GERMANY - Print media company Heidelberger Druckmaschinen Aktiengesellschaft (Heidelberg) has decided to transfer the funding of its pension obligations to a contractual trust arrangement (CTA), with an initial transfer of e450m.
The e450m has already been set aside to meet the pension obligations. It is comprised of all the shares in special funds held by Heidelberg, worth around e370m, and a cash payment of around e80m.
The pension rights of the existing and retired employees have remained unchanged.
Dr Herbert Meyer (pictured), chief financial officer at Heidelberger said: This measure will reduce Heidelberg's consolidated balance sheet total and, in doing so, facilitate comparison of its key financial indicators on the international capital market.
According to Mercer Human Resource Consulting, Germany has made use of the CTA vehicle as reliable way of converting existing company assets into pension plan assets recognized under FAS 87 and IAS 19.
The CTA is a “complex legal framework”, said Mercer, “that can be created without changing the investment structure or tax treatment of those assets”.
Contributions to CTAs are considered to be company assets and do not represent taxable income to employees although, according to Mercer, a disadvantage is that the transferred assets may no longer be used for other purposes, such as capital expenditures or acquisitions.
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