Mercedes 2015 Annual Report Download - page 230

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 237
German plans
Most employees in Germany have defined benefit pension
plans; most of the pension plans for the active workforce are
based on individual retirement benefit accounts, to which
the Company makes annual contributions. The amount of the
contributions for employees paid according to wage-tariff
agreements depends on the tariff classification in the respec-
tive year, and for executives it depends on their respective
income. For the commitments to retirement benefits made until
2011, the contributions continue to be converted into capital
components and credited to the individual pension account with
the application of fixed factors related to each employee’s
age. The conversion factors include a fixed value increase.
The pension plans were newly structured for new entrants
in 2011 to reduce the risks associated with defined benefit plans.
New entrants now benefit from value increases of the con-
tributions through an investment fund with a special lifecycle
model. The Company guarantees at a minimum the value of
the contributions paid in. Pension payments are made either as
a life annuity, twelve annual installments, or a single lump sum.
In addition, previously concluded defined benefit plans exist
which primarily depend on employees’ wage-tariff classification
upon transition into the benefit phase and which foresee
a life annuity.
As well as the employer-financed pension plans granted
by German companies, the employees of some companies
are also offered various earnings-conversion models.
Most of the pension obligations in Germany relating to defined
benefit pension plans are funded by assets invested in long-term
outsourced funds. Contractual trust arrangements (CTA) exist
between Daimler AG as well as some subsidiaries in Germany and
the Daimler Pension Trust e.V. The Daimler Pension Trust e. V.
acts as a collateral trust fund.
In Germany, there are no statutory or regulatory minimum
funding requirements.
Non-German plans
Significant plans exist primarily in the United States and Japan.
They comprise plans relating to final salaries as well as plans
relating to salary based components. Most of the obligations
outside Germany from defined benefit pension plans are
funded by assets outplaced into long-term investment funds.
Risks from defined benefit pension plans
The general requirements with regard to retirement benefit
models are laid down in the Pension Policy, which has Group-wide
validity. Accordingly, the committed benefits are intended
to contribute to additional financial security during retirement,
and in the case of death or invalidity to be capable of being
planned and fulfilled by the respective company of the Group
and to have a low-risk structure. In addition, a committee
exists that approves new pension plans and amendments
to existing pension plans as well as guidelines relating
to company retirement benefits.
The obligations from defined benefit pension plans and the
pension plan assets can be subject to fluctuations over time.
This can cause the funded status to be negatively or positively
impacted. Fluctuations in the defined benefit pension obliga-
tions result at the Daimler Group in particular from changes
in financial assumptions such as discount rates and increases
in the cost of living, but also from changes in demographic
assumptions such as adjusted life expectancies. With most
of the German plans, expected long-term wage and salary
increases do not have an impact on the amount of the obligation.
The fair value of plan assets is predominantly determined by the
situation on the capital markets. Unfavorable developments,
especially of equity prices and fixed-interest securities, could
reduce that fair value. The diversification of fund assets, the
engagement of asset managers using quantitative and qualitative
analyses, and the continual monitoring of performance and
risk help to reduce associated investment risk. The Group regu-
larly makes additional contributions to the plan assets in
order to cover future obligations from defined benefit pension
plans. In addition, the Group made extraordinary contributions
of €1.0 billion in 2015 and €2.5 billion in 2014 to sustainably
strengthen the German plan assets. In 2015, an extraordinary
contribution of €0.2 billion was paid into the US pension
plan assets.
As a general principle, it is the Group’s objective to design
new pension plans as defined benefit plans based on capital
components or on annual contributions, or as defined
contribution plans.
Composition of provisions for pensions
and similar obligations
December 31,
2015 2014
In millions of euros
Provision for pension benefits 7,534 11,619
Provision for other post-employment benefits 1,129 1,187
8,663 12,806
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