Volvo 2013 Annual Report Download - page 150

USA
In the US, the Volvo Group has tax-qualifi ed pension plans, post-retire-
ment medical plans and non-qualifi ed pension plans. The tax-qualifi ed
pension plans are funded while the other plans are generally unfunded.
The Volvo Group’s subsidiaries in the United States mainly secure their
pension obligations through transfer of funds to pension plans. At the end
of 2013, the total value of pension obligations secured by pension plans of
this type amounted to 13,262 (14,645). At the same point in time, the total
value of the plan assets in these plans amounted to 11,916 (10,592), of
which 58% (53) was invested in equity instruments. The regulations for
securing pension obligations stipulate certain minimum levels concerning
the ratio between the value of the plan assets and the value of the obliga-
tions. During 2013, the Volvo Group contributed 819 (1,022) to the Amer-
ican pension plans.
France
In France, the Volvo Group has two types of defi ned benefi t plans, retire-
ment indemnity plan and jubilee award plan. The plans are unfunded. The
retirement indemnities plan is compulsory in France. The benefi ts are
based on the Collective Bargaining Agreement applicable in the Company,
on the employee’s seniority at retirement date and on the fi nal pay. The
benefi t payment is due only if employees are working for the Company
when they retire. The jubilee awards plan is an internal agreement. The
benefi t is based on the employee’s seniority career at 20, 30, 35 and 40
years. As of December 31 2013 the total value of pension obligations
amounted to 2,356 (2,002).
Great Britain
The Volvo Group has six defi ned benefi t pension plans in Great Britain.
The plans are funded. The defi ned benefi t pension plans provides bene-
fi ts which are linked to each members fi nal pay at the earlier of their date
of leaving or retirement. All plans are closed to new entrants and two of
the plans are closed to future accrual. Members of the Plan also have the
option to commute an amount of their pension benefi t as cash at retire-
ment as permitted by UK legislation.
The pension funds are set up as separate legal entities, which are gov-
erned by trustees who are responsible for the governance of the plan. The
trustee boards are composed of representatives from the employer, the
employees and independent trustees. The strategic allocation of plan
assets must comply with the investment guidelines agreed by the trustees
of the respective schemes. At the end of 2013, the total value of pension
obligations secured by pension plans amounted to 5,315 (4,740). The
total value of the plan assets in these plans amounted to 5,274 (4,837).
During 2013, the Volvo Group has made extra contributions to the pen-
sion plans in Great Britain in the amount of 88 (87).
Sweden
The main defi ned benefi t plan in Sweden is the ITP2 plan and it is based
on fi nal salary. The plan is semi-closed, meaning that only new employees
born before 1979 have the possibility to choose the ITP2 solution. The
Volvo Group’s pension foundation in Sweden was formed in 1996 to
secure obligations relating to retirement pensions for white-collar workers
in Sweden in accordance with the ITP plan. Plan assets amounting to
2,456 were contributed to the foundation at its formation, corresponding
to the value of the pension obligations at that time. Since its formation, net
contributions of 2,633, whereof 380 during 2013, have been made to the
foundation. The plan assets in the Volvo Group’s Swedish pension founda-
tion are invested in Swedish and foreign stocks and mutual funds, and in
interest-bearing securities, in accordance with a distribution that is deter-
mined by the foundation’s Board of Directors. As of December 31, 2013,
the fair value of the foundation’s plan assets amounted to 8,206 (7,217),
of which 49% (44) was invested in equity instruments. At the same date,
retirement pension obligations attributable to the ITP plan amounted to
10,951 (12,140).
Swedish companies can secure new pension obligations through balance-
sheet provisions or pension-fund contributions. Furthermore, a credit insur-
ance policy must be taken out for the value of the obligations. In addition
to benefi ts relating to retirement pensions, the ITP plan also includes, for
example, a collective family pension, which the Volvo Group fi nances through
an insurance policy with the Alecta insurance company. According to an
interpretation from the Swedish Financial Reporting Board, this is a multi-
employer defi ned-benefi t plan. For fi scal year 2013, the Volvo Group did
not have access to information from Alecta that would have enabled this
plan to be recognized as a defi ned-benefi t plan. Accordingly, the plan has
been recognized as a defi ned-contribution plan. The Volvo Group estimates
it will pay premiums of about SEK 294 M to Alecta in 2014. The collective
consolidation level measures the apportionable assets in relation to the
in surance commitment. According to Alecta’s consolidation policy for
de fi ned-benefi t pension insurance, the collective consolidation level is
normally allowed to vary between 125% and 155%. Alecta’s consolidation
ratio amounts to 148% (129). If the consolidation level falls short or exceeds
the normal interval one measure may be to increase the contract price for
new subscription and expanding existing benefi ts or introduce premium
reductions.
The Volvo Group’s share of the total saving premiums for ITP2 in Alecta
as at December 31, 2013 amounted to 0.35% and the share of the total
number of active policy holders amounted to 1.92%.
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FINANCIAL INFORMATION 2013