Provisions for employee benefits

Pensions

Pension liabilities of almost all business units have been placed with the industry-wide pension funds: Stichting Pensioenfonds ABP (ABP) and the Stichting Pensioenfonds Metaal en Techniek (PMT). The flexible retirement scheme for utility companies has been transferred to an insurance company for the sector as a whole. A limited number of employees have individual plans insured with various insurance companies (defined-contribution plans).

The ABP and PMT pension plans aim to provide a pension corresponding to 70% of the pensionable salary at the state retirement age. Employees may opt to retire earlier or later (ABP: between 60 and 70, PMT: from 62 upwards) than the state retirement age, in which case their pension is adjusted accordingly. The flexible retirement plan is being phased out and is no longer applicable for employees born after 1949.

A defined-contribution plan is a plan in which a fixed contribution is paid for the benefit of an employee without any further claim by or liability to that employee. Liabilities in respect of contributions to pension and related plans on the basis of available contributions are recognised as an expense in the period to which they relate.

A defined-benefit plan is a plan in which the employee is promised a pension the value of which is dependent on age, salary and years of service. In both 2011 and 2012 the ABP, PMT and flexible retirement plans qualified as multi-employer defined-benefit plans. There is a liability under these plans, the value of which is defined by the present value of pensions proposed for future distribution at the reporting date less the fair value of the fund assets after taking into account unrecognised actuarial gains and losses and unrecognised past service pension costs. The information required to determine this liability for each participating employer cannot be determined by ABP, PMT or the insurer of the flexible retirement plan for utility companies, because they have no consistent and reliable way of allocating fund assets and plan obligations to individual employers taking part in the plans. This is a consequence of the nature of the plans which expose employers taking part in these plans to actuarial risks related to current and former employees of other employers also taking part in the plans. Consequently, it is not possible to state whether there are surpluses or deficits for a given employer. In the event of future shortfalls, pension funds may only adjust future contributions and only within a limited range. The relevant plans have therefore been treated as defined contribution plans.

Other provisions for employee benefits

A provision is recognised for the obligation to contribute towards the health insurance premiums of retired employees. A provision is also recognised for the obligation to pay out amounts related to long-service benefits and on the retirement of employees. These liabilities are calculated at the reporting date using the projected unit credit method, using a pre-tax discount rate which reflects the current market evaluation of the time value of money.