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The Medscheme Group operates a post-employment medical benefit scheme. Eligible members are entitled to a fixed Rand
amount subsidy based on their medical scheme contributions. This post-employment medical benefit scheme is the present
value of the employer’s share of the expected medical scheme contributions to be paid in respect of current and future
continuation members. IAS 19 requires that companies should have provided for the liability by the time that the employee
and/or their dependants become entitled to receive the post-employment benefits, which is usually the date of retirement or
death in service. Although the post-employment liability usually only vests at retirement or death in service and is generally
not dependent on the length of service that an employee has had with the employer, the liability accrues uniformly while
in service.
The accumulated post-employment medical aid obligation was determined by independent actuaries in June 2017 using the
projected unit credit method prescribed by IAS 19. Future benefits valued are projected using specific actuarial assumptions
and the liability for in-service members is accrued over an expected working lifetime.
| |
June 2016
R’000 |
|
| Balance at the end of the year |
2 771 |
|
2 691 |
|
| The amounts recognised in the statement of comprehensive income are as follows: |
|
|
|
|
| Interest cost |
229 |
|
231 |
|
| Expected benefit payment |
(434) |
|
(468) |
|
| Net actuarial loss/(gain) recognised in the current year |
285 |
|
(206) |
|
| Net movement for the year |
80 |
|
(443) |
|
| The amount recognised in the statement of financial position is determined as follows: |
|
|
|
|
| Present value of funded obligations |
2 691 |
|
3 134 |
|
| Interest cost |
229 |
|
231 |
|
| Expected employer benefit payments |
(434) |
|
(468) |
|
| Actuarial loss/(gain) |
285 |
|
(206) |
|
| Accrued liability in excess of plan assets |
2 771 |
|
2 691 |
|
| Assets and liabilities recognised in the statement of financial position is as follows: |
|
|
|
|
| Present value of funded obligations |
|
|
|
|
| Fair value of plan assets |
– |
|
– |
|
| Present value of unfunded obligations |
2 771 |
|
2 691 |
|
| Accrued liability in excess of plan assets |
2 771 |
|
2 691 |
|
|
|
|
The risks faced by the Group as a result of the post-employment healthcare obligation can be summarised as follows:
- Inflation: The risk that future CPI inflation and healthcare cost inflation are higher than expected and uncontrolled.
- Longevity: The risk that pensioners live longer than expected and thus their healthcare benefit is payable for longer
than expected.
- Open-ended, long-term liability: The risk that the liability may be volatile in the future and uncertain.
- Future changes in legislation: The risk that changes to legislation with respect to the post-employment healthcare liability
may increase the liability for the Group.
- Future changes in the tax environment: The risk that changes in the tax legislation governing employee benefits may
increase the liability for the Group.
- Administration: Administration of this liability poses a burden to the Group.
- Enforcement of eligibility criteria and rules: The risk that eligibility criteria and rules are not strictly or consistently enforced.
The principal actuarial assumptions used were as follows:
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June 2016
|
|
| Discount rate |
8.00% p.a. |
|
9.30% p.a. |
|
| Healthcare cost inflation |
7.10% p.a. |
|
9.10% p.a. |
|
| Post-retirement mortality |
PA(90) |
|
PA(90) |
|
| |
ultimate table* |
|
ultimate table* |
|
|
|
|
| * |
Rated down two years with a 1% improvement p.a. from a base year of 2006. |
No explicit assumption was made about additional mortality or healthcare costs due to Aids.
The liability was recalculated to show the effect of:
- a one percentage point decrease or increase in the rate of healthcare cost inflation;
- five or ten percentage point increase in the rate of healthcare cost inflation for the next five years, thereafter returning to
a healthcare cost inflation of 8.20% p.a.; and
- a one percentage point decrease or increase in the discount rate.
Disclosure requirement paragraph 145 of IAS 19
| |
Healthcare cost inflation |
| |
Central
assumption
7.10% |
(1%) |
1% |
| Accrued liability 30 June 2017 (R’million) |
2 770 |
2 750 |
2 793 |
| % Change |
– |
(0.7%) |
0.8% |
| Interest cost 2017/18 |
0.203 |
0.201 |
0.205 |
| % Change |
– |
(1.0%) |
1.0% |
| |
Central
assumption
9.10% |
(1%) |
1% |
| Sensitivity results from previous valuation |
|
|
|
| Interest Cost 2016/17 |
0.229 |
0.227 |
0.231 |
| % Change |
– |
(0.9%) |
0.9% |
| |
Healthcare cost inflation |
| |
Central
assumption
7.10% |
5%
for 5 years |
10%
for 10 years |
| Accrued liability 30 June 2017 (R’million) |
2.770 |
2.836 |
2.913 |
| % Change |
– |
2.4% |
5.1% |
| |
Discount rate |
| |
Central
assumption
8.00% |
(1%) |
1% |
| Accrued liability 30 June 2017 (R’million) |
2.770 |
2.916 |
2.638 |
| % Change |
– |
5.3% |
(4.8%) |
|