23 Pensions and other post-employment benefits continued
Ahold
Annual Report 2011
Groupata glance
Performance
Governance
Notes to the consolidated financial statements continued
Investors
Cash contributions
From 2011 to 2012, Company contributions are expected to increase from €117 million to €123 million in the Netherlands and from
$95 million (€69 million) to $118 million (€91 million) in the United States.
As of year-end 2011, the funding ratio, calculated in accordance with regulatory requirements, of the largest Dutch plan was 106 percent
and the ongoing U.S. pension plan was 92 percent. Since the frozen plan was terminated effective July 12011the plan is no longer
subject to U.S. funding requirements, but to plan termination rules that will require Ahold to fully fund the liabilities at the time the assets are
distributed to settle the plan. 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 2011 included additional contributions of $38 million (€28 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
2011
2010
2009
2008
2007
Defined benefit obligations at year end
Fair value of plan assets at year end
(3,624) (3,415) (3,167) (2,835) (3,028)
3,879 3,496 3,089 2,636 3,514
Surplus (deficit)
255
81
(78) (199)
486
Experience gains (losses) on defined benefit obligations 34 (25) 2 (29) 39
Experience gains (losses) on plan assets 93 112 157 (785) (156)
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
2011
2010
2011
2010
Discount rate for obligations
5.4
5.4
5.2
5.8
Expected return on plan assets
5.9
6.3
7.1
7.3
Future salary increases
3.9
3.6
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 2010 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 2011. 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 2011
(177)
(98)
(275)
Net periodic benefit cost 2012
(19)
(8)
(27)
0.5 percentage-point decrease
Defined benefit obligations at year-end 2011
203
110
313
Net periodic benefit cost 2012
13
11
24
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 2011 was 9.5 percent for the Dutch
plans (2010: 8.9 percent) and 5.1 percent for the U.S. plans (2010: 11.4 percent).
