Net Defined Benefit Liability (Asset)

12 Months Ended

Dec. 31, 2022

Disclosure of defined benefit plans [abstract]

Net Defined Benefit Liability (Asset)

24. NET DEFINED BENEFIT LIABILITY(ASSET)

The Group’s pension plan is based on the defined benefit retirement pension plan. Employees and directors with one or more years of service are entitled to receive a payment upon termination of their employment, based on their length of service and rate of salary at the time of termination. The assets of the plans are measured at their fair value at the end of reporting date. The plan liabilities are measured using the projected unit method, which takes account of projected earnings increases, using actuarial assumptions that give the best estimate of the future cash flows that will arise under the plan liabilities.

The Group is exposed to various risks through defined benefit retirement pension plan, and the most significant risks are as follows:

Volatility of asset	The defined benefit obligation was estimated with an interest rate calculated based on blue chip corporate bonds earnings. A deficit may occur if the rate of return of plan assets falls short of the interest rate.
Decrease in profitability of blue-chip bonds	A decrease in profitability of blue-chip bonds will be offset by some increase in the value of debt securities that the employee benefit plan owns but will bring an increase in the defined benefit obligation.
Risk of inflation	Defined benefit obligations are related to inflation rate; the higher the inflation rate is, the higher the level of liabilities. Therefore, deficit occurs in the system if an inflation rate increases.

(1) Details of net defined benefit liability are as follows (Unit: Korean Won in millions):

	December 31, 2021			December 31, 2022
Present value of defined benefit obligation		1,618,098			1,377,545
Fair value of plan assets		(1,591,458	)		(1,661,623	)
Net defined benefit liabilities (*)		26,640			(284,078	)

(*) Net defined benefit liability of 26,640 million Won as of December 31, 2021 are the subtracted amount of the net defined benefit asset of 21,346 million Won from the net defined benefit liability of 47,986. Net defined benefit assets of 284,078 million Won as of December 31, 2022 are the subtracted amount of the net defined benefit liability of 35,202 million Won from the net defined benefit assets of 319,280.

(2) Changes in the carrying value of defined benefit obligation are as follows (Unit: Korean Won in millions):

		For the years ended December 31
		2020			2021			2022
Beginning balance			1,442,859			1,610,680			1,618,098
Current service cost			174,509			178,416			166,741
Interest cost			34,653			39,814			48,238
Remeasurements	Financial assumption		(20,838	)		(92,367	)		(356,344	)
	Demographic assumptions		4,161			(251	)		(9	)
	Experience adjustments		(4,481	)		(12,155	)		(3,838	)
Retirement benefit paid			(55,864	)		(106,050	)		(92,914	)
Foreign currencies translation adjustments			(119	)		165			(69	)
Changes due to business combinations			34,001			—			—
Others			1,799			(154	)		(2,358	)
Ending balance			1,610,680			1,618,098			1,377,545

(3) Changes in the plan assets are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2020			2021			2022
Beginning balance		1,352,971			1,564,101			1,591,458
Interest income		34,534			40,927			49,916
Remeasurements		(7,666	)		(15,022	)		(18,095	)
Employer’s contributions		211,505			103,251			127,979
Retirement benefit paid		(52,627	)		(99,523	)		(87,472	)
Changes due to business combination		27,599			—			—
Others		(2,215	)		(2,276	)		(2,163	)
Ending balance		1,564,101			1,591,458			1,661,623

(4) The fair value of the plan assets by composition as of December 31, 2021 and 2022 are as follows (Unit: Korean Won in millions):

	December 31, 2021		December 31, 2022
Cash and due from banks		1,591,458		1,661,623

Meanwhile, among plan assets, realized returns on plan assets amount to 25,905 million Won and 31,821 million Won for the years ended December 31, 2021 and 2022, respectively. The contribution expected to be paid in the next accounting year amounts to 123,043 million Won.

(5) Amounts related to the defined benefit plan that are recognized in the consolidated statements of comprehensive income are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2020			2021			2022
Current service cost		174,509			178,416			166,741
Net interest income (expense)		119			(1,113	)		(1,678	)
Cost recognized in net income		174,628			177,303			165,063
Remeasurements (*)		(13,492	)		(89,751	)		(342,096	)
Cost recognized in total comprehensive income		161,136			87,552			(177,033	)

(*) Amount before tax

Retirement benefits related to defined contribution plans recognized as expenses are 3,827 million Won, 4,494 million Won and 4,240 million Won for the years ended December 31, 2020, 2021 and 2022, respectively.

(6) Key actuarial assumptions used in net defined benefit liability measurement are as follows:

	December 31, 2020	December 31, 2021	December 31, 2022
Discount rate	2.13% ~ 2.97%	2.40% ~ 3.49%	5.25% ~ 5.99%
Future wage growth rate	2.05% ~ 7.00%	2.03% ~ 5.56%	2.1% ~ 5.84%
Mortality rate	Issued by Korea Insurance Development Institute	Issued by Korea Insurance Development Institute	Issued by Korea Insurance Development Institute
Retirement rate	Experience rate for each employment classification	Experience rate for each employment classification	Experience rate for each employment classification

The weighted average maturity of defined benefit liability is a minimum of 5.38 to a maximum 10.71 years.

(7) The sensitivity to actuarial assumptions used in the assessment of defined benefit obligation is as follows (Unit: Korean Won in millions):

		December 31, 2021			December 31, 2022
Discount rate	Increase by 1% point		(161,428	)		(146,319	)
	Decrease by 1% point		189,630			170,529
Future wage growth rate	Increase by 1% point		188,392			174,546
	Decrease by 1% point		(163,431	)		(153,712	)