2.9 Employee benefits
TX Group has a range of defined benefit plans in Switzerland. These plans are managed in accordance with the legal requirements by autonomous, legally independent pension funds. The Board of Trustees, as the highest management body of these pension funds, is composed of an equal number of employee and employer representatives.
The plan participants are insured against the economic consequences of old age, disability and death, with the benefits governed by the respective plan policies on the basis of the contributions paid. Depending on the individual plan, the employer pays contributions of at least 50 per cent up to a maximum of 65 per cent to the pension funds.
The pension funds can change their financing system (contributions and future benefits). In the event of a funding deficit, determined in accordance with the legal requirements of Switzerland, and if other measures are unsuccessful, the pension funds may charge the employer deficit reduction contributions.
All insurance risks are borne by the pension funds. These risks can be broken down into demographic and financial risks, and are regularly assessed by the Board of Trustees, which is also responsible for asset management.
The management of the plan assets aims at securing the insured parties’ benefit entitlements over the long term using the contributions paid by the employees and employer as stipulated in the plan policies. Criteria such as security, the generation of a return on investments that is in line with the market, risk distribution, efficiency and guarantee of the necessary cash and cash equivalents are all taken into account.
Risk capacity, calculated in accordance with recognised rules, is taken into account when determining the investment strategy. The structure of the plan assets takes particular account of the employee benefit obligations, including the plan’s actual financial position and expected changes to the number of insured members. The plan assets are thus distributed across different asset classes, markets and currencies, while ensuring that there is sufficient market liquidity. The target return on plan assets is determined within the context of risk capacity, and should play a key role in financing the benefits promised.
Actuarial assumptions
| in per cent | 2022 | 2021 | ||
|---|---|---|---|---|
| Discount rate as of 1 January | 0.30 | 0.20 | ||
| Discount rate as of 31 December | 2.30 | 0.30 | ||
| Expected salary increases | 1.00 | 1.00 | ||
| Expected pension increases | – | – | ||
| Mortality table | BVG2020 GT | BVG2020 GT | ||
| Date of most recent actuarial calculation | 30.09.2022 | 30.09.2021 |
Amounts recognised in the balance sheet
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Employee benefit obligations as of 31 December | (1 334.0) | (1 661.8) | ||
| Employee benefit plan assets as of 31 December | 1 720.9 | 1 982.4 | ||
| Overfunding / (liabilities) as of 31 December | 386.8 | 320.6 | ||
| Adjustment of asset limit | (362.2) | – | ||
| Net plan assets / (net plan liabilities) as of 31 December | 24.7 | 320.6 | ||
| of which net plan assets | 31.7 | 348.1 | ||
| of which employee benefit obligations | (7.0) | (27.5) |
At the end of 2021, there was a surplus of CHF 320.6 million, which was fully capitalised. As of 31 December 2022, there is an even larger surplus of CHF 386.8 million, of which only CHF 24.7 million could be capitalised. The main reason for this development is that the higher discount factor reduced the liabilities more than the plan assets declined due to the negative performance in 2022 and the surplus thus increased. At the same time, however, the available economic benefit has decreased so much that the asset ceiling takes effect and only a small part of the surplus can be capitalised. According to IFRIC 14, the amount of the economic benefit is the present value of the difference between the employer’s current service cost and the employer’s contributions plus any available employer contribution reserves.
Amounts recognised in the income statement
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Current employer service cost | (27.9) | (34.7) | ||
| Past (service cost) / income | 0.3 | 3.2 | ||
| Effect of plan curtailments / settlements | – | (0.5) | ||
| Interest cost for employee benefit obligations | (4.9) | (3.6) | ||
| Interest income on plan assets | 5.9 | 3.8 | ||
| Administration costs (excl. asset management costs) | (0.8) | (0.9) | ||
| Other effects | 1.0 | 0.8 | ||
| Company's net periodic pension cost | (26.4) | (32.0) | ||
| of which employee benefit expense and administration costs | (27.4) | (32.2) | ||
| of which net interest on net plan assets / (net plan liabilities) | 0.9 | 0.2 |
In both years, the past service cost was mainly attributable to plan amendments due to the lowering of the technical interest rate. The plan amendments relate to various follow-on agreements with collective foundations. As in the previous year, the further effects concern the creation and partial reversal of accruals for the financing of various social plans, and in 2021 additionally the use of the employer contribution reserve for TX Group welfare fund to settle compensation for reduced working hours at a rate of 100 per cent.
Amounts recognised in other comprehensive income
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Actuarial gains / (losses) on employee benefit obligations | 290.6 | 102.0 | ||
| Gains / (losses) on plan assets, excluding interest | (214.8) | 133.1 | ||
| Change in asset limit, excluding net interest | (362.2) | – | ||
| Total | (286.3) | 235.1 |
Composition of actuarial gains / (losses)
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Financial assumptions | 291.0 | 20.9 | ||
| Demographical assumptions | (3.9) | 77.8 | ||
| Adjustments due to experience | 3.6 | 3.3 | ||
| Total | 290.6 | 102.0 |
Actuarial gains are even higher in 2022 than in the previous year. The effect from the changes in the financial assumptions is primarily due to the significantly higher interest rate level, as the discount rate has increased by around 2 per cent compared to the previous year. Accordingly, employee benefit obligations have reduced considerably.
Changes in employee benefit obligations
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Present value as of 1 January | (1 661.8) | (1 838.5) | ||
| Interest cost | (4.9) | (3.6) | ||
| Current employer service cost | (27.9) | (34.7) | ||
| Employee contributions | (18.5) | (20.7) | ||
| Benefits paid | 93.6 | 91.8 | ||
| Effect of plan curtailments/settlements | 0.3 | 3.2 | ||
| Change in group of consolidated companies | – | 39.6 | ||
| Administration costs (excl. asset management costs) | (0.8) | (0.9) | ||
| Other effects | (4.6) | – | ||
| Actuarial gains / (losses) | 290.6 | 102.0 | ||
| Present value as of 31 December | (1 334.0) | (1 661.8) | ||
| of which plan liabilities for current employees | (561.9) | (694.4) | ||
| of which plan liabilities for retired employees | (772.2) | (967.4) |
Changes in plan assets
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Market value as of 1 January | 1 982.4 | 1 933.4 | ||
| Interest income on plan assets | 5.9 | 3.8 | ||
| Employer contributions | 19.8 | 22.7 | ||
| Employee contributions | 18.5 | 20.7 | ||
| Benefits paid | (93.6) | (91.8) | ||
| Effect of plan curtailments / settlements | – | (0.5) | ||
| Change in group of consolidated companies | – | (39.0) | ||
| Other effects | 2.6 | 0.0 | ||
| Gains / (losses) on plan assets, excluding interest | (214.8) | 133.1 | ||
| Market value as of 31 December | 1 720.9 | 1 982.4 |
Allocation of plan assets
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Listed market prices | ||||
| Shares | 562.9 | 713.2 | ||
| Bonds | 547.0 | 629.0 | ||
| Real estate | 242.6 | 273.3 | ||
| Other | 1.8 | 1.5 | ||
| Total listed market prices | 1 354.3 | 1 631.2 | ||
| Non-listed market prices | ||||
| Cash and cash equivalents | 8.5 | 14.2 | ||
| Real estate | 297.9 | 291.2 | ||
| Other | 60.1 | 60.0 | ||
| Total non-listed market prices | 366.5 | 351.2 | ||
| Total assets at fair value | 1 720.9 | 1 982.4 | ||
| of which shares of TX Group AG | – | – | ||
| of which assets used by Group companies | – | – |
Expected contributions for the coming year
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Employer contributions | 19.7 | 20.1 | ||
| Employee contributions | 17.9 | 18.2 |
Maturity of employee benefit obligations
| in years | 2022 | 2021 | ||
|---|---|---|---|---|
| Weighted average duration of employee benefit obligations in years | 11.0 | 13.4 |
Sensitivity analysis
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Effects on employee benefit obligations as of 31 December in the event of | ||||
| Decrease in the discount rate by 0.25% | 36.7 | 57.3 | ||
| Increase of discount rate by 0.25% | (34.9) | (53.8) | ||
| Decrease in salary increases by 0.25% | (2.8) | (3.6) | ||
| Increase of salary by 0.25% | 2.7 | 3.6 | ||
| Increase of life expectancy by 1 year | 44.3 | 69.2 | ||
| Decrease in life expectancy by 1 year | (45.7) | (68.3) |
Contributions to defined contribution plans
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Total | 0.4 | 1.2 |
Liabilities to employee benefit funds
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Liabilities to TX Group employee benefit funds | 0.2 | 0.1 | ||
| Liabilities to other employee benefit funds | 1.3 | 1.0 | ||
| Total | 1.5 | 1.0 |
Significant judgements or estimates
The calculation of the employee benefit obligations requires an estimate of future service periods, future salary and pension developments, interest on savings, the timing of contractual service payments and the employee share of the financing gap. This assessment takes into account previous experience and predicted future trends.
Accounting policies
TX Group has both defined contribution and defined benefit pension plans. Employee benefit plans are largely in line with the regulations and conditions prevailing in Switzerland. The majority of employees are insured against old age, disability and death under the autonomous employee benefit plans of TX Group. All other employees are insured under collective insurance contracts with insurance companies. Contributions to the employee benefit plans are made by both the employer and the employees pursuant to legal requirements and in accordance with the respective plan policies.
The pension plans of the Danish, German and Austrian companies are defined contribution plans under which contributions are paid to public pension plans. There are no other payment obligations. The contributions are recognised immediately as personnel expenses.
Every year, an independent actuary calculates the defined benefit obligation in accordance with the criteria stipulated by the IFRS, using the projected unit credit method. The obligations correspond to the present value of the anticipated future cash flows. The plan assets and income are calculated annually. Actuarial gains and losses are recognised immediately under other comprehensive income.
An economic benefit will result if the company can at some point in the future reduce its contributions. The amount that should become available to the company as a reduction of future contributions is defined as the present value of the difference between the service cost and the contributions laid down in the respective plan policies, and must be capitalised in compliance with the limitation imposed by IAS 19.64. The effects of the employer contribution reserves are also considered.
Of the pension cost, the current employee service cost and past service cost, plan settlements, etc. are reported as personnel expenses while the interest result is recognised in the financial result.
Any funding deficit of the defined benefit liability plans is recognised as an employee benefit liability. This is calculated by deducting the present value of the employee benefit obligation from the plan assets measured at fair value.
The calculations to determine the plan assets, employee benefit obligation and pension cost take into account long-term actuarial assumptions such as the discount rate, future salary increases, mortality rates and expected future pension increases, which can differ from the actual results and will have an impact on net assets, the financial position and earnings positions. As pension plans are long term in nature, these estimates should be seen to be subject to a significant element of uncertainty.
Contributions to defined contribution plans are recognised in the income statement.