29. Retirement benefit plans

29. Retirement benefit plans

Defined contribution plans

We operate defined contribution systems for our qualifying employees. The assets of the schemes are held separately from ours in designated pension plans. For defined contribution systems, we pay contributions to publicly or privately administered pension or insurance funds. Once the contribution is paid, we do not have any remaining obligation.

Defined benefit plans in Belgium

Our personnel in Belgium participated in a defined contribution plan (extra-legal pension). The Belgian defined contribution pension plans were by law subject to minimum guaranteed rates of return, i.e. 3.25% on employer contributions and 3.75% on employee contributions. These rates, which apply as an average over the entire career, may be modified by Royal Decree. Therefore, those plans were basically accounted for as defined contribution plans.

As a consequence of the law of 18 December 2015, minimum returns were guaranteed by the employer as follows: (a) for the contributions paid as from 1 January 2016, a new variable minimum return based on OLO rates, with a minimum of 1.75% and a maximum of 3.75%. In review of the low rates of the OLO in the last years, the return has been initially set to 1.75%; (b) for the contributions paid until end of December 2015, the previously applied legal returns as mentioned above, continue to apply until retirement date of the employees.

In view of the minimum returns guarantees, the Belgian defined contribution plans classify as defined benefit plans as from end December 2015.

As at 31 December 2015 no net liability was recognized in the balance sheet as the minimum rates of return to be guaranteed by the employer were closely matched by the rates of return guaranteed by the insurer. As at 31 December 2016 however a net liability of €386.6 thousand was recorded.

The contributions for those plans that were due by the employer for 2016 and 2015 amounted to respectively €528.0 thousand and €476.3 thousand, of which €42.5 thousand was paid after 31 December 2016 (2015: €35.9 thousand). No contributions were made by the employees.

The plan assets as at 31 December 2016 consisted of €1,788.7 thousand (2015: €1,063.7 thousand) individual insurance reserves, which benefit from a weighted average guaranteed interest rate of 2.82% (2015:3.0%).

Defined benefit plans in France

We use two defined benefit plans for the employees of our French entity. The defined benefit plans are not supported by funds.

The chemical and pharmaceutical industry’s collective bargaining agreements require that our French entity pays a retirement allowance depending on the seniority of the employees at the moment they retire. The benefit obligations for these retirement allowances amounted to €1,808.5 thousand for 2016 (2015: €1,520.9 thousand). This increase is mainly due to changed actuarial assumptions (decrease of discount rate from 2% to 1.44%).

Additionally, there are also seniority premiums paid in France. The provisions for these premiums amounted to €1,324.9 thousand in 2016 (2015: €1,172.0 thousand).

Total obligation included in the balance sheet related to the defined benefit plans amounts to €3,133.4 thousand for the year ended 31 December 2016 (2015: €2,692.9 thousand).

Actuarial gains and losses are recognized immediately on the balance sheet, with a charge or credit to other comprehensive income (OCI), in accordance with IAS 19R. They are not recycled subsequently. Actuarial losses of €193.2 thousand have been booked through other comprehensive income (OCI) at the end of 2016 (2015: €201.5 thousand of actuarial gains).

Total amounts due by all entities to the pension plans in 2016 were €1.7 million in total (2015: €1.5 million).

Obligations included in the balance sheet:

 

31 December

(thousands of €)

2016

2015

Present value of funded defined benefit obligation

2,175

 

Plan assets

(1,789)

(1,064)

Deficit / surplus

387

(1,064)

Present value of unfunded defined benefit obligation

3,133

2,693

Reclassification – Belgian contribution plans

1,064

Liability included in the balance sheet

3,520

2,693

The present value of the gross obligation developed as follows:

(thousands of €)

2016

2015

Opening balance

3,757

2,865

 

 

 

Current service cost

649

194

Actual taxes on contributions paid

(48)

 

Interest cost

82

50

Benefits paid

(119)

(44)

Reclassification – Belgian contribution plans

1,064

Actuarial gains (–) or losses due to experience adjustments

500

(27)

Actuarial gains (–) or losses due to experience adjustments related to new financial assumptions

432

(99)

Actuarial gains (–) or losses due to experience adjustments related to new demographic assumptions

56

(247)

Closing balance

5,308

3,757

The fair value of the plan assets developed as follows:

(thousands of €)

2016

2015

Opening balance

(1,064)

 

Interest income on plan assets

(32)

 

Actual administration costs

2

 

Contributions from employer

(411)

 

Actual taxes on contributions paid

48

 

Plan assets gain during the period

(332)

 

Reclassification – Belgian contribution plans

(1,064)

Closing balance

(1,788)

(1,064)

The expected rate of return on the plan assets is 2%.

The fair value of the plan assets is the fair market value of the plan assets. The fair value of the plan assets was calculated as the reduced lump sums (received from the plan administrators) actualized with the assumptions set (discount rate and mortality tables). The total plan assets are equal to the fair value of the plan assets increased with the financing fund.

Amounts recognized in profit or loss for defined benefit plans are as follows:

 

Year ended 31 December

(thousands of €)

2016

2015

Current service cost

649

194

Interest cost

82

50

Interest income

(32)

 

Administration expenses

2

 

Revaluations of net liability / net asset

73

(171)

Total expense

773

73

Obligation included in the balance sheet reconciles as follows:

(thousands of €)

2016

2015

Opening balance

2,693

2,865

Real employer contributions

(411)

 

Total expense recognized in the income statement

773

73

Re-measurement on the net defined benefit liability

583

(202)

Benefits paid

(119)

(44)

Closing balance

3,520

2,693

The most important actuarial assumptions were:

 

31 December

(%)

2016

2015

Discount rate

1.60%

2.00%

Expected salary increase

2.50%

2.25%

Inflation rate

1.75%

1.75%

The discount rate was based on the Merrill Lynch yields for AA rated Eurozone corporate bonds (bonds with maturity dates which correspond with the commitments).

Breakdown of defined benefit obligation by type of plan participants:

 

31 December

(number of participants)

2016

2015

Active plan participants

267

254

Breakdown of defined benefit obligation by type of benefits:

 

31 December

(thousands of €)

2016

2015

Retirement and death benefits

3,983

2,585

Other post-employment benefits

1,325

1,172

Major categories of plan assets: fair value plan of assets:

 

31 December

(thousands of €)

2016

2015

Equity

89

74

Debt

1,698

979

Cash

 

11

Sensitivity analysis on discount rate: effect on obligation

 

 

 

31 December

Obligation (thousands of €)

2016

Discount rate 1.10%

3,792

Discount rate 1.35%

3,661

Discount rate 1.60%

3,520

Discount rate 1.85%

3,419

Discount rate 2.10%

3,312

Sensitivity analysis on discount rate: effect on obligation

 

 

 

31 December

Obligation (thousands of €)

2015

Discount rate 1.50%

2,868

Discount rate 1.75%

2,779

Discount rate 2.00%

2,693

Discount rate 2.25%

2,612

Discount rate 2.50%

2,534