Accounting principles and methods
The Group grants its employees post-employment benefits (pension plans, retirement indemnities, etc.) and other long-term benefits (e.g. long-service awards) in compliance with the specific laws and measures in force in each country where it does business.
Calculation and recognition of employee benefits
Obligations under defined-benefit plans are calculated by the projected unit credit method, which determines the present value of entitlements earned by employees at year-end under all types of plan, taking into consideration the prospects for wage increases and each country’s specific economic conditions.
Post-employment benefit obligations are valued mainly using the following methods and assumptions:
- retirement age, determined on the basis of the applicable rules for each plan, and the requirements to qualify for a full pension;
- career-end salary levels, with reference to employee seniority, projected salary levels at the time of retirement based on the expected effects of career advancement, and estimated trends in pension levels;
- forecast numbers of pensioners, determined based on employee turnover rates and mortality data available in each country;
- reversion pensions where relevant, taking into account both the life expectancy of the employee and his/her spouse and the marriage rate;
- a discount rate that depends on the geographical zone and the duration of the obligations, determined at the year-end date by reference to the market yield on high-quality corporate bonds or the rate on government bonds whose duration is coherent with EDF group’s commitments to employees.
The amount of the provision corresponds to the value of obligations less the fair value of the fund assets that cover those obligations.
The net expense booked during the year for employee benefit obligations includes:
- in the income statement:
- in other components of consolidated comprehensive income:
- the actuarial gains and losses relating to post-employment benefits and any return on hedging assets in excess of the discount rates used,
- the effect of the limitation to the asset ceiling if any.
Post-employment benefit obligations
When they retire, Group employees benefit from pensions determined under local rules. They may also be entitled to benefits directly paid by the companies, and additional benefits prescribed by the relevant regulations.
French entities covered by the IEG system
Entities belonging to the specific IEG (electricity and gas) sector system, namely EDF, Enedis, Électricité de Strasbourg, EDF PEI and certain subsidiaries of the Dalkia subgroup, are Group companies where almost all employees benefit from the IEG statutes, including the special pension system and other statutory benefits.
After the financing reform for the IEG sector system took effect on 1 January 2005 (law of 9 August 2004), pension provisions were recognised by IEG companies to cover entitlements not funded by France’s standard systems (CNAV, AGIRC and ARRCO), to which the IEG system is affiliated, or by the CTA (contribution tarifaire d’acheminement) levy on gas and electricity transmission and distribution services.
As a result of the system affiliation mechanism, any change (whether favourable or unfavourable to employees) in the standard French pension system that is not passed on to the IEG pension system is likely to cause a variation in the amount of the provisions recorded by the Group to cover its obligations.
The obligations concerned by the pensions and for which a provision is recorded thus include:
- specific benefits of employees in the deregulated or competitive activities;
- specific benefits earned by employees from 1 January 2005 for the regulated activities (transmission and distribution) (benefits earned prior to that date are financed by the CTA levy).
In addition to pensions, other benefits are granted to IEG status former employees (not currently in active service), as detailed below:
- benefits in kind: Article 28 of the IEG national statutes entitles such employees and current employees to benefits in kind in the form of supplies of electricity or gas at preferential prices. The obligation for supplies of energy to employees of the EDF and ENGIE (formerly GDF- Suez) groups corresponds to the probable present value of kWh to be supplied to beneficiaries or their dependants during their retirement, valued on the basis of the unit cost (which mainly depends on the marginal production cost and taxes). It also includes the payment made under the energy exchange agreement with ENGIE;
- retirement gratuities: these are paid upon retirement to employees due to receive the statutory old-age pension, or to their dependants if the employee dies before reaching retirement. These obligations are almost totally covered by an insurance policy;
- bereavement benefit: this is paid out upon the death of an inactive or disabled employee, in order to provide financial assistance for the expenses incurred at such a time (Article 26 – 5 of the National Statutes). It is paid to the deceased’s principal dependants (statutory indemnity equal to three months’ pension, subject to a ceiling) or to a third party that has paid funeral costs (discretionary indemnity equal to the costs incurred);
- bonus pre-retirement paid leave: all employees eligible to benefit immediately from the statutory old-age pension and aged at least 55 at their retirement date are entitled to 18 days of bonus paid leave during the last twelve months of their employment;
- other benefits include help with the cost of studies, time banking for pre-retirement leave, and pensions for personnel sent on secondment to subsidiaries not covered by the IEG system.
French and foreign subsidiaries not covered by the special IEG system
Regarding pension obligations in the United Kingdom, EDF Energy had three principal defined-benefit pension plans at 1 January 2021:
- the British Energy Generation Group (BEGG) plan, of which the majority of members are current or retired employees of the Nuclear Generation The BEGG plan was closed to new members in August 2012;
- the EDF Energy Generation and Supply Group (EEGSG) plan, which was established in December 2010 for the employees remaining with EDF Energy following the transfer of the former Group plan to UK Power Networks as part of the sale of the Networks. The EEGSG plan has not accepted any new members since then;
- the EDF Energy Pension Scheme (EEPS). This scheme was established in March 2004 and membership remained open to new employees until 1 January 2021.
From 30 June or 31 Décember 2021, depending on the option chosen, employees were transferred from the EEGSG, EEPS and BEGG defined-benefit plans to their replacement, a new defined-contribution plan called “my Retirement Plan” and the old plans were closed.
The closed plans were merged into a single plan called “EDF group of the ESPS” (EDFG). This plan will remain in force for rights vested up to the closing date of the previous plans. The corresponding obligations will be adjusted for changes in discount and inflation rates, but will no longer be affected by new members or wage increases.
Other long-term benefit obligations
These benefits concern employees currently in service, and are earned according to local regulations, particularly the statutory regulations for the electricity and gas sector for EDF and French subsidiaries covered by the IEG regime. They include:
- annuities following incapacity, invalidity, industrial accident or work related illness;
- long-service awards;
- specific benefits for employees who have been in contact with asbestos.
