IBM 1997 Annual Report Download - page 73

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71
notes to consolidated financial statements
International Business Machines Corporation
and Subsidiary Companies
V Employee Benefits Trust
Effective November 1, 1997, the company created an employee benefits trust to which the company contributed 10 million
shares of treasury stock. The company is authorized to instruct the trustee to sell shares from time to time and to
use proceeds from such sales, and any dividends paid on such contributed stock, toward the partial satisfaction of the
company’s future obligations under certain of its compensation and benefits plans, including its retiree medical plans.
The shares held in trust are not considered outstanding for earnings per share purposes until they are committed to
be released, and the shares will be voted by the trustee in accordance with its fiduciary duties. As of December 31, 1997,
no shares have been committed to be released.
W Retirement Plans
The company and its subsidiaries have defined benefit and defined contribution retirement plans covering substantially
all regular employees, and a supplemental retirement plan that covers certain executives. The aggregate (benefit)
cost of these plans for 1997, 1996 and 1995 was $(50) million, $120 million and $377 million, respectively.
The cost of the defined benefit plans for 1997, 1996 and 1995 was as follows:
Net Periodic Pension Cost
U.S. Plan Non-U.S. Plans
1997 1996 1995 1997 1996 1995
(Dollars in millions)
Service cost $397 $412 $315 $360 $378 $386
Interest cost on the projected
benefit obligation 2,215 2,125 2,098 1,173 1,292 1,325
Return on plan assets:
Actual (6,193) (4,849) (5,500) (3,461) (2,543) (1,848)
Deferred 3,286 2,148 2,958 2,021 1,075 403
Net amortizations (125) (121) (123) 16 28 12
Settlement (gains)/curtailment
losses – – – (68) (102) 128
_______________ _______________ _______________ _______________ ______________ _______________
Net periodic pension cost
(benefit) $(420) $(285) $(252) $41 $128 $406
Total net periodic pension
cost for all non-U.S. plans $50 $148 $417
Expected long-term rate of
return on plan assets 9.5% 9.25% 9.25% 6.0-9.5% 6.5-10.0% 6.25-10.0%
Cost of defined
contribution plans $236 $209 $176 $64 $29 $21
Net periodic pension cost is determined using the
Projected Unit Credit actuarial method. Settlement gains
in 1997 and 1996 reflect principally the transfer of assets
to defined contribution plans upon election by the
employees in certain countries. Curtailment losses in
1995 resulted from the significant reductions in the
expected years of future service caused by termination
programs and represent the immediate recognition of
associated prior service cost and a portion of previously
unrecognized actuarial losses.