Coverage of obligations connected with employee benefits

There are no defined-benefit corporate pension plans in the Ternai Group. In Italy the pension coverage provided by the public system, which originally was one of the highest in the OCSE countries, has been reduced by a series of reforms that began in the 1990s. Terna offers its employees defined-contribution supplementary pension coverage on a voluntary basis. Specifically, senior executives may enroll in the Fondenel pension fund, which provides for contributions by both the executive and the Company. In both cases the amount varies according to the date of hiring and the date the executive first joined a supplementary pension plan. The other employees (blue-collar workers, white-collar workers, and junior executives) may enroll in the Fopen pension fund. In addition to the pension plans, employees of Italian companies receive other defined-benefit payments, specifically:  

  • During their working life, all employees receive a contractual “loyalty bonus” when they reach their 25th and 35th year of employment at a company
  • When they terminate their employment they receive benefits that are owed all employees (TFR), senior executives hired or appointed by February 28, 1999 (allowance in lieu of notice), and blue- and white-collar workers and junior executives hired by July 24, 2001 (IMA).  
  • Senior executives are entitled to post-employment supplementary health care (ASEM).
  • Employees hired by June 30, 1996 are granted reduced rates on the electricity consumed for household use (electricity discount).

The composition and changes of the TFR and other personnel funds as of December 31, 2010 are shown in the following table.

millions of euro 
Dec. 31, 2009 Appropriation Interest cost Drawdowns and   other movements Dec. 31, 2010
Benefits owed during employment   
         
Loyalty bonus 4.9 0.0 0.2 -0.9 4.2
Total 4.9 0.0 0.2 -0.9 4.2
Benefits owed at termination of employment        
TFR bonus
71.5 11.0 2.6 -17.2 67.9
IMA bonus 7.3 0.4 0.2 -1.2 6.7
Allowance in lieu and similar benefits 3.3 0.0 0.1 -0.4 3.0
Total 82.1 11.4 2.9 -18.8 77.6
Post-employment benefits  
         
Electricity discount
26.7 1.4 1.5 -0.3 29.3
ASEM 11.4 0.0 0.3 -0.5 11.2
Total 38.1 1.4 1.8 -0.8 40.5
Total 125.1 12.8 4.9 -20.5 122.3

Amounting to 122.3 million euro as of December 31, 2010 (compared to 125.1 million euro as of December 31, 2009), the item recorded a 2.8 million euro decrease with respect to the previous year, attributable to the year’s drawdowns (20.5 million euro), which were partially offset by the appropriations and the recording of the time-discounting expense of the period (a total of 17.7 million euro).     

The following table breaks down the costs regarding liabilities for benefits to employees recorded in the Income Statement.

millions of euro TFR
Allowance in lieu and similar benefits
IMA Loyalty bonus ASEM Electricity discount
Total
December 31, 2009 71.5 3.3 7.3 4.9 11.4 26.7 125.1
Appropriations 11.0 0.0 0.4 0.0 0.0 1.4 12.8
Financial expense
2.6 0.1 0.2 0.2 0.3 1.5 4.9
Disbursements and transfers -17.2 -0.4 -1.2 -0.9 -0.5 -0.3 -20.5
December 31, 2010
67.9 3.0 6.7 4.2 11.2 29.3 122.3

The following table shows the main assumptions used in the actuarial estimate of the liabilities for employee benefits.

Percentage values
2010 2009
Discount rate
4.1% 4.1%
Rate of increase of labor costs
2.0% - 4.0% 2.0% - 4.0%
Rate of increase of health-care costs
3.0% 3.0%