Note 12. Employee benefits
The Company has retirement plans covering substantially all employees. The principal plans are defined contribution plans, except for the plans of the Company’s operations in the Netherlands and Japan.
There are 148 eligible employees in the Netherlands. These employees participate in a multi-employer union plan (PME) determined in accordance with the collective bargaining agreements effective for the industry in which we operate. This collective bargaining agreement has no expiration date. This multi-employer union plan, accounted for as a defined-contribution plan, covers approximately 1,282 companies and approximately 147,000 contributing members. Our contribution to the multi-employer union plan was less than 5 percent of the total contribution to the plan as per the Statutory annual report for the year ended December 31, 2014. The plan monitors its risks on a global basis, not by participating company or employee, and is subject to regulation by Dutch governmental authorities. By law (the Dutch Pension Act), a multi-employer union plan must be monitored against specific criteria, including the coverage ratio of the plan’s assets to its obligations. As of January 1, 2015 new pension legislation has been enacted. This legislation results in amongst others, an increase of legally required coverage levels. The coverage percentage is calculated by dividing the funds capital by the total sum of pension liabilities and is based on actual market interest rates. The coverage ratio as per December 31, 2015 of 97.7 percent (December 31, 2014: 104.1 percent) is calculated giving consideration to the new pension legislation and is below the legally required level. We have however no obligation to pay off any deficits the pension fund may incur, nor have we any claim to any potential surpluses.
Every company participating in the PME contributes a premium calculated as a percentage of its total pensionable salaries, with each company subject to the same contribution rate. The premium can fluctuate yearly based on the coverage ratio of the multi-employer union plan, for 2015 the contribution percentage was 23.6 percent, for 2016 this will be 23.2% (approximately €3.4 million). The pension rights of each employee are based upon the employee’s average salary during employment.
Our net periodic pension cost for this multi-employer union plan for any period is the amount of the required employer contribution for that period.
Defined benefit plan
The Company’s employees in Japan participate in a defined benefit plan. The Company makes contributions to defined benefit plans in Japan that provide pension benefits for employees upon retirement. These are average-pay plans, based on the employees' years of service and compensation near retirement.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at December 31, 2015. The present value of the defined benefit obligation and the related current service cost and passed service cost were measured using the Projected Unit Credit Method. Significant actuarial assumptions for the determination of the defined obligation are discount rate, future general salary increases and future pension increases.
The net liability of the plan developed as follows:
|Defined benefit obligations||(8,079)||(9,800)|
|Fair value of plan assets||6,297||8,630|
|Net liability for defined benefit plans||(1,782)||(1,170)|
The changes in defined benefit obligations and fair value of plan assets are as follows:
|Defined benefit obligations|
|Balance January 1||7,604||8,079|
|Current service cost||515||567|
|Interest on obligation||69||77|
|Remeasurement losses (gains)||98||236|
|Foreign currency translation effect||(43)||895|
|Balance December 31||8,079||9,800|
|Fair value of plan assets|
|Balance January 1||5,127||6,297|
|Return on plan assets||113||294|
|Foreign currency translation effect||7||722|
|Balance December 31||6,297||8,630|
The defined benefit cost consists of the following:
|Current service cost||515||567|
|Net interest costs||17||12|
|Net defined benefit cost||463||579|
The assumptions in calculating the actuarial present value of benefit obligations and net periodic benefit cost are as follows:
|Discount rate for obligations||0.90%||0.80%|
|Expected rate of compensation increase||2.93%||2.93%|
Assumptions regarding life expectancy are based on mortality tables published in 2015 by the Ministry of Health, Labour and Welfare of Japan.
The main risk on the pension plan relates to the discount rate. The defined benefit obligation is sensitive to a change in discount rates, a relative change of the discount rate with 25 basis points would have resulted in a change of the defined benefit obligation with 2.52%.
The allocation of plan assets is as follows:
The investment strategy is determined based on an asset-liability study in consultation with investment advisers and within the boundaries given by regulatory bodies for pension funds. Equity securities consist primarily of publicly traded Japanese companies and common collective funds. Publicly traded equities are valued at the closing prices reported in the active market in which the individual securities are traded (level 1). Common collective funds are valued at the published price (level 1) per share multiplied by the number of shares held as of the measurement date.
Fixed income (bonds and loans) consists of corporate bonds, government securities and common collective funds. Corporate and government securities are valued by third-party pricing sources (level 2). Common collective funds are valued at the net asset value per share (level 2) multiplied by the number of shares held as of the measurement date.
Real estate fund and other values are primarily reported by the fund manager and are based on valuation of the underlying investments (level 3) which include inputs such as cost, discounted cash flows, independent appraisals and market based comparable data.
The plan assets do not include any of the Company’s shares.
Retirement plan costs
ASMI contributed €1,306 to the defined benefit plan in 2015. The Company expects to pay benefits for years subsequent to December 31, 2015 as follows:
|Expected contribution defined benefit plan|
|Aggregate for the years 2021-2025||3,335|
Retirement plan costs consist of the following:
|Defined contribution plans||2,479||3,407|
|Defined benefit plans||463||579|
|Total retirement plan costs||4,162||5,451|
The Company does not provide for any significant post-retirement benefits other than pensions.