APC 2005 Annual Report Download - page 97

95
Consolidated Financial Statements
15.1 - Changes in provisions for pensions and other post-employment benefit obligations
Changes in provisions for pensions and other post-employment benefit obligations were as follows:
A one-point increase or decrease in healthcare costs
would increase or decrease the post-employment
healthcare obligation by around 45 million.
The return on assets is generally determined on the
basis of the interest rate on investment-grade corpo-
rate bonds or government bonds.
Pension and termination benefit obligations
Pension and termination benefit obligations primarily
concern the Group’s North American and European
subsidiaries. For the most part, these are defined ben-
efit plans. They feature either a lump-sum payment on
the employee’s retirement or regular pension pay-
ments after retirement. The amount is based on years
of service, grade and end-of-career salary. They also
include top-hat payments granted to certain senior
executives guaranteeing supplementary retirement
income beyond that provided by general, mandatory
pension schemes.
Benefit obligations under these plans were partially or
fully funded through payments to external funds. At
December 31, 2005, 95% of the Group's total commit-
ment are partially or fully funded for an amount of
1,885 million.
External funds are invested in equities (around 60%),
bonds (around 26%) and real estate (around 7%).
Contributions amounted to 34.5 million in 2005 and
are estimated at 12 million for 2006.
Payments made under defined contribution plans are
recorded in the income statement, in the year of pay-
ment and are in full settlement of the Group’s liability.
Defined contribution plan payments totaled 32.3 mil-
lion in 2005.
At December 31, 2005, provisions for pensions and
termination benefits totaled 607 million, compared
with 521 million the year before.
Other post-employment benefits, including
healthcare and life insurance, and other long-
term benefits
The North American subsidiaries pay certain health-
care costs and provide life insurance benefits to
retired employees who fulfill certain criteria in terms of
age and years of service. These post-employment
benefit obligations are unfunded.
Healthcare coverage for North American employees
represents 83% of this obligation. In September 2005,
one of these plans was amended by changing the con-
tributions and terms of eligibility. The effect of this plan
amendment, which reduced the obligation by around
$20 million (17 million), will be reflected in the income
statement over the vesting period, with 6 million rec-
ognized in 2005 for vested rights and 11 million to be
recognized over the next twelve years.
The assumptions used to determine post-employment
benefit obligations related to healthcare and life insur-
ance are the same as those used to estimate pension
benefit obligations in the country concerned.
Other benefit obligations include healthcare coverage
plans in Europe, for 64 million, and long-service
awards due by subsidiaries in France, for 12 million.
Provisions set aside in respect of these obligations
totaled 593 million at December 31, 2005, compared
with 505 million a year earlier.
Pensions Of which Other post- Of which Provisions
and US plans employment and US plans for pensions
termination long-term and other post
benefits benefits employment
benefits
Dec. 31, 2004 521.1 8.8 505.0 418.5 1,026.2
Net cost recognized in
the statement of income 47.9
1.5 22.6 21.9 70.5
Benefits paid (49.1) - (23.5)
(22.4) (72.6)
Plan participants' contributions (34.4)
(23.6) - - (34.4)
Actuarial gains and
losses recognized in equity 117.2
61.8 14.9 14.6 132.1
Translation adjustment 5.6
3.8 67.1 65.5 72.7
Changes in the scope
of consolidation 2.4
- 3.0 - 5.4
Other changes (10.7)
(0.1) 4.3 - (6.4)
Dec. 31, 2005* 600.0 52.2 593.4 498.1 1,193.5
* Including  7 million in pension assets recognized under "Other receivables" (see note 11)