On July 1, Royal Philips and Dutch trade unions announced the outcomes of their negotiations for the collective labor agreement for Philips' workforce in the Netherlands. The negotiation results, which are subject to approvals, cover changes in the company's Dutch pension plan and associated one-off EUR 600 million contributions in 2014.
 
"We are making all efforts to create a sustainable pension framework for Philips' employees and for our company; following the curtailment of open ended obligations in the US pension fund earlier this quarter, we are glad that the Dutch collective labor agreement is another important milestone in that direction"  said Philips Chief Executive Officer Frans van Houten. "The results express the strong commitment from all the parties involved in the negotiations to ultimately reach a balanced agreement in tough economic times."
 
The proposed changes in the Dutch pension plan consist of a change in the retirement age (from 65 years to 67 years), a fixed annual company cash contribution rate for the next 5 years and the introduction of an employee contribution. In connection with these changes, the broad outlines of a new funding agreement have been agreed upon as part of which Philips will no longer be liable for the funding of potential future deficits of the plan. As part of this change in funding, Philips plans to make a one-off EUR 600 million contribution to the Philips Pension funds, the company's Dutch pension fund. The new funding agreement and its implementation are subject to approval by the Trustees of the Dutch pension fund, and it is expected to come into force on January 1, 2014.
 
The proposed new funding agreement for the Dutch pension plan is in accordance with Philips' objective to mitigate the company's financial exposure to its pension plans. Philips successfully changed its US pension plan rules in earlier this quarter. Due to this change, Philips will recognize a one-off curtailment gain of EUR 78 million in the second quarter of 2013, which will be reported under EBITA.