Notes to the
consolidated
financial statements
continued
23 Pensions and other post-employment benefits
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
Defined benefit plans
Ahold Delhaize has a number of defined benefit pension plans covering a substantial number of employees, former employees and retirees in the
Netherlands, the United States, Belgium, Greece and Serbia.
Additionally in Belgium, the Company maintains a plan covering company executives that provides lump-sum benefits to participants upon death
or retirement based on a formula applied to the last annual salary of the participant before his or her retirement or death. The plan is subject
to the legal requirement to guarantee a minimum return on the contributions. The assets of the plan, which are made up of the contributions,
are managed through a fund that is administered by an independent insurance company, providing a minimum guaranteed return. The plan
participant’s contributions are defined in the terms of the plan, while the annual contributions to be paid by the Company are determined based
on the funding level of the plan and are calculated based on current salaries, taking into account the legal minimum funding requirement, which
is based on the vested reserves to which employees are entitled upon retirement or death. The plan mainly invests in debt securities in order to
achieve the required minimum return. The Company bears any risk above the minimum guarantee given by the insurance company. There are no
asset ceiling restrictions.
In the Netherlands, the Company has a career average plan covering all employees over the age of 21. The plan provides benefits to participants
or beneficiaries upon retirement, death or disability. The assets of the plan, which are made up of contributions from Ahold Delhaize and the
employees, are managed by Ahold Pensioenfonds, an independent foundation. The contributions are established in a funding agreement
between Ahold Delhaize, employee representatives, and Ahold Pensioenfonds every five years based on the funding levels of the plan.
The contributions are determined as a percentage of an employee’s pensionable salary.
In the United States, the Company maintains a funded plan covering employees at Ahold USA. This plan is closed to new participants. The plan
provides a life annuity benefit based upon final pay to participants or beneficiaries upon retirement, death or disability. The assets of the plan,
which are made up of contributions from Ahold Delhaize, are maintained with various trustees. Contributions to the plan are required under the
current funding policy if the prior year-end funding ratio falls below 100% as measured using regulatory interest rates without funding relief in
order to avoid variable Pension Benefit Guaranty Corporation (PBGC) premiums. In addition, the Company provides additional pension benefits for
certain company executives and life insurance and medical care benefits for certain retired employees meeting age and service requirements at
its U.S. subsidiaries, all of which the Company funds as claims are incurred.
In Belgium, the Company sponsors plans for substantially all of its employees. The plans are funded by fixed monthly contributions from both the
Company and employees. The contributions are adjusted annually according to the Belgian consumer price index; however, certain employees
who were employed before 2005 were able to choose not to participate in the employee contribution part of the plan. The plans assure
the employees a lump-sum payment at retirement based on the contributions made, and provide employees with death-in-service benefits.
Belgian law prescribes a variable minimum guaranteed rate of return with Belgian 10-year government bonds as the underlying benchmark, and
a collar of 1.75% and 3.75%. The Company substantially insures these returns with an external insurance company that receives and manages the
contributions to the plans. According to the relevant legislation, a short-fall only needs to be compensated by the employer at the point in time
when the employee either retires or leaves the Company. As these plans have defined benefit features (when the return provided by the insurance
company can be below the legally required minimum return, in which case the employer has to cover the gap with additional contributions), the
Company treats these plans as defined benefit plans.
In Greece, the Company operates an unfunded defined benefit post-employment plan. This plan relates to retirement benefits prescribed by Greek
law, consisting of lump-sum compensation payable in case of normal retirement or termination of employment. The amount of the indemnity is
based on an employee’s monthly earnings and a multiple depending on the length of service and the status of the employee. There is no legal
requirement to fund these plans with contributions or other plan assets. Employees participate in the plan once they have completed a minimum
service period, generally one year.
