Q4 - Power Corporation of Canada

Significant assumptions – The discount rate assumption used indetermining pension and post-employment benefit obligationsand net benefit expense reflects the market yields, as of themeasurement date, on high quality debt instruments with cashflows that match expected benefit payments.The overall expected rate of return on plan assets for the year isdetermined based on long term market expectations prevailingat the beginning of the year for each asset class, weighted byportfolio allocation, less an allowance in respect of all expensesexpected to be charged to the fund. Anticipated future longtermperformance of individual asset categories is considered,reflecting management’s best estimates of expected futureinflation and expected real yields on fixed income securities and and best estimates.The period of time over which benefits are assumed to be paid isbased on best estimates of future mortality, including allowancesfor mortality improvements. Mortality assumptions are significantin measuring the defined benefit obligation for defined benefitplans. The mortality assumptions applied by the Company takeinto consideration average life expectancy, including allowancesfor future mortality improvement as appropriate, and reflectvariations in such factors as age, gender and geographic location.The assumptions also take into consideration an estimation offuture improvements in longevity. This estimate is subject toconsiderable uncertainty and judgment is required in establishingthis assumption.The mortality tables are reviewed at least annually, andassumptions are in accordance with accepted actuarial practice inCanada. Emerging plan experience is reviewed and considered inestablishing the best estimate for future mortality.As these assumptions relate to factors that are long-term in nature,they are subject to a degree of uncertainty. Differences betweenactual experience and the assumptions, as well as changes in theassumptions resulting from changes in future expectations, resultin increases or decreases in the pension and post-employmentbenefits expense and defined benefit obligation in future years.There is no assurance that the plans will be able to earn assumedrates of return, and market driven changes to assumptions couldimpact future contributions and expenses.The following table indicates the impact of changes to certain keyassumptions related to pension and post-employment benefits.Impact of a change of 1.0% in significant assumptionsDefined benefitOther post-employmentpension plansbenefitsObligation Expense Obligation ExpenseDiscount rateIncrease (551) (12) (48) 1Decrease 705 16 59 (1)Expected long-term rate of return on plan assetsIncrease n/a (31) n/a n/aDecrease n/a 31 n/a n/aRate of compensation increaseIncrease 124 14 – –Decrease (109) (12) – –GREAT-WEST LIFECO INC.Health care trend rateIncrease n/a n/a 40 2Decrease n/a n/a (33) (2)Funding – The Company’s subsidiaries have both funded andunfunded pension plans as well as other post-employment benefitplans which are unfunded. The Company’s funded pension plansare funded to or above the amounts required by relevant legislation.During the year, the Company contributed $121 million ($123million in 2011) to the pension plans and made benefit paymentsof $17 million ($17 million in 2011) for post-employment benefits.The Company expects to decrease contributions to its definedbenefit pension plans by approximately $8 million in 2013.International Financial Reporting Standards – The Companyissued its first annual consolidated financial statements incompliance with International Financial Reporting Standards(IFRS) for the year ended December 31, 2011.Due to the evolving nature of IFRS, there are a number of IFRSchanges that could impact the Company in the future. TheCompany actively monitors future IFRS changes proposed by theInternational Accounting Standards Board (IASB) to assess if thechanges to the standards may have an impact on the Company’sresults or operations. In addition, the Company considerspotential changes to financial reporting, disclosure controls andprocedures, or information systems of the Company as a result ofthese IFRS changes.Great-West Lifeco Inc. Annual Report 2012 43POWER CORPORATION OF CANADA C 39