Defined Benefit Plans

12 Months Ended

Dec. 31, 2013

Compensation and Retirement Disclosure [Abstract]

Defined Benefit Plans

Defined Benefit Plans

Certain of our subsidiaries in Europe maintain various funded and unfunded defined benefit plans for their employees. Annual service cost for these employee benefit plans is determined using the projected unit credit actuarial method. The subsidiaries that maintain funded plans have established investment policies for plan assets. The investment strategies are long-term in nature and designed to meet the following objectives:

•Ensure that funds are available to pay benefits as they become due;

•Maximize the total returns on plan assets subject to prudent risk taking; and

•Preserve or improve the funded status of the trusts over time.

Our subsidiaries review the asset allocation within their respective portfolios on a regular basis. Generally, the portfolios will be rebalanced to a target allocation when an individual asset class approaches its minimum or maximum targeted level. Allocations to real estate occur over multiple time periods. Assets targeted to real estate, but not yet allocated, are invested in fixed income securities with corresponding adjustments to fixed income rebalancing guidelines.

The following is a summary of the funded status of our defined benefit plans at December 31, 2013 (in millions):

Projected benefit obligation at beginning of period	$	384.6
Acquisition (a)	687.1
Service cost	25.8
Interest cost	26.8
Actuarial gain	(4.8		)
Participants’ contributions	11.8
Benefits paid	(28.1		)
Effect of changes in exchange rates	59.8
Projected benefit obligation at end of period	$	1,163.0
Accumulated benefit obligation at end of period	$	1,144.7
Fair value of plan assets at beginning of period	$	310.9
Acquisition (a)	626.0
Actual earningsof plan assets	37.0
Group contributions	44.6
Participants’ contributions	11.8
Benefits paid	(27.6		)
Effect of changes in exchange rates	54.3
Fair value of plan assets at end of period	$	1,057.0
Net liability (b)	$	106.0

_______________ 

(a) Amounts relate to the Virgin Media Acquisition.

(b) The net liability related to our defined benefit plans is included in other long-term liabilities in our consolidated balance sheet.

The change in the amount of net actuarial gain (loss) not yet recognized as a component of net periodic pension costs in our consolidated statements of operations is as follows:

	Before-tax amount			Tax benefit (expense)			Net-of-tax amount
	in millions
Balance of net actuarial loss at January 1, 2013	$	(5.2	)	$	1.6		$	(3.6	)
Net actuarialgain	12.7			(1.4		)	11.3
Amount recognized as a component of net loss attributable to Liberty Global shareholders	(0.8		)	0.1			(0.7		)
Changes in ownership and other	(0.6		)	0.2			(0.4		)
Balance of net actuarial gain at December 31, 2013	$	6.1		$	0.5		$	6.6

We expect that the amount of net actuarial gain or loss to be recognized in our 2014 consolidated statement of operations will not be significant.

The measurement date used to determine our defined benefit plan assumptions was December 31, 2013. The actuarial assumptions used to compute the net periodic pension cost are based on information available as of the beginning of the period, specifically market interest rates, past experience and management’s best estimate of future economic conditions. Changes in these assumptions may impact future benefit costs and obligations. In computing future costs and obligations, the subsidiaries must make assumptions about such items as employee mortality and turnover, expected salary and wage increases, discount rate, expected long-term rate of return on plan assets and expected future cost increases.

The expected rates of return on the assets of the funded plans are the long-term rates of return the subsidiaries expect to earn on their trust assets. The rates of return are determined by the investment composition of the plan assets and the long-term risk and return forecast for each asset category. The forecasts for each asset class are generated using historical information as well as an analysis of current and expected market conditions. The expected risk and return characteristics for each asset class are reviewed annually and revised, as necessary, to reflect changes in the financial markets. To compute the expected return on plan assets, the subsidiaries apply an expected rate of return to the fair value of the plan assets.

The weighted average assumptions used in determining benefit obligations at December 31, 2013 are as follows:

Expected rate of salary increase	3.1	%
Discount rate	3.8	%
Return on plan assets	5.1	%

The components of net periodic pension cost recorded in our consolidated statement of operations during 2013 are as follows (in millions):

Service cost	$	25.8
Interest cost	26.8
Expected return on plan assets	(30.0		)
Other	(1.1		)
Net periodic pension cost	$	21.5

The asset allocation by asset category and by fair value hierarchy level (as further described in note 7) of our plan assets is as follows:

	December 31, 2013
	Total		Level 1		Level 2		Level 3
	in millions
Equity securities	$	344.3	$	344.3	$	—	$	—
Debt securities	275.5		275.5		—		—
Insurance contract (a)	153.4		—		—		153.4
Hedge funds	133.1		117.8		15.3		—
Guarantee investment contracts	83.0		83.0		—		—
Real estate	36.7		28.9		—		7.8
Other	31.0		31.0		—		—
Total	$	1,057.0	$	880.5	$	15.3	$	161.2

_______________ 

(a) Relates to the purchase of an insurance contract by a trustee of one of our defined benefit plans. The insurance contract will pay an income stream to the plan which is expected to match all future cash outflows in respect of certain liabilities. The fair value of this insurance contract is presented as an asset of the plan and is measured based on the future cash flows to be received under the contract discounted using the same discount rate used to measure the associated liabilities.

A reconciliation of the beginning and ending balances of our plan assets measured at fair value using Level 3 inputs is as follows (in millions):

Balance at January 1, 2013	$	—
Acquisition (a)	147.3
Actual return on plan assets:
Gains relating to assets still held at year-end	1.0
Purchases of investments	0.9
Foreign currency translation adjustments and other, net	12.0
Balance at December 31, 2013	$	161.2

_______________ 

(a) Amount relates to the Virgin Media Acquisition.

The weighted average asset allocation established for the funded plans at December 31, 2013 is as follows:

Equity securities	32.6	%
Debt securities	26.1	%
Insurance contracts	14.5	%
Hedge funds	12.6	%
Guarantee investment contracts	7.9	%
Real estate	3.5	%
Other	2.8	%
Total	100.0	%

Our subsidiaries’ contributions to their respective defined benefit plans in 2014 are currently expected to aggregate $58.6 million.

As of December 31, 2013, the benefits that we currently expect to pay during the next ten years with respect to our defined benefit plans are as follows (in millions):

2014	$	45.7
2015	$	45.2
2016	$	45.1
2017	$	49.7
2018	$	50.6
2019 through 2023	$	284.6