Siemens 2014 Annual Report Download - page 282

108 A. To our Shareholders 131 B. Corporate Governance 171 C. Combined Management Report
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the defined benefit plan members an inflation increase of the
accrued benefits until the start of retirement is mandatory.
Furthermore, the plans expose the Company to actuarial risks
such as investment risk, interest rate risk, longevity risk and
salary increase risk. The funding environment is determined by
the Pension Regulator and the applicable social and labor laws.
The defined benefit plans are each governed by a benefit trust
whose decision making body is a Board of Trustees who have a
fiduciary duty to act in the best interests of the beneficiaries
according to the trust agreement and law. The required fund-
ing is determined by a funding valuation carried out every third
year based on legal requirements, which measures the liabili-
ties on a government bond basis rather than under a high qual-
ity corporate bond basis as under IAS , thus the technical
funding deficit is usually larger. The funding valuation assump-
tions are negotiated between the Company and the Trustees.
The latest funding valuation, for the largest plan, in UK in cal-
endar year  resulted in a technical underfunding of GBP 
(€ ,) million, based on the assumptions at that date. As a
result, in fiscal , Siemens entered into an agreement with
the trustees to provide an annual payment of GBP  (€ ) mil-
lion for the next  years, beginning in fiscal . The agree-
ment also provides for a cumulative advance payment by
Siemens AG compensating the remaining annual payments at
the date of early termination of the agreement due to cancella-
tion or insolvency. In addition to these payments the Company
is obliged to pay GBP  (€ ) million until the next funding valu-
ation, when the funding requirements will be updated based
on new assumptions. This valuation process will start in calen-
dar year .
Switzerland:
Siemens Switzerland sponsors several funded defined benefit
(cash-balance) plans following the Swiss law of occupational
benefits (BVG) according to which each employer has to grant
post-employment benefits for qualifying employees. These
plans are administered by foundations that are legally sepa-
rated from the entity. For the main pension fund, which rep-
resents almost all of the defined benefit obligation in Switzer-
land, the board of the pension fund is composed of equally
many employer and employee representatives. The board of
each pension fund is required by law and by the regulations to
act in the fund’s and all stakeholders’ best interest, i.e. in the
interest of all active employees and retirees. The board of the
pension fund is responsible for the investment policy and the
asset management, as well as for any changes in the plan rules,
in which it determines the necessary contributions to finance
the benefits. The Company is required to make total contribu-
tions at least as high as the sum of the employee contributions
set out in the plan rules. Employer’s and employees’ contribu-
tions are determined by the respective foundation boards.
About  % of the necessary contributions are financed by
the employees. In the case of an underfunding in a plan the
Company together with the employees may be asked to pay
extra contributions in a well defined framework of recovery
measures. The plans expose the Company to various actuarial
and financial risks such as longevity, interest rate risks and
salary increases.
The amounts included in the Company’s Consolidated Financial
Statements arising from its post-employment defined benefit
plans are as follows:
Defined benefit
obligation (DBO)
Fair value
of plan assets
Effects in connection
with asset ceiling
Net defined
benefit balance
September , September , September , September ,
(in millions of €)        
Germany 22,414 20,367 15,105 14,017 ––(7,309) (6,350)
U.S. 3,730 3,769 2,888 2,575 ––(842) (1,194)
U.K. 4,845 4,455 4,818 4,022 (97) (65) (125) (498)
CH 2,784 2,828 2,673 2,489 (59) (49) (170) (388)
Other 1,818 1,753 1,021 975 (46) (32) (843) (810)
Total 35,591 33,173 26,505 24,078 (202) (146) (9,288) (9,241)
The net defined benefit balance of € , million and
€ , million as of September ,  and  comprises
€ , million and € , million net defined benefit liability
and €  million and €  million net defined benefit asset,
respectively.