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PENSIONS AND OTHER POST-EMPLOYMENT BENEFIT OBLIGATIONS | 12 Months Ended
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Dec. 31, 2020
Disclosure of employee benefits [Abstract] |
PENSION AND OTHER POST-EMPLOYMENT BENEFIT OBLIGATIONS | NOTE 7 - EMPLOYEE BENEFIT EXPENSES
|  |  |  | Year ended December 31,
(in millions of Euros) |  | Notes |  | 2020 |  | 2019 |  | 2018
Wages and salaries |  |  |  | (855) |  |  | (994) |  |  | (889) |
Pension costs - defined benefit plans |  | 23 |  | (23) |  |  | (19) |  |  | (20) |
Other post-employment benefits |  | 23 |  | (9) |  |  | (9) |  |  | (6) |
Share-based compensation |  | 30 |  | (15) |  |  | (16) |  |  | (12) |
Total employee benefit expenses |  |  |  | (902) |  |  | (1,038) |  |  | (927) |
NOTE 23 - PENSIONS AND OTHER POST-EMPLOYMENT BENEFIT OBLIGATIONS The Group operates a number of pensions, other post-employment benefits and other long-term employee benefit plans. Some of these plans are defined contribution plans and some are defined benefit plans, with assets held in separate trustee-administered funds. Benefits paid through pension trusts are sufficiently funded to ensure the payment of benefits to retirees when they become due. Actuarial valuations are reflected in the Consolidated Financial Statements as described in NOTE 2.6 - Principles governing the preparation of the Consolidated Financial Statements. 23.1 Description of the plans Pension plans Constellium’s pension obligations are in the U.S., Switzerland, Germany and France. Pension benefits are generally based on the employee’s service and highest average eligible compensation before retirement and are periodically adjusted for cost of living increases, either by company practice, collective agreement or statutory requirement. Benefit plans in the U.S., Switzerland and France are funded through long-term employee benefit funds. Other post-employment benefits (OPEB) The Group provides healthcare and life insurance benefits to retired employees and in some cases to their beneficiaries and covered dependents, mainly in the U.S. Eligibility for coverage depends on certain age and service criteria. These benefit plans are unfunded. Other long-term employee benefits Other long-term employee benefits mainly include jubilees in France, Germany and Switzerland and other long-term disability benefits in the U.S. These benefit plans are unfunded. 23.2 Description of risks The defined benefit obligations expose the Group to a number of risks, including longevity, inflation, interest rate, medical cost inflation, investment performance, and change in law governing the employee benefit obligations. These risks are mitigated when possible by applying an investment strategy for the funded schemes that aims to reduce the volatility of returns and achieve a matching of the underlying liabilities to minimize the long-term costs. This is achieved by investing in a diversified selection of asset classes. Investment performance risk Our pension plan assets consist primarily of funds invested in listed stocks and bonds. The present value of funded defined benefit obligations is calculated using a discount rate determined by reference to high-quality corporate bond yields. If the return on plan assets is below this rate, it will increase the plan deficit. Interest rate risk A decrease in the discount rate will increase the defined benefit obligation. At December 31, 2020, impacts of the change on the defined benefit obligation of a 50 basis points increase / decrease in the discount rates are calculated by using a proxy based on the duration of each scheme:
(in millions of Euros) |  | 50 bp increase in discount rates |  | 50 bp decrease in discount rates
France |  | (11) |  |  | 11 |
Germany |  | (9) |  |  | 10 |
Switzerland |  | (26) |  |  | 28 |
United States |  | (33) |  |  | 33 |
Total sensitivity on Defined Benefit Obligations |  | (79) |  |  | 82 |
Longevity risk The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of plan participants. An increase in the life expectancy of the plan participants will increase the plan’s liability. 23.3 Actuarial assumptions Pension and other post-employment benefit obligations were updated based on the discount rates applicable at December 31, 2020.
|  | At December 31,
|  | 2020 |  | 2019
|  | Rate of increase in salaries |  | Rate of increase in pensions |  | Discount rate |  | Rate of increase in salaries |  | Rate of increase in pensions |  | Discount rate
Switzerland |  | 1.50% |  | — |  | 0.00% |  | 1.50% |  | — |  | 0.15%
U.S. |  | — |  | — |  | — |  | — |  | — |  | —
Hourly pension |  | 2.20% |  | — |  | 2.45% - 2.65% |  | 2.20% |  | — |  | 3.15% - 3.25%
Salaried pension |  | 3.80% |  | — |  | 2.55% |  | 3.80% |  | — |  | 3.25%
OPEB (A) |  | 3.80% |  | — |  | 2.50% - 2.80% |  | 3.80% |  | — |  | 3.20% - 3.40%
Other benefits |  | 3.80% |  | — |  | 2.20% - 2.55% |  | 3.80% |  | — |  | 3.00% - 3.20%
France |  | 1.50% - 3.50% |  | 2.00% |  | — |  | 1.50% - 3.50% |  | 2.00% |  | —
Retirements |  | — |  | — |  | 0.50% |  | — |  | — |  | 0.95%
Other benefits |  | — |  | — |  | 0.40% |  | — |  | — |  | 0.80%
Germany |  | 2.50% |  | 1.50% |  | 0.55% |  | 2.75% |  | 1.70% |  | 1.00%
(A)The other main financial assumptions used for the OPEB healthcare plans, which are predominantly in the U.S. were: •Medical trend rate: i) pre-65: 6.25% starting in 2020 decreasing gradually to 4.50% in 2029 and stable onwards and ii) post-65: 6.00% starting in 2020 decreasing gradually to 4.50% in 2029 and stable onwards, and •Claims costs are based on company experience. For both pension and healthcare plans, the post-employment mortality assumptions allow for future improvements in life expectancy. 23.4 Amounts recognized in the Consolidated Statement of Financial Position
|  | At December 31,
|  | 2020 |  | 2019
(in millions of Euros) |  | Pension Benefits |  | Other Benefits |  | Total |  | Pension Benefits |  | Other Benefits |  | Total
Present value of funded obligation |  | 772 |  |  | — |  |  | 772 |  |  | 768 |  |  | — |  |  | 768 |
Fair value of plan assets |  | (458) |  |  | — |  |  | (458) |  |  | (445) |  |  | — |  |  | (445) |
Deficit of funded plans |  | 314 |  |  | — |  |  | 314 |  |  | 323 |  |  | — |  |  | 323 |
Present value of unfunded obligation |  | 134 |  |  | 216 |  |  | 350 |  |  | 127 |  |  | 220 |  |  | 347 |
Net liability arising from defined benefit obligation |  | 448 |  |  | 216 |  |  | 664 |  |  | 450 |  |  | 220 |  |  | 670 |
23.5 Movement in net defined benefit obligations
|  | At December 31, 2020
|  | Defined benefit obligations |  | Plan Assets |  | Net defined benefit liability
(in millions of Euros) |  | Pension benefits |  | Other benefits |  | Total |
At January 1, 2020 |  | 895 |  |  | 220 |  |  | 1,115 |  |  | (445) |  |  | 670 |
Included in the Consolidated Income Statement |  |  |  |  |  |  |  |  |  |
Current service cost |  | 21 |  |  | 7 |  |  | 28 |  |  | — |  |  | 28 |
Interest cost / (income) |  | 13 |  |  | 6 |  |  | 19 |  |  | (8) |  |  | 11 |
Past service cost |  | — |  |  | 2 |  |  | 2 |  |  | — |  |  | 2 |
Immediate recognition of gains arising over the year |  | — |  |  | 2 |  |  | 2 |  |  | — |  |  | 2 |
Administration expenses |  | — |  |  | — |  |  | — |  |  | 2 |  |  | 2 |
Included in the Statement of Comprehensive Income / (loss) |  |  |  |  |  |  |  |  |  |
Remeasurements due to: |  |  |  |  |  |  |  |  |  |
—actual return less interest on plan assets |  | — |  |  | — |  |  | — |  |  | (28) |  |  | (28) |
—changes in financial assumptions |  | 51 |  |  | 16 |  |  | 67 |  |  | — |  |  | 67 |
—changes in demographic assumptions |  | (6) |  |  | (4) |  |  | (10) |  |  | — |  |  | (10) |
—experience losses |  | (4) |  |  | 1 |  |  | (3) |  |  | — |  |  | (3) |
Effects of changes in foreign exchange rates |  | (27) |  |  | (17) |  |  | (44) |  |  | 20 |  |  | (24) |
Included in the Consolidated Statement of Cash Flows |  |  |  |  |  |  |  |  |  |
Benefits paid |  | (41) |  |  | (18) |  |  | (59) |  |  | 34 |  |  | (25) |
Contributions by the Group |  | — |  |  | — |  |  | — |  |  | (28) |  |  | (28) |
Contributions by the plan participants |  | 4 |  |  | 1 |  |  | 5 |  |  | (5) |  |  | — |
At December 31, 2020 |  | 906 |  |  | 216 |  |  | 1,122 |  |  | (458) |  |  | 664 |
|  | At December 31, 2019
|  | Defined benefit obligations |  | Plan Assets |  | Net defined benefit liability
(in millions of Euros) |  | Pension benefits |  | Other benefits |  | Total |
At January 1, 2019 |  | 789 |  |  | 201 |  |  | 990 |  |  | (380) |  |  | 610 |
Included the Consolidated Income Statement |  |  |  |  |  |  |  |  |  |
Current service cost |  | 17 |  |  | 7 |  |  | 24 |  |  | — |  |  | 24 |
Interest cost / (income) |  | 18 |  |  | 8 |  |  | 26 |  |  | (10) |  |  | 16 |
Past service cost |  | (2) |  |  | 1 |  |  | (1) |  |  | — |  |  | (1) |
Immediate recognition of gains arising over the year |  | — |  |  | 2 |  |  | 2 |  |  | — |  |  | 2 |
Administration expenses |  | — |  |  | — |  |  | — |  |  | 2 |  |  | 2 |
Included in the Statement of Comprehensive Income / (loss) |  |  |  |  |  |  |  |  |  |
Remeasurements due to: |  |  |  |  |  |  |  |  |  |
—actual return less interest on plan assets |  | — |  |  | — |  |  | — |  |  | (54) |  |  | (54) |
—changes in financial assumptions |  | 101 |  |  | 25 |  |  | 126 |  |  | — |  |  | 126 |
—changes in demographic assumptions |  | (2) |  |  | (2) |  |  | (4) |  |  | — |  |  | (4) |
—experience losses |  | (3) |  |  | (6) |  |  | (9) |  |  | — |  |  | (9) |
Effects of changes in foreign exchange rates |  | 16 |  |  | 3 |  |  | 19 |  |  | (11) |  |  | 8 |
Included in the Consolidated Statement of Cash Flows |  |  |  |  |  |  |  |  |  |
Benefits paid |  | (43) |  |  | (20) |  |  | (63) |  |  | 38 |  |  | (25) |
Contributions by the Group |  | — |  |  | — |  |  | — |  |  | (25) |  |  | (25) |
Contributions by the plan participants |  | 4 |  |  | 1 |  |  | 5 |  |  | (5) |  |  | — |
At December 31, 2019 |  | 895 |  |  | 220 |  |  | 1,115 |  |  | (445) |  |  | 670 |
23.6 Benefit plan amendments In 2018, the Group announced a plan to transfer certain participants in the Constellium Rolled Products Ravenswood Retiree Medical and Life Insurance Plan (“the Plan”) from a company-sponsored program to a third-party health network that provides similar benefits at a lower cost. This change in benefits resulted in the recognition of a gain of €36 million from negative past service cost, which was reduced by €3 million in 2019 and €2 million in 2020 to reflect delays in the estimated implementation timetable (see 23.7 Ravenswood OPEB dispute). During the year ended December 31, 2019, the Group decided to terminate the medical care plan for the active participants of one of its French entities effective October 1, 2019. This resulted in both a decrease of the defined benefit obligation and the recognition of a €2 million gain from negative past service cost. In addition, the Group offered a lump sum option to Constellium Rolled Products Ravenswood former employees with deferred benefits. This resulted in both a decrease of the defined benefit obligation and the recognition of a €3 million gain from negative past service cost. 23.7 Ravenswood OPEB disputes The United Steelworkers Local Union 5668 (the “Union”) is contesting the OPEB amendments and filed a lawsuit against Constellium Rolled Products Ravenswood, LLC ("Ravenswood") in a federal district court in West Virginia (the “District Court”) seeking to enjoin the Plan changes and to compel arbitration. The District Court issued an order in December 2018, enjoining Ravenswood from implementing the OPEB amendments pending resolution in arbitration. In September 2019, the arbitrator issued a decision ruling against Ravenswood and sustaining the Union’s grievance. Ravenswood filed a motion in the District Court to vacate this decision, which was denied in June 2020. In July 2020, Ravenswood appealed that denial to the Fourth Circuit Court of Appeals and that court decision is still pending. The Group intends to continue to vigorously defend this matter as it believes it has a strong legal position and it is probable that Ravenswood will ultimately prevail and be able to implement the OPEB amendments. Additionally, during 2019, the Union filed a grievance disputing the existing limitation of Ravenswood’s liability for the healthcare costs of pre-Medicare retirees. An arbitration was held in August 2020, briefs were submitted and the arbitrator issued his decision on November 4, 2020 denying the Union's grievance. The Union had until February 2, 2021 to appeal such decision but it did not, thus this matter is now considered fully closed. 23.8 Net defined benefit obligations by country
|  | At December 31,
|  | 2020 |  | 2019
(in millions of Euros) |  | Defined benefit obligations |  | Plan assets |  | Net defined benefit liability |  | Defined benefit obligations |  | Plan assets |  | Net defined benefit liability
France |  | 168 |  |  | (5) |  |  | 163 |  |  | 161 |  |  | (3) |  |  | 158 |
Germany |  | 143 |  |  | (1) |  |  | 142 |  |  | 144 |  |  | (1) |  |  | 143 |
Switzerland |  | 310 |  |  | (223) |  |  | 87 |  |  | 299 |  |  | (214) |  |  | 85 |
United States |  | 500 |  |  | (229) |  |  | 271 |  |  | 510 |  |  | (227) |  |  | 283 |
Other countries |  | 1 |  |  | — |  |  | 1 |  |  | 1 |  |  | — |  |  | 1 |
Total |  | 1,122 |  |  | (458) |  |  | 664 |  |  | 1,115 |  |  | (445) |  |  | 670 |
23.9 Plan asset categories
|  | At December 31,
|  | 2020 |  | 2019
(in millions of Euros) |  | Quoted in an active market |  | Unquoted in an active market |  | Total |  | Quoted in an active market |  | Unquoted in an active market |  | Total
Cash & cash equivalents |  | 8 |  |  | — |  |  | 8 |  |  | 5 |  |  | — |  |  | 5 |
Equities |  | 109 |  |  | 64 |  |  | 173 |  |  | 119 |  |  | 51 |  |  | 170 |
Bonds |  | 106 |  |  | 103 |  |  | 209 |  |  | 102 |  |  | 105 |  |  | 207 |
Property |  | 8 |  |  | 46 |  |  | 54 |  |  | 14 |  |  | 37 |  |  | 51 |
Other |  | 1 |  |  | 13 |  |  | 14 |  |  | 1 |  |  | 11 |  |  | 12 |
Total fair value of plan assets |  | 232 |  |  | 226 |  |  | 458 |  |  | 241 |  |  | 204 |  |  | 445 |
23.10 Cash flows Expected contributions to pension and other benefit plans amount to €24 million and €15 million, respectively, for the year ending December 31, 2021. Future benefit payments expected to be paid either by pension funds or directly by the Company to beneficiaries are as follows:
(in millions of Euros) |  | Estimated benefits payments
Year ended December 31, |  |
2021 |  | 49 |
2022 |  | 48 |
2023 |  | 49 |
2024 |  | 53 |
2025 |  | 52 |
2026 to 2030 |  | 275 |
The weighted-average maturity of the defined benefit obligations was 14.2 years and 14.1 years at December 31, 2020 and 2019, respectively.

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