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 2012 the Group expensed 193 (2011: 205; 2010: 148) 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 2012, the Group employed 163,532 participants of defined benefit plan and supported 53,421 pensioners eligible for post-employment benefits.

As at 31 December 2012, management estimated that employees’ average remaining working period was 10 years (2011 – 9 years; 2010 – 10 years)

As at 31 December 2012, 2011 and 2010 net defined benefit plan liability comprised the following:


  2012 2011 2010
Present value of obligations on defined benefit plans 11,006 11,189 16,759
Fair value of plan assets (9) (4) (1)
Present value of unfunded obligations 10,997 11,185 16,758
Unrecognized past service cost (686) (960) (1,861)
Unrecognized actuarial gains 1,819 1,527 1,300
Net defined benefit plan liability 12,130 11,752 16,197

Net expenses/ gains for the defined benefit plan recognized in 2012, 2011 and 2010 were as follows:


  2012 2011 2010
Current service cost 522 604 835
Interest cost 951 1,039 1,423
Expected return on plan assets (1) - -
Actuarial gains (41) - (101)
Amortization of past service cost - non-guaranteed part 274 483 608
Curtailment effect (281) (5,115) (357)
Net expense/(gain) for the defined benefit plan 1,424 (2,989) 2,408

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 to introduction of the new collective labour agreement in December 2011. The agreement abolished certain social benefits in regard of the former Company’s employees and other miscellaneous social payments.

The following table summarizes movements in the present value of defined benefit obligations for the above plan in 2012, 2011 and 2010:


  2012 2011 2010
Present value of defined benefit obligations as at 1 January 11,189 16,759 15,964
Curtailment of liabilities (241) (4,868) (322)
Interest cost 951 1,039 1,423
Current service cost 522 604 835
Past service cost - - 1
Benefits paid (1,042) (1,453) (1,794)
Actuarial (gains)/losses (373) (892) 652
Present value of defined benefit obligations as at 31 December 11,006 11,189 16,759

The following table summarizes movements in the fair value of defined benefit plan assets in 2012, 2011 and 2010:


  2012 2011 2010
Fair value of plan assets as at 1 January 4 1 5
Expected return on plan assets 1 - -
Actuarial (gains)/losses (1) - 1
Benefits paid (1,042) (1,453) (1,794)
Contributions by the employer 1,047 1,456 1,789
Fair value of plan assets as at 31 December 9 4 1

As at 31 December 2012, 2011 and 2010 the principal actuarial assumptions used in determining the amounts for the defined benefit plan were as follows:


  2012 2011 2010
Discount rate 7.00% 8.50% 8.00%
Future salary increases 9.20% 9.72% 9.72%
Rate used for calculation of annuity value 4.00% 4.00% 4.00%
Increase in financial support benefits 5.00% 5.50% 5.50%
Staff turnover 5% for aged 50 and below 0%  for aged above 50 5% for aged 50 and below 0%  for aged above 50 5% for aged 50 and below 0%  for aged above 50
Mortality tables (source of information) 1985/86 1985/86 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 four annual periods are as follows:


  2012 2011 2010 2009 2008
Defined benefit obligations 11,006 11,189 16,759 15,964 17,617
Defined benefit assets (9) (4) (1) (5) (288)
Plan deficit 10,997 11,185 16,758 15,959 17,329
Experience adjustments on defined benefit plan liabilities (1,102) (664) (266) (301) (851)
Experience adjustments on defined benefit plan assets 1 - (1) 8 30

The Group expects to contribute 1,400 to its non-state pension fund in 2013 in respect of defined benefit plans.

History

Service