106
23 Pensions and other post-employment benefits continued
Ahold
Annual Report 2011
Groupata glance
Performance
Governance
Investors
Notes to the consolidated financial statements continued
The assumed medical cost trend rates used in measuring the defined benefit obligations related to medical care plans were 8.5 percent in
2011 and 9.0 percent in 2010, declining to an ultimate trend rate of 5.0 percent as of 2019. Because of the limited size of Ahold's medical
care plans, the impact of a 1.0 percentage-point increase or decrease in assumed medical cost trend rates on the defined benefit
obligation and net periodic benefit cost would be negligible.
Plan assets
The pension plan asset allocation differs per plan. On a weighted average basis, the allocation was as follows:
The Netherlands
United States
Percent
2011
2010
2011
2010
Equity securities
22
34
32
38
Debt securities
56
51
59
55
Real estate
14
10
2
1
Other
8
5
7
6
Total
100
100
100
100
In the Netherlands, the plan assets are managed by outside investment managers following investment strategies based on the
composition of the plan liabilities. With the aid of Asset Liability Management modeling, analyses are made of possible future economic
scenarios and investment portfolios. Based on these analyses, investment strategies are determined for each plan to produce optimal
investment returns at acceptable funding ratio risk levels. Less favorable years can be part of these scenarios. Currently the strategic
targets for asset allocation of the Dutch pension plan are: 25 percent equity securities (including equity derivatives and forward currency
contracts), 50 percent debt securities, 15 percent real estate investments, and 10 percent other investments, cash included. To partially
hedge against interest rate risk exposure on the pension liabilities, the Dutch pension plan uses interest rate swap contracts. The Dutch
early retirement plan has a relatively short remaining term; therefore the plan assets are invested in fixed income securities and cash
instruments only.
In the United States, 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. Pension plan assets are invested in a trust intended to comply with the Employee
Retirement Income Security Act of 1974, as amended, (ERISA) and applicable fiduciary standards. The long-term investment objective for
the plan's assets is to maintain an acceptable funding ratio between assets and plan liabilities without undue exposure to risk. Currently,
the strategic targets are: 45 percent equity securities, 45 percent debt securities, and 10 percent other investments. These strategic targets
are followed by the ongoing plans; however the weighted average allocations presented above are impacted by the frozen plan, which has
50 percent of its investments in debt securities and 50 percent in cash in order to meet the planned settlement in 2012.
In 2011 and 2010, neither the Dutch nor the U.S. plans had any plan assets invested in Ahold shares.
Defined contribution plans
In the United States and Other Europe, there are defined contribution plans principally in the form of savings, incentive compensation, and
bonus plans. In connection with the Company's decision to transition its defined benefit pension plan for active salaried, non-union, and
certain union employees in the United States to a defined contribution pension plan, as further described above, a new 401(k) plan was
introduced as of January 1, 2009.
During 2011 and 2010, the Company contributed €28 million and €27 million, respectively, to defined contribution plans. These
contributions were recognized as an expense in the income statement and related entirely to continuing operations in 2011 and 2010.
Multi-employer plans
A significant number of union employees in the United States are covered by multi-employer plans based on obligations arising from
collective bargaining agreements. These plans provide retirement and other benefits to participants based on their service to contributing
employers. The benefits are paid from assets held in trust for that purpose. Trustees are appointed in equal number by employers and
unions and they are typically responsible for determining the level of benefits to be provided to participants, as well as the investment of the
assets and the administration of the plan.
