APC 2013 Annual Report Download - page 223

CONSOLIDATED FINANCIALSTATEMENTS ATDECEMBER 31, 2013
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The discount rate is determined on the basis of the interest rate At December31, 2013, provisions for pensions and termination
for investment-grade (AA) corporate bonds or, if a liquid market benefits total EUR1,061million, compared with EUR1,488million
does not exist, government bonds with a maturity that matches in2012. These provisions have been included in non-current
the duration of the benefit obligation. In the United States, the liabilities, as the current portion was not considered material in
average discount rate is determined on the basis of a yield curve relation to the total liability.
for investment-grade (AA and AAA) corporate bonds. Payments made under defined contribution plans are recorded in
The discount rate currently stands at 3.00% for 10 years duration the income statement in the year of payment and are in full
and 3.30% for 15 years duration in the euro zone, 4.70% in the settlement of the Group’s liability. Defined contribution plan
United States and 4.50% in the United Kingdom. payments total EUR62million in2013, compared with
EUR70million in2012.
A 0.5 point increase in the discount rate would reduce pension
and termination benefit obligations by around EUR163million and
Other post-employment and long-term benefits:
the service cost by EUR2million. A 0.5 point decrease would
including healthcare, life insurance and long service
increase pension and termination benefit obligations by
awards
EUR187million and the service cost by EUR2million.
The North American subsidiaries pay certain healthcare costs and
The post-employment healthcare obligation mainly concerns the provide life insurance benefits to retired employees who fulfill
United States. A one point increase in the healthcare costs rate certain criteria in terms of age and years of service. The average
would increase the post-employment healthcare obligation by duration of these North American plans is 10.5 years. These
EUR26million and the sum of the service cost and interest cost post-employment benefit obligations are unfunded.
by EUR1million. A one point decrease in healthcare costs rate
would decrease the post-employment healthcare obligation by Healthcare coverage for North American employees represents
EUR23million and the sum of the service cost and interest cost 73% of this obligation.
by EUR1million. The main benefits paid in 2013 are primarily for the North
In2013, the rate of healthcare cost increases in the United States American plans and amount to EUR19million. They are estimated
is based on a decreasing trend from 7.33% in2014 to 4.5% at EUR18million for each of the next 3 years.
in2023. The rate of healthcare cost increases in the United States The assumptions used to determine post-employment benefit
was based on a decreasing trend from 7.67% in2013 to 4.5% obligations related to healthcare and life insurance are the same
in2023 at December31, 2012. The rate in France was estimated as those used to estimate pension benefit obligations in the
at 4% in2013 and at 4% in2012. country concerned.
Pensions and termination benefits
Other long-term benefit obligations include healthcare coverage
plans in Europe, for EUR85million, and long-service awards due
Pension obligations primarily concern the Group’s North American by subsidiaries in France, for EUR12million.
and European subsidiaries. These plans feature either a lump-sum At December31, 2013, provisions for these benefit obligations
payment on the employee’s retirement or regular pension total EUR425million, compared with EUR488million at
payments after retirement. The amount is based on years of December31, 2012. These provisions have been included in
service, grade and end-of-career salary. The average duration of
5
non-current liabilities, as the current portion was not considered
the North American plans is 12.7 years. material in relation to the total liability.
Pension obligations also include top-hat payments granted to
certain senior executives guaranteeing supplementary retirement
income beyond that provided by general, mandatory pension
schemes.
The majority of benefit obligations under these plans, which
represent 85% of the Group’s total commitment or
EUR2,253million at December31, 2013, are partially or fully
funded through payments to external funds. These funds are not
invested in Group assets.
External funds are invested in equities (around 33%), bonds
(around59%), real estate (around 5%) and cash (around 3%).
Main contributions are primarily for the North American plans and
amount to EUR35million in2013. They are estimated at
EUR44million for2014, EUR57million for2015 and
EUR61million for2016.
221
2013 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC