26. Retirement benefit obligations/pension liabilities

Retirement benefit obligations result mainly from two German pension plans and a Swiss post-employment benefit plan.

The German defined benefit pension plan for employees of NORMA Group was closed to new participants in 1990; participants receive benefits from this plan in the form of payments on retirement, disability and death. Entitlements to benefits depend on years of service and salary. The portion of salary above the contribution assessment ceiling for statutory pension insurance results in higher benefit entitlements compared to the portion of salary up to the contribution assessment ceiling. Even if no further benefits can be earned from these old commitments, the Company continues to bear the actuarial risks, such as longevity risk and increases in the pension trend. Due to the amount of the obligation and the composition of the plan participants – approx. 96% pensioners – there would be no material impact on NORMA Group even if the actuarial parameters were to change significantly.

Employees hired after 1990 are eligible under a defined contribution scheme. The contributions are paid into an insurance contract providing lump sum payments in case of retirements and deaths.

In fiscal year 2015, a further plan was opened for members of the Management Board. This second German defined benefit plan results from a direct commitment to an annual pension to the Management Board of NORMA Group if the member joins before fiscal year 2020. The pension is calculated as a percentage of the pensionable income. The entitlement to a pension arises when the employment contract is terminated, but not before reaching the age of 65, or if incapacity for work occurs. The percentage depends on the number of years of service as a member of the Management Board. The percentage is 4% of the last annual fixed salary before leaving the Company for each completed year of service. The percentage can rise to a maximum of 55%. A pension for surviving dependents is also provided for.

The obligations arising from the promised benefits are subject to actuarial risks, such as actuarial interest rate risks, inflation risks and longevity risks. Further details on this plan can be found in the remuneration report for the Management Board and Supervisory Board. REMUNERATION REPORT

In addition to the German plans, there is a defined benefit plan in Switzerland, which is based on the Swiss Occupational Pensions Act (BVG). Under the BVG, every employer must grant post-employment benefits to eligible employees. The plan is a capital-based plan under which the Company must make contributions that are at least equal to the employee contributions specified in the plan conditions. This plan is administered by a foundation that is legally independent of the Company and is subject to the BVG. The Group has outsourced the investment process to the foundation, which determines the strategic asset allocation in its collective life portfolio. All regulatory benefits from the plan are fully reinsured via an insurance carrier. The reinsurance covers the risks of disability, death and longevity. In addition, there is a 100% capital and interest guarantee for the pension capital invested with the insurer. In the event of underfunding, the employer and employee contributions can be increased on the basis of a decision by the respective foundation board. Strategies of the foundation board to compensate for a potential shortfall are subject to the approval of the regulatory authority.

In addition to the plans described in Germany and Switzerland, NORMA Group participates in a multi-employer pension plan at one site in the USA. NORMA Group’s obligation to participate in the fund results from an agreement with the employee organization. The plan is governed by US federal law, under which the plan is administered in trust on behalf of the contributing employers and beneficiary employees. The multi-employer plan would currently be treated as a defined benefit pension plan, but the administering organization does not provide sufficient information to the participating employers to account for the plan as a defined benefit plan. For this reason, this plan is treated in accordance with the regulations for defined contribution pension plans (IAS 19.34). NORMA Group’s share of the contributions paid to the pension plans amounted to EUR 1.2 million in the past fiscal year (2024: EUR 1.4 million). The contributions to the plan are recognized directly in personnel expenses for the period. Possible future changes to the contributions are determined through negotiations with the employee organization or result from the regulations that are amended from time to time. Apart from the agreed contributions, NORMA Group has no fixed obligation to this plan. In the unlikely event of a termination under certain criteria or in the event of liability for the obligations of other companies under the provisions of federal law in the USA, additional future contribution payment obligations could arise. The funded status of the multi-employer plan is reported annually by the US Department of Labor and is affected by various factors, including plan assets, investment performance, inflation, changes in demographics and changes in participant benefit levels.

In the immediately preceding years, the plan was significantly underfunded and was in a “critical and declining” status. NORMA Group (and the other contributing employers) carried a combined potential future payment obligation equal to this underfunding. In 2023, the Plan received a USD 994 million special grant from the US government under the American Rescue Plan Act of 2021 (ARPA). The plan is currently expected to be fully funded by 2051. Under the provisions of ARPA, the potential future payment obligation of NORMA and the other contributing employers will not be reduced by USD 994 million immediately, but the USD 994 million will be used pro rata temporis over a ten-year period to reduce the unfunded vested rights of the plan. ARPA also requires the plan to use a lower interest rate to measure its unfunded vested benefits for the period in which the USD 994 million is phased in, which may offset the direct benefit of the USD 994 million grant in calculating a particular employer’s potential future payment obligation.

The expected employer contributions to the pension funds for the following year 2026 amount to EUR 1.2 million.

Reconciliation of the defined benefit obligation (DBO) and the plan assets

The amounts included in the Group’s Consolidated Financial Statements arising from its post-employment defined benefit plans are as follows:

The reconciliation of the net defined benefit liability (liability in the Statement of Financial Position) is as follows:

A detailed reconciliation of the changes in the DBO is provided in the following table:

The total defined benefit obligation at the end of the past fiscal year includes EUR 4,338 thousand for active employees, EUR 5,155 thousand for former employees with vested benefits and EUR 5,397 thousand for retirees and surviving dependents.

The slight reduction in pension obligations is primarily the result of the Group-wide adjustment of the discount factor for obligations due to the slight increase in interest rates. This change is reflected in the actuarial gains and losses from financial assumptions.

A detailed reconciliation of the changes in the fair value of plan assets is provided in the following table:

From fiscal year 2022 on, the partial reinsurance of pension obligations under the plan for members of the Management Board was effected by taking out corresponding reinsurance policies. The payments for these are included under the item “Employer contributions.”

Breakdown of plan assets

The breakdown of the plan assets of the benefit plans is as follows:

Cash deposits and equity securities have quoted prices in active markets. The values for insurance contracts represent their fair value. No quoted prices in an active market are available for these.

Actuarial assumptions

The principal actuarial assumptions are as follows:

The biometric assumptions are based on the 2018 G Heubeck life-expectancy tables for the German plan and on the life-expectancy tables of the BVG 2020 G for the Swiss plan. The tables are generation tables and hence differ according to gender, status and year of birth.

Sensitivity analysis

If the discount rate differed by 0.25% points upwards or 0.25% points downwards from the interest rate applied on the reporting date, the carrying amount of the pension obligation would be an estimated EUR 318 thousand lower or EUR 341 thousand higher. If the pension trend were to deviate from the management’s estimates by 0.25% upwards or downwards, the carrying amount of the pension obligation would be an estimated EUR 226 thousand higher or EUR 221 thousand lower. The decrease/increase in mortality rates by 10% results in an increase/decrease in life expectancy depending on the individual age of each beneficiary. This means , for example, that the life expectancy of a 55-year-old male NORMA Group employee on December 31, 2025 increases/decreases by approximately one year. To determine the sensitivity of longevity, the mortality rates for all beneficiaries were reduced/increased by 10%. The DBO as of December 31, 2025 would increase by EUR 297 thousand or decrease by EUR 311 thousand as a result of a 10% reduction/increase in mortality rates.

When calculating the sensitivity of the DBO for the relevant actuarial assumptions, the same method was used (calculation of the present value using the projected unit credit method) as for the calculation of the liabilities from post-employment benefits recognized in the Consolidated Statement of Financial Position. Increases and decreases in the discount rate or pension trend do not have the same positive or negative effect when calculating the DBO, also due to the compound interest effect when calculating the present value of future benefits. If several assumptions are changed simultaneously, the overall effect does not necessarily have to correspond to the sum of the individual effects due to the changes in the assumptions. If the assumptions change by a different amount, this does not necessarily have a linear effect on the DBO.

Future cash flows

Employer contributions expected to be paid to the post-employment defined benefit plans in fiscal year 2026 amount to EUR 230 thousand (2024: EUR 245 thousand).

The expected payments from the plans for post-employment benefits are distributed as follows for the next 10 fiscal years, whereby the last 5 years are shown as a total:

The weighted average term of the defined benefit obligation is 11.81 years (2024: 12.30 years).