In € million

 

Employee benefits

 

Restructuring

 

Environment

 

Litigation

 

Other

 

Total

At December 31, 2015

 

3,133

 

97

 

723

 

214

 

106

 

4,273

Additions

 

97

 

102

 

53

 

36

 

101

 

389

Reversals of unused amounts

 

(24)

 

(16)

 

(13)

 

(67)

 

(6)

 

(125)

Uses

 

(200)

 

(71)

 

(90)

 

(23)

 

(30)

 

(414)

Increase through discounting

 

87

 

0

 

36

 

3

 

0

 

126

Remeasurements

 

275

 

0

 

0

 

0

 

0

 

275

Currency translation differences

 

(52)

 

(1)

 

17

 

10

 

(2)

 

(27)

Acquisitions and changes in consolidation scope

 

10

 

3

 

5

 

(3)

 

(2)

 

12

Disposals

 

(9)

 

0

 

2

 

(1)

 

(2)

 

(10)

Transfer from/to liabilities associated with assets held for sale

 

(201)

 

0

 

0

 

0

 

(1)

 

(202)

Other

 

1

 

(16)

 

5

 

(1)

 

(17)

 

(28)

At December 31, 2016

 

3,118

 

99

 

737

 

167

 

148

 

4,269

Of which current provisions

 

0

 

92

 

99

 

26

 

73

 

291

In total provisions are stable.

The main events of 2016 are:

  • a net change in provisions of € 151 million (net amount of additions, reversals, and uses);
  • a decrease of the discount rates, mainly in the Eurozone and in the United Kingdom, and changes of other financial and demographic assumptions used for the computation of the employee benefits obligations, which led to a negative impact in equity of € 275 million; and
  • the transfer of liabilities from continuing to liabilities associated with assets held for sale amounting to € 202 million, relating mainly to employee benefits obligations at Acetow.

Management expects provisions (other than employee benefits) to be used (cash outlays) as follows:

In € million

 

Up to 5 years

 

Between 5 and 10 years

 

Beyond 10 years

 

Total

(1)

Excluding provisions with cash deposit to guarantee the liabilities (€ 18 million)

Total provisions for environment

 

342

 

141

 

254

 

737

Total provisions for litigation(1)

 

144

 

6

 

 

 

149

Total provisions for restructuring and other

 

201

 

19

 

30

 

249

At December 31, 2016

 

686

 

165

 

284

 

1,136

F31.A. Provisions for employee benefits

Accounting policy

General

The Group’s employees are offered various post-employment and other long-term employee benefits as a result of legislation applicable in certain countries, and contractual agreements entered into by the Group with its employees or constructive obligations.

The post-employment benefits are classified as defined contribution or defined benefit plans.

Defined contribution plans

Defined contribution plans involve the payment of fixed contributions to a separate entity and release the employer from any subsequent obligation, as this separate entity is solely responsible for paying the amounts due to the employee. The expense is recognized when an employee has rendered service to the Group during the period.

Defined benefit plans

Defined benefit plans concern all plans other than defined contribution plans and include:

  • post-employment benefits: pension plans, termination benefits, other retirement obligations, and supplemental benefits;
  • other long-term employee benefits: long-service benefits granted to employees according to their seniority in the Group; and
  • other post-employment benefits: medical care.

Taking projected final salaries into account on an individual basis, post-employment benefits are measured by applying a method (projected unit credit method) using assumptions involving discount rate, life expectancy, turnover, wages, annuity revaluation, and medical cost inflation. The assumptions specific to each plan take into account the local economic and demographic contexts.

The discount rates are interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension obligation.

The amount recognized under post-employment obligations corresponds to the difference between the present value of future obligations and the fair value of the plan assets funding the plan. If this calculation gives rise to a deficit, an obligation is recognized in liabilities. Otherwise, a net asset limited to the lower of the surplus in the defined benefit plan and the present value of any future plan refunds or any reduction in future contributions to the plan is recognized.

The defined benefit cost consists of service cost and net interest (based on discount rate) on the net liability or asset, both recognized in profit or loss, and remeasurements of the net liability or asset, recognized in other comprehensive income.

Service cost consists of current service cost, past service cost resulting from plan amendments or curtailments, and settlement gains or losses.

The interest expenses arising from the reverse discounting of the benefit obligations, the financial income on plan assets (determined by multiplying the fair value of the plan assets by the discount rate), and interest on the effect of the asset ceiling are recognized on a net basis in the net financial charges.

Remeasurements of the net liability or asset consist of:

  • actuarial gains and losses on the benefit obligations arising from experience adjustments and/or changes in actuarial assumptions (including the effect of changes in the discount rate)
  • the return on plan assets (excluding amounts in net interest) and changes in the limitation of the net asset recognized.

Other long-term benefits such as long service awards are accounted for in the same way as post-employment benefits but remeasurements are fully recognized in the net financial charges during the period in which they occur.

The actuarial calculations of post-employment obligations and other long-term benefits are performed by independent actuaries.

Overview

In € million

 

2016

 

2015

Post-employment benefits

 

2,949

 

2,964

Other long-term benefits

 

120

 

115

Termination benefits

 

48

 

53

Total employee benefits

 

3,118

 

3,133

A. Defined contribution plans

For defined contribution plans, Solvay pays contributions to publicly or privately administered pension funds or insurance companies. For 2016, the expense amounted to € 56 million as against € 31 million in 2015; this increase is due mainly to the acquisition of Cytec at the end of 2015, for which expenses have been consolidated as from January 1, 2016.

B. Defined benefit plans

Defined benefit plans can either be funded via outside pension funds or insurance companies (“funded plans”) or financed within the Group (“unfunded plans”).

The net liability results from the net of the provisions and the capitalized pensions assets.

In € million

 

2016

 

2015

Provisions

 

2,949

 

2,964

Asset plan surplus

 

(13)

 

(9)

Net liability

 

2,936

 

2,955

Operational expense

 

55

 

30

Finance expense

 

80

 

66

B.1. Management of risks

Over recent years, the Group has reduced its exposure to defined benefit plan obligations stemming from future services by converting existing plans into pension plans with a lower risk profile (hybrid plans, cash balance plans, and defined contribution plans) or by closing them to new entrants.

Solvay continuously monitors its risk exposure, focusing on the following risks:

Asset volatility

Equity instruments, though expected to outperform corporate bonds in the long-term, create volatility and risk in the short term. To mitigate this risk, the allocation to equity instruments is monitored using Assets and Liabilities Management techniques, to ensure it remains appropriate given the long-term objectives of the Group and of the respective schemes.

Changes in bond yields

A decrease in corporate bond yields will increase the carrying amount of the plan’s liabilities. For funded schemes this impact will be offset partially by an increase in the fair value of the plan assets.

Inflation risk

The defined benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). A limited part of the assets is either unaffected by or only loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit.

Life expectancy

The majority of the schemes’ obligations are to provide benefits for the life of the member. Increases in life expectancy will therefore increase the plans’ liabilities.

Currency risk

This risk is limited, as major plans in foreign currency are funded and most of their assets are denominated in the currency in which benefit payments will take place.

Regulatory risk

For partly or fully unfunded plans, the Group is exposed to the risk of external funding following regulatory constraints. This should not impact the defined benefit obligation but could expose the Group to a potential significant cash outlay.

For more information about Solvay Group risk management, please refer to the Management of risks section of the present document.

B.2 Description of obligations

The provisions have been set up primarily to cover post-employment benefits granted by most Group companies, in line either with local rules and customs or with established practices which generate constructive obligations.

The largest post-employment plans in 2016 are in the United Kingdom, France, the United States, Germany, and Belgium. These five countries represent 94% of the total defined benefit obligation.

 

 

2016

 

2015

United Kingdom

 

30%

 

30%

France

 

20%

 

19%

United States

 

27%

 

27%

Germany

 

10%

 

12%

Belgium

 

7%

 

6%

Other countries

 

6%

 

6%

United Kingdom

Solvay sponsors a few defined benefit plans in the United Kingdom; the largest one is the Rhodia Pension Fund. This is a final salary funded pension plan, with entitlement to accrue a percentage of salary per year of service. It was closed to new entrants in 2003 and replaced by a defined contribution plan.

Broadly, about 8% of the liabilities are attributable to current employees, 26% to former employees, and 66% to current pensioners.

The Fund functions and complies with UK legislation under a large regulatory framework. The Pensions Regulator has a risk-based approach to regulation and a code of practice which provides practical guidance to trustees and employers of defined benefit schemes on how to comply with the scheme funding requirements. In accordance with UK legislation, the Fund is subject to Scheme Specific Funding which requires that pension plans are funded prudently.

The UK Rhodia Pension Fund is governed by a Board of Trustees. They manage the Fund with prudent and fair judgment. The Trustees determine the liabilities used for Statutory Funding Objectives based on prudent actuarial and economic assumptions. Any shortfall or deficit once these liabilities have been deducted from the Fund’s assets must be reduced by additional contributions and in a time frame that fits with the employer’s ability to pay and the strength of covenant or contingent security being offered.

The Rhodia Pension Fund is subject to a triennial valuation cycle for funding purposes. This valuation is performed by the scheme actuary in line with UK regulations and is discussed between the Trustees and the sponsoring employer to agree the valuation assumptions and a funding plan. The last completed valuation was as at January 1, 2015 which established a fixed contribution rate of pensionable pay for active members plus a deficit recovery plan which aims to fund the scheme through technical provisions over a period of time. Future contributions were kept at the same level as those agreed at the previous valuation, which required the recovery plan to be extended for another year.

France

Solvay sponsors various defined benefit plans in France: the French compulsory retirement indemnity plan as well as two closed and one open top hat plans.

The main plan is for all former Rhodia current and retired employees who contributed to the plan prior to its closure in the 1970s. It offers a full benefit guarantee based on the end-of-career salary. This plan is unfunded and approximately 95% of the liabilities are attributable to current pensioners.

Solvay does not expect to have any cash out impact in France due to the changes in legislation regarding minimum funding requirements.

United States

As of year end 2016 Solvay sponsored six different defined benefit pension plans in the United States (three qualified plans and three non-qualified plans).  A qualified plan is an employer-sponsored retirement plan that qualifies for special tax treatment under Section 401(a) of the Internal Revenue Code. At this moment all defined benefit plans are closed to new entrants; newly hired employees are eligible to participate in a defined contribution plan.  Note that all three of the qualified defined benefit pension plans are funded while the three non-qualified defined benefit pension plans are unfunded.  The qualified plans make up the vast majority of the pension liabilities as of December 31, 2016.

Solvay's plans are in compliance with local laws regarding audited financial statements, governmental filings, and Pension Benefit Guaranty Corporation insurance premiums where applicable.  The plans are reviewed and monitored locally by fiduciary committees for purposes of plan investments and administrative matters.

For the US qualified plans, Solvay’s contributions take into account minimum (tax-deductible) funding requirements and maximum tax deductible contributions, both regulated by the tax authorities.

Certain eligible participants may elect to receive their pension in a single lump sum payment instead of a monthly payment.

During 2016, Solvay took action to reduce the liabilities of its qualified pension plans.  In December 2016, Solvay offered a voluntary lump-sum pension settlement to participants in these plans, and it also entered into an agreement with an insurance carrier to purchase a group annuity contract to settle a substantial portion of the plans’ liabilities for current pensioners.

Broadly, about 31% of the liabilities are attributable to current employees, 10% to former employees for whom benefit payments have not yet commenced, and 59% to current pensioners.

 In connection with the lump-sum offering, approximately 900 plan participants who had deferred vested benefits elected to receive their pension benefits in the form of a one-time lump-sum payment with no future payments due.  As a result, US$ 42 million in pension lump sums were distributed from the plans in December 2016. 

In addition, as noted above, Solvay purchased a group annuity contract under which an insurance carrier will pay and administer future benefit payments for approximately 3,100 pensioners.  This transaction closed in December 2016 with the transfer of US$ 112 million in assets to the selected insurance carrier.

In 2016, in the United States Solvay contributed to three multiemployer pension plans under collective bargaining agreements that cover certain of its union-represented employees. Solvay withdrew from the National Integrated General Pension Plan on June 1, 2016, pursuant to collective bargaining agreements. Following the Cytec acquisition Solvay is now contributing to the Western Conference of Teamsters pension fund on behalf of Orange, California, union employees. Each of the multiemployer plans is a defined benefit pension plan. None of the multiemployer plans provides an allocation of its assets, liabilities, or costs among contributing employers. None of the multiemployer plans provides sufficient information to permit Solvay, or other contributing employers, to account for the multiemployer plan as a defined benefit plan. Accordingly, the company accounts for its participation in each of the multiemployer plans as if they were a defined contribution plan. The annual contributions paid to multiemployer plans during 2016 and 2015 were less than € 1 million.

Germany

Solvay sponsors five different defined benefit plans in Germany, of which two are closed to new entrants and three are open. As is common in Germany, all these plans are unfunded. Under these plans, employees are entitled to annual pensions on retirement based on their service and final salary.

Broadly, about 64% of the liabilities are attributable to current pensioners.

Belgium

Solvay sponsors two defined benefit plans in Belgium. These are funded pension plans. The plan for executives has been closed since the end of 2006, and the plan for the white and blue collars has been closed since 2004. The past service benefits provided under these plans continues to be adapted each year considering annual salary increase and inflation (“Dynamic management”). In accordance with market practice in Belgium, because of favorable retirement lump-sum taxation most benefits are paid as lump sum.

Furthermore, Solvay sponsors two open defined contribution plans. These are funded pension plans: the plan for executives opened at the beginning of 2007 and the plan for white and blue collars opened at the beginning of 2005. There are four different investment funds – ranging from “Prudent” to “Dynamic” – in which participants may choose to invest their contributions However, regardless of their choices, Belgian law stipulates that the employer must guarantee a return on employer contribution and on personal contribution, thereby creating a potential liability for the Company. Since January 1, 2016 the return is set on an annual basis with a minimum of 1.75% and a maximum of 3.75%. For 2016 and 2017 the return is fixed at 1.75% for both types of contributions. For these plans Solvay has € 110 million of plan assets at December 31, 2016, and paid € 9 million of contributions during 2016. At the end of 2016 the net liability recognized in the consolidated statement of financial position concerning these plans is not material.

Solvay’s plans are administered through two Solvay Pension Funds that operate in compliance with local laws regarding minimum funding, investments principles, audited financial statements, governmental filings, and governance principles. Pension Funds are managed through a General Assembly and a Board of Directors delegating day-to-day activities to an operational committee.

Other plans

The majority of the obligations relate to pension plans. In some countries (mainly the United States), there are also post-retirement medical plans, which represent 6% of the total defined benefit obligation.

B.3 Financial impacts

Changes in net liability

In € million

 

2016

 

2015

Net amount recognized at beginning of period

 

2,955

 

3,014

Net expense recognized in P&L - Defined benefit plans

 

135

 

96

Actual employer contributions/direct actual benefits paid

 

(181)

 

(168)

Acquisitions/disposals

 

0

 

189

Remeasurements before impact of asset ceiling

 

290

 

(291)

Change in the effect of the asset ceiling limit on remeasurements

 

(16)

 

12

Reclassifications

 

1

 

30

Currency translation differences

 

(54)

 

61

Transfer from/to (liabilities associated with) assets held for sale

 

(195)

 

12

Net amount recognized at end of period

 

2,936

 

2,955

The decrease of the net liability of € 19 million between 2015 and 2016 is explained mainly by the net effect of:

  • remeasurements (€ 275 million) due primarily to the decrease of discount rates for Eurozone, United Kingdom and United States, partially offset by favorable investment returns. Total remeasurement amounts to € 290 million of which € 16 million were not recognized due to asset ceiling. Note that remeasurements in 2015 amounted to € (279) million in the context of increase in discount rates;
  • the classification as held for sale of Acetow activities (€ (195) million);
  • the positive effect on foreign currency, mainly in United Kingdom (€ (54) million);
  • the net expense in the consolidated income statement (€ 135 million); and
  • the cash out (€ (181) million).
Net expense

In € million

 

2016

 

2015

Service costs

 

39

 

18

Current service costs

 

49

 

51

Past service costs (including curtailments)

 

(10)

 

(32)

Net interest

 

80

 

66

Interest cost

 

194

 

149

Interest income

 

(114)

 

(83)

Administrative expenses paid

 

16

 

11

Net expense recognized in P&L - Defined benefit plans

 

135

 

96

Remeasurements recognized in other comprehensive income

 

275

 

(279)

The service costs and administrative expenses of these defined benefit plans are recognized within cost of sales, commercial and administrative costs, research & development costs, operating gains and losses and results from legacy remediation. The net interest is reported as a finance expense.

In 2016 the Group’s current service costs amounted to € 49 million, of which € 32 million related to funded plans and € 17 million related to unfunded plans. Cytec integration has not generated an increase of service cost because the majority of its US pensions plans are closed. Conversely, the administrative and interest costs increased in 2016 further to the Cytec integration. Past service costs include favorable impacts reflecting the amendment of the medical plan in Brazil (€ 9 million).

In 2015 the Group current service costs amounted to € 51 million, of which € 33 million related to funded plans and € 18 million related to unfunded plans. Past service costs include favorable impacts reflecting the evolution of the post retirement Medicare insurance policy in the United States (€ 30 million).

Net liability

In € million

 

2016

 

2015

Defined benefit obligations - funded plans

 

3,650

 

3,648

Fair value of plan assets at end of period

 

(2,811)

 

(2,940)

Deficit for funded plans

 

839

 

708

Defined benefit obligations - unfunded plans

 

2,089

 

2,223

Deficit/Surplus (-)

 

2,928

 

2,931

Amounts not recognized as asset due to asset ceiling (recognized in other comprehensive income)

 

8

 

24

Net liability (asset)

 

2,936

 

2,955

Provision recognized

 

2,949

 

2,964

Asset recognized

 

(13)

 

(9)

Changes in defined benefit obligations

In € million

 

2016

 

2015

Defined benefit obligation at beginning of period

 

5,871

 

5,103

Current service costs

 

49

 

51

Interest cost

 

194

 

149

Employee contributions

 

4

 

4

Past service costs (including curtailments)

 

(9)

 

(32)

Settlements

 

(139)

 

1

Acquisitions/disposals (-)

 

0

 

986

Remeasurements in other comprehensive income

 

456

 

(324)

Actuarial gains and losses due to changes in demographic assumptions

 

(22)

 

(77)

Actuarial gains and losses due to changes in financial assumptions

 

460

 

(242)

Actuarial gains and losses due to experience

 

18

 

(5)

Actual benefits paid

 

(318)

 

(270)

Currency translation differences

 

(175)

 

158

Reclassification and other movements

 

0

 

38

Transfer from/to (liabilities associated with) assets held for sale

 

(195)

 

9

Defined benefit obligation at end of period

 

5,739

 

5,871

Defined benefit obligations - funded plans

 

3,650

 

3,648

Defined benefit obligations - unfunded plans

 

2,089

 

2,223

In 2016 the classification as held for sale of Acetow activities led to a decrease of defined benefit obligations of € 190 million.

In 2015 the major variation on Solvay defined benefit obligation was the acquisition of Cytec activities which led to an increase of € 992 million.

Changes in the fair value of plan assets

In € million

 

2016

 

2015

Fair value of plan assets at beginning of period

 

2,940

 

2,102

Interest income

 

114

 

83

Remeasurements in other comprehensive income

 

166

 

(33)

Return on plan assets (excluding amounts in net interests)

 

166

 

(33)

Employer contributions

 

181

 

168

Employee contributions

 

4

 

4

Acquisitions/disposals (-)

 

0

 

797

Administrative expenses paid

 

(16)

 

(11)

Settlements

 

(138)

 

1

Actual benefits paid

 

(318)

 

(270)

Currency translation differences

 

(121)

 

97

Reclassification and other movements

 

(1)

 

7

Transfer from/to (liabilities associated with) assets held for sale

 

0

 

(4)

Fair value of plan assets at end of period

 

2,811

 

2,940

Actual return on plan assets

 

280

 

50

In 2016 the total return on plan assets amounted to € 280 million.

In 2015 the major variation on Solvay plan assets was the acquisition of Cytec activities which led to an increase of € 785 million.

The Group’s cash contributions (including direct benefit payments) for 2016 amounted to € 181 million, of which € 79 million were contributions to funds and € 102 million were direct benefits payments.

The Group’s cash contributions (including direct benefit payments) for 2015 amounted to € 168 million, of which € 63 million were contributions to funds and € 105 million were direct benefits payments.

Excluding significant changes in the regulatory environment (see “Regulatory risk” above), the Group’s cash contributions in 2017 are expected to approximate € 209 million. This increase is due to additional contributions in the United States.

Categories of plan assets

 

 

2016

 

2015

 

Quoted

 

Non quoted

 

Quoted

 

Non quoted

Equity

 

38%

 

0%

 

51%

 

0%

Bonds

 

 

 

 

 

 

 

 

Investment Grade

 

57%

 

0%

 

44%

 

0%

Non Investment Grade

 

1%

 

0%

 

1%

 

0%

Properties

 

1%

 

0%

 

1%

 

0%

Cash and cash equivalents

 

3%

 

0%

 

3%

 

0%

Derivatives

 

 

 

 

 

 

 

 

Structured debt (LDI)

 

0%

 

0%

 

0%

 

0%

Other derivatives

 

0%

 

0%

 

0%

 

0%

Others

 

0%

 

0%

 

0%

 

0%

Total

 

100%

 

0%

 

100%

 

0%

With respect to the invested assets, it should be noted that these assets do not contain any direct investment in Solvay Group shares or in property or other assets occupied or used by Solvay. This does not prevent Solvay shares from being included in mutual investment fund type investments.

Changes in assets ceiling

In € million

 

2016

 

2015

Effect of the asset ceiling limit at beginning of year

 

24

 

12

Change in the effect of the asset ceiling limit on remeasurements

 

(16)

 

12

Effect of the asset ceiling limit at end of year

 

8

 

24

The changes in asset ceiling recognized through OCI amount to € (16) million as against € 12 million in 2015. These impacts relate to the plans of Brazil, Portugal, and Switzerland.

Actuarial assumptions

These assumptions are not related to a specific segment.

In %

 

Eurozone

 

United Kingdom

 

United States

 

2016

 

2015

 

2016

 

2015

 

2016

 

2015

Discount rates

 

1.50

 

2.25

 

2.75

 

3.75

 

4.00

 

4.25

Expected rates of future salary increases

 

1.75 – 4.00

 

1.75 – 4.00

 

2.40 – 3.50

 

2.15 – 3.25

 

3.00 – 3.75

 

3.00 – 3.75

Inflation

 

1.50 – 2.00

 

1.75

 

3.50

 

3.25

 

2.25

 

2.25

Expected rates of pension growth

 

0.00 – 1.75

 

0.00 – 1.75

 

3.50

 

3.25

 

NA

 

NA

Expected rates of medical care cost increases

 

1.75

 

1.75

 

5.40

 

5.50

 

4.50 – 7.00

 

4.50 – 7.50

Actuarial assumptions used in determining the annual cost

These assumptions are not related to a specific segment.

In %

 

Eurozone

 

United Kingdom

 

United States

 

2016

 

2015

 

2016

 

2015

 

2016

 

2015

Discount rates

 

2.25

 

1.75

 

3.75

 

3.50

 

4.25

 

4.00

Expected rates of future salary increases

 

1.75 – 4.00

 

1.75 – 4.00

 

2.15 – 3.25

 

1.90 – 3.00

 

3.00 – 3.75

 

3.00 – 3.75

Inflation

 

1.75

 

1.75

 

3.25

 

3.00

 

2.25

 

2.25

Expected rates of pension growth

 

0.00 – 1.75

 

0.00 – 1.75

 

3.25

 

3.00

 

NA

 

NA

Expected rates of medical care cost increases

 

1.75

 

1.75

 

5.40

 

5.50

 

4.50 – 7.00

 

4.50 – 7.50

Actuarial assumptions regarding future mortality are based on recent country-specific mortality tables. These assumptions translate at December 31, 2016 into an average remaining life expectancy in years for a pensioner retiring at age 65:

In years

 

United Kingdom

 

United States

 

Belgium

 

France

 

Germany

Retiring at the end of the reporting period

Male

 

21

 

20

 

18

 

24

 

20

Female

 

24

 

22

 

21

 

28

 

24

Retiring 20 years after the end of the reporting period

Male

 

23

 

21

 

18

 

27

 

22

Female

 

25

 

23

 

21

 

31

 

26

In some countries such as United Kingdom and United States, the mortality assumptions reflect actual scheme experience and/or Solvay’s expectations in terms of future mortality improvements.

The actuarial assumptions used in determining the benefit obligation at December 31 are based on the following employee benefit liability durations:

 

 

Eurozone

 

United Kingdom

 

United States

Duration in years

 

12.3

 

16.1

 

10.6

Sensitivities

Sensitivity to a change of percentage in the discount rates on the defined benefits obligation is as follows:

In € million

 

0.25% increase

 

0.25% decrease

Eurozone

 

(72)

 

75

United Kingdom

 

(67)

 

70

United States

 

(38)

 

39

Others

 

(6)

 

6

Total

 

(183)

 

190

Sensitivity to a change of percentage in the inflation rates on the defined benefits obligation is as follows:

In € million

 

0.25% increase

 

0.25% decrease

Eurozone

 

66

 

(64)

United Kingdom

 

53

 

(51)

United States

 

0

 

0

Others

 

4

 

(4)

Total

 

123

 

(119)

Sensitivity to a change of percentage in salary growth rate on the defined benefits obligation is as follows:

In € million

 

0.25% increase

 

0.25% decrease

Eurozone

 

18

 

(17)

United Kingdom

 

3

 

(3)

United States

 

1

 

(1)

Others

 

1

 

(1)

Total

 

23

 

(22)

Sensitivity to a change of one year on mortality tables on the defined benefits obligation is as follows:

In € million

 

Age correction +1 year

 

Age correction (1) year

Eurozone

 

(74)

 

76

United Kingdom

 

(54)

 

54

United States

 

(30)

 

31

Others

 

(7)

 

7

Total

 

(165)

 

168

F31.B. Provisions other than for employee benefits

Accounting policy

General

Provisions are recognized when (a) the Group has a present obligation (legal or constructive) as a result of a past event, (b) it is probable that the Group will be required to settle the obligation, and (c) a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount is the present value of expenditures required to settle the obligation. Impacts of changes in discount rates are generally recognized in the financial result.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received if the Group settles the obligation.

Onerous contracts

An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Present obligations arising from onerous contracts are recognized and measured as provisions.

Restructurings

A restructuring provision is recognized when the Group has developed a detailed formal plan for the restructuring and has, by starting to implement the plan or announcing its main features to those affected by it, raised a valid expectation in those affected that it will carry out the restructuring. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.

Environmental liabilities

Solvay analyzes twice a year all its environmental risks and the corresponding provisions. Solvay measures these provisions to the best of its knowledge of applicable regulations, the nature and extent of the pollution, clean-up techniques, and other available information.

Restructuring provisions

These provisions amount to € 99 million, as against € 97 million at the end of 2015.

The main provisions at the end of 2016 relate to:

  • the reorganization of Corporate Functions following Group portfolio review (€ 48 million); and
  • Cytec (€ 18 million).

Environmental provisions

These provisions amount to € 737 million at the end of 2016, as against € 723 million at the end of 2015, and pertain to:

  • mines and drilling operations to the extent that legislation and/or operating permits in relation to quarries, mines, and drilling operations contain requirements to pay compensation to third parties. These provisions, based on local expert advice, can be expected to be used over a 1-20 year horizon and amount to € 148 million;
  • the discontinuation of mercury electrolysis activities: forecast expenditure is staggered over time as a result of the expected reutilization of the sites, national regulations on the management of contaminated soils, and the state of contamination of soils and groundwater. Most of these provisions can be expected to be used over a 10-20 year time horizon;
  • dikes, dump sites and land: the provisions relate mainly to soda plant dikes, old lime dikes and land and dump sites linked to activities at certain industrial sites. These provisions have a horizon of 1 to 20 years; and
  • various types of pollution (organic, inorganic) coming from miscellaneous specialty chemical productions; these provisions mainly cover discontinued activities or closed plants. Most of these provisions have a horizon of 1 to 20 years.

The estimated amounts are discounted based on the probable date of settlement, and are adjusted periodically to reflect the passage of time.

Provisions for litigation

Provisions for litigation refer to tax and legal exposures. They amount to € 167 million at the end of 2016 as against € 214 million at the end of 2015. The decrease is explained mainly by the reversal of (a) a tax provision of € 25 million and (b) a legal provision for Pharma of € 20 million.

The balance at the end of 2016 relates to tax risks (€ 81 million) and legal claims (€ 76 million).

Other provisions

Other provisions relate to the shutdown or disposal of activities and amount to € 148 million, as against € 106 million at the end of 2015.