of fiscal year
  
2,405,730
   
2,413,556
 
Actual return (negative return) on plan assets
  
66,652
   
(125,549
)
Foreign exchange translation
  
(390
)  
(4,268
)
Partial withdrawal of assets from employee retirement benefits trusts
(Note)
  
(27,534
)  
—  
 
Employer contributions
  
20,487
   
20,587
 
Plan participants’ contributions
  
1,229
   
1,200
 
Benefits paid
  
(52,618
)  
(52,902
)
         
Fair value of plan assets at end of fiscal year
  
2,413,556
   
2,252,624
 
         
Funded status
  
822,738
   
681,328
 
         
Amounts recognized in the consolidated balance sheets consist of:
  
   
 
Prepaid pension cost
  
850,472
   
711,981
 
Accrued pension liability
  
(27,734
)  
(30,653
)
         
Net amount recognized
  
822,738
   
681,328
 
         
Amounts recognized in Accumulated other comprehensive income (loss)
before-tax
consist of:
  
   
 
Prior service benefits (cost)
  
(1,309
)  
(3,914
)
Net actuarial gain (loss)
  
262,044
   
86,200
 
         
Net amount recognized
  
260,735
   
82,286
 
         
 
 
 
 
 
Note:During the fiscal year ended March 31, 2019, a subsidiary of MHFG partially withdrew assets from employee retirement benefit trusts, which were established for the payment of employees’ severance pay and retirement pensions. Overall, the trusts remain in overfunded status as of March 31, 2019. No gains or losses have been recognized as a result of this transaction.
 
 
 
 
The aggregated accumulated benefit obligations of these plans were ¥1,590,818 million and ¥1,571,296 million, as of March 31, 2019 and 2020, respectively. The defined benefit plans generally employ a multi-variable and
non-linear
formula based upon rank and years of service. Employees with service in excess of one year are qualified to receive lump-sum severance indemnities.
The following table shows the projected benefit obligations and the fair value of plan assets for the plans of MHFG and its subsidiaries with projected benefit obligations in excess of plan assets, and the accumulated benefit obligations and the fair value of plan assets for the plans with accumulated benefit obligations in excess of plan assets at March 31, 2019 and 2020:
         
 
2019
 
 
2020
 
 
(in millions of yen)
 
Plans with projected benefit obligations in excess of plan assets:
  
   
 
Projected benefit obligations
  
61,579
   
63,619
 
Fair value of plan assets
  
33,845
   
32,966
 
Plans with accumulated benefit obligations in excess of plan assets:
  
   
 
Accumulated benefit obligations
  
61,579
   
63,619
 
Fair value of plan assets
  
33,845
   
32,966
 
 
 
 
 
 
 
 
 
Note:The plans with projected benefit obligations in excess of plan assets include those with accumulated benefit obligations in excess of plan assets.
 
 
 
 
 
 
 
Investment policies and asset allocation
In managing plan assets, the MHFG Group determines the appropriate levels of risk that the Group can assume under the given circumstances to maximize the investment returns from a long-term perspective while ensuring that sufficient funds will be available to plan participants and beneficiaries. Generally, the investment returns are relative to the risks involved. In considering the maximum levels of risk that the MHFG Group can assume, it primarily considers the following factors: the employers’ burden of maintaining the benefit plans based on the design of the plans and future plan contributions, the age distribution of the plan participants and beneficiaries, the financial conditions of the employers, and the employers’ ability to absorb future variability in plan premiums. The long-term asset allocation to each asset category such as Japanese equity securities, Japanese debt securities, foreign equity securities and foreign debt securities is determined based upon the optimal portfolio, which is estimated to yield the maximum return within the range of an acceptable level of risk. Additionally, the asset allocation is reviewed whenever there are large fluctuations in pension plan liabilities caused by modifications of pension plans, or there are changes in the market environment. When selecting an investment in each asset category, the MHFG Group takes into consideration credit standing of an investee, concentration of credit risk to a certain investee and liquidity of a financial instrument among other things. The investments in each asset category are further diversified across funds, strategies and sectors along with other things. There is no significant investment in a single investee except Japanese government bonds.
Certain subsidiaries of MHFG established employee retirement benefit trusts and transferred their assets to the trusts as plan assets. These assets are separated from the employer’s proprietary assets for the payment to the plan beneficiaries. The assets held in these trusts are primarily Japanese equity securities and have been entrusted directly to qualified trustees including trust banks.
MHFG and certain subsidiaries’ target allocation for the plan assets, excluding those of the employee retirement benefit trusts, at March 31, 2020 is as follows:
     
Asset category
 
Asset ratio
 
Japanese equity securities
  
5.00
%
Japanese debt securities
  
34.00
%
Foreign equity securities
  
25.00
%
Foreign debt securities
  
23.00
%
General account of life insurance companies
  
11.00
%
Other
  
2.00
%
     
Total
  
100.00
%
     
 
 
 
 
 
 
 
 
Note:General account of life insurance companies is a contract with life insurance companies which guarantees payments of principal and predetermined interest payments.
 
 
 
 
 
 
 
Fair value of plan assets
The following table presents the fair value of plan assets of MHFG and its subsidiaries at March 31, 2019 and 2020, by asset class. For the detailed information on fair value measurements, including descriptions of Level 1, 2 and 3 of the fair value hierarchy and the valuation methodologies, see Note 27 “Fair value.”
                                 
 
2019
  
2020
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
 
 
(in billions of yen)
 
Japanese equity securities:
  
   
   
   
   
   
   
   
 
Common stocks
(1)
  
1,317
   
—
   
—
   
1,317
   
1,194
   
—  
   
—  
   
1,194
 
Pooled funds
(2)
  
11
   
4
   
—
   
15
   
10
   
4
   
—  
   
14
 
Japanese debt securities:
  
   
   
   
   
   
   
   
 
Government bonds
  
190
   
—
   
—
   
190
   
196
   
—  
   
—  
   
196
 
Pooled funds
(2)
  
—
   
10
   
—
   
10
   
—  
   
9
   
—  
   
9
 
Other
  
—
   
24
   
—
   
24
   
—  
   
23
   
—  
   
23
 
Foreign equity securities:
  
   
   
   
   
   
   
   
 
Common stocks
  
120
   
—
   
—
   
120
   
101
   
—  
   
—  
   
101
 
Pooled funds
(2)
  
—
   
5
   
—
   
5
   
—  
   
4
   
—  
   
4
 
Foreign debt securities:
  
   
   
   
   
   
   
   
 
Government bonds
  
178
   
6
   
—
   
184
   
188
   
7
   
—  
   
195
 
Pooled funds
(2)
  
—
   
10
   
—
   
10
   
—  
   
11
   
—  
   
11
 
Other
  
—
   
18
   
—
   
18
   
—  
   
20
   
—  
   
20
 
General account of life insurance companies
(3)
  
—
   
111
   
—
   
111
   
—  
   
111
   
—  
   
111
 
Other
  
79
(4)
 		  
4
   
—
   
83
   
68
(4)
 		  
1
   
—  
   
69
 
Plan assets measured at net asset value
(5)
  
   
   
   
327
   
   
   
   
306
 
                                 
Total assets at fair value
  
1,895
   
192
   
—
   
2,414
   
1,757
   
190
   
—  
   
2,253
 
                                 
 
 
 
 
 
 
 
 
Notes:
(1)This class represents equity securities held in the employee retirement benefit trusts of ¥1,317 billion and ¥1,194 billion carried at fair value at March 31, 2019 and 2020, respectively, which are well-diversified across industries.
 
 
 
 
 
(2)These classes primarily include pension investment fund trusts. Investments in these classes are generally measured at fair value and can be redeemed within a short-term period upon request.
 
 
 
 
 
(3)Investments in this class are measured at conversion value, which is equivalent to fair value.
 
 
 
 
 
(4)Amounts primarily include cash and short-term assets carried at fair value.
 
 
 
 
 
(5)In accordance with ASC 820, certain plan assets that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.
 
 
 
 
 
There were no returns on and purchases and sales of Level 3 assets during the fiscal years ended March 31, 2019 and 2020.
Contributions
The total contribution of approximately ¥50 billion is expected to be paid to the pension plans during the fiscal year ending March 31, 2021, based on the current funded status and expected asset return assumptions.
Estimated future benefit payments
The following table presents forecasted benefit payments including the effect of expected future service for the fiscal years indicated:
     
 
(in millions of yen)
 
Fiscal year ending March 31:
  
 
2021
  
70,325
 
2022
  
70,623
 
2023
  
71,165
 
2024
  
72,469
 
2025
  
73,118
 
2026-2030
  
346,908