Cemex 2012 Annual Report Download - page 94

Notes to the
consolidated
financial
statements
94
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Significant events related to employees’ pension benefits
Applicable regulation in the United Kingdom requires entities to maintain plan assets at a level similar to that of the obligations.
In November 2012, in order to better manage CEMEX’s obligations under its defined benefit pension schemes and future cash
funding requirements thereof, CEMEX implemented an asset backed pension funding arrangement in its operations in the United
Kingdom by means of which CEMEX transferred certain operating assets to a non-transferable limited partnership, owned,
controlled and consolidated by CEMEX UK with a total value of approximately US$553 and entered into lease agreements for the
use of such assets with the limited partnership, in which the pension schemes hold a limited interest. On an ongoing basis CEMEX
UK will make annual rental payments of approximately US$20, increasing at annual rate of 5%, which will generate profits in
the limited partnership that are then distributed to the pension schemes. As previously mentioned, the purpose of the structure,
in addition to provide the pension schemes with secured assets producing an annual return over a period of 25 years, improves
the security for the trustees of the pension schemes, and reduces the level of cash funding that CEMEX UK will have to make in
future periods. In 2037, on expiry of the lease arrangements, the limited partnership will be terminated and under the terms of
the agreement, the remaining assets will be distributed to CEMEX UK. Any future profit distribution from the limited partnership
to the pension fund will be considered as an employer contribution to plan assets in the period in which they occur.
On February 29, 2012, CEMEX UK agreed with the trustees of its employees’ defined benefits pension plans to the modification of
certain terms and benefits accrued until February 29, 2012. Beginning on this date, the eligible employees in the United Kingdom
started to accrue pension benefits in the existing defined contribution scheme. In addition, during 2012, the adjustment for the
change in the consumer price index explained below was extended to retirees under the pension plan. As of the modifications
dates, the changes to the defined benefits schemes resulted in a curtailment event and also affected prior service costs, generating
a net gain in the operating results for 2012 of approximately $1,914 (US$146), mainly related to: 1) the effect of replacing
salary increases with inflationary ones for the current retirees, and 2) the removal of certain death and termination benefits. In
addition, during 2011, based on the applicable regulation, CEMEX UK communicated to the pension plans’ trustees its decision to
adopt for active beneficiaries the consumer price index for purposes of the restatement by inflation of the related obligations, in
replacement of the retail price index, which had been used until 2010, resulting in a decrease in the projected benefit obligation
related to past services of approximately $509, which is reflected in both the table of the net periodic cost and the table of the
reconciliation of the benefits’ obligations, within the line item of actuarial results. As of December 31, 2012, the deficit in these
plans, excluding other postretirement benefits, was approximately $2,929 (US$228). These plans in the United Kingdom have
been closed to new participants since 2004.
During 2011, following the required notices to the plans’ trustees, CEMEX settled its defined benefit pension plans in the
Republic of Ireland. As a result, the available assets were used to provide beneficiaries’ entitlements in accordance with the
agreement reached between CEMEX and the trustees of the relevant pension schemes. As of the wind up date, the total deficit
in these schemes was approximately €15 (US$19 or $266). As part of the wind up agreement to settle this liability, CEMEX
agreed to make contributions of approximately €11, of which approximately €10 will be paid over the next 20 years subject to
a compound annual interest rate of 3% from the date of wind up to the date of payment. CEMEX granted security over certain
non-operating assets for this payment. The wind up gave rise to a settlement gain in 2011 of approximately €4 (US$6 or $70),
and the remaining liability as of December 31, 2011 of approximately €10 (US$13 or $181) was reclassified to other current
and non-current liabilities, as appropriate.
During 2011, CEMEX reduced significantly its workforce subject to defined pension and other postretirement benefits due to
the ongoing streamlining of its operations in Mexico. The net periodic cost for 2011 reflects a curtailment gain of approximately
$107 related to the significant decrease in the number of active participants, of which approximately $10 refer to pensions and
approximately $97 to other postretirement benefits.