5.1 Employee benefit liabilities
5. Other information
This section provides other information and disclosures not included in other sections for example information about the employee benefits obligations. It also includes an overview of the balance-sheet related deferred tax assets and liabilities and then significant events occurring after the reporting date.
5.1 Employee benefit liabilities
Economic benefit/economic obligation and pension benefit expenses
GF maintains mostly defined benefit pension plans in Switzerland, Germany, Great Britain and the USA, with the employee benefit plan in the USA intended to be closed in the second half of 2019. With the exception of pension plans in Germany, the employee pension plans have their own assets in addition to the respective pension obligations.
The table shows the economic benefit and the economic obligation at the end of the year under review and for the previous year, as well as the changes in pension benefit expenses.
The economic proportion in the patronage fund in the amount of CHF 9 million is attributable to the acquisition of Precicast Industrial Holding SA and represents long-term investments in securities as collateral for pension liabilities, which are included under “Other financial assets” see note 5.2.
The pension plans overfunded in the amount of CHF 32 million (previous year: CHF 24 million) are attributable to the Georg Fischer Pension Fund. The assets developed positively in the year under review thanks to the revaluation of the real estate. However, the GF Machining Solutions Pension Fund is no longer overfunded (previous year: CHF 24 million), partly due to the loss made on assets and changes in technical parameters.
The pension plans underfunded in the amount of CHF 20 million (previous year: CHF 24 million) are based on the defined benefit plans in Great Britain and the USA. The amount of the underfunding depends significantly on the value of the securities and on the discount rate and the expected mortality rate used in the calculation of the pension liabilities. The total economic obligation, which represents the expected cash outflow in the medium term, amounts to CHF 14 million (previous year: CHF 20 million). Due to the upcoming liquidation of the pension fund in the USA as at the end of 2019, which is expected to have a slightly positive outcome, and the favourable trend in the discount rate in Great Britain, the economic obligation was reduced by CHF 5 million. The income is included in the pension fund expenses for the period.
The recognized economic obligation from the pension plans with no assets of their own, i.e. unfunded plans, amounted to CHF 33 million (previous year: CHF 107 million) and concerns primarily the employee pension plans in Germany. The CHF 74 million decrease was largely due to the divestment of the two iron casting plants in Singen and in Mettmann in the amount of CHF 79 million. In addition, the mortality tables in Germany were adjusted. This led to a corresponding increase in the economic obligation in the amount of CHF 7 million and is included in the pension fund expenses for the period.
Loans from pension funds in the amount of CHF 4 million (previous year: CHF 28 million) are current account balances of patronage foundations at Georg Fischer AG. In the previous year, these loans mainly originated from pension funds in Germany that had invested their fund assets in Group companies. The CHF 24 million decrease is due to the divestment of the two iron casting plants in Singen and Mettmann.
The following table summarizes the pension benefit expenses in the year under review and for the previous year:
Movements in the recognized economic obligations from pension plans and the employer-paid contributions for the year under review amounted to CHF 32 million (previous year: CHF 24 million) and are included in “Personnel expenses”.
The employee benefit plans of the Corporation comply with the legislation in force in each country. Employee benefit plans are mostly institutions and foundations that are independent of the Corporation. They are usually financed by both, employee and employer contributions.
The economic impact of the employee benefit plans is assessed each year. Surpluses or deficits are determined by means of the annual statements of each specific benefit plan, which are based either on Swiss GAAP FER 26 (Swiss benefit plans) or on the accepted methods in each foreign country (foreign plans). An economic benefit is capitalized if it is permitted and intended to use the surplus to reduce the employee contributions. If employer contribution reserves exist, they are also capitalized. An economic obligation is recognized as a liability if the conditions for an accrual are met. They are reported under “Employee benefit obligations”. Changes in the economic benefit or economic obligation, as well as the contributions incurred for the period, are recognized in “Personnel expenses” in the income statement.