23.

Employee benefits (Post-Employment)


	2018		2017
Liabilities
Petros Pension Plan		—		10,728
Petros Pension Plan - Renegotiated		7,152		—
Petros Pension Plan - Non-renegotiated		2,880		—
Petros 2 Pension Plan		411		260
AMS Medical Plan		12,236		10,802
Other plans		71		40

Total		22,750		21,830

Current		810		844
Non-current		21,940		20,986

Total		22,750		21,830

23.1.

Pension Plans

The Company’s post-retirement plans are managed by Fundação Petrobras de Seguridade Social (Petros Foundation), which was established by Petrobras as a nonprofit legal entity governed by private law with administrative and financial autonomy.

a)	Petros Plan

The Petros Plan was established by Petrobras in July 1970 as a defined-benefit pension plan and currently provides post-retirement benefits for employees of Petrobras and Petrobras Distribuidora S.A., in order to complement government social security benefits. The Petros Plan has been closed to new participants since September 2002.

Petros Foundation performs an annual actuarial review of its costs using the capitalization method for most benefits. The employers (sponsors) make regular contributions in amounts equal to the contributions of the participants (active employees, assisted employees and retired employees), on a parity basis.

On February 15, 2018, the the Superintendency of Post-retirement Benefits (PREVIC) authorized the split of Petros Plan into two new separate plans: Petros Plan –Renegotiated (PPR) and Petros Plan – Non-renegotiated (PPNR). The Petros Plan split has been in place since April 1, 2018.

As of December 31, 2018, the balance of the Terms of Financial Commitment (TFC), signed by Petrobras and Petros Foundation in 2008 is US$ 3,268. The TFC is a financial commitment agreement to cover obligations under the pension plans (PPR and PPNR), which amounts are due in 20 years, with 6% p.a. semiannual coupon payments based on the updated balance. The Company has provided crude oil and oil products pledged as security for the TFC totaling US$ 4,496.

The employers’ expected contributions to such plans for 2019 are US$ 197. Interest payments on TFC are expected to reach US$ 195. Estimated costs amounting to US$ 838 will be recognized within the income statement ratably over the year (increase in the present value of the defined benefit).

The average durations of the actuarial liability related to the plans, as of December 31, 2018, are 13.08 and 11.69 years, respectively (12.51 years as of December 31, 2017 for the former Petros Plan).

Deficit settlement plan – Petros Plan

The Petros Plan has a deficit settlement plan (PED) in place due to its accumulated deficit until 2015. This deficit, updated by interest and inflation, reached US$ 8,253 at December 31, 2017. The PED was approved by the Executive Council of Petros Foundation on September 12, 2017 and assessed by the Company and the SEST.

Additional contributions from participants and sponsors commenced in March 2018. Certain participants appealed before the judiciary and have had their contributions suspended based on judicial injunctions. In these cases, the Company has not paid its parity contributions. In 2018, the Company made contributions amounting to US$ 166 with respect of contributions under the PED.

Pursuant to relevant regulation, the sponsors and participants will cover this deficit based on their respective proportions of regular contributions (parity basis).

The deficit of Petros Plan was transferred to PPR and PPNR on April 1, 2018.

Split of Petros Plan

This split arose from the renegotiation procedures held in 2006-2007 period and in 2012, when 75% of the participants accepted the option to change to a model that sets forth solely inflation indexation on the annual adjustment of their benefits. The other participants’ benefits remained adjusted by the same rate as the Petrobras’ workforce had their salaries adjusted.

Assets and actuarial liability of Petros plan were transferred to the new plans based on future commitments on a participant basis. As there were no changes in post-retirement benefits rules, the actuarial liabilities of these plans were reviewed only during the annual actuarial assumptions review carried out in December 2018.

The movement of these events is shown below:


										Consolidated
	2018
	Petros			Petros Renegotiated			Petros Non- renegotiated			Total
Changes in the present value of obligations
Obligations at the beginning of 2018		25,081			—			—			25,081
Interest expense		591			—			—			591
Current service cost		23			—			—			23
Contributions paid by participants		86			—			—			86
Benefits paid		(500	)		—			—			(500	)
Cumulative Translation Adjustment		(124	)		—			—			(124	)

Balance at March 31, 2018		25,157			—			—			25,157

Transfer due to split of Petros plan		(25,157	)		18,940			6,217			—
Current interest cost		—			1,144			374			1,518
Current service cost		—			53			7			60
Contributions paid by participants		—			219			69			288
Benefits Paid		—			(881	)		(788	)		(1,669	)
Remeasurement: Experience (gains) / losses *		—			(1,295	)		(30	)		(1,325	)
Remeasurement: (gains) / losses - demographic assumptions		—			6			71			77
Remeasurement: (gains) / losses - financial assumptions		—			1,206			336			1,542
Cumulative Translation Adjustment		—			(2,704	)		(883	)		(3,587	)

Obligations at the end of the year of December 31, 2018		—			16,688			5,373			22,061

Changes in the fair value of plan assets
Fair value of plan assets at the beginning of the year		14,353			—			—			14,353
Interest income		336			—			—			336
Contributions paid by the sponsor (Company)		93			—			—			93
Contributions paid by participants		86			—			—			86
Benefits Paid		(500	)		—			—			(500	)
Cumulative Translation Adjustment		(69	)		—			—			(69	)

Balance at March 31, 2018		14,299			—			—			14,299

Transfer due to split of Petros plan		(14,299	)		10,786			3,513			—
Interest income		—			653			211			864
Contributions paid by the sponsor (Company)		—			229			74			303
Contributions paid by participants		—			219			69			288
Term of financial commitment (TFC) paid by the Company		—			141			54			195
Benefits Paid		—			(881	)		(788	)		(1,669	)
Remeasurement: Return on plan assets due to lower interest income		—			(71	)		(153	)		(224	)
Cumulative Translation Adjustment		—			(1,539	)		(488	)		(2,027	)

Fair value of plan assets at the end of the year of December 31, 2018		—			9,537			2,492			12,029

Amounts recognized in the Statement of Financial Position
Present value of obligations		—			16,688			5,373			22,061
( -) Fair value of plan assets		—			(9,537	)		(2,492	)		(12,029	)

Net actuarial liability as of December 31,		—			7,151			2,881			10,032

Changes in the net actuarial liability
Balance as of January 1,		10,728			—			—			10,728
Remeasurement effects recognized in OCI **		—			(12	)		531			519
Current service cost		23			53			7			83
Net interest on liabilities / (assets)		255			1,144			374			1,773
Contributions paid		(93	)		(229	)		(74	)		(396	)
Payments related to Term of financial commitment (TFC)		—			(141	)		(54	)		(195	)
Transfer due to spin-off		(10,858	)		8,155			2,703			—
Cumulative Translation Adjustment		(55	)		(1,818	)		(607	)		(2,480	)

Balance at December 31, 2018		—			7,152			2,880			10,032

(*)	It includes the effect of the extraordinary contributions of the participants related to the deficit with the Petros plan, as set out in note 23.

(**)	Other Comprehensive Income

b)	Petros 2 Plan

Petros 2 Plan was established in July 2007 by Petrobras and certain subsidiaries as a variable contribution plan recognizing past service costs for contributions for the period from August 2002 to August 29, 2007. The Petros 2 Plan currently provides post-retirement benefits for employees of Petrobras, Petrobras Distribuidora S.A., Stratura Asfaltos, Termobahia, Termomacaé, Transportadora Brasileira Gasoduto Brasil-Bolívia S.A. – TBG, Petrobras Transporte S.A. – Transpetro, Petrobras Biocombustível and Araucária Nitrogenados. The plan is open to new participants although there will no longer be payments relating to past service costs.

Certain elements of the Petros 2 Plan have defined benefit characteristics, primarily the coverage of disability and death risks and the guarantee of minimum defined benefit and lifetime income. These actuarial commitments are treated as defined benefit components of the plan and are accounted for by applying the projected unit credit method. Contributions paid for actuarial commitments that have defined contribution characteristics are accrued monthly in the statement of income and are intended to constitute a reserve for programmed retirement. The contributions for the portion of the plan with defined contribution characteristics were US$ 260 in 2018.

The defined benefit portion of the contributions was suspended from July 1, 2012 to June 30, 2019, as determined by the Executive Council of Petros Foundation, based on advice of the actuarial consultants from Petros Foundation. Therefore, the entire contributions are being applied to the individual accounts of plan participants.

For 2019, the employers’ expected contributions to the defined contribution portion of the plan are US$255. Estimated costs amounting to US$ 80 will be recognized within the income statement ratably over the year (increase in the present value of the defined benefit).

The average duration of the actuarial liability related to the plan, as of December 31, 2018 is 42.48 years (43.53 at December 31, 2017).

c)	Petros 3 Plan

On December 18, 2018, the Board of Directors approved a proposal for a new pension plan with defined contribution characteristics to be offered. Its adhesion is voluntary to the participants of Petros Plan –Renegotiated and Petros Plan – Non-renegotiated.

The migration to this new plan will only be possible after the proposal review and approval by all relevant bodies. The proposal has already been approved by the Petros Deliberative Council and the Petrobras Board of Directors and is awaiting approval from PREVIC and SEST.

The participants’ new benefit will be recalculated based on future commitments on a participant basis at the time of migration. Therefore, each participant will have an individual account, and the amount of the retirement benefit will depend on the accumulated balance, being recalculated annually in connection with the return on plan assets.

23.2.

Other plans

The Company also sponsors other pension and health care plans of certain of its Brazilian and international subsidiaries. Most of these plans are unfunded and their assets are held in trusts, foundations or similar entities governed by local regulations.

23.3.

Pension Plans assets

Pension plans assets follow a long term investment strategy based on the risks assessed for each different class of assets and provide for diversification, in order to lower portfolio risk. The portfolio profile must comply with the Brazilian National Monetary Council (Conselho Monetário Nacional – CMN) regulations.

Petros Foundation establishes investment policies for 5-year periods, reviewed annually. Petros uses an asset liability management model (ALM) to address net cash flow mismatches of the benefit plans, based on liquidity and solvency parameters, simulating a 30-year period.


	PPR						PPNR						Petros plan 2
	Minimum			Maximum			Minimum			Maximum			Minimum			Maximum
Fixed-income		50	%		100	%		45	%		100	%		55	%		70	%
Variable-income		—			25	%		—			30	%		5	%		12	%
Structured investments		—			4	%		—			4	%		—			6	%
Real estate properties		—			12	%		—			12	%		—			2	%
Loans to participants		—			8	%		—			8	%		2	%		5	%
Investments abroad		—			—			—			—			—			5	%

The pension plan assets by type of asset are set out as follows:


	2018									2017
Type of asset	Quoted prices in active markets		Unquoted prices		Total fair value		%			Total fair *value()**		%
Receivables		—		1,087		1,087		9	%		1,139		8	%

Fixed income		6,522		1,239		7,761		61	%		8,686		58	%

Government bonds		6,522		—		6,522		—			6,744		—
Fixed income funds		—		940		940		—			1,815		—
Other investments		—		299		299		—			9		—
Variable income		2,081		127		2,208		17	%		3,162		21	%

Common and preferred shares		2,081		—		2,081		—			2,877		—
Other investments		—		127		127		—			285		—
Structured investments		—		237		237		2	%		373		2	%

Real estate properties		—		829		829		7	%		1,045		7	%

		8,603		3,519		12,122		96	%		14,405		96	%

Loans to participants		—		533		533		4	%		620		4	%

Total		8,603		4,052		12,655		100	%		15,025		100	%

(*)	Amounts reclassified for comparative purposes.

As of December 31, 2018, the investment portfolio included debentures of US$ 11, Company’s common shares in the amount of US$ 3 and real estate properties leased by the Company in the amount of US$ 344.

Loans to participants are measured at amortized cost, which is considered to be an appropriate estimate of fair value.

The Company has improved its monitoring model over Petros Foundation, mainly through the enhancement on internal controls over investment portfolio and the establishment of specific committees to provide technical advisory for the members indicated by the Company to the Executive and Fiscal Councils of Petros Foundation, in accordance with relevant regulation establishing practices to be performed by the Board of Directors and Executive Officers of the sponsors.

23.4.

Medical Benefits: Health Care Plan - Assistência Multidisciplinar de Saúde (“AMS”)

Petrobras, Petrobras Distribuidora S.A., Petrobras Transporte S.A. – Transpetro, Petrobras Biocombustível, Transportadora Brasileira Gasoduto Brasil-Bolívia – TBG and Termobahia operate a medical benefit plan for their employees in Brazil (active and retired) and their dependents: the AMS health care plan. The plan is managed by the Company based on a self-supporting benefit assumption and includes health prevention and health care programs. The plan is mainly exposed to the risk of an increase in medical costs due to new technologies, new types of coverage and to a higher level of usage of medical benefits. The Company continuously improves the quality of its technical and administrative processes, as well as the health programs offered to beneficiaries in order to mitigate such risks.

The employees make fixed monthly contributions to cover high-risk procedures and variable contributions for a portion of the cost of the other procedures, both based on the contribution tables of the plan, which are determined based on certain parameters, such as salary and age levels. The plan also includes assistance towards the purchase of certain medicines in registered drugstores throughout Brazil. There are no health care plan assets.

Benefits are paid and recognized by the Company based on the costs incurred by the participants, of which the Company satisfies 70% of these costs as governed by the collective bargaining agreement.

The average duration of the actuarial liability related to this health care plan, as of December 31, 2018, is 22.24 years (22.08 as of December 31, 2017).

CGPAR resolutions

On January 18, 2018, the Inter-ministerial Commission for Corporate Governance and Administration of Participations of the Union (CGPAR), through CGPAR Resolutions 22 and 23, established guidelines and parameters of governance and cost limits to health care plans operated by state-owned companies.

The main objective of the resolutions is to make feasible the sustainability and the economic, financial and actuarial balance of the health plans operated by state-owned companies.

The company has up to 48 months to adjust the AMS health plan to this new regulation provisions and is assessing the financial impacts it may cause, including among others, a possible decrease in its actuarial liability following the parity basis of contribution, between the Company and the participants, determined by this rule.

23.5.

Net actuarial liabilities and expenses calculated by independent actuaries and fair value of plans assets

a)	Changes in the actuarial liabilities, in the fair value of the assets and in the amounts recognized in the statement of financial position


	2018
	Pension Plans						Medical Plan
	Petros *plans ()**			Petros 2			AMS			Other plans			Total
Changes in the present value of obligations
Obligations at the beginning of the year		25,081			887			10,802			85			36,855
Interest expense		2,111			77			927			4			3,119
Current service cost		83			33			155			7			278
Contributions paid by participants		374			—			—			—			374
Benefits paid		(2,173	)		(35	)		(456	)		(3	)		(2,667	)
Remeasurement: Experience (gains) / losses (**)		(1,373	)		8			(115	)		—			(1,480	)
Remeasurement: (gains) / losses - demographic assumptions		80			—			176			—			256
Remeasurement: (gains) / losses - financial assumptions		1,577			165			2,412			(2	)		4,152
Others		—			—			—			34			34
Cumulative Translation Adjustment		(3,699	)		(139	)		(1,665	)		(13	)		(5,516	)

Obligations at the end of the year		22,061			996			12,236			112			35,405

Changes in the fair value of plan assets
Fair value of plan assets at the beginning of the year		14,353			627			—			45			15,025
Interest income		1,203			54			—			—			1,257
Contributions paid by the sponsor (Company)		278			—			321			—			599
Contributions paid by participants		374			—			—			—			374
Term of financial commitment (TFC) paid by the Company		223			—			—			—			223
Benefits Paid		(2,401	)		(38	)		(504	)		(3	)		(2,946	)
Remeasurement: Return on plan assets due to lower interest income		(233	)		35			—			(4	)		(202	)
Others		—			—			—			3			3
Cumulative Translation Adjustment		(1,768	)		(93	)		183			—			(1,678	)

Fair value of plan assets at the end of the year		12,029			585			—			41			12,655

Amounts recognized in the Statement of Financial Position
Present value of obligations		22,061			996			12,236			112			35,405
( -) Fair value of plan assets		(12,029	)		(585	)		—			(41	)		(12,655	)

Net actuarial liability as of December 31,		10,032			411			12,236			71			22,750

Changes in the net actuarial liability
Balance as of January 1,		10,728			260			10,802			40			21,830
Remeasurement effects recognized in other comprehensive income		517			138			2,473			2			3,130
Costs incurred in the period		991			56			1,082			11			2,140
Current service cost		908			23			927			4			1,862
Contributions paid		(278	)		—			(321	)		—			(599	)
Payments related to Term of financial commitment (TFC)		(223	)		—			—			—			(223	)
Others		—			—			—			31			31
Cumulative Translation Adjustment		(2,611	)		(66	)		(2,727	)		(17	)		(5,421	)

Balance as of December 31,		10,032			411			12,236			71			22,750

(*)	It includes the changes in Petros plan, PPR and PPNR plans.

(**)	It includes additional constribuitons of participants regarding the deficit settlement plan as set out in note 23.1.


	2017
	Pension Plan						Medical Plan
	Petros			Petros 2			AMS			Other plans			Total
Changes in the present value of obligations
Obligations at the beginning of the year		25,872			678			11,214			78			37,842
Interest expense:		2,776			72			1,222			10			4,080
Term of financial commitment (TFC)		325			—			—			—			325
Actuarial		2,451			72			1,222			10			3,755
Current service cost		89			44			161			4			298
Contributions paid by participants		68			—			—			—			68
Benefits paid		(1,905	)		(34	)		(466	)		(3	)		(2,408	)
Remeasurement: Experience (gains) / losses (*)		(2,755	)		61			(520	)		7			(3,207	)
Remeasurement: (gains) / losses - demographic assumptions		22			(30	)		(63	)		(9	)		(80	)
Remeasurement: (gains) / losses - financial assumptions		1,293			113			(567	)		7			846
Others		—			—			—			(6	)		(6	)
Cumulative Translation Adjustment		(379	)		(17	)		(179	)		(3	)		(578	)

Obligations at the end of the year		25,081			887			10,802			85			36,855

Changes in the fair value of plan assets
Fair value of plan assets at the beginning of the year		15,120			385			—			40			15,545
Interest income		1,609			40			—			3			1,652
Contributions paid by the sponsor (Company)		230			—			467			2			699
Contributions paid by participants		68			—			—			—			68
Term of financial commitment (TFC) paid by the Company		223			—			—			—			223
Benefits Paid		(1,905	)		(34	)		(466	)		(3	)		(2,408	)
Remeasurement: Return on plan assets due to lower interest income		(786	)		249			—			4			(533	)
Others		—			—			—			—			—
Cumulative Translation Adjustment		(206	)		(13	)		(1	)		(1	)		(221	)

Fair value of plan assets at the end of the year		14,353			627			—			45			15,025

Amounts recognized in the Statement of Financial Position
Present value of obligations		25,081			887			10,802			85			36,855
( -) Fair value of plan assets		(14,353	)		(627	)		—			(45	)		(15,025	)

Net actuarial liability as of December 31,		10,728			260			10,802			40			21,830

Changes in the net actuarial liability
Balance as of January 1,		10,752			293			11,214			38			22,297
Remeasurement effects recognized in other comprehensive income		(654	)		(105	)		(1,150	)		1			(1,908	)
Costs incurred in the period		1,256			76			1,383			11			2,726
Contributions paid		(230	)		—			(467	)		(2	)		(699	)
Payments related to Term of financial commitment (TFC)		(223	)		—			—			—			(223	)
Others		—			—			—			(6	)		(6	)
Cumulative Translation Adjustment		(173	)		(4	)		(178	)		(2	)		(357	)

Balance as of December 31,		10,728			260			10,802			40			21,830

(*)	It includes additional constribuitons of participants regarding the deficit settlement plan as set out in note 23.1.

b)	Defined benefit costs


	2018
	Pension Plans								Medical Plan
	Petros plan		PPR		PPNR		Petros 2		AMS		Other Plans		Total
Service cost		23		54		6		33		155		7		278
Interest on net liabilities (assets)		254		492		162		23		927		4		1,862

Net expenses for the year		277		546		168		56		1,082		11		2,140

Related to active employees:
Included in the cost of sales		46		94		23		29		235		—		427

Operating expenses in statement of income		19		46		11		17		122		9		224
Related to retirees		212		406		134		10		725		2		1,489

Net expenses for the year		277		546		168		56		1,082		11		2,140


	2017
	Pension Plans				Medical Plan
	Petros Plans		Petros 2		AMS		Other Plans		Total
Service cost		89		44		161		4		298
Interest on net liabilities (assets)		1,167		32		1,222		7		2,428

Net expenses for the year		1,256		76		1,383		11		2,726

Related to active employees:
Included in the cost of sales		236		40		263		—		539
Operating expenses in statement of income		103		24		136		10		273
Related to retirees		917		12		984		1		1,914

Net expenses for the year		1,256		76		1,383		11		2,726


	2016
	Pension Plans				Medical Plan
	Petros Plans		Petros 2		AMS		Other Plans		Total
Service cost		83		21		128		18		250
Interest on net liabilities (assets)		945		12		1,093		4		2,054

Net expenses for the year		1,028		33		1,221		22		2,304

Related to active employees:
Included in the cost of sales		257		18		287		2		564
Operating expenses in statement of income		128		11		154		19		312
Related to retirees		643		4		780		1		1,428

Net expenses for the year		1,028		33		1,221		22		2,304

c)	Sensitivity analysis of the defined benefit plans

The effect of a 100 basis points (bps) change in the assumed discount rate and medical cost trend rate is as set out below:


	Discount Rate										Medical Cost
	Pension Benefits					Medical Benefits					Medical Benefits
	+100 bps			-100 bps		+100 bps			-100 bps		+100 bps		-100 bps
Pension Obligation		(1,714	)		3,889		(1,498	)		1,869		1,994		(1,005	)
Current Service cost and interest cost		13			140		(74	)		89		248		(117	)

d)	Actuarial assumptions

2018

Assumptions

PPR

PPNR

Petros 2

AMS

Discount rate - (real rate)(1)

9.11%

9.08%

9.22%

9.16%

Nominal discount rate (real rate + inflation) (2)

For 2019: 5.55%
As of 2020: 5.33%

For 2019: 5.40%
As of 2020: 5.24%

For 2019: 7.28%
As of 2020: 6.84%

according to
security plan

Expected changes in medical and hospital costs (3)

n/a

12.03% to 4% p.a.

Mortality table

EX-PETROS 2013
(bidecremental)

EX-PETROS 2017
(bidecremental)

AT-2000 female,
smoothed in a
10%

EX-PETROS 2013
(bidecremental)

Disability table

American group

American group
reduced by 40%

American group

Mortality table for disabled participants

AT-49 male

IAPB 1957 strong

AT-49 male

Age of retirement

Male, 56 years /
Female, 55 years

Male, 58 years /
Female, 56 years

1st eligibility

Male, 56 years /
Female, 55 years

2017

Assumptions

Petros plan

Petros 2

AMS

Discount rate - (real rate)(1)

9.52%

9.63%

9.59%

Nominal discount rate (real rate + inflation) (2)

5.19%

6.59%

according to
security plan

Expected changes in medical and hospital costs (3)

n/a

11.3% to 4.5% p.a.

Mortality table

EX-PETROS 2013

(bidecremental

)

AT-2000 female,
smoothed in a 10%

EX-PETROS 2013
(bidecremental)

Disability table

American group

American group
reduced by 40%

American group

Mortality table for disabled participants

AT-49 male

IAPB 1957 strong

AT-49 male

Age of retirement

Male, 57 years /
Female, 56 years

1st eligibility

Male, 57 years /
Female, 56 years

(1)	Inflation reflects market projections: 4.01% for 2019 and converging to 4% in 2026 onwards.

(2)	Expected salary growth only of Petrobras, the sponsor, based on the Salaries and Benefits Plan.

(3)	Decreasing rate, converging in 30 years to the long-term expected inflation. Refers only to Petrobras (sponsor) rate.

e)	Expected maturity analysis of pension and medical benefits


	2018
	Pension Plan						Medical Plan
	PPR		PPNR		Petros 2		AMS		Other plans		Total
Up to 1 Year		1,278		476		34		417		4		2,209
1 To 2 Years		1,163		409		33		439		3		2,047
2 To 3 Years		1,137		390		32		458		3		2,020
3 To 4 Years		1,108		372		32		476		3		1,991
Over 4 Years		12,002		3,726		865		10,446		99		27,138

Total		16,688		5,373		996		12,236		112		35,405

23.6.

Other defined contribution plans

Petrobras, through its subsidiaries in Brazil and abroad, also sponsors other defined contribution pension plans for employees. Contributions paid amounting to US$ 3 in 2018 were recognized in the statement of income.