30. Post-employment and other employee benefits - €3,696 million

The Group provides its employees with a variety of benefits, including termination benefits, additional months’ pay for having reached age limits or eligibility for old-age pension, loyalty bonuses for achievement of seniority milestones, supplemental retirement and healthcare plans, residential electricity discounts (which for companies in Italy only regard certain retired employees) and similar benefits. More specifically:

  • for Italy, the item “pension benefits” regards estimated accruals made to cover benefits due under the supplemental retirement schemes of retired executives and the benefits due to personnel under law or contract at the time the employment relationship is terminated. As from December 2012, the item also includes the benefit plan introduced in December 2012. The plan is dependent on future service to be performed and provides for benefits for a maximum of 48 months as from termination of the employment relationship. That plan was terminated by the Group in 2013, as discussed in greater detail below, as no employees opted to participate and as a significant number of those entitled subsequently elected to participate in the plan provided for in the agreements reached under the provisions of Article 4 of Law 92/2012. For the foreign companies, the item reports post-employment benefits;
  • the item “electricity discount” comprises, for the Italian companies, a number of benefits regarding residential electricity supply. Until 2011 the discount was granted to current and retired employees, but, following an agreement with the unions, has now been replaced by other forms of remuneration for current employees and therefore remains in effect only for retired employees;
  • the item “health insurance” reports benefits for current or retired employees covering medical expenses;
  • “other benefits” comprise liabilities in respect of defined- benefit plans and other benefits not included in the previous items.

The table below reports changes in post-employment and other employee benefits at December 31, 2013 and 2012 and the reconciliation of that obligation (€3,696 million at December 31, 2013), net of plan assets (€21 million at December 31, 2013), with the actuarial defined-benefit obligation.

Millions of euro 2013 2012 restated 
 Pension benefits Electricity discount Health insurance Other benefits Total Pension benefits Electricity discount Health insurance Other benefits Total 
Actuarial defined-benefit obligation at January 1  2,330  1,683  236  246  4,495  1,225  1,500  250  190  3,165 
Assets not recognized in accounts  47  - - - 47  27  - - - 27 
Accounting defined-benefit obligation at January 1  2,377  1,683  236  246  4,542  1,252  1,500  250  190  3,192 
Changes through profit or loss  (924)  63  14  94  (753)  1,065  73  18  74  1,230 
Changes through other comprehensive income  (4)  205  (16)  77  262  169  194  (27)  23  359 
Contributions/Benefits paid  (158)  (96)  (15)  (49)  (318)  (130)  (88)  (16)  (42)  (276) 
Other changes  (40)  (13)  (7)  (58)  21  11  37 
Accounting defined-benefit obligation at December 31  1,251  1,857  206  361  3,675  2,377  1,683  236  246  4,542 
Assets not recognized in accounts  (58)  - - - (58)  (47)  - - - (47) 
Actuarial defined-benefit obligation at December 31  1,193  1,857  206  361  3,617  2,330  1,683  236  246  4,495 

Millions of euro 2013 2012 restated 
 Pension benefits Electricity discount Health insurance Other benefits Total Pension benefits Electricity discount Health insurance Other benefits Total 
Changes through profit or loss:                     
Service cost  (993)  96  (889)  998  63  1,067 
Net interest cost  69  57  12  10  148  68  68  17  10  163 
Other changes  - - - (12)  (12)  (1)  - - -
Total  (924)  63  14  94  (753)  1,065  73  18  74  1,230 
Changes through other comprehensive income:                     
(Gains)/Losses from changes in demographic assumptions  (1)  30  33  80  - 93 
(Gains)/Losses from changes in demographic assumptions  (104)  177  (13)  (7)  53  24  (57)  (12)  - (45) 
(Gains)/Losses from changes in demographic assumptions  (6)  29  (4)  54  73  217  251  (21)  16  463 
(Gains)/Losses from changes in financial assumptions  84  - - - 84  (172)  - - - (172) 
Change in asset ceiling/ IFRIC 14  19  - - - 19  20  - - - 20 
Total  (4)  205  (16)  77  262  169  194  (27)  23  359 

The pension benefit obligation at December 31, 2012 reports the charge (€970 million) in respect of past service cost recognized following the introduction at the end of 2012 of the transition-to-retirement plan, which provided for the payment of post-employment benefits to the employees of the wholly-owned Italian subsidiaries of the Group who, having met specific requirements, opted to terminate their employment four years before the statutory retirement age set out in current labor legislation.

As discussed in note 4, that obligation was recognized in full following the entry into force of the new IAS 19, which eliminated the possibility of deferring recognition of the past service cost of new employee benefit plans. This prompted the restatement of the comparative figures in the 2012 income statement.

During 2013, the Group terminated the transition-to-retirement plan after virtually no employees opted to participate and a significant number of those entitled to participate in that plan instead opted to participate in the mechanism provided for under Article 4, paragraphs 1-7-ter, of the Law 92/2012, as the latter offers better financial and organizational conditions, making the earlier plan unattractive. The termination of the 2012 plan led to the reversal of the associated liability at the termination date in the total amount of €1,028 million, of which €970 million in respect of the reversal of the initial provision and €58 million in current service costs and interest costs accrued in the period. In addition, the application of a number of supplementary provisions of the union agreements implementing Article 4 led to the adjustment of the liabilities of other employee benefit plans, with a positive impact of €38 million.

The employees of the foreign companies included in the framework agreement of October 25, 2000 in Spain participate in a specific defined-contribution pension plan and, in cases of disability or death of employees in service, a defined-benefit plan which is covered by appropriate insurance policies. In addition, the company has certain obligations to retired ex-workers, mainly concerning the supply of electricity. Outside Spain, defined- benefit pension plans are also in force, notably in Brazil. The obligation recognized at the end of the year is reported net of the fair value of the plan assets (where this is not greater than that of the related liabilities), which are attributable entirely to Endesa, in the amount of €1,185 million at December 31, 2013. The plan assets break down as follows.

Millions of euro 2013 2012 
 Spain Brazil Total Spain Brazil Total 
Shares  - 73  73  183  84  267 
Fixed-income securities  - 321  321  449  469  918 
Property  - 34  34  - 47  47 
Assets held by insurance companies  128  - 128  - - -
Other  612  17  629  48  27  75 
Total  740  445  1,185  680  627  1,307 

At December 31, 2013, shares and fixed-income securities included shares or bonds issued by Endesa Group companies in the amount of €6 million (€7 million at December 31, 2012).

The main actuarial assumptions used to calculate the liabilities in respect of employee benefits and the plan assets, which are consistent with those used the previous year, are set out in the following table.

 Italy Iberian peninsula Latin America Other Italy Iberian peninsula Latin America Other 
 2013 2012 
Discount rate  0.75%-3.00%  1.72%-3.64%  5.40%-2.43%  3.15%-7.90%  1.60%-3.20%  1.22%-3.74%  5.50%-9.80%  4.20%-7.00% 
Rate of wage increases  2.00%-4.00%  2.30%  0.00%-7.61%  2.00%-6.00%  2.00%-4.00%  2.30%  0.00%-7.61%  3.00%-6.00% 
Rate of increase in healthcare costs  3.00%  3.50%  4.50% - 1.57%  - 3.00%  3.50%  4.50%-11.57%  -
Expected rate of return on plan assets  - 3.61%  5.40%-2.43%  - - 3.74%  9.98%  -

The following table reports the outcome of a sensitivity analysis that demonstrates the effects on the defined-benefit obligation as a result of changes reasonably possible at the end of the year in the individual actuarial assumptions used in estimating the obligation.

Millions of euros Pension benefits Electricity discount Health insurance Other benefits 
A decrease of 0.5% in discount rate  145  102  11  13 
An increase of 0.5% in discount rate  (115)  (135)  (13)  (7) 
An increase of 0.5% in inflation rate  46  39  (5) 
An increase of 0.5% in remuneration  25  (23)  12 
An increase of 0.5% in pensions currently being paid  19  (23) 
An increase of 1% in healthcare costs  19  (23)  24 
An increase of 1 year in life expectancy of active and retired employees  55  64 

The sensitivity analysis used an approach that extrapolates the effect on the net defined-benefit obligation of reasonable changes in an individual assumption, leaving the other assumptions unchanged.

The contributions expected to be paid into defined-benefit plans in the subsequent year amount to €16 million.

The following table reports expected benefit payments in the coming years for employee benefits.

Millions of euro 2013 
Within 12 months  397 
In 2–5 years 1,066 
More than 5 years  1,527