24. Post-employment commitments and others

As stated in Note 2.2.12, the Group has assumed commitments with employees including defined contribution and defined benefit plans (see Glossary), healthcare and other post-employment benefits.

Employees are covered by defined contribution plans in practically all of the countries, in which the Group operates, with the plans in Spain and Mexico being the most significant. Most defined benefit plans are closed to new employees and with liabilities relating largely to retired employees, the most significant being those in Spain, Mexico, the United States and Turkey. In Mexico, the Group provides medical benefits to a closed group of employees and their family members, both in active service and in retirement.

The breakdown of the balance sheet net defined benefit liability as of December 31, 2015, 2014 and 2013 is provided below:

Download Excel

Net Defined Benefit Liability (asset) on the Balance Sheet	Millions of euros
	2015	2014	2013
Pension commitments	5,306	4,737	4,266
Early retirement commitments	2,855	2,803	2,634
Medical benefits commitments	1,023	1,083	811
Total commitments	9,184	8,622	7,711
Pension plan assets	1,974	1,697	1,436
Early retirement plan assets	-	-	-
Medical benefit plan assets	1,149	1,240	938
Total plan assets (*)	3,124	2,937	2,374
Total net liability / asset on the balance sheet	6,060	5,685	5,337
Of which:
Net asset on the balance sheet (**)	(238)	(285)	(175)
Net liability on the balance sheet (***)	6,299	5,970	5,512

(*) In Turkey, the foundation responsible for managing the benefit commitments holds an additional asset of €421 million which, in accordance with IFRS regarding the asset ceiling, has not been recognized in the accounts,– because although it could be used to reduce future pension contributions it could not be immediately refunded to the employer. (**) Recorded under the heading “Other Assets - Other” of the consolidated balance sheet (See Note 20) (***) Recorded under the heading “Provisions - Provisions for pensions and similar obligations” of the consolidated balance sheet (See Note 23)

The amounts relating to post-employment benefits charged to the consolidated profit and loss account for the years ended December 31, 2015, 2014 and 2013 are as follows:

Download Excel

Consolidated Income Statement Impact	Notes	Millions of euros
		2015	2014	2013
Interest and similar expenses (*)	36.2	108	172	199
Interest expense		309	336	342
Interest income		(201)	(165)	(143)
Personnel expenses		141	121	150
Defined contribution plan expense	43.1	84	63	80
Defined benefit plan expense	43.1	57	58	70
Provisions (net)	45	592	816	373
Early retirement expense		502	681	336
Past service cost expense		26	(29)	6
Remeasurements (**)		20	93	-
Other provision expenses		44	71	31
Total impact on Consolidated Income Statement: Debit (Credit)		841	841	1,109

(*) Interest and similar charges includes interest charges/credits. (**) Actuarial losses (gains) on remeasurement of the net defined benefit liability relating to early retirements in Spain and other similar benefits (see Note 2.2.12).

The amounts relating to post-employment benefits charged to the balance sheet as of December 31, 2015, 2014 and 2013 are as follows:

Download Excel

Equity Impact	Notes	Millions of euros
		2015	2014	2013
Defined benefit plans		128	353	70
Post-employment medical benefits		7	144	(58)
Total impact on equity: Debit (Credit) (*)	23	135	497	12

(*) Actuarial gains (losses) on remeasurement of the net defined benefit liability relating to pension commitments before income taxes.

24.1 Defined benefit plans

Defined benefit pension commitments relate mainly to employees who have already retired or taken early retirement from the Group, certain closed groups of active employees still accruing defined benefit pensions, and in-service death and disability benefits provided to most active employees. For the latter the Group pays the required premiums to fully insure the related liability. The change in these pension commitments during the years ended December 31, 2015, 2014 and 2013 is presented below.

Download Excel

	Millions of euros
	2015			2014			2013
Pension Commitments	Defined Benefit Obligation	Plan Assets	Net Liability (asset)	Defined Benefit Obligation	Plan Assets	Net Liability (asset)	Defined Benefit Obligation	Plan Assets	Net Liability (asset)
Balance at the beginning	8,622	2,937	5,685	7,714	2,375	5,337	8,206	2,431	5,775
Current service cost	57	0	57	58	-	58	70	-	70
Interest income or expense	309	201	108	336	165	172	342	143	199
Contributions by plan participants	2	2	-	1	1	-	1	1	-
Employer contributions	-	8	(8)	-	264	(264)	-	256	(256)
Past service costs (1)	530	0	530	652	-	652	342	-	342
Remeasurements:
Return on plan assets (2)	-	(106)	106	-	178	(178)	-	(286)	286
From changes in demographic assumptions	8	-	8	31	-	31	3	-	3
From changes in financial assumptions	(53)	-	(53)	724	-	724	(289)	-	(289)
Other actuarial gain and losses	88	(7)	94	13	-	13	4	-	4
Benefit payments	(1,086)	(146)	(940)	(984)	(130)	(854)	(932)	(114)	(817)
Settlement payments	(2)	(17)	15	-	-	-	(1)	(1)	-
Business combinations and disposals	795	321	474	-	-	-	-	-	-
Effect on changes in foreign exchange rates	(136)	(98)	(38)	43	53	(10)	(121)	(93)	(29)
Other effects	50	28	22	33	31	3	88	40	48
Balance at the end	9,184	3,124	6,060	8,622	2,937	5,685	7,712	2,375	5,337
Of which
Spain	6,491	380	6,111	6,212	382	5,830	5,778	385	5,393
Mexico	1,527	1,745	(219)	1,643	1,908	(266)	1,313	1,490	(177)
The United States	362	329	33	362	324	38	276	244	32
Turkey	435	337	98

(1) Including gains and losses arising from settlements. (2) Excluding interest, which is recorded under "Interest income or expense".

The balance under the heading “Provisions - Provisions for pensions and similar obligations” of the accompanying consolidated balance sheet as of December 31, 2015 includes €365 million relating to post-employment benefit commitments of former members of the Board of Directors and the Bank’s Management Committee.

The most significant commitments are those in Spain and Mexico and, to a lesser extent, in the United States and Turkey. The remaining commitments are located mostly in Portugal and South America. Unless otherwise required by local regulation, all defined plans have been closed to new entrants, who instead are able to participate in the Group´s defined contribution plans. Both the costs and the present value of the commitments are determined by independent qualified actuaries using the “projected unit credit” method.

In order to guarantee the good governance of these systems the Group has established specific Benefits Committees. These committees include members from the different areas of the business to ensure that all decisions are made taking into consideration all of the associated impacts. Both the costs and the present value of the commitments are determined by independent qualified actuaries using the “projected unit credit” method.

The following table sets out the key actuarial assumptions used in the valuation of these commitments:

Download Excel

Actuarial Assumptions	2015				2014				2013
	Spain	Mexico	USA	Turkey	Spain	Mexico	USA	Turkey	Spain	Mexico	USA	Turkey
Discount rate	2.00%	9.30%	4.30%	10.30%	2.25%	8.75%	3.97%	-	3.50%	9.49%	4.86%	-
Rate of salary increase	2.00%	4.75%	3.00%	8.60%	2.00%	4.75%	3.25%	-	3.00%	4.75%	3.25%	-
Rate of pension increase		2.13%		7.10%		2.13%	2.25%	-		2.13%		-
Medical cost trend rate		6.75%		9.94%		6.75%	8.00%	-		6.75%		-
Mortality tables	PERM/F 2000P	EMSSA 97	RP 2014	CSO2001	PERM/F 2000P	EMSSA 97	RP 2014	-	PERM/F 2000P	EMSSA 97	RP 2000 Projected & adjusted	-

Discount rates used to value future benefit cash flows have been determined by reference to high quality corporate bonds (Note 2.2.12) of the appropriate currency (Euro in the case of Spain, Mexican peso for Mexico and USD for the United States and new Turkish Lira for Turkey).

The expected return on plan assets has been set in line with the adopted discount rate.

Assumed retirement ages have been set by reference to the earliest age at which employees are entitled to retire, the contractually agreed age in the case of early retirements in Spain or by using retirement rates.

Changes in the main actuarial assumptions may affect the valuation of the commitments. The table below shows the sensitivity of the benefit obligations to changes in the key assumptions:

Download Excel

	Basis points change	Millions of euros		Millions of euros
		2015		2014
Sensitivity Analysis		Increase	Decrease	Increase	Decrease
Discount rate	50	(357)	391	(328)	360
Rate of salary increase	50	9	(9)	10	(10)
Rate of pension increase	50	23	(22)	17	(16)
Medical cost trend rate	100	213	(169)	201	(159)
Change in obligation from each additional year of longevity		130	-	126	-

The sensitivities provided above have been determined at the date of these consolidated financial statements, and reflect solely the impact of changing one individual assumption at a time, keeping the rest of the assumptions unchanged, thereby excluding the effects which may result from combined assumption changes.

In addition to the commitments to employees shown above, the Group has other less material commitments. These include long-service awards, which consist of either an established monetary award or some vacation days granted to certain groups of employees when they complete a given number of years of service. As of December 31, 2015, 2014 and 2013 the actuarial liabilities for the outstanding awards amounted to €39 million, €45 million and €47 million, respectively. These commitments are recorded under the heading "Provisions - Other provisions" of the accompanying consolidated balance sheet (see Note 23).

As described above, the Group maintains both pension and medical benefit commitments with their employees.

Post-employment commitments and other long-term benefits

These pension commitments relate mostly to pensions already in payment, and which have been determined based on salary and years of service in accordance with the specific plan rules. For most plans pension payments are due on retirement, death and long term disability.

In addition, during the year ended December 31, 2015, Group entities in Spain offered certain employees the option to take early retirement (that is, earlier than the age stipulated in the collective labor agreement in force). This offer was accepted by 1,817 employees (1,706 and 1,055 during 2014 and 2013, respectively). These commitments include both the liability for the benefit payments due as well as the contributions payable to external pension funds during the early retirement period. As of December 31, 2015, 2014 and 2013 the value of these commitments amounted to €2,855, €2,803 and €2,634 million respectively.

The change in the defined benefit plan obligations and plan assets during the year ended December 31, 2015 was as follows:

Download Excel

	Millions of euros
	Defined Benefit Obligation
2015	Spain	Mexico	USA	Turkey	Rest of the world
Balance at the beginning	6,212	574	362	-	392
Current service cost	9	8	3	2	5
Interest income or expense	123	48	15	16	12
Contributions by plan participants	-	-	-	2	-
Employer contributions	-	-	-	-	-
Past service costs (1)	550	(15)	-	2	(7)
Remeasurements:
Return on plan assets (2)	-	-	-	-	-
From changes in demographic assumptions	-	-	(7)	15	-
From changes in financial assumptions	101	(23)	(18)	(25)	3
Other actuarial gain and losses	11	2	(3)	74	-
Benefit payments	(964)	(40)	(32)	(9)	(11)
Settlement payments	-	-	-	-	-
Business combinations and disposals	400	-	-	395	-
Effect on changes in foreign exchange rates	1	(36)	42	(36)	(39)
Other effects	50	1	-	-	(1)
Balance at the end	6,491	518	362	435	355

Download Excel

	Millions of euros
	Plan Assets
2015	Spain	Mexico	USA	Turkey	Rest of the world
Balance at the beginning	382	668	324	-	323
Current service cost	-	-	-	-	-
Interest income or expense	-	57	14	12	9
Contributions by plan participants	-	-	-	2	-
Employer contributions	-	1	-	-	7
Past service costs (1)	-	-	-	-	-
Remeasurements:
Return on plan assets (2)	-	(50)	(19)	54	3
From changes in demographic assumptions	-	-	-	-	-
From changes in financial assumptions	-	-	-	-	-
Other actuarial gain and losses	-	-	-	-	(7)
Benefit payments	(51)	(39)	(12)	(5)	(8)
Settlement payments	-	-	(17)	-	-
Business combinations and disposals	22	-	-	299	-
Effect on changes in foreign exchange rates	-	(41)	38	(25)	6
Other effects	27	-	1	-	-
Balance at the end	380	596	329	337	332

Download Excel

2015	Millions of euros
	Net Liability (asset)
	Spain	Mexico	USA	Turkey	Rest of the world
Balance at the beginning	5,830	(94)	38	-	69
Current service cost	9	8	3	2	4
Interest income or expense	123	(10)	1	4	3
Contributions by plan participants	-	-	-	-	-
Employer contributions	-	(1)	-	-	(7)
Past service costs (1)	550	(15)	-	2	(7)
Remeasurements:
Return on plan assets (2)	-	50	19	(54)	(3)
From changes in demographic assumptions	-	-	(7)	15	-
From changes in financial assumptions	101	(23)	(18)	(25)	3
Other actuarial gain and losses	11	2	(3)	74	7
Benefit payments	(913)	-	(20)	(4)	(3)
Settlement payments	-	-	17	-	-
Business combinations and disposals	378	-	-	96	-
Effect on changes in foreign exchange rates	1	5	4	(11)	(45)
Other effects	23	1	(1)	-	(1)
Balance at the end	6,111	(78)	33	98	23
Of which
Vested benefit obligation relating to current employees	172
Vested benefit obligation relating to retired employees	5,939

(1) Including gains and losses arising from settlements. (2) Excluding interest, which is recorded under "Interest income or expense".

The change in net defined benefit plan liabilities (assets) during the years ended December 31, 2014 and 2013 was as follows:

Download Excel

	Millions of euros
	2014: Net liability (asset)				2013: Net liability (asset)
	Spain	Mexico	USA	Rest of world	Spain	Mexico	USA	Rest of world
Balance at the beginning	5,395	(38)	32	76	5,620	(33)	20	79
Current service cost	18	7	5	6	20	9	5	6
Interest income or expense	169	(3)	2	17	178	(3)	1	18
Contributions by plan participants	-	-	-	-	-	-	-	-
Employer contributions	-	(72)	(2)	(7)	-	(64)	-	(6)
Past service costs (1)	683	-	(20)	(12)	337	-	-	4
Remeasurements:
Return on plan assets (2)	-	(27)	(47)	(59)	-	98	43	5
From changes in demographic assumptions	-	1	31	-	-	-	3	-
From changes in financial assumptions	398	38	39	69	-	(59)	(34)	-
Other actuarial gain and losses	(4)	-	(3)	10	(4)	14	(2)	(2)
Benefit payments	(847)	-	(3)	(4)	(807)	(1)	(2)	(7)
Settlement payments	-	-	-	-	-	-	-	-
Business combinations and disposals	-	-	-	-	-	-	-	-
Effect on changes in foreign exchange rates	1	-	6	(16)	-	1	(1)	(20)
Other effects	17	-	(1)	(13)	50	-	(2)	(2)
Balance at the end	5,830	(94)	38	69	5,395	(38)	32	76
Of which
Vested benefit obligation relating to current employees	221				213
Vested benefit obligation relating to retired employees	5,609				5,182

(1) Includes gains and losses from settlements. (2) Excludes interest which is reflected in the line item “Interest income and expenses”.

In Spain, local regulation requires that pension and death benefit commitments must be funded, either through the assets held for a qualified pension plan or an insurance contract.

These insurance contracts meet the requirements of the accounting standard regarding the non-recoverability of contributions. However, a significant number of the insurance contracts are held with BBVA Seguros, S.A. and CatalunyaCaixa Vida –consolidated subsidiaries – and consequently these policies cannot be considered plan assets under IAS 19. For this reason, the liabilities insured under these policies are fully recognized under the heading "Provisions – Provisions for pensions and similar obligations" of the accompanying consolidated balance sheet (see Note 23), while the related assets held by the insurance company are included within the Group´s consolidated assets (registered according to the classification of the corresponding financial instruments). As of December 31, 2015 the value of these separate assets was €2,921 million, representing direct rights of the insured employees held in the consolidated balance sheet, hence these benefits are effectively fully funded,

On the other hand, some pension commitments have been funded through insurance contracts held with insurance companies not related to the Group, and can therefore be considered qualifying insurance policies and plan assets under IAS 19. In this case the accompanying consolidated balance sheet reflects the value of the obligations net of the fair value of the qualifying insurance policies. As of December 31, 2015, 2014 and 2013, the fair value of the aforementioned insurance contracts (€380, €382 and €385 million, respectively) exactly match the value of the corresponding obligations and therefore no amount for this item has been recorded in the accompanying consolidated balance sheet.

Pensions are paid by the insurance companies with whom BBVA has affected the insurance contracts and to whom all insurance premiums have been paid. The premiums are determined by the insurance companies using “cash flow matching” techniques to ensure that benefits can be met when due, guaranteeing both the actuarial and interest rate risk.

In Mexico, there is a defined benefit plan for employees hired prior to 2001. Other employees participate in a defined contribution plan. External funds/trusts have been constituted locally to meet benefit payments as required by local regulation.

In The United States there are mainly two defined benefit plans, both closed to new employees, who instead are able to join a defined contribution plan. External funds/trusts have been constituted locally to fund the plans, as required by local regulation.

In Turkey there is a defined benefit plan which compliments the level of benefits provided under the social security system. In addition, the foundation which manages the plan, in accordance with local regulation, holds a liability of €36m pending its transfer to the social security system, as established under Law 5754 of April 17, 2008. The amount of the transferring liability has been determined in accordance with the said Law and is fully funded.

The Bank also has the duty to pay indemnities to certain employees and members of the Group’s Senior Management in the event that they cease to hold their positions for reasons other than their own will, retirement, disability or dereliction of duty. The amount will be calculated according to the salary and professional conditions of each, taking into consideration fixed elements of the employee’s remuneration and length of office at the Bank. Under no circumstances will it be paid in cases of disciplinary dismissal for misconduct by decision of the employer on grounds of the employee's dereliction of duties.

In 2015 as a consequence of certain Senior Management members leaving the Group, indemnities for a total of €26,277 thousand were paid, which have been recorded as Other Personnel Expenses (see Note 43). Moreover, beneficiaries were paid an equivalent part of the sums that the Group had previously provisioned to satisfy contractual pension commitments to the value of € 11,458 thousand.

Medical benefit commitments

The change in medical plan obligations and plan assets during the years ended December 31, 2015, 2014 and 2013 was as follows:

Download Excel

	Millions of euros
	2015			2014			2013
Medical Benefits Commitments	Defined Benefit Obligation	Plan assets	Net liability (asset)	Defined Benefit Obligation	Plan assets	Net liability (asset)	Defined Benefit Obligation	Plan assets	Net liability (asset)
Balance at the beginning	1,083	1,240	(157)	811	938	(128)	985	895	90
Current service cost	31	-	31	23	-	23	30	-	30
Interest income or expense	95	109	(14)	78	90	(13)	80	75	5
Contributions by plan participants	-	-	-	-	-	-	-	-	-
Employer contributions	-	-	-	-	183	(183)	-	186	(186)
Past service costs (1)	1	-	1	1	-	1	1	-	1
Remeasurements:
Return on plan assets (2)	-	(94)	94	-	46	(46)	-	(140)	140
From changes in demographic assumptions	-	-	-	-	-	-	-	-	-
From changes in financial assumptions	(91)	-	(91)	181	-	181	(196)	-	(196)
Other actuarial gain and losses	4	-	4	10	-	10	(2)	-	(2)
Benefit payments	(30)	(30)	-	(29)	(28)	(1)	(29)	(28)	(1)
Settlement payments	(2)	-	(2)	-	-	-	-	-	-
Business combinations and disposals	-	-	-	-	-	-	-	-	-
Effect on changes in foreign exchange rates	(69)	(76)	8	9	10	(1)	(57)	(49)	(9)
Other effects	-	-	-	-	1	(1)	(1)	(1)	-
Balance at the end	1,023	1,149	(126)	1,083	1,240	(157)	811	938	(128)

(1) Including gains and losses arising from settlements. (2) Excluding interest, which is recorded under "Interest income or expense".

The valuation of these benefits and their accounting treatment in the accompanying consolidated financial statements follow the same methodology as that employed in the valuation of pension commitments.

In Mexico there is a medical benefit plan for employees hired prior to 2007. New employees from 2007 are covered by medical insurance policy. An external trust has been constituted locally to fund the plan, in accordance with local legislation and Group policy.

In Turkey employees are currently provided with medical benefits through a foundation in collaboration with the social security, although local legislation prescribes the future unification of this and similar systems into the general social security system itself.

Estimated benefit payments

The estimated benefit payments over the next ten years for all the entities in Spain, Mexico, the United States and Turkey are as follows:

Download Excel

Estimated Benefit Payments	Millions of euros
	2016	2017	2018	2019	2020	2021-2025
Commitments in Spain	832	747	661	576	495	1,411
Commitments in Mexico	79	81	87	92	97	579
Commitments in The United States	15	16	17	17	18	104
Commitments in Turkey	26	16	18	19	22	165
Total	952	860	783	704	632	2,259

Plan assets

The majority of the Group´s defined benefit plans are funded by plan assets held in external funds/trusts legally separate from the Group sponsoring entity. However, in accordance with local regulation, some commitments are funded through internally held provisions, principally those relating to early retirements in Spain.

Plan assets are those assets which will be used to directly settle the assumed commitments and which meet the following conditions: they are not part of the Group sponsoring entity´s assets, they are available only to pay post-employment benefits and they cannot be returned to the Group sponsoring entity.

To manage the assets associated with defined benefit plans, BBVA Group has established investment policies designed according to criteria of prudence and minimizing the financial risks associated with plan assets.

The investment policy consists of investing in a low risk and diversified portfolio of assets with maturities consistent with the term of the benefit obligation and which, together with contributions made to the plan, will be sufficient to meet benefit payments when due, thus mitigating the plans‘ risks.

In those countries where plan assets are held in pension funds or trusts, the investment policy is developed consistently with local regulation. When selecting specific assets, current market conditions, the risk profile of the assets and their future market outlook are all taken into consideration. In all the cases, the selection of assets takes into consideration the term of the benefit obligations as well as short-term liquidity requirements.

The risks associated with these commitments are those which give rise to a deficit in the defined benefit plan. A deficit could arise from factors such as a fall in the market value of plan assets, an increase in long-term interest rates leading to a decrease in the fair value of fixed income securities, or a deterioration of the economy resulting in more write-downs and credit rating downgrades.

The table below shows the allocation plan assets as of December 31, 2015:

Download Excel

Plan Assets Breakdown	Millions of euros
	2015
Cash or cash equivalents	83
Other debt securities (Goverment bonds)	2,247
Property, fixtures and materials	1
Mutual funds	1
Asset-backed securities	61
Insurance contracts	5
Other	9
Total	2,407
Of which:
Bank account in BBVA	21
Debt securities issued by BBVA	5

In addition to the above there are plan assets relating to the previously mentioned insurance contracts in Spain and the foundation in Turkey.

The following table provides details of investments in quoted markets (Level 1) as of December 31, 2015:

Download Excel

Plan Assets Breakdown Investments in quoted markets	Millions of euros
	2015
Cash or cash equivalents	83
Other debt securities (Goverment bonds)	2,247
Mutual funds	1
Asset-backed securities	61
Total	2,392
Of which:
Bank account in BBVA	21
Debt securities issued by BBVA	5

The remainders of the assets are mainly invested in Level 2 assets in in accordance with the classification established under IFRS 13 (mainly insurance contracts).

During 2016 the Group expects to make contributions to the plans similar to the actual contributions made during 2015.

24.2 Defined contribution commitments

Certain Group entities sponsor defined contribution plans. Some of these plans allow employees to make contributions which are then matched by the employer.

Contributions are recognized as and when they are accrued, with a charge to the consolidated income statement in the corresponding financial year. No liability is therefore recognized in the accompanying consolidated balance sheet (See Note 43.1).