NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HYDRO ONE ANNUAL REPORT 2013 82 The effect of 1% change in health care cost trends on the service cost and interest cost for the post-retirement and post-employment benefits for  the years ended December 31, 2013 and 2012 is as follows: The effect of 1% change in health care cost trends on the projected benefit obligation for the post-retirement and post-employment benefits at  December 31, 2013 and 2012 is as follows: The discount rate used to determine the current year pension obligation and the subsequent year’s net periodic benefit costs is based on a  yield curve approach. Under the yield curve approach, expected future benefit payments for each plan are discounted by a rate on a third  party bond yield curve corresponding to each duration. The yield curve is based on AA long-term corporate bonds. A single discount rate is  calculated that would yield the same present value as the sum of the discounted cash flows. Year ended December 31 2013 2012 Pension Benefits: Weighted average expected rate of return on plan assets  6.25% 6.25% Weighted average discount rate  4.25% 5.25% Rate of compensation scale escalation (without merit)  2.50% 2.50% Rate of cost of living increase  2.00% 2.00% Average remaining service life of employees  (years) 11 11 Post-Retirement and Post-Employment Benefits: Weighted average discount rate  4.25% 5.25% Rate of compensation scale escalation (without merit)  2.50% 2.50% Rate of cost of living increase  2.00% 2.00% Average remaining service life of employees  (years) 11 11 Rate of increase in health care cost trends 1 4.39% 4.41% 1  6.91% per annum in 2013, grading down to 4.39% per annum in and after 2031 (2012 – 7.03% in 2012, grading down to 4.41% per annum in and after 2031) The following weighted average assumptions were used to determine the net periodic benefit costs for the years ended December 31, 2013  and 2012. Assumptions used to determine current year-end benefit obligations are the assumptions used to estimate the subsequent year’s net  periodic benefit costs. December 31 (millions of Canadian dollars) 2013 2012 Projected benefit obligation: Effect of 1% increase in health care cost trends  258 246 Effect of 1% decrease in health care cost trends  (200) (191) Year ended December 31 (millions of Canadian dollars) 2013 2012 Service cost and interest cost: Effect of 1% increase in health care cost trends  21 17 Effect of 1% decrease in health care cost trends  (16) (13)