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 | 2023 | 2022 | ||
|---|---|---|---|---|
| Discount rate as of 1 January | 2.30 | 0.30 | ||
| Discount rate as of 31 December | 1.50 | 2.30 | ||
| Interest rate on retirement savings capital | 1.50 | 2.30 | ||
| Future salary increases | 1.00 | 1.00 | ||
| Mortality tables | BVG2020 GT | BVG2020 GT | ||
| Date of last actuarial valuation | 30.09.2023 | 30.09.2022 |
Amounts recognised in the balance sheet
| in CHF mn | 2023 | 2022 | ||
|---|---|---|---|---|
| Defined benefit obligation as of 31 December | (1 448.5) | (1 334.0) | ||
| Fair value of plan assets as of 31 December | 1 804.7 | 1 720.9 | ||
| Surplus / (deficit) as of 31 December | 356.3 | 386.8 | ||
| Adjustment to asset ceiling | (298.8) | (362.2) | ||
| Net defined benefit asset / (liabilitiy) as of 31 December | 57.4 | 24.7 | ||
| of which recognised as separate asset | 78.0 | 31.7 | ||
| of which recognised as separate liability | (20.6) | (7.0) |
At the end of 2022, there was a surplus of CHF 386.8 million, of which only CHF 24.7 million could be capitalised. The main reason for this development was that the higher discount factor had reduced the liabilities more than the plan assets had declined due to the negative performance in 2022 and the surplus thus increased. At the same time, however, the available economic benefit had decreased so much that the asset ceiling took effect and only a small part of the surplus could be capitalised. As a result of the lower discount rate, the future service cost in 2023 is just higher than the employer contributions, so the economic benefit no longer consists of the employer contribution reserve alone, with an asset of CHF 57.4 million being 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 | 2023 | 2022 | ||
|---|---|---|---|---|
| Current employer service cost | (19.3) | (27.9) | ||
| Past (service cost) / income | 0.3 | 0.3 | ||
| Interest cost for employee benefit obligation | (30.9) | (4.9) | ||
| Interest income on plan assets | 39.7 | 5.9 | ||
| Net interest on effect of asset ceiling | (8.3) | – | ||
| Administration costs (excl. asset management costs) | (0.7) | (0.8) | ||
| Other effects | 0.5 | 1.0 | ||
| Company's net periodic pension cost | (18.6) | (26.4) | ||
| of which service and administration cost | (19.1) | (27.4) | ||
| of which net interest on net defined benefit asset / (liability) | 0.6 | 0.9 |
The gain in respect of past service is mainly attributable in both years to reductions in conversion rates for various follow-on agreements with collective foundations. Since interest in each case is calculated on the discount rate at the start of the financial year, the interest effects in 2023 were significantly greater too. Further effects relate to the creation and partial reversal of accruals for the financing of various social plans and the use of the employer contribution reserve for the TX Group welfare fund.
Amounts recognised in other comprehensive income
| in CHF mn | 2023 | 2022 | ||
|---|---|---|---|---|
| Actuarial gain / (loss) on employee benefit obligation | (83.6) | 290.6 | ||
| Gain / (loss) on plan assets, excluding interest income | 45.4 | (214.8) | ||
| Change in effect of asset ceiling, excluding net interest | 71.6 | (362.2) | ||
| Total | 33.4 | (286.3) |
Composition of actuarial gains / (losses)
| in CHF mn | 2023 | 2022 | ||
|---|---|---|---|---|
| Financial assumptions | (96.6) | 291.0 | ||
| Demographical assumptions | (1.1) | (3.9) | ||
| Adjustments due to experience | 14.1 | 3.6 | ||
| Total | (83.6) | 290.6 |
Unlike 2022, an actuarial loss was made in 2023. The effect from the changes in the financial assumptions is primarily due to the lower interest rate level, as the discount rate has decreased by around 0.8 per cent compared with the previous year. Employee benefit obligations have increased accordingly.
Changes in employee benefit obligations
| in CHF mn | 2023 | 2022 | ||
|---|---|---|---|---|
| Present value as of 1 January | (1 334.0) | (1 661.8) | ||
| Interest expense | (30.9) | (4.9) | ||
| Current employer service cost | (19.3) | (27.9) | ||
| Employee contributions | (19.9) | (18.5) | ||
| Benefits paid | 78.6 | 93.6 | ||
| Past service cost / (income) | 0.3 | 0.3 | ||
| Change in group of consolidated companies | (39.1) | – | ||
| Administration costs (excl. cost for managing plan assets) | (0.7) | (0.8) | ||
| Other effects | – | (4.6) | ||
| Actuarial gains / (losses) | (83.6) | 290.6 | ||
| Present value as of 31 December | (1 448.5) | (1 334.0) | ||
| of which employee benefit obligation for current employees | (646.1) | (561.9) | ||
| of which employee benefit obligation for retired employees | (802.4) | (772.2) |
Changes in plan assets
| in CHF mn | 2023 | 2022 | ||
|---|---|---|---|---|
| Market value as of 1 January | 1 720.9 | 1 982.4 | ||
| Interest income on plan assets | 39.7 | 5.9 | ||
| Employer contributions | 21.5 | 19.8 | ||
| Employee contributions | 19.9 | 18.5 | ||
| Benefits paid | (78.6) | (93.6) | ||
| Change in group of consolidated companies | 36.3 | – | ||
| Other effects | (0.3) | 2.6 | ||
| Gain / (loss) on plan assets, excluding net interest | 45.4 | (214.8) | ||
| Market value as of 31 December | 1 804.7 | 1 720.9 |
Allocation of plan assets
| in CHF mn | 2023 | 2022 | ||
|---|---|---|---|---|
| Quoted market prices | ||||
| Shares | 502.4 | 562.9 | ||
| Bonds | 672.0 | 547.0 | ||
| Real estate | 227.1 | 242.6 | ||
| Other | 2.7 | 1.8 | ||
| Total quoted market prices | 1 404.2 | 1 354.3 | ||
| Non-quoted market prices | ||||
| Cash and cash equivalents | 34.4 | 8.5 | ||
| Real estate | 299.2 | 297.9 | ||
| Other | 66.9 | 60.1 | ||
| Total non-quoted market prices | 400.5 | 366.5 | ||
| Total assets at fair value | 1 804.7 | 1 720.9 | ||
| of which shares of TX Group AG | – | – | ||
| of which assets used by Group companies | – | – |
Expected contributions for the coming year
| in CHF mn | 2023 | 2022 | ||
|---|---|---|---|---|
| Employer contributions | 21.3 | 19.7 | ||
| Employee contributions | 19.4 | 17.9 |
Maturity of employee benefit obligations
| in years | 2023 | 2022 | ||
|---|---|---|---|---|
| Weighted average duration of employee benefit obligations in years | 11.6 | 11.0 |
Sensitivity analysis
| in CHF mn | 2023 | 2022 | ||
|---|---|---|---|---|
| Effects on employee benefit obligations as of 31 December in the event of | ||||
| Decrease in the discount rate by 0.25% | 42.5 | 36.7 | ||
| Increase of discount rate by 0.25% | (40.4) | (34.9) | ||
| Decrease in salary increases by 0.25% | (3.0) | (2.8) | ||
| Increase of salary by 0.25% | 2.7 | 2.7 | ||
| Increase of life expectancy by 1 year | 52.0 | 44.3 | ||
| Decrease in life expectancy by 1 year | (53.2) | (45.7) |
Contributions to defined contribution plans
| in CHF mn | 2023 | 2022 | ||
|---|---|---|---|---|
| Total | 0.3 | 0.4 |
Liabilities to employee benefit funds
| in CHF mn | 2023 | 2022 | ||
|---|---|---|---|---|
| Liabilities to TX Group employee benefit funds | 1.7 | 0.2 | ||
| Liabilities to other employee benefit funds | 1.2 | 1.3 | ||
| Total | 2.9 | 1.5 |
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, expected 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.