Note 24
The plan assets are generally managed by outside
investment managers and rebalanced periodically. The
committees for the various U.S. plans establish investment
policies and strategies and regularly monitor the
performance of the assets, including the selection of
investment managers, setting long-term strategic targets
and monitoring asset allocations. Target allocation ranges
are guidelines, not limitations, subject to variation from time
to time, or as circumstances warrant. Occasionally, the
committees may approve allocations above or below a target
range. The investment strategy with respect to pension plan
assets is to invest in accordance with the Employee
Retirement Income Security Act of 1974 ("ERISA") and
fiduciary standards. The long-term primary objective for the
plan assets is to protect the assets from erosion of
purchasing power, and to provide for a reasonable amount
of long-term growth of capital, without undue exposure to
risk. Currently, the strategic targets are between 50-70
percent for equity securities, 30-45 percent for debt
securities and 0-5 percent for other investments.
In 2006 the fair value of the plan assets (U.S. plans and Dutch
plans in the aggregate) included EUR 1 of Ahold shares
(2005: 2).
Medical cost trend rates
The assumed medical cost trend rates used in measuring
the defined benefit obligations related to medical care plans
were 9.9 percent, 11.25 percent and 9.0 percent in 2006,
2005 and 2004, respectively, declining to 5.1 percent.
The sensitivity for these plans is as follows:
A 1.0 percent-point increase in assumed medical cost
trend rates would have increased the aggregate of current
service cost and interest cost components of net periodic
post-employment medical cost by EUR 0.2 in 2006,
EUR 0.5 in 2005 and EUR 0.6 in 2004. The effect of this
change on the accumulated post-employment benefit
obligation for medical care plans as of the end of 2006
and 2005 would have been an increase of EUR 2.3 and
EUR 5.7, respectively.
A 1.0 percent-point decrease in assumed medical cost
trend rates would have decreased the aggregate of current
service cost and interest cost components of net periodic
post-employment medical cost by EUR 0.2 in 2006,
EUR 0.4 in 2005 and EUR 0.5 in 2004. The effect of this
change on the accumulated post-employment benefit
obligation for medical care plans as of the end of 2006
and 2005 would have been a decrease of EUR 2.0 and
EUR 6.3, respectively.
Basis used in determining the expected returns
on plan assets
The expected return on plan assets is based on the current
and projected investment portfolio mix of each plan, taking
into account the corresponding long-term yields for the
separate asset categories, which depend on components
like the risk-free rate of return in real terms, expected
inflation and expected risk and liquidity premiums. For U.S.
plans, actual long-term historical return information is also
taken into account in determining the expected return on
plan assets. The expected return on plan assets is
determined as a weighted-average rate of return based on
the asset allocation. Due to differences in both current and
projected plan asset allocations over the plans, the expected
rate of return can differ from plan to plan.
Expected contributions 2007
For the Dutch defined benefit plans, the contributions are
expected to decrease from EUR 158 in 2006 to EUR 150 in
2007. For the U.S. defined benefit plans, contributions are
expected to decrease from EUR 38 in 2006 to EUR 29
in 2007.
Expected future benefit payments
The Dutch and U.S. plans have the following expected
schedule of benefit payments for the next 10 years:
Dutch plans
U.S. plans
Total
2007
79
60
139
2008
83
62
145
2009
85
64
149
2010
86
67
153
2011
88
71
159
2012-2016
427
424
851
Total
848
748
1,596
Defined contribution plans
In the United States, there are defined contribution plans
principally in the form of savings, incentive compensation
and bonus plans. Additionally, certain union employees in
the United States are covered by multi-employer plans,
which can be defined benefit plans on the basis of the terms
of the benefits provided, but that are accounted for as
defined contribution plans if sufficient information is not
available to account for these plans as defined benefit plans.
These plans are generally flat salary plans. Ahold is only one
of several employers participating in each of these plans and
the financial information that is provided by the third-party
managers of the plans on the basis of the contractual
agreements is usually insufficient to reliably measure
Ahold's proportionate share in the plan assets and liabilities
on defined benefit accounting principles. Furthermore, the
financial statements of the multi-employer plans are drawn
up on the basis of other accounting policies than those
applied by Ahold. Consequently, these multi-employer plans
are not included in Ahold's balance sheets.
Ahold Annual Report 2006 97
