IAS 19 para 148, multi-employer scheme treated as defined contribution, provision for deficit contributions

Ibstock plc – Annual report – 31 December 2017

Industry: manufacturing

  1. Post-employment benefit obligations (extract)

(b) Multi-employer scheme

The Group participates in two multi-employer defined benefit pension schemes, being Aluminium, Brick and Glass Workers International Union (“AB&GW”) and National Integrated Group Pension Plan (“NIGPP”), which are both held in the United States. As the Group is unable to identify its share of the assets and liabilities for these schemes as insufficient information is available on which to calculate this split (as confirmed with the schemes actuaries), they are accounted for on a defined contribution basis. The charge for the year to December 2017 is £267,000 (year ended 31 December 2016: £243,000). The Group is not liable for any other contributing entities within either scheme. For exit from the schemes by the Group at the most recent actuarial valuation, it was estimated that the withdrawal liability for the schemes equalled £15,527,000 (2016: £18,346,000) and £2,171,000 (2016: £1,836,000) for the AB&GW and NIGPP, respectively, although management currently do not have any plans on withdrawing from either scheme.

The minimum contribution requirements for the AB&GW scheme are based on a minimum monthly charge per active employee, with the minimum contribution requirements for the NIGPP scheme being based on a minimum charge per hour worked. The expected contributions to the plan for the next annual reporting year, being the year ending December 2018, is £381,000. In respect of the AB&GW scheme, based on the total contributions made in 2017 to the multi-employer schemes, the level of participation the Group made compared to other participating entities was 85% and the Group has circa 70% of all members (active, deferred and retired). In respect of the NIGPP scheme, based on the proportion of the withdrawal liability against total plan liabilities, the level of participation the Group made compared to other participating entities was less than 1%.

In total, the AB&GW plan has a deficit as at 31 December 2017 of £18,189,000 (2016: £21,284,000). The contribution rates agreed to be paid by the Group include an element of rehabilitation funding with respect to the total plan deficit. For this scheme, the arrangements gives rise to a present obligation and as such a liability has been recognised of £8,735,000 (2016: £9,389,000) for future committed contribution amounts as at 31 December 2017, with an associated recognised deferred tax asset of £2,292,000 (2016: £3,727,000). This has been calculated by discounting the future cash flows, which accrete at 7% per annum in line with the rehabilitation funding plan as set by the scheme Trustees, at a rate commensurate with the time value of money using a 20-year US treasury rate (2.58%) given the duration of the rehabilitation funding plan runs to 2034. This calculation is based on management’s estimated number of employees in future years. The movement in the current year is primarily driven by the movement in the Sterling: Dollar exchange rate. The Trustees meet annually to reassess the funding contribution increase – this has been set at the 7% rate since 2012. Based on the contribution rates and total withdrawal liability for the NIGPP plan, management has determined any present obligation arising from the plan is immaterial.

 

 

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