Chrysler 2014 Annual Report Download - page 227

2014 | ANNUAL REPORT 225
The weighted average assumptions used to determine the defined benefit obligations were as follows:
At December 31,
2014 2013
U.S. Canada U.S. Canada
(%)
Discount rate 4.1 3.9 4.9 4.7
Salary growth — — n/a 2.7
Weighted average ultimate healthcare cost trend rate 5.0 3.6 5.0 3.6
The discount rates used for the measurement of these obligations are based on yields of high-quality (AA-rated) fixed
income securities for which the timing and amounts of payments match the timing and amounts of the projected
benefit payments. The average duration of the U.S. and Canadian liabilities was approximately 12 and 16 years,
respectively.
The annual rate of increase in the per capita cost of covered U.S. health care benefits assumed for next year and used
in the 2014 plan valuation was 6.5 percent (6.8 percent in 2013). The annual rate was assumed to decrease gradually
to 5.0 percent after 2021 and remain at that level thereafter. The annual rate of increase in the per capita cost of
covered Canadian health care benefits assumed for next year and used in the 2014 plan valuation was 3.3 percent
(3.3 percent in 2013). The annual rate was assumed to increase gradually to 3.6 percent in 2017 and remain at that
level thereafter.
Other post-employment benefits
Other post-employment benefits includes other employee benefits granted to Group employees in Europe and
comprises, amongst others, the Italian employee severance indemnity (TFR) obligation amounting to €886 million at
December 31, 2014 and €861 million at December 31, 2013. These schemes are required under Italian Law.
The amount of TFR to which each employee is entitled must be paid when the employee leaves the Group and is
calculated based on the period of employment and the taxable earnings of each employee. Under certain conditions
the entitlement may be partially advanced to an employee during their working life.
The legislation regarding this scheme was amended by Law 296 of December 27, 2006 and subsequent decrees
and regulations issued in the first part of 2007. Under these amendments, companies with at least 50 employees are
obliged to transfer the TFR to the “Treasury fund” managed by the Italian state-owned social security body (INPS) or
to supplementary pension funds. Prior to the amendments, accruing TFR for employees of all Italian companies could
be managed by the company itself. Consequently, the Italian companies’ obligation to INPS and the contributions
to supplementary pension funds take the form, under IAS 19 - Employee Benefits, of defined contribution plans
whereas the amounts recorded in the provision for employee severance pay retain the nature of defined benefit plans.
Accordingly, the provision for employee severance indemnity in Italy consists of the residual obligation for TFR until
December 31, 2006. This is an unfunded defined benefit plan as the benefits have already been entirely earned, with
the sole exception of future revaluations. Since 2007 the scheme has been classified as a defined contribution plan
and the Group recognizes the associated cost over the period in which the employee renders service.