Chrysler 2007 Annual Report Download - page 167

166 Fiat Group Consolidated Financial Statements at December 31, 2007 - Notes
Post-employment benefits and other long-term employee benefits are calculated on the basis of the following assumptions:
At December 31, 2007 At December 31, 2006
in % Italy USA UK Other Italy USA UK Other
Discount rate 4.70 5.80 5.60 5-5.3 3.98 5.80 5.00 4-5
Future salary increase 4.60 0-4 4.00 0-3.75 3.65 0-3 3.50 1.5-3.5
Inflation rate 2.00 n/a 3.25 2.00 2.00 n/a 3.00 2.00
Increase in health care costs n/a 5-9 n/a n/a n/a 5-10 n/a n/a
Expected return on plan assets n/a 8.00 7.25 n/a n/a 8.25 7.25 n/a
The expected long-term rate of return on plan assets reflects management’s expectations on long-term average rates of return on
funds invested to provide for benefits included in the projected benefit obligations. Beginning with the year-end December 31, 2005
valuations, the expected return is based on the outlook for inflation, fixed income returns and equity returns, while also
considering asset allocation and investment strategy, premiums for active management to the extent asset classes are actively
managed and plan expenses. Historical return patterns and correlations, consensus return forecasts and other relevant financial
factors are analysed to check for reasonability and appropriateness.
Reserve for employee severance indemnity (“TFR”)
The TFR consists of the residual obligation for severance indemnities which was required until December 31, 2006 under Italian
legislation to be paid to employees of Italian companies with more than 50 employees when leaving the company, and accrued
over the employee’s working life for other companies. This provision is settled to retiree employees and may be partially paid in
advance if certain conditions are met. This defined benefit post-employment plan is unfunded.
Pension plans
The item Pension plans consists principally of the obligations of Group companies operating in the United States (mainly to the
CNH – Case New Holland Sector) and in the United Kingdom.
Under these plans a contribution is generally made to a separate fund (trust) which independently administers the plan assets.
Under certain circumstances, the plan provides for a fixed contribution by employees and for a variable contribution by the
employer necessary to, at a minimum, to satisfy the funding requirements as prescribed by the laws and regulations of each
country. Prudently the Group makes discretionary contributions in addition to the funding requirements. If these funds are
overfunded, that is if they present a surplus compared to the requirements of law, the Group companies concerned are not
required to contribute to the plan in respect of the minimum performance requirement as long as the fund is in surplus.
The investment strategy for these assets depends on the features of the plan and on the maturity of the obligations. Typically,
longer term plan benefit obligations are funded by investing in more equity securities; shorter term plan benefit obligations are
funded by investing in more fixed income securities.
With regard to pension plans in the United States from January 1, 2003 CNH Global N.V. makes contributions to these plans by
cash and ordinary shares.
In the United Kingdom the Group participates in a plan financed by various entities belonging to the Group, called the “Fiat Group
Pension Scheme”, amongst others. Under this plan, participating employers make contributions on behalf of their active employees
(active), retirees and employees who have left the Group but have not yet retired (deferred).