Note 22 - Post employment benefits

All amounts in SEKm unless otherwise stated

Post-employment benefits

The Group sponsors pension plans in many of the countries in which it has significant activities. Pension plans can be defined contribution or defined benefit plans or a combination of both. Under defined benefit pension plans, the company enters into a commitment to provide post-employment benefits based upon one or several parameters for which the outcome is not known at present. For example, benefits can be based on final salary, on career average salary, or on a fixed amount of money per year of employment. Under defined contribution plans, the company’s commitment is to make periodic payments to independent authorities or investment plans, and the level of benefits depends on the actual return on those investments. Some plans combine the promise to make periodic payments with a promise of a guaranteed minimum return on the investments. These plans are also defined benefit plans.

In some countries, the companies make provisions for compulsory severance payments. These provisions cover the Group’s commitment to pay employees a lump sum upon reaching retirement age, or upon the employees’ dismissal or resignation. These plans are listed below as Other post-employment benefits.

In addition to providing pension benefits and compulsory severance payments, the Group provides healthcare benefits for some of its employees in certain countries, mainly in the US.

The Group’s major defined benefit plans cover employees in the US, the UK, Switzerland, Germany, France, Italy and Sweden. The Italian and French plans are unfunded and the rest of the plans are funded.

In Sweden, in addition to benefits relating to retirement pensions, there is also a family pension for many of the Swedish employees. This commitment is classified as a multi-employer defined benefit plan and administered by Alecta. It has not been possible to obtain the necessary information for the accounting of this plan as a defined benefit plan, and therefore, it has been accounted for as a defined contribution plan.

Below are set out schedules which show the obligations of the plans in the Electrolux Group, the assumptions used to determine these obligations and the assets relating to the benefit plans, as well as the amounts recognized in the income statement and balance sheet. The schedules also include a reconciliation of changes in net provisions during the year, a reconciliation of changes in the present value of the obligation during the year and a reconciliation of the changes in the fair value of plan assets.

The provisions for post-employment benefits amounted to SEK 287m (957). The decrease of SEK 670m is mainly due to lower contributions by employer and a lower pension expense. The unrecognized actuarial losses in the plans for post-employment benefits increased with SEK 2,159m to SEK 3,492m (1,333). The increase is mainly due to sharp falls in discount rates across all plans and poor performance of the plan assets.

Amounts recognized in balance sheet
	December 31, 2011				December 31, 2010
	Pension benefits	Healthcare benefits	Other post-employment benefits	Total	Pension benefits	Healthcare benefits	Other post-employment benefits	Total
Present value of funded obligations	19,973	2,249	—	22,222	18,332	2,068	—	20,400
Fair value of plan assets	–18,468	–1,331	—	–19,799	–18,069	–1,340	—	–19,409
Surplus/deficit	1,505	918	—	2,423	263	728	—	991
Present value of unfunded obligations	739	—	638	1,377	666	—	657	1,323
Unrecognized actuarial losses(-) /gains(+)	–3,360	–87	–45	–3,492	–1,532	232	–33	–1,333
Unrecognized past-service cost	—	—	–21	–21	–1	1	–24	–24
Effect of limit on assets	—	—	—	—	—	—	—	—
Net provisions for post-employment benefits	–1,116	831	572	287	–604	961	600	957
Whereof reported as
Prepaid pension cost in other non-current assets¹⁾	1,824	—	—	1,824	1,529	—	—	1,529
Provisions for post-employment benefits	708	831	572	2,111	925	961	600	2,486

1) Pension assets are related to Canada, Norway, Sweden, Switzerland and the United Kingdom.


Reconciliation of changes in net provisions for post-employment benefits
	Pension benefits	Healthcare benefits	Other post-employment benefits	Total
Net provision for post-employment benefits, January 1, 2010
Expenses for defined post-employment benefits	226	37	51	314
Contributions by employer	–626	–192	–72	–890
Exchange-rate differences	8	–43	–90	–125
Net provision for post-employment benefits, December 31, 2010	–604	961	600	957
Expenses for defined post-employment benefits	–9	–5	43	29
Contributions by employer	–479	–143	–65	–687
Exchange-rate differences and other changes	–24	18	–6	–12
Net provision for post-employment benefits, December 31, 2011	–1,116	831	572	287


Amounts recognized in income statement
	December 31, 2011				December 31, 2010
	Pension benefits	Healthcare benefits	Other post-employment benefits	Total	Pension benefits	Healthcare benefits	Other post-employment benefits	Total
Current service cost	198	1	4	203	312	1	4	317
Interest cost	865	93	28	986	957	114	35	1,106
Expected return on plan assets	–1,099	–88	—	–1,187	–1,140	–90	—	–1,230
Amortization of actuarial losses/gains	29	–8	—	21	92	–10	—	82
Amortization of past-service cost	–2	–1	1	–2	5	–6	2	1
Losses/gains on curtailments and settlements	2	–2	10	10	15	28	10	53
Effect of limit on assets	–2	—	—	–2	–15	—	—	–15
Total expenses for defined post-employment benefits	–9	–5	43	29	226	37	51	314
Expenses for defined contribution plans	—	—	—	396	—	—	—	427
Total expenses for post-employment benefits	—	—	—	425	—	—	—	741
Actual return on plan assets	–735	—	—	–735	–1,864	—	—	–1,864

For the Group, total expenses for pensions, healthcare and other post-employment benefits have been recognized as operating expenses and classified as cost of goods sold, selling expenses or administrative expenses depending on the function of the employee. In the Parent Company, a similar classification has been made.


Reconciliation of change in present value of defined benefit obligation for funded and unfunded obligations
	2011				2010
	Pension benefits	Healthcare benefits	Other post-employment benefits	Total	Pension benefits	Healthcare benefits	Other post-employment benefits	Total
Opening balance, January 1	18,998	2,068	657	21,723	19,610	2,055	734	22,399
Current service cost	198	1	4	203	312	1	4	317
Interest cost	865	93	28	986	957	114	35	1,106
Contributions by plan participants	41	16	—	57	41	21	—	62
Actuarial losses/gains	1,458	190	16	1,664	222	150	26	398
Past-service cost	–3	—	–2	–5	—	—	15	15
Curtailments/special termination benefit cost	6	–2	—	4	10	32	12	54
Liabilities extinguished on settlements	–5	—	6	1	–2	—	–3	–5
Exchange-rate differences on foreign plans	215	38	–6	247	–1,054	–117	–94	–1,265
Benefits paid	–1,062	–168	–65	–1,295	–1,098	–199	–72	–1,369
Other	1	13	—	14	—	11	—	11
Closing balance, December 31	20,712	2,249	638	23,599	18,998	2,068	657	21,723


Reconciliation of change in fair value of plan assets
	2011				2010
	Pension benefits	Healthcare benefits	Other post-employment benefits	Total	Pension benefits	Healthcare benefits	Other post-employment benefits	Total
Opening balance, January 1	18,069	1,340	—	19,409	17,749	1,259	—	19,008
Expected return on plan assets	1,099	88	—	1,187	1,140	90	—	1,230
Actuarial gains/losses	–344	–108	—	–452	581	53	—	634
Settlements	—	—	—	—	—	—	—	—
Contributions by employer	479	143	65	687	626	192	72	890
Contributions by plan participants	41	16	—	57	41	21	—	62
Exchange-rate differences on foreign plans	185	17	—	202	–974	–76	—	–1,050
Benefits paid	–1,062	–168	–65	–1,295	–1,098	–199	–72	–1,369
Other	1	3	—	4	4	—	—	4
Closing balance, December 31	18,468	1,331	—	19,799	18,069	1,340	—	19,409

The pension plan assets include ordinary shares issued by AB Electrolux with a fair value of SEK 49m (86). In 2012, the Group expects to pay a total of SEK 763m in contributions to the funds and payments of benefits directly to the employees. In 2011, this amounted to SEK 687m, of which SEK 380m were contributions to the Group’s pension funds.


Major categories of plan assets as a percentage of total plan assets
	December 31,
%	2011	2010
European equities	10	16
North American equities	15	16
Other equities	10	10
European bonds	19	19
North American bonds	24	22
Other bonds	4	—
Alternative investments¹⁾	12	13
Property	5	3
Cash and cash equivalents	1	1
Total	100	100

1) Includes hedge funds and infrastructure investments.

Principal actuarial assumptions at balance-sheet date expressed as a weighted average
	December 31,
%	2011	2010
Discount rate	4.1	4.9
Expected long-term return on assets	6.5	6.8
Expected salary increases	3.7	3.8
Annual increase of healthcare costs	8.0	8.0

When determining the discount rate, the Group uses AA-rated corporate bond indexes which match the duration of the pension obligations. If no corporate bond is available, government bonds are used to determine the discount rate. In Sweden, mortgage bonds are used for determining the discount rate.
Expected long-term return on assets is calculated by assuming that fixed-income holdings are expected to have the same return as ten-year corporate bonds. Equity holdings are assumed to return an equity-risk premium of 5% over ten-year government bonds. Alternative investments are assumed to return 4% over three-month Libor annually. The benchmark allocation for the assets is used when calculating the expected return, as this represents the long-term actual allocation.
Expected salary increases are based on local conditions in each country.
The assumed healthcare-cost trend rate has a significant effect on the amounts recognized in the profit or loss. A one-percentage point change in the assumed medical cost-trend rate would have the following effects:

Healthcare benefits sensitivity analysis
	2011		2010
	One-percentage point increase	One-percentage point decrease	One-percentage point increase	One-percentage point decrease
Effect on aggregate of service cost and interest cost	9	–8	11	–9
Effect on defined benefit obligation	245	–209	210	–181


Amounts for annual periods
		December 31,
	2011	2010	2009	2008	2007
Defined benefit obligation	–23,599	–21,723	–22,399	–23,185	–20,597
Plan assets	19,799	19,409	19,008	13,989	14,008
Surplus/deficit	–3,800	–2,314	–3,391	–9,196	–6,589
Experience adjustments on plan liabilities	208	425	222	217	–221
Experience adjustments on plan assets	–452	634	1,130	–1,665	–38

Parent Company

According to Swedish accounting principles adopted by the Parent Company, defined benefit liabilities are calculated based upon officially provided assumptions, which differ from the assumptions used in the Group under IFRS. The pension benefits are secured by contributions to a separate fund or recorded as a liability in the balance sheet. The accounting principles used in the Parent Company’s separate financial statements differ from the IFRS principles, mainly in the following:

The pension liability calculated according to Swedish accounting principles does not take into account future salary increases.
The discount rate used in the Swedish calculations is set by the Swedish Pension Foundation (PRI) and was 4.0% (4.0). The rate is the same for all companies in Sweden.
Changes in the discount rate and other actuarial assumptions are recognized immediately in the profit or loss and the balance sheet.
Deficit must be either immediately settled in cash or recognized as a liability in the balance sheet.
Surplus cannot be recognized as an asset, but may in some cases be refunded to the company to offset pension costs.

Change in present value of defined benefit pension obligation for funded and unfunded obligations
	Funded	Unfunded	Total
Opening balance, January 1, 2010	1,217	374	1,591
Current service cost	31	13	44
Interest cost	62	19	81
Other change of present value	—	—	—
Benefits paid	–44	–36	–80
Closing balance, December 31, 2010	1,266	370	1,636
Current service cost	118	43	161
Interest cost	60	17	77
Other change of present value	—	—	—
Benefits paid	–49	–35	–84
Closing balance, December 31, 2011	1,395	395	1,790


Change in fair value of plan assets
	Funded
Opening balance, January 1, 2010	1,587
Actual return on plan assets	110
Contributions and compensation to/from the fund	61
Closing balance, December 31, 2010	1,758
Actual return on plan assets	–38
Contributions and compensation to/from the fund	7
Closing balance, December 31, 2011	1,727


Amounts recognized in balance sheet
	December 31,
	2011	2010
Present value of pension obligations	–1,790	–1,636
Fair value of plan assets	1,727	1,758
Surplus/deficit	–63	122
Limitation on assets in accordance with Swedish accounting principles	–332	–492
Net provisions for pension obligations	–395	–370
Whereof reported as provisions for pensions	–395	–370


Amounts recognized in income statement
	2011	2010
Current service cost	161	44
Interest cost	77	81
Total expenses for defined benefit pension plans	238	125
Insurance premiums	69	74
Total expenses for defined contribution plans	69	74
Special employer’s contribution tax	63	46
Cost for credit insurance	1	1
Total pension expenses	371	246
Compensation from the pension fund	–43	—
Total recognized pension expenses	328	246

The Swedish Pension Foundation

The pension liabilities of the Group’s Swedish defined benefit pension plan (PRI pensions) are funded through a pension foundation established in 1998. The market value of the assets of the foundation amounted at December 31, 2011, to SEK 2,048m (2,086) and the pension commitments to SEK 1,657m (1,505). The Swedish Group companies recorded a liability to the pension fund as per December 31, 2011, in the amount of SEK 152m (58). Contributions to the pension foundation during 2011 amounted to SEK 58m (73) regarding the pension liability at December 31, 2010. Contributions from the pension foundation during 2011 amounted to SEK 52m (0).