18. Employee benefits

According to staff agreements, the Group contributes to pension plans and also provides additional benefits for its active and retired employees.

Defined contribution plans

The non-state pension fund NPF Telecom-Soyuz maintains the defined contribution plan of Group. In 2014 the Group expensed 14 (2013: 124) in relation to defined contribution plans.

Defined benefit plans and other long-term employee benefits

To become eligible for benefits under the plan upon retirement the participant must achieve the statutory retirement age, which is currently 55 for women and 60 for men and fulfil certain minimum seniority requirements.

As at 31 December 2014, the Group employed 151,725 participants of defined benefit plan (2013: 160,219) and supported 37,493 pensioners eligible for post-employment benefit (2013: 47,378).

As at 31 December 2014 and 2013 net defined benefit plan liability comprised the following:

  2014 2013
Present value of obligations on defined benefit plans 5,975 9,783
Fair value of plan assets (10) (9)
Present value of unfunded obligations 5,965 9,774

Net expenses/ gains for the defined benefit plan recognized in 2014 and 2013 were as follows:

  2014 2013
Current service cost 446 495
Interest cost 783 769
Expected return on plan assets (1) (1)
Other expenses - 600
Curtailment effect (169) -
Net expense for the defined benefit plan 1,059 1,863

Net expense/ gain for the defined benefit plan, excluding interest cost and return on plan assets, is included in the consolidated statement of comprehensive income in the line “Wages, salaries, other benefits and payroll taxes”. Return on plan assets and interest cost are recognized in “Other investing and financing gain” and “Finance costs” line items of these consolidated statements of comprehensive income.

Curtailment effect occurred due staff reduction in 2014.

The following table summarizes movements in the present value of defined benefit obligations for the above plan in 2014 and 2013:

  2014 2013
Present value of defined benefit obligations as at 1 January 9,783 10,870
Curtailment of liabilities (169) -
Interest cost 783 769
Current service cost 446 495
Other expenses - 600
Benefits paid (1,079) (1,097)
Actuarial gains (3,789) (1,854)
Present value of defined benefit obligations as at 31 December 5,975 9,783

The following table summarizes movements in the fair value of defined benefit plan assets in 2014 and 2013:

  2014 2013
Fair value of plan assets as at 1 January 9 9
Expected return on plan assets 1 1
Actuarial (gains)/losses - (1)
Benefits paid (1,082) (1,097)
Contributions by the employer 1,082 1,097
Fair value of plan assets as at 31 December 10 9

As at 31 December 2014 and 2013 the principal actuarial assumptions used in determining the amounts for the defined benefit plan were as follows:

  2014 2013
Discount rate 13.00% 8.00%
Future salary increases 8.10% 9.20%
Inflation rate 7.00% 5.00%
Increase in financial support benefits 7.00% 5.00%
Staff turnover Probability distribution depends on age and gender 5% for aged 50 and below 0%  for aged above 50
Mortality tables (source of information) 2010 with 40% adjustment 1985/86

The amounts of experience adjustments and present value of defined benefit obligation and defined benefit assets for the current annual period and previous two annual periods are as follows:

  2014 2013
Defined benefit obligations 5,975 9,783
Defined benefit assets (10) (9)
Plan deficit 5,965 9,774
Experience adjustments on defined benefit plan liabilities (1,047) (1,084)
Experience adjustments on defined benefit plan assets - (1)

The Group expects to contribute 762 to its non-state pension funds in 2015 in respect of defined benefit plans.

The following net pension liabilities are in consolidated statements of financial position in 2014 and 2013:

  2014 2013
Net defined benefit obligations as at 1 January 9,774 10,861
Total defined benefit plan expenses, net 1,062 1,863
Contributions by the employer (1,082) (1,097)
Remeasurement of pension liabilities (3,789) (1,853)
Net defined benefit obligations as at 31 December 5,965 9,774

Remeasurement of pension liabilities consists of:

  2014 2013
Actuarial (gains)/losses on liabilities (3,789) (1,854)
Actuarial (gains)/losses on assets - 1
Remeasurement of pension liabilities (3,789) (1,853)

My Annual Report

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