The state of our Pension fund – October 2015
The DISA Pension Fund board sent to all pensioners and survivors a full report that details the financial situation overview; 2014 accounts summarized; history of DuPont’s exceptional contributions since 2005; summary of the evolution and events in 2014 and early 2015; condensed information about the partial liquidation, subsequent to the move of 80 people to CHEMOURS on 31.07.15 (ex-DD Performance Chemicals) and relevant consequences to our fund.
The report addresses the most important concerns discussed by delegates from your ad-hoc team with DISA and Fund management. We are of the opinion that this annual report from the DISA Pension fund shows a reassuring outlook regarding performance of the fund and its overall management. Notable facts are:
- Status of the fund. Since 2013 the DISA Pension has been split into two entities. One to serve pensions to employees that worked with DISA up to and including July 2012, which is that part that covers our pensions and a new fund that covers new employees from that same date. Our fund is therefore a “closed fund” which is fed by active employees hired before July 2012 and the fund’s capital.
- Discount rate ( Technical Interest Rate). The discount rate is the interest rate used to calculate the value of the required reserves to pay our pensions. A high rate, as was used in the past, reduces the amount needed but requires a steady and high investment performance, with the risk of reduced coverage. The company has set about reducing the discount rate over the last few years and a new step was taken at the end of 2014, bringing the rate to 3%. When this is done, it means that the fund has to increase its reserves, in this case to the tune of 48.8 million. This was funded by the revenue from investments. The plan is to continue reducing the discount rate in the future, whenever funds as available to do so, with a target of 2.5% or 2%.
- The investment performance. The results for 2014 were very good. This is due in part to the fact that the DISA Pension fund employs professional help to guide these investments, which are made in accordance with Swiss law aimed at preserving and growing the fund without taking high risks. Because of the proportion of investment in financial instruments (shares and bonds), a special provision is set up to buffer any sudden changes in value.
- Pension fund coverage. The coverage rate, after lowering the discount rate, at the end of 2014 was 109.9%. This has been achieved in part due to good investment results but also by a DuPont decision to achieve this goal with substantial cash input over the last 9 years. A total of 203 million CHF have been contributed unilaterally by DuPont over that period, to fund the reduction of the discount rate from 5% in 2005 to the present 3% and to maintain the coverage percentage at or above 100%. The cash injection was a 10-year project. An assessment of whether to launch another similar project is ongoing.
- The Chemours split. A group of DuPont businesses, aggregated under the name of Chemours, were spun off in 2015 worldwide. In DISA this represented 80 employees that had to change employer and thus leave our fund, taking with them their accumulated personal reserves. This is similar to what happened in 2012 when the paint business was sold. The partial liquidation of the fund has no effect on the rights and reserves of the remaining beneficiaries.
- Participants and Pensioners. As at end December 2014 there were 579 participants and 865 beneficiaries. With the departure of the Chemours employees in July 2015, the participants therefore fell to below 500.
- TPG/RAP program. This program covering the special arrangements of those of us who had service in multiple subsidiaries is covered by specific annual contributions by DISA to the fund.