94
23 Pensions and other post-employment benefits continued
Ahold
Annual Report 2010
Group at a glance
Performance
Governance
Financials
Notes to the consolidated financial statements continued
Cash contributions
Company contributions are expected to remain the same at €116 million in the Netherlands and increase from $67 million (€51 million) to
$94 million (€70 million) in the United States from 2010 to 2011, respectively. The increase in the U.S. contributions includes an additional
contribution to bring the frozen plan's funding ratio, as described below, to 100 percent.
As of year-end 2010, the funding ratio, calculated in accordance with regulatory requirements, of the largest Dutch plan was 112 percent,
the ongoing U.S. pension plan was 103 percent, and the U.S. frozen plan was 92 percent. Under the financing agreement with the Dutch
pension fund, Ahold can be required to contribute a maximum amount of €150 million over a five-year period if the funding ratio is below
105 percent (€50 million was paid under this agreement in 2009). The contributions to the U.S. plans in 2009 included additional
contributions of $88 million (€62 million) in order to bring funding ratios to minimum required levels.
Actuarial assumptions
The assumptions used in the actuarial calculations of the defined benefit obligations and net periodic benefit cost require a large degree of
judgment. Actual experience may differ from the assumptions made. The following table provides a summary of the funded status of all
defined benefit plans and the experience adjustments (i.e. the part of the actuarial results that is not caused by changes in actuarial
assumptions) on defined benefit obligations and plan assets. The experience adjustments for each year relate to the plans included in the
balance sheet at the end of that year.
million 2010 2009 2008 2007 2006
Defined benefit obligations at year end (3,415) (3,167) (2,835) (3,028) (3,739)
Fair value of plan assets at year end 3,496 3,089 2,636 3,514 3,673
Surplus (deficit)81 (78) (199) 486 (66)
Experience gains (losses) on defined benefit obligations (25) 2 (29) 39 4
Experience gains (losses) on plan assets 112 157 (785) (156) 184
The assumptions required to calculate the actuarial present value of benefit obligations and net periodic benefit costs are determined per
plan. The key assumptions are as follows (expressed as weighted averages):
The Netherlands
United States
Percent
2010
2009
2010
2009
Discount rate for obligations
5.4
5.0
5.8
6.2
Expected return on plan assets
6.3
6.3
7.3
7.9
Future salary increases
3.6
3.8
5.0
5.0
The discount rates used to calculate the present value of the obligations are based on the market yields on high-quality corporate bonds
(i.e. bonds rated AA) with the same currency and term as the obligations. During 2010, Ahold refined the determination of the discount
rates to better reflect market conditions. The refinement resulted in increases to the discount rates by 50 to 60 basis points for the plans in
the Netherlands and by 20 to 40 basis points for the plans in the United States.
The following table shows the effect on the defined benefit obligation and on net periodic benefit cost if the discount rate had been 0.5
percentage-points higher or lower as of year-end 2010. Positive amounts represent increases and negative amounts represent decreases
in defined benefit obligations and net periodic benefit cost:
million The Netherlands United States Total
0.5 percentage-point increase
Defined benefit obligations at year-end 2010
(153)
(85)
(238)
Net periodic benefit cost 2011
(8)
(6)
(14)
0.5 percentage-point decrease
Defined benefit obligations at year-end 2010
186
95
281
Net periodic benefit cost 2011
10
10
20
The expected return on plan assets is determined as a weighted-average rate of return 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 such as the risk-free rate of return in real terms, expected inflation and expected risk and liquidity premiums. In addition,
actual long-term historical return information is taken into account. The actual return on plan assets in 2010 was 8.9 percent for the Dutch
plans (2009: 10.2 percent) and 11.4 percent for the U.S. plans (2009: 16.1 percent).
