19. 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 2011 the Group expensed 205 (2010: 148; 2009: 222) 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 December 31, 2011, the Group employed 173,878 participants of defined benefit plan and supported 59,410 pensioners eligible for post-employment benefits.

As at December 31, 2011, management estimated that employees' average remaining working period was 9 years (2010 - 10 years; 2009 - 14 years)

As at December 31, 2011, 2010 and 2009 net defined benefit plan liability comprised the following:


  2011 2010 2009
Present value of obligations on defined benefit plans 11,189 16,759 15,964
Fair value of plan assets (4) (1) (5)
Present value of unfunded obligations 11,185 16,758 15,959
Unrecognized past service cost (960) (1,861) (2,451)
Unrecognized actuarial gains/losses 1,527 1,300 2,070
Net defined benefit plan liability 11,752 16,197 15,578

Net expenses for the defined benefit plan recognized in 2011, 2010 and 2009 were as follows:


  2011 2010 2009
Current service cost 604 835 902
Interest cost 1,039 1,423 1,571
Expected return on plan assets - - (15)
Actuarial gains - (101) (137)
Past service cost - guaranteed part - - 114
Amortization of past service cost - non-guaranteed part 483 608 735
Curtailment effect (5,115) (357) (254)
Final settlement effect - - (246)
Net (gain)/expense for the defined benefit plan (2,989) 2,408 2,670

Net gain/expense 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 2011, 2010 and 2009:


  2011 2010 2009
Present value of defined benefit obligations as at January 1 16,759 15,964 17,617
Curtailment of liabilities (4,868) (322) (154)
Interest cost 1,039 1,423 1,571
Current service cost 604 835 902
Past service cost - 1 (10)
Benefits paid (1,453) (1,794) (435)
Business combinations - - (7)
Liabilities extinguished on settlements - - (1,661)
Actuarial (gains)/losses (892) 652 (1,859)
Present value of defined benefit obligations as at December 31 11,189 16,759 15,964

The following table summarizes movements in the fair value of defined benefit plan assets in 2011, 2010 and 2009:


  2011 2010 2009
Fair value of plan assets as at January 1 1 5 288
Expected return on plan assets - - 15
Actuarial (gains)/losses - 1 (42)
Benefits paid (1,453) (1,794) (435)
Assets distributed on settlement - - (1,661)
Contributions by the employer 1,456 1,789 1,840
Fair value of plan assets as at December 31 4 1 5

As at December 31, 2011, 201 and 2009 the principal actuarial assumptions used in determining the amounts for the defined benefit plan were as follows:


  2011 2010 2009
Discount rate 8.50% 8.00% 9.00%
Future salary increases 9.72% 9.72% 9.72%
Rate used for calculation of annuity value 4.00% 4.00% 4.00%
Increase in financial support benefits 5.50% 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
7.00%
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:


  2011 2010 2009 2008 2007
Defined benefit obligations 11,189 16,759 15,964 17,617 19,349
Defined benefit assets (4) (1) (5) (288) (300)
Plan (deficit)/proficit 11,185 16,758 15,959 17,329 19,049
Experience adjustments on defined benefit
plan liabilities
664 266 301 851 1,714
Experience adjustments on defined benefit
plan assets
- (1) 8 30 2

The Group expects to contribute 1,500 to its non-state pension fund in 2012 in respect of defined benefit plans.

History

Service