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PENSIONS AND OTHER POST-EMPLOYMENT BENEFIT OBLIGATIONS

12 Months Ended

Dec. 31, 2021

Disclosure of employee benefits [Abstract]

PENSIONS AND OTHER POST-EMPLOYMENT BENEFIT OBLIGATIONS

NOTE 7 - EMPLOYEE BENEFIT EXPENSES


		Year ended December 31,
(in millions of Euros)	Notes	2021	2020	2019
Wages and salaries		(920)	(855)	(994)
Pension costs - defined benefit plans	22	(24)	(23)	(19)
Other post-employment benefits	22	(8)	(9)	(9)
Share-based compensation	29	(15)	(15)	(16)
Total employee benefit expenses		(967)	(902)	(1,038)

NOTE 22 - PENSIONS AND OTHER POST-EMPLOYMENT BENEFIT OBLIGATIONS

The Group has 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.

22.1 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.

22.2 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, 2021, 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	(10)	10
Germany	(7)	8
Switzerland	(24)	25
United States	(34)	38
Total sensitivity on Defined Benefit Obligations	(75)	81

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.

22.3 Actuarial assumptions

Pension and other post-employment benefit obligations were updated based on the discount rates applicable at December 31, 2021.


	At December 31,
	2021			2020
	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%	—	0.15%	1.50%	—	0.00%
U.S.	—	—	—	—	—	—
Hourly pension	2.20%	—	2.80% - 2.95%	2.20%	—	2.45% - 2.65%
Salaried pension	3.80%	—	2.85%	3.80%	—	2.55%
OPEB (A)	3.80%	—	2.85% - 2.95%	3.80%	—	2.50% - 2.80%
Other benefits	3.80%	—	2.60% - 2.85%	3.80%	—	2.20% - 2.55%
France	1.80% - 3.80%	2.00%	—	1.50% - 3.50%	2.00%	—
Retirements	—	—	1.00%	—	—	0.50%
Other benefits	—	—	0.90%	—	—	0.40%
Germany	2.50%	1.80%	1.05%	2.50%	1.50%	0.55%

(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: 6.05% starting in 2021 decreasing gradually to 4.50% in 2029 and stable onwards and ii) post-65: 5.80% starting in 2021 decreasing gradually to 4.50% in 2029 and stable onwards,

•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.

22.4 Amounts recognized in the Consolidated Statement of Financial Position


	At December 31,
	2021			2020
(in millions of Euros)	Pension Benefits	Other Benefits	Total	Pension Benefits	Other Benefits	Total
Present value of funded obligation	766	—	766	772	—	772
Fair value of plan assets	(544)	—	(544)	(458)	—	(458)
Deficit of funded plans	222	—	222	314	—	314
Present value of unfunded obligation	128	249	377	134	216	350
Net liability arising from defined benefit obligation	350	249	599	448	216	664

22.5 Movement in net defined benefit obligations


	At December 31, 2021
	Defined benefit obligations			Plan Assets	Net defined benefit liability
(in millions of Euros)	Pension benefits	Other benefits	Total
At January 1, 2021	906	216	1,122	(458)	664
Included in the Consolidated Income Statement
Current service cost	22	8	30	—	30
Interest cost / (income)	10	5	15	(6)	9
Past service cost	1	31	32	—	32
Immediate recognition of gains arising over the year	—	—	—	—	—
Administration expenses	—	—	—	2	2
Included in the Statement of Comprehensive Income
Remeasurements due to:
—actual return less interest on plan assets	—	—	—	(56)	(56)
—changes in financial assumptions	(29)	(9)	(38)	—	(38)
—changes in demographic assumptions	(13)	—	(13)	—	(13)
—experience losses	(9)	(2)	(11)	—	(11)
Effects of changes in foreign exchange rates	38	17	55	(32)	23
Included in the Consolidated Statement of Cash Flows
Benefits paid	(36)	(18)	(54)	32	(22)
Contributions by the Group	—	—	—	(21)	(21)
Contributions by the plan participants	4	1	5	(5)	—


At December 31, 2021	894	249	1,143	(544)	599


	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 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
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

Movements in net defined benefit obligations reported in Other Comprehensive Income in the years ended December 31, 2021 and 2020, primarily reflected the impact of changes in discount rates (see note 22.3), the difference between actual returns and interest on plan assets and the impact of changes in foreign exchanges rates.

22.6 Ravenswood OPEB dispute

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 providing similar benefits at a lower cost. The United Steelworkers Local Union 5668 (the “Union”) contested this change in benefits 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 Plan 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. In November 2021, the Fourth Circuit Court issued an opinion in favor of the Union, and the Group elected not to further pursue legal action on this matter.

The Group recognized a gain of €36 million from negative past service cost in the year ended December 31, 2018, reflecting its decision to amend the plan benefits and its determination at the time that it was probable that it would ultimately prevail in the dispute with the Union. This gain was partially reversed in the years ended December 31, 2019 and 2020, to reflect delays in the estimated implementation timetable as a result of the dispute with the Union. The Group recognized a loss of €31 million from past service cost in the year ended December 31, 2021, following the Fourth Circuit Court's ruling in favor of the Union.

22.7 Net defined benefit obligations by country


	At December 31,
	2021			2020
(in millions of Euros)	Defined benefit obligations	Plan assets	Net defined benefit liability	Defined benefit obligations	Plan assets	Net defined benefit liability
France	158	(5)	153	168	(5)	163
Germany	134	(2)	132	143	(1)	142
Switzerland	306	(268)	38	310	(223)	87
United States	545	(269)	276	500	(229)	271
Other countries	—	—	—	1	—	1
Total	1,143	(544)	599	1,122	(458)	664

22.8 Plan asset categories


	At December 31,
	2021			2020
(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	4	—	4	8	—	8
Equities	115	61	176	109	64	173
Bonds	149	110	259	106	103	209
Property	16	55	71	8	46	54
Other	—	34	34	1	13	14
Total fair value of plan assets	284	260	544	232	226	458

22.9 Cash flows

Expected contributions to pension and other benefit plans amount to €22 million and €18 million, respectively, for the year ending December 31, 2022.

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,
2022						55
2023						55
2024						57
2025						57
2026						58
2027 to 2031						290

The weighted-average maturity of the defined benefit obligations was 14.2 years for the years ended December 31, 2021 and 2020.