The calculation of obligations as well as the relevant plan assets was based on the following actuarial parameters:
| XLS |
|
|
|
|
|
|
|
|
Germany |
Other countries | ||
|
in % |
2011 |
2010 |
2011 |
2010 |
|
Discount rate |
4.5 |
4.5 |
3.8 |
4.0 |
|
Future salary increases |
2.5 |
2.5 |
2.8 |
3.0 |
|
Future pension increases |
1.8 |
1.8 |
3.0 |
3.2 |
|
Staff turnover |
1.9 |
1,9 |
7.7 |
7.3 |
|
Expected return on plan assets |
4.5 |
– |
4.4 |
4.9 |
|
Future cost increases for health care benefits |
– |
– |
5.0 |
5.0 |
There 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, liquid assets, 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:
| XLS |
|
|
|
|
|
€ million |
Dec. 31, 2011 |
Dec. 31, 2010 |
|
Present value of benefit obligations funded by provisions |
167.1 |
1,467.7 |
|
Present value of funded benefit obligations |
2,322.8 |
888.1 |
|
Present value of all benefit obligations |
2,489.9 |
2,355.8 |
|
|
|
|
|
Fair value of plan assets of all funds |
–1,370.3 |
–793.3 |
|
Funded status |
1,119.6 |
1,562.5 |
|
|
|
|
|
Other changes |
– |
0.3 |
|
Net liability recognized in the balance sheet |
1,119.6 |
1,562.8 |
|
|
|
|
|
Refund claims on plan assets |
17.3 |
18.8 |
|
Provisions for pensions and other post-employment benefits |
1,136.9 |
1,581.6 |
Within the scope of a Contractual Trust Arrangement (CTA) of Merck KGaA, liquid assets amounting to € 520.0 million were transferred to a trustee, Merck Pensionstreuhand e.V., Darmstadt, in December 2011. The trustee used € 218.1 million of these liquid assets to acquire Merck Capital Asset Management Limited, Malta, which holds the financial assets being used to cover pension obligations and previously disclosed separately in the balance sheet. These financial assets are thus part of the plan assets. Accordingly, benefit obligations of Merck KGaA were reclassified from the category “funded by provisions” to the category “funded”.
In 2011, the following items were recognized in income:
| XLS |
|
|
|
|
|
€ million |
2011 |
2010 |
|
Current service cost |
81.9 |
69.5 |
|
Past service cost |
0.3 |
–0.1 |
|
Interest cost on pension obligations |
100.2 |
99.6 |
|
Expected return on plan assets |
–39.1 |
–34.1 |
|
Other effects |
–1.0 |
0.1 |
|
Total amount recognized in income |
142.3 |
135.0 |
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 € 0.9 million higher or € 0.8 million lower. The expenses recognized in 2011 would have been € 0.1 million higher or lower.
The actual gain on plan assets amounted to € 26.2 million (2010: gain of € 61.0 million). Apart from the interest component stemming from the 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:
| XLS |
|
|
|
|
|
|
|
|
|
€ million |
benefit |
funded benefit |
2011 |
benefit |
funded benefit |
2010 |
|
Present value of all defined obligations on January 1 |
1,467.7 |
888.1 |
2,355.8 |
1,260.2 |
617.5 |
1,877.7 |
|
Currency translation differences |
–0.5 |
25.0 |
24.5 |
2.8 |
71.2 |
74.0 |
|
Current service cost |
9.0 |
72.9 |
81.9 |
35.4 |
34.1 |
69.5 |
|
Interest cost on pension obligations |
7.0 |
93.2 |
100.2 |
66.3 |
33.3 |
99.6 |
|
Other effects recognized in income |
–0.2 |
–0.7 |
–0.9 |
0.1 |
0.1 |
0.2 |
|
Actuarial gains/losses |
0.7 |
14.1 |
14.8 |
160.5 |
37.2 |
197.7 |
|
Pension payments in the reporting period |
–6.3 |
–95.7 |
–102.0 |
–56.6 |
–37.9 |
–94.5 |
|
Reclassification Merck KGaA due to CTA |
–1,310.6 |
1,310.6 |
– |
– |
– |
– |
|
Transfers/Changes in scope of consolidation/ Other changes |
0.3 |
15.3 |
15.6 |
–1.0 |
132.6 |
131.6 |
|
Present value of all defined obligations on December 31 |
167.1 |
2,322.8 |
2,489.9 |
1,467.7 |
888.1 |
2,355.8 |
In 2011, actuarial losses from pension obligations included experience adjustments (losses) amounting to € 9.6 million (2010: gains of € 10.0 million).
The fair value of the plan asset of all funds changed as follows in the reporting period:
| XLS |
|
|
|
|
|
€ million |
2011 |
2010 |
|
Fair value of the plan assets on January 1 |
793.3 |
582.6 |
|
Currency translation differences |
23.2 |
68.1 |
|
Expected return on plan assets |
39.1 |
34.1 |
|
Other effects recognized in income |
– |
0.1 |
|
Actuarial gains/losses |
–12.9 |
26.9 |
|
Funding CTA Merck KGaA |
520.0 |
– |
|
Employer contributions |
39.3 |
36.4 |
|
Employee contributions |
14.1 |
12.5 |
|
Pension payments in the reporting period |
–42.1 |
–37.1 |
|
Transfers/Changes in scope of consolidation/Other changes |
–3.7 |
69.7 |
|
Fair value of the plan assets of all funds on December 31 |
1,370.3 |
793.3 |
The actuarial losses of € 12.9 million (2010: gains of € 26.9 million) correspond to the experience adjustments for the plan assets.
In 2011, actuarial gains (+) and losses (–) as well as the effects of limiting defined benefit assets in accordance with IAS 19.58 amounting to € –27.7 million (2010: € –170.7 million) were taken to equity, together with other effects totaling € –2.8 million (2010: € –4.8 million). Moreover, € 0.2 million (2010: € –0.2 million) was transferred to retained earnings. As of December 31, 2011, for the aforementioned reasons, a total of € –503.2 million (2010: € –472.9 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:
| XLS |
|
|
|
|
|
in % |
Dec. 31, 2011 |
Dec. 31, 2010 |
|
Debt instruments |
43.3 |
41.6 |
|
Equity instruments |
15.9 |
34.1 |
|
Real estate |
11.2 |
14.4 |
|
Other assets |
29.6 |
9.9 |
|
|
100.0 |
100.0 |
On average, the expected rate of return on debt instruments is 3.6%, on equity instruments 5.5% and on real estate 4.8%. 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:
| XLS |
|
|
|
|
|
|
|
|
€ million as of Dec. 31 |
2011 |
2010 |
2009 |
2008 |
2007 |
|
Present value of the defined benefit obligations |
2,489.9 |
2,355.8 |
1,877.7 |
1,585.9 |
1,665.9 |
|
Fair value of the plan assets of all funds |
–1,370.3 |
–793.3 |
–582.6 |
–462.6 |
–520.5 |
|
Funded status |
1,119.6 |
1,562.5 |
1,295.1 |
1,123.3 |
1,145.4 |
We expect that the direct payments to beneficiaries will amount to around € 60 million in 2012. Employer contributions to plan assets will probably amount to around € 39 million in 2012.
The cost of ongoing contributions in 2011 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 € 19.1 million in 2011 (2010: € 16.7 million). In addition, employer contributions of € 56.4 million (2010: € 49.9 million) were transferred to the German statutory pension insurance system and € 28.9 million (2010: € 19.6 million) to statutory pension insurance systems abroad.