[33] Provisions for pensions and other post-employment benefits 

The calculation of obligations as well as the relevant plan assets is based on the following actuarial parameters:

These are average values weighted by the present value of the respective benefit obligation. The average expected return on plan assets is weighted by the fair value of the respective plan assets. Plan assets for funded benefit obligations primarily comprise fixed-income securities, stocks and real estate. They do not include financial instruments issued by Merck Group companies or real estate used by Group companies.

The balance sheet item “Provisions for pensions and other post-employment benefits” can be broken down as follows:

In 2010, the following items were recognized in income:

At EUR 1,316.8 million (2009: EUR 1,136.1 million), the pension plans of the Group parent company Merck KGaA account for the bulk of the present value of pension obligations funded by provisions. The present value of commitments for future health care expenses of retirees in the United States is based on an expected future increase in health care costs of 5.0%. If the rate of increase is one percentage point higher or lower, the measurement of the present value of the commitment would be either EUR 0.9 million higher or EUR 0.8 million lower. The expenses recognized in 2010 would have been EUR 0.1 million higher or lower.

The actual gain on plan assets amounted to EUR 61.0 million (2009: EUR 63.8 million). Apart from the interest component stemming from interest expense on the pension obligations and the expected return on the plan assets, which are disclosed in the financial result, the relevant expense of defined benefit and defined contribution plans is distributed across the individual functional areas.

During the reporting period the present value of the benefit obligations changed as follows:

The fair value of the plan asset of all funds changed as follows in the reporting period:

In 2010, actuarial gains (+) and losses (–) as well as the effects of limiting defined benefit assets in accordance with IAS 19.58 amounting to EUR –170.7 million (2009: EUR –178.1 million) were taken to equity, together with other effects totaling EUR –4.8 million (2009: EUR 14.5 million). Moreover, EUR –0.2 million (2009: EUR –0.5 million) was transferred to retained earnings. As of December 31, 2010, for the aforementioned reasons, a total of EUR –472.9 million (2009: EUR –297.2 million) was taken to equity for the benefit obligations presented here.

The fair value of the plan assets can be allocated to the individual asset categories as follows. Weighted average values are used here.

On average, the expected rate of return on debt instruments is 3.4%, on equity instruments 7.0% and on real estate 5.2%. The respective rates of return take into account country-specific conditions and are based, among other things, on interest and dividend income expected over the long term as well increases in the value of the investment portfolio after the deduction of directly allocable taxes and expenses.

Over the past five years, the funded status, composed of the present value of the defined benefit obligations and the fair value of the plan assets, has changed as follows:

We expect that the direct payments to beneficiaries will amount to around EUR 83 million in 2011 (2010: EUR 72 million).

In 2011, employer contributions to plan assets will probably amount to around EUR 41 million (2010: EUR 24 million).

The cost of ongoing contributions in 2010 for defined contribution plans that are financed exclusively by external funds and for which the companies of the Merck Group are only obliged to pay the contributions amounted to EUR 16.7 million in 2010 (2009: EUR 8.6 million). In addition, employer contributions of EUR 49.9 million (2009: EUR 48.3  million) were transferred to the German statutory pension insurance system and EUR 19.6 million (2009: EUR 8.2 million) to statutory pension insurance systems abroad.