23 Pensions and other post-employment benefits (continued)
Ahold Annual Report 2012 115
Ahold at a glance
Our strategy
Our performance
Governance
Financials
Investors
Notes to the consolidated
financial statements
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% equity securities (including equity derivatives and forward currency contracts), 50% debt securities, 15% real estate investments and 10% 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 1 974, 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% equity securities, 45% debt securities and 1 0% 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 70% of its investments in debt securities and 30% in cash in order to meet the remaining planned settlement in 2013.
In 2012 and 201 1 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 12009.
During 2012 and 2011the Company contributed €30 million and €28 million, respectively, to defined contribution plans. These contributions were recognized as an expense in the income
statement and related entirely to continuing operations in 2012 and 201 1
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 oversight of the investment of the assets and administration of the plan. Benefit levels are generally determined through
the collective bargaining process by the participating employers and unions.
Most of these plans are defined contribution plans. All plans that are defined benefit plans, on the basis of the terms of the benefits provided, are accounted for as defined contribution plans
because sufficient information is not available to account for these plans as defined benefit plans. These plans are generally flat dollar benefit 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 sheet.
Defined benefit plans
Ahold participated in 13 multi-employer pension plans that are defined benefit plans on the basis of the terms of the benefits provided. The following table presents Ahold's estimate of its
proportionate share of each plan's deficit or surplus. Ahold's participation is the relative amount of its contributions during the year in relation to the total amount of contributions made to the
plan. The estimate of Ahold's net proportionate share of the plans' deficits is based on the latest available information received from these plans, as indicated below, and updated for market
trends and conditions through the end of 2012, and does not represent Ahold's direct obligation. While this is our best estimate, based upon information available to us, it is imprecise and not
necessarily reliable.
