Pensions and Other Benefits (Tables)

12 Months Ended

Dec. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Net Periodic Benefit Cost for DB Pension Plans and Other Benefits

The elements of net periodic benefit cost for DB pension plans and other benefits recognized in the year, including the recognition of an $11 million gain related to legacy pension plans, included the following components:



	Pensions									Other benefits
(in millions of Canadian dollars)	2015			2014			2013			2015		2014			2013
Current service cost (benefits earned by employees in the year)	$	126		$	106		$	135		$	12	$	14		$	16
Interest cost on benefit obligation	463			477			445			21		23			21
Expected return on fund assets	(816		)	(757		)	(746		)	—		—			—
Recognized net actuarial loss (gain)	265			190			267			2		(2		)	(11		)
Amortization of prior service costs	(6		)	(68		)	(58		)	1		—			—
Net periodic benefit cost (recovery)	$	32		$	(52	)	$	43		$	36	$	35		$	26

Information About DB Pension Plans and Other Benefits

Information about the Company’s DB pension plans and other benefits, in aggregate, is as follows:



	Pensions						Other benefits
(in millions of Canadian dollars)	2015			2014			2015			2014
Change in projected benefit obligation:
Benefit obligation at January 1	$	11,360		$	9,921		$	517		$	483
Current service cost	126			106			12			14
Interest cost	463			477			21			23
Employee contributions	43			51			1			—
Benefits paid	(608		)	(579		)	(34		)	(27		)
Foreign currency changes	42			15			4			2
Plan amendments and other	(6		)	—			—			—
Actuarial loss (gain)	(226		)	1,369			(8		)	22
Projected benefit obligation at December 31	$	11,194		$	11,360		$	513		$	517



	Pensions						Other benefits
(in millions of Canadian dollars)	2015			2014			2015			2014
Change in fund assets:
Fair value of fund assets at January 1	$	11,376		$	10,722		$	7		$	8
Actual return on fund assets	1,374			1,088			(1		)	—
Employer contributions	81			80			33			26
Employee contributions	43			51			1			—
Benefits paid	(608		)	(579		)	(34		)	(27		)
Foreign currency changes	34			14			—			—
Fair value of fund assets at December 31	$	12,300		$	11,376		$	6		$	7
Funded status – plan surplus (deficit)	$	1,106		$	16		$	(507	)	$	(510	)

Pension Plan Asset



	2015						2014
	Pension plans in surplus			Pension plans in deficit			Pension plans in surplus			Pension plans in deficit
Projected benefit obligation at December 31	$	(10,681	)	$	(513	)	$	(10,878	)	$	(482	)
Fair value of fund assets at December 31	12,082			218			11,182			194
Funded Status	$	1,401		$	(295	)	$	304		$	(288	)

Amounts Recognized in the Company's Consolidated Balance Sheets

Amounts recognized in the Company’s Consolidated Balance Sheets are as follows:



	Pensions						Other benefits
(in millions of Canadian dollars)	2015			2014			2015			2014
Pension asset	$	1,401		$	304		$	—		$	—
Accounts payable and accrued liabilities	(10		)	(9		)	(34		)	(34		)
Pension and other benefit liabilities	(285		)	(279		)	(473		)	(476		)
Total amount recognized	$	1,106		$	16		$	(507	)	$	(510	)

Amounts Recognized in Accumulated Other Comprehensive Losses

Amounts recognized in accumulated other comprehensive losses are as follows:



	Pensions						Other benefits
(in millions of Canadian dollars)	2015			2014			2015			2014
Net actuarial loss:
Other than deferred investment gains	$	3,144		$	3,895		$	77		$	86
Deferred investment gains	(1,101		)	(803		)	—			—
Prior service cost	(20		)	(20		)	4			5
Deferred income tax	(580		)	(858		)	(20		)	(23		)
Total (Note 8)	$	1,443		$	2,214		$	61		$	68

Actuarial Assumptions Used Were Approximately

Weighted-average actuarial assumptions used were approximately:



(percentages)	2015		2014		2013
Benefit obligation at December 31:
Discount rate	4.22		4.09		4.90
Projected future salary increases	3.00		3.00		3.00
Health care cost trend rate	7.00	⁽¹⁾	7.00	⁽¹⁾	8.00	⁽²⁾
Benefit cost for year ended December 31:
Discount rate	4.09		4.90		4.28
Expected rate of return on fund assets	7.75		7.75		7.75
Projected future salary increases	3.00		3.00		3.00
Health care cost trend rate	7.00	⁽¹⁾	7.50	⁽²⁾	8.00	⁽²⁾

⁽¹⁾The health care cost trend rate is assumed to be 7.00% in 2016 (7.00% in 2015), and then decreasing by 0.50% per year to an ultimate rate of 5.00% per year in 2020 and thereafter.

⁽²⁾The health care cost trend rate was previously assumed to be 6.50% in 2016 (7.00% in 2015, 7.50% in 2014), and then decreasing by 0.50% per year to an ultimate rate of 5.00% per year in 2019 and thereafter.

Summary of Impact of One-percentage Point Change in Assumed Health Care Cost Trend Rates

A one-percentage-point change in the assumed health care cost trend rate would have the following effects:



(in millions of Canadian dollars)	One percentage point increase		One percentage point decrease
Increase (decrease) in the total of service and interest costs	$	—	$	—
Increase (decrease) in post-retirement benefit obligation	6		(6		)

Summary of Pension Plan Asset Allocation and Current Weighted Average Policy Range

The Company’s pension plan asset allocation, the current weighted average asset allocation targets and the current weighted average policy range for each major asset class, were as follows:



	Current asset allocation target	Current policy range	Percentage of plan assets at December 31
Asset allocation (percentage)	Current asset allocation target	Current policy range	2015	2014
Cash and cash equivalents	0.5	0 – 5	1.1	1.7
Fixed income	29.5	20 – 40	21.0	21.9
Public equity	46.0	35 – 55	54.5	52.5
Real estate and infrastructure	12.0	4 – 20	5.8	7.6
Absolute return	12.0	0 – 18	17.6	16.3
Total	100.0		100.0	100.0

Summary of Defined Benefit Pension Plan Assets at Fair Value

The following is a summary of the assets of the Company’s DB pension plans at fair values at December 31, 2015 and 2014:



(in millions of Canadian dollars)	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs Level (2)		Significant unobservable inputs (Level 3)		Investments measured at NAV⁽¹⁾		Total
December 31, 2015
Cash and cash equivalents	$	129	$	11	$	—	$	—	$	140
Fixed income
• Government bonds⁽²⁾	—		1,276		—		—		1,276
• Corporate bonds⁽²⁾	—		1,228		—		—		1,228
• Mortgages⁽³⁾	—		81		—		—		81
Public equities
• Canada	1,449		46		—		—		1,495
• U.S. and international	5,169		34		—		—		5,203
Real estate⁽⁴⁾	—		—		451		—		451
Derivative assets⁽⁵⁾	—		—		—		—		—
Absolute return⁽⁶⁾
• Funds of hedge funds	—		—		—		781		781
• Multi-strategy funds	—		—		—		517		517
• Credit funds	—		—		—		555		555
• Equity funds	—		—		—		311		311
Infrastructure⁽⁷⁾	—		—		—		262		262
	$	6,747	$	2,676	$	451	$	2,426	$	12,300
December 31, 2014
Cash and cash equivalents	$	106	$	83	$	—	$	—	$	189
Fixed income
• Government bonds⁽²⁾	—		1,180		—		—		1,180
• Corporate bonds⁽²⁾	—		1,229		—		—		1,229
• Mortgages⁽³⁾	—		77		—		—		77
Public equities
• Canada	1,448		48		—		—		1,496
• U.S. and international	4,454		27		—		—		4,481
Real estate⁽⁴⁾	—		—		654		—		654
Derivative assets⁽⁵⁾	—		1		—		—		1
Absolute return⁽⁶⁾
• Funds of hedge funds	—		—		—		652		652
• Multi-strategy funds	—		—		—		473		473
• Credit funds	—		—		—		490		490
• Equity funds	—		—		—		246		246
Infrastructure⁽⁷⁾	—		—		—		208		208
	$	6,008	$	2,645	$	654	$	2,069	$	11,376

⁽¹⁾Investments measured at net asset value ("NAV"):

Amounts are compromised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient. These investments have not been classified in the fair value hierarchy.

⁽²⁾Government & Corporate Bonds:

Fair values for bonds are based on market prices supplied by independent sources as of the last trading day.

⁽³⁾Mortgages:

The fair value of mortgages of $81 million (2014 – $77 million) is based on current market yields of financial instruments of similar maturity, coupon and risk factors.

⁽⁴⁾Real estate:

The fair value of real estate investments of $451 million (2014 – $654 million) is based on property appraisals which use a number of approaches that typically include a discounted cash flow analysis, a direct capitalization income method and/or a direct comparison approach. Appraisals of real estate investments are generally performed semi-annually by qualified external accredited appraisers. There are $278 million of unfunded commitments for real estate investments as at December 31, 2015 (2014 – nil).

⁽⁵⁾ The Company’s pension funds may utilize the following derivative instruments: equity futures to replicate equity index returns (Level 2); currency forwards to partially hedge foreign currency exposures (Level 2); bond forwards to reduce asset/liability interest rate risk exposures (Level 2); interest rate swaps to manage duration and interest rate risk (Level 2); credit default swaps to manage credit risk (Level 2); and options to manage interest rate risk and volatility (Level 2).

⁽⁶⁾ Absolute return:

The fair value of absolute return fund investments of $2,164 million (2014 – $1,861 million) is based on the NAV reported by the fund administrators. The funds have different redemption policies and periods. There are no unfunded commitments for absolute return investments as at December 31, 2015 (2014 – nil).



-	Fund of hedge funds invest in a portfolio of hedge funds that allocate capital across a broad array of funds and/or investment managers, with monthly redemptions upon 95 days' notice.
-	Multi-strategy funds include funds that invest in broadly diversified portfolios of equity, fixed income and derivative instruments with quarterly redemptions upon 60 days' notice.
-	Credit funds invest in an array of fixed income securities with quarterly redemptions upon 60 days' notice.
-	Equity funds invest primarily in U.S. and global equity securities. Redemptions range from quarterly upon 60 days notice to tri-annually upon 45 days' notice.

⁽⁷⁾ Infrastructure:

Infrastructure fund values of $262 million (2014 – $208 million) are based on the NAV of the funds that invest directly in infrastructure investments. The fair values of the investments have been estimated using the capital accounts representing the plans ownership interest in the funds. The investment in each fund is not subject to redemption and is normally returned through distributions as a result of the liquidation of the underlying infrastructure investments. It was estimated that the investments in these funds will be liquidated over the weighted-average period of approximately two years. As at December 31, 2015, unfunded commitments for infrastructure investments were negligible (2014 – negligible).

Summary of Defined Benefit Pension Plan Assets Measured at Fair Value Using Unobservable Inputs

During 2014 and 2015 the portion of the assets of the Company’s DB pension plans measured at fair value using unobservable inputs (Level 3) changed as follows⁽¹⁾:



(in millions of Canadian dollars)	Real Estate
As at January 1, 2014	$	847
Disbursements	(236		)
Net realized gains	67
Decrease in net unrealized gains	(24		)
As at December 31, 2014	$	654
Disbursements	(223		)
Net realized gains	64
Decrease in net unrealized gains	(44		)
As at December 31, 2015	$	451

⁽¹⁾ Upon adoption of ASU 2015-07, investments measured at NAV are no longer required to be categorized within the fair value hierarchy.

Summary of Estimated Future Pension and Other Post-retirement Benefit Payments

The estimated future defined benefit pension and other benefit payments to be paid by the plans for each of the next five years and the subsequent five-year period are as follows:



(in millions of Canadian dollars)	Pensions		Other benefits
2016	$	595	$	36
2017	609		35
2018	621		35
2019	632		34
2020	642		33
2021 – 2025	3,318		158