29. Employee benefits liabilities
In addition to the social security plans mandated by the law, the Group sponsors an independent pension plan in Switzerland. All employees in Switzerland are covered by this plan, which is a defined benefit plan according to IAS19. Retirement benefits are based on contributions, computed as a percentage of salary, adjusted for the age of the employee and shared approximately 46%/54% by employee and employer. In addition to retirement benefits, the plan provides death and long-term disability benefits to its employees. Liabilities and plan assets are revised every year by an independent actuary.
In certain locations abroad, the Group is subject to termination and jubilee benefits treated as defined benefit plans according to IAS 19.
Plan assets have been estimated at market fair value. Liabilities have been calculated according to the "Projected Unit Credit" method.
The following table sets forth the status of the pension plans and the amount that is recognized in the balance sheet:
| In CHF'000 | 31.12.2008 | 31.12.2007 | 31.12.2006 | 01.01.2006 |
|---|---|---|---|---|
| Fair value of plan assets | 75 443 | 87 081 | 69 994 | 55 886 |
| Defined benefit obligation | -111 687 | -107 717 | -99 328 | -81 006 |
| Funded status | -36 244 | -20 636 | -29 334 | -25 120 |
| Unrecognized gains/(losses) | -14 537 | -586 | -11 721 | -11 040 |
| Prepaid/(accrued) pension cost | -21 707 | -20 050 | -17 613 | -14 080 |
The liability that is recognized in the balance sheet at December 31, 2008 amounts to kCHF 21 707 (kCHF 20 050 at December 31, 2007).
According to IAS 19, the following amount is recorded as net pension cost in the income statement of the financial year 2008 (respectively 2007):
| In CHF'000 | 2008 | 2007 |
|---|---|---|
| Service cost | -13 858 | -12 701 |
| Interest cost | -3 848 | -2 839 |
| Expected return on plan assets | 4 354 | 3 500 |
| Employees contributions | 4 979 | 4 422 |
| Amortization of gains/(losses) | 394 | -38 |
| Curtailment gain/(loss) | - | 22 |
| Net pension (cost)/income | -7 979 | -7 634 |
| Exchange rate difference | 611 | -141 |
| Employer contribution | 6 042 | 5 338 |
The net pension cost for the financial year 2008 amounts to kCHF 7 979 (kCHF 7 634 for the financial year 2007).
The main assumptions used for the calculation of the pension cost and the defined benefit obligation for the years 2008 and 2007 are as follows:
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Switzerland | ||
| Discount rate | 3.50% | 3.50% |
| Rate of future increase in compensations | 2.00% | 2.00% |
| Rate of future increase in current pensions | 1.00% | 1.00% |
| Expected long-term rate of return on plan assets | 4.50% | 5.00% |
| Turnover | 4.8% on average | 5.3% on average |
| Retirement age | according to the rules | according to the rules |
| Abroad | ||
| Discount rate | 5.50% | 5.00% |
| Rate of future increase in compensations | 3.33% | 3.39% |
| Turnover | 11.9% on average | 12.6% on average |
| Retirement age | according to the law | according to the law |
The changes in defined benefit obligation, fair value of plan assets and unrecognized gains/(losses) during the year 2008 and 2007 are as follows:
| A. Change in defined benefit obligation | ||
| In CHF'000 | 2008 | 2007 |
| Defined benefit obligation as of 1.1. | -107 717 | -99 328 |
| Service cost | -13 858 | -12 701 |
| Interest cost | -3 848 | -2 839 |
| Change in assumptions | 5 112 | 21 304 |
| Actuarial (gains)/losses | 3 993 | -9 671 |
| Acquisition | -331 | - |
| Curtailment gain/(loss) | - | 22 |
| Benefits payments | 4 351 | -4 363 |
| Exchange rate difference | 611 | -141 |
| Defined benefit obligation as of December 31, | -111 687 | -107 717 |
| B. Change in fair value of plan assets | ||
| In CHF'000 | 2008 | 2007 |
| Fair value of plan assets as of 1.1. | 87 081 | 69 994 |
| Expected return on plan assets | 4 354 | 3 500 |
| Employees' contributions | 4 979 | 4 421 |
| Employer's contribution | 6 042 | 5 338 |
| Plan assets gains/(losses) | -22 662 | -535 |
| Benefits (paid)/received | -4 351 | 4 363 |
| Fair value of plan assets as of December 31, | 75 443 | 87 081 |
| C. Change in unrecognized gains/(losses) | ||
| In CHF'000 | 2008 | 2007 |
| Unrecognized gains/(losses) as of 1.1. | -586 | -11 721 |
| Amortization | -394 | 38 |
| Change in assumptions | 5 112 | 21 304 |
| Actuarial gains / (losses) | 3 993 | -9 671 |
| Plan assets gains / (losses) | -22 662 | -536 |
| Unrecognized gains/(losses) as of December 31, | -14 537 | -586 |
The actual return on plan assets amounts to kCHF -18 308 for the year 2008 (kCHF 2 964 for the year 2007). The estimated employer's contribution to the pension plans for the financial year 2009 amounts to kCHF 5 787.
The categories of plan assets and their corresponding expected return at December 31, 2008 (respectively December 31, 2007) are as follows:
| In CHF'000 | Proportion in % 31.12.2008 | Expected return 31.12.2008 | Proportion in % 31.12.2007 | Expected return 31.12.2007 |
|---|---|---|---|---|
| Cash | 13.2% | 1.5% | 8.8% | 1.5% |
| Swiss bonds | 31.9% | 2.5% | 29.6% | 2.5% |
| Foreign bonds | 9.6% | 3.9% | 10.5% | 3.9% |
| Swiss shares | 16.2% | 8.3% | 17.9% | 8.3% |
| Foreign shares | 18.5% | 8.9% | 21.7% | 8.9% |
| Real estates | 8.4% | 4.4% | 8.9% | 4.4% |
| Structured products | 2.2% | 4.0% | 2.6% | 4.0% |
| Total | 100.0% | 4.8% | 100.0% | 5.0% |