Pension Plans and Similar Obligations

12 Months Ended

Dec. 31, 2023

Pension Plans and Similar Obligations

Pension Plans and Similar Obligations

(B.4) Pension Plans and Similar Obligations

y Defined Contribution Plans

Amounts for domestic and foreign defined contribution plans are based on a percentage of the employees’ salaries or on the amount of contributions made by employees. In Germany and some other countries, we make contributions to public pension schemes that are operated by national or local government or similar institutions. Expenses for such local state pension plans are recognized as short-term employee benefits, that is, social security expenses.

y Defined Benefit Pension Plans

The discount rates used in measuring our post-employment benefit assets and liabilities are derived from rates available on high-quality corporate bonds and government bonds for which the timing and amounts of payments match the timing and the amounts of our projected pension payments. Net interest expense and other expenses related to defined benefit plans are recognized as employee benefits expenses and classified in our Consolidated Income Statements according to the activities that the employees owning the awards perform. Since our domestic defined benefit pension plans primarily consist of an employee-financed post-retirement plan that is fully financed with qualifying insurance policies, current service cost may become a credit as a result of adjusting the defined benefit liability’s carrying amount to the fair value of the qualifying plan assets. Such adjustments are recorded in service cost. Total expenses on defined benefit pension plans comprise related current and past service costs as well as interest income and expense.

Total Expense of Pension Plans

€ millions	2023	2022	2021
Defined contribution plans	381	425	328
Defined benefit pension plans	57	22	62
Pension expenses	438	447	390

Defined Benefit Plans

Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets

	Domestic Plans		Foreign Plans		Other Foreign Post-		Total
€ millions					Employment Plans
	2023	2022	2023	2022	2023	2022	2023	2022
Present value of the DBO	1,060	949	686	577	256	211	2,002	1,737
Fair value of the plan assets	1,063	953	672	579	98	91	1,833	1,623
Net defined benefit liability (asset)1	0	0	64	57	158	120	222	177
Thereof: Net defined benefit asset	0	0	-17	-16	-63	0	-79	-16
Net defined benefit liability	0	0	80	73	221	120	301	193
Net defined benefit asset as % of / Non-current other financial assets	0	0	0	0	1	0	1	0
Net defined benefit liability as % of / Non-current provisions	0	0	19	20	51	33	69	54

¹ After the effects of the asset ceiling

Of the present value of the DBO of our domestic plans, €1,006 million (2022: €899 million) relate to plans that provide for lump-sum payments not based on final salary; of the present value of the DBO of our foreign plans, €535 million (2022: €448 million) relate to plans that provide for annuity payments not based on final salary.

The following significant weighted average assumptions were used for the actuarial valuation of our domestic and foreign pension liabilities as well as other post-employment benefit obligations as at the respective measurement date:

Significant Actuarial Assumptions

Percent	Domestic Plans			Foreign Plans			Other Foreign Post-Employment Plans
	2023	2022	2021	2023	2022	2021	2023	2022	2021
Discount rate	3.5	4.2	1.2	2.0	2.6	0.5	5.3	5.5	3.1

The sensitivity analysis table below shows how the present value of all defined benefit obligations would have been influenced by reasonably possible changes to significant actuarial assumptions. The sensitivity analysis considers change in discount rate assumptions, holding all other actuarial assumptions constant.

Sensitivity Analysis

€ millions	Domestic Plans			Foreign Plans			Other Foreign Post-Employment Plans			Total
	2023	2022	2021	2023	2022	2021	2023	2022	2021	2023	2022	2021
Present value of all defined benefit obligations if:
Discount rate was 50 basis points higher	1,015	908	1,134	649	505	626	247	203	203	1,911	1,616	1,964
Discount rate was 50 basis points lower	1,108	993	1,260	727	562	714	266	219	223	2,101	1,774	2,196

Investments in Plan Assets

Our investment strategy on domestic benefit plans is to invest all contributions in stable insurance policies.

Our investment strategies for foreign benefit plans vary according to the conditions in the country in which the respective benefit plans are situated. We have adopted a long-term investment horizon for all major foreign benefit plans. Although our policy is to invest in a risk-diversified portfolio consisting of a mix of assets, both the defined benefit obligation and plan assets can fluctuate over time, which exposes the Group to actuarial and market (investment) risks. Depending on the statutory requirements in each country, it might be necessary to reduce any underfunding by addition of liquid assets.

Plan Asset Allocation

€ millions	2023		2022
	Quoted in an	Not Quoted in an	Quoted in an	Not Quoted in an
	Active Market	Active Market	Active Market	Active Market
Total plan assets	714	1,120	611	1,012
Thereof: Asset category
Equity investments	190	0	170	0
Corporate bonds	233	0	190	0
Insurance policies	59	1,120	41	1,012

Our expected contribution in 2024 to our domestic and foreign defined benefit pension plans is immaterial. The weighted duration of our defined benefit plans amounted to 10 years as at December 31, 2023 and 2022.

Total future benefit payments from our defined benefit plans as at December 31, 2023, are expected to be €2,707 million (2022: €2,404 million). Of this amount, 76% (2022: 76%) have maturities of over five years, and 55% (2022: 61%) relate to domestic plans.