Obtain the annual statements for BCE Inc. for the year ended

Obtain the annual statements for BCE Inc. for the year ended December 31, 2009, from the company's website or SEDAR (www.sedar.com).

Instructions

Refer to the 2009 financial statements of BCE Inc and answer the following questions.

(a) Determine what the funded status is of the defined benefit plans and what the dollar amount of the over- or underfunding is at December 31, 2009, and December 31, 2008. Has the status improved or deteriorated since the end of the preceding year? What is the major reason for the change in BCE's funded status? What is the status of the plans in the net deficit position and what is the status of the plans in a net surplus position at December 31, 2009?

(b) What is the amount of the pension asset or liability reported on BCE's December 31, 2009 balance sheet? Provide reconciliation to the funded status reported in (a). Comment on this representation.

(c) What was the expected return on the plan assets in 2009? What was the actual return on the plan assets for the year? What amount of actuarial gains and losses, if any, were amortized to pension expense in 2009? What was the total amount of actuarial gains and losses arising during the year? How much has not yet been recognized in the accounts at December 31, 2009? How much was recognized for past service costs during the year? What was the total amount of past service costs arising during the year? How much has not yet been recognized in the accounts at December 27, 2009?

(d) What was the expense that the company reported for its defined benefit plans? Estimate the amount of expense that would have been reported under the immediate recognition approach for December 31, 2009. Comment on any differences.

(e) What type of post-retirement plans does the company have? Are these in a surplus or deficit position? What were the balances reported for these plan obligations? How do these balances compare with the actual deficits or surpluses in the plans and why?

(f) What is the total expense for the defined contribution plans during 2009? 2008?

All of the answers below are taken from Note 23 of the 2009 financial statements.

(a)  The plan asset and accrued benefit obligation balances at the end of years 2009 and 2008 are presented below.

(in $millions )	Dec. 31, 2009	Dec. 31, 2008
Accrued benefit obligation	14,680	13,602
Plan assets	13,069	11,510
Funded status–deficit	1,611	2,092

he under-funded status has improved slightly since the end of the 2008          mainly because the employer made a large contribution of $1.025 billion in 2009 compared to only $189 million in 2008.  At the same time, the actual return on the plan assets was a gain of $1,566 million compared to a loss of $2,610 million in 2008. 

This net deficit of $1,611 million at December 31, 2009, is allocated as follows to the various plans

(in $millions )	Plans in a deficit	Plans in a surplus
Accrued benefit obligation	14,553	127
Plan assets	12,811	258
Funded status–deficit (surplus)	1,742	-131

(b)  The reconciliation of the funded status of these plans at December 31, 2009, to the amounts reported on the balance sheet is as follows:

(in $millions)	Dec. 31, 2009
Funded status–deficit	$ (1,611)
Unamortized net actuarial loss	3,358
Unamortized cost of past services	56
Unamortized transitional obligation	1
Valuation allowance	(100)
Accrued benefit asset, net *	$ 1,704
Reported on the statement of financial position as follows:
Long term asset – Accrued benefit asset	2,316
Long term liability – Accrued benefit liability	(612)

The company is showing a large asset of $2.316 billion, when in actual fact, the company’s plan in a surplus position is only $131 million. In addition, the company’s actual deficit for its plans is $1.742 billion, and yet only $612 is reported as a liability.  This results in a very distorted reporting of the liabilities and assets of the company since the company does not really own these assets, nor can they used for operating purposes.  This would result in a distortion of various debt to equity ratios calculated for the company, for example.

(c)       The company’s results are shown below in the table: (in $millions)

Expected return on plan assets (1,566 – 685)	881
Actual return on plan assets	1,566
Current year’s amortization of actuarial losses	(84)
Actual amount of actuarial losses arising during the year	(1,043)
Actuarial losses not yet recognized	3,358
Current year’s amortization of past service costs	(5)
Actual amount of past service costs arising during the year	0
Past service costs not yet recognized	56

(d)   The expense reported for the defined benefit plans $239 million.

The expense under the immediate recognition approach would be calculated as follows:

Current service cost	175
Interest cost	892
Actual return on plan assets	(1,566)
Actuarial losses arising during the year	1,043
Valuation allowance	33
	577

This is substantially higher than the expense under the defer-and-amortize approach due to the differences in the returns on the plan assets and the actuarial losses arising during the year.

(e)   BCE has other post employment plans that provide for health and life insurance coverage, but these plans are being phased out over the next 10 years ending December  31, 2016.  The company also provides to some workers disability plans, workers’ compensation and medical benefits to former employees until their retirement commences.  These plans were a large deficit position at December 31, 2009 and 2008 of $1,431 million and $1,355 million.  The company has few assets top fund these plans.  For 2009 and 2008, the company reported liabilities of $1,404 and $1,443 million respectively.  In contrast to the pension benefits, these liabilities are very close to the obligations, with differences of only $27 million in 2009, and $88 million in 2008.  The primary reason for this is that that company has few assets, and unamortized amounts of actuarial gains and losses and past service costs, only represent about 10% of the actual obligation balances.

(f)   The total expense for the defined contribution plans were:  $45 million for both 2008 and 2009.