IBM 2000 Annual Report Download - page 88

page no.
eighty-six
notes to consolidated financial statements
international business machines corporation
and Subsidiary Companies
(INCOME)/COST OF PENSION PLANS:
U.S. Plan Non-U.S. Plans
(dollars in millions) 2000 1999 1998 2000 1999 1998
Service cost $«««563 $«««566 $«««532 $«««445 $«««475 $«««399
Interest cost 2,553 2,404 2,261 1,234 1,282 1,213
Expected return on plan assets (3,902) (3,463) (3,123) (2,042) (1,937) (1,739)
Amortization of transition assets (141) (140) (140) (10) (11) (10)
Amortization of prior service cost 31 (21) 16 24 25 26
Recognized actuarial losses —16— 428 5
Settlement (gains)/losses — — — (25) (23) 10
Net periodic pension (income)/cost —
U.S. Plan and material non-U.S. Plans $÷(896) $÷(638) $÷(454) $÷(370) $÷(161) $««÷(96)
Cost of other defined benefit plans 72 68 59 23 37 54
Total net periodic pension (income)/cost
for all defined benefit plans $÷(824) $÷(570) $÷(395) $÷(347) $««(124) $««÷(42)
Cost of defined contribution plans $÷«294 $«««275 $«««258 $÷«149 $÷«131 $÷÷«90
Total retirement plan (income)/cost recognized
in the Consolidated Statement of Earnings $««(530) $««(295) $««(137) $««(198) $÷÷«««7 $÷÷«48
Effective January 1, 2001, the company increased pension
benefits to recipients who retired before January 1, 1997.
The increases range from 2.5 percent to 25 percent, and are
based on the year of retirement and the pension benefit
currently being received. This improvement is expected to
result in an additional cost to the company of approximately
$100 million in 2001.
Effective July 1, 1999, the company amended the IBM
Retirement Plan to establish the IBM Personal Pension Plan
(the U.S. Plan). The new plan establishes a new formula for
determining pension benefits for many of its employees.
Under the amended U.S. Plan, a new formula was created
whereby retirement benefits are credited to each employee’s
cash balance account monthly based on a percentage of the
employee’s pensionable compensation. Employees who were
retirement eligible or within five years of retirement eligibility
with at least one year of service, or who were at least forty
years of age with at least ten years of service as of June 30,
1999, could elect to participate under the new formula or to
have their service and earnings credit accrue under the pre-
existing benefit formula. Benefits become vested on the
completion of five years of service under either formula.
The number of individuals receiving benefits for this plan
at December 31, 2000 and 1999, was 129,290 and 124,175,
respectively. Net periodic pension (income)/cost for this plan
for the years ended December 31, 2000, 1999 and 1998 was
$(896) million, $(638) million and $(454) million, respectively.
U.S. regular, full-time and part-time employees are eligible
to participate in the Tax Deferred Savings Plan (TDSP), which
is a qualified voluntary defined contribution plan; the company
matches 50 percent of the employee’s contribution up to the
first 6 percent of the employee’s compensation. The total
(income)/cost of all of the company’s U.S. defined contribution
plans was $294 million, $275 million and $258 million for the
years ended December 31, 2000, 1999 and 1998, respectively.
Non-U.S. Plans
Most subsidiaries and branches outside the United States have
defined benefit and/or defined contribution retirement plans
that cover substantially all regular employees, under which
the company deposits funds under various fiduciary-type
arrangements, purchases annuities under group contracts or
provides reserves. Benefits are typically based on years of serv-
ice and the employee’s compensation, generally during a fixed
number of years immediately before retirement. The ranges
of assumptions that are used for the non-U.S. plans reflect the
different economic environments within various countries.
The total non-U.S. retirement plan (income)/cost of these
plans for the years ended December 31, 2000, 1999 and 1998
was $(198) million, $7 million and $48 million, respectively.
U.S. Supplemental Executive Retention Plan
The company also has a non-qualified U.S. Supplemental
Executive Retention Plan (SERP). The SERP, which is
unfunded, provides defined pension benefits outside the IBM
Retirement Plan to eligible executives based on average
earnings, years of service and age at retirement. Effective
July 1, 1999, the company adopted the Supplemental
Executive Retention Plan (which replaced the previous
Supplemental Executive Retirement Plan). Some participants
of the pre-existing SERP will still be eligible for benefits
under that plan, but will not be eligible for the new plan.
The total (income)/cost of this plan for the years ended
December 31, 2000, 1999 and 1998, was $24 million, $30 mil-
lion and $25 million, respectively. These amounts are
reflected in cost of other defined benefit plans below. At
December 31, 2000 and 1999, the projected benefit obliga-
tion was $163 million and $149 million, respectively, and the
amounts included in the Consolidated Statement of
Financial Position were pension liabilities of $131 million
and $109 million, respectively.