IBM 2006 Annual Report Download - page 102

Employees purchased 5.8 million, 6.7 million and 11.6 million
shares under the ESPP during the years ended December 31, 2006,
2005 and 2004, respectively. Cash dividends declared and paid by the
company on its common stock also include cash dividends on the
company stock purchased through the ESPP. Dividends are paid on
full and fractional shares and can be reinvested in the ESPP. The
company stock purchased through the ESPP is considered outstand-
ing and is included in the weighted-average outstanding shares for
purposes of computing basic and diluted earnings per share.
Approximately 20.3 million, 26.2 million and 32.8 million shares
were available for purchase under the ESPP at December 31, 2006,
2005 and 2004, respectively.
V. RETIREMENT-RELATED BENEFITS
DESCRIPTION OF PLANS
IBM sponsors defined benefit pension plans and defined contri-
bution plans that cover substantially all regular employees, a
supplemental retention plan that covers certain U.S. executives and
nonpension postretirement benefit plans primarily consisting of
retiree medical and dental benefits for eligible retirees and depen-
dents. These benefits form an important part of the company’s total
compensation and benefits program that is designed to attract and
retain highly skilled and talented employees.
U.S. Plans
DEFINED BENEFIT PENSION PLAN
IBM Personal Pension Plan
IBM provides U.S. regular, full-time and part-time employees hired
prior to January 1, 2005 with noncontributory defined benefit pension
benefits via the IBM Personal Pension Plan (PPP). The PPP consists
of a tax-qualified (qualified) plan and a non-tax qualified (non-quali-
fied) plan. The qualified plan is funded by company contributions to
an irrevocable trust fund, which is held for the sole benefit of partici-
pants and beneficiaries. The non-qualified plan, which is unfunded,
provides benefits in excess of IRS limitations for qualified plans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
100 2006 Annual Report
Benefits provided to the PPP participants are calculated using
benefit formulas that vary based on the participant. Pension benefits
are calculated using one of two methods based upon specified crite-
ria used to determine each participant’s eligibility. The first method
uses a five-year, final pay formula that determines benefits based on
salary, years of service, mortality and other participant-specific fac-
tors. The second method is a cash balance formula that calculates
benefits using a percentage of employees’ annual salary, as well as an
interest crediting rate.
In December 2005, the company approved an amendment to the
PPP, which provides that no further benefits under the PPP will
accrue for active participants after December 31, 2007.
U.S. Supplemental Retention Plan
The company also sponsors a non-qualified U.S. Supplemental Reten-
tion Plan (SRP). The SRP, which is unfunded, provides benefits to
eligible U.S. executives based on average earnings, years of service and
age at termination of employment. Effective July 1, 1999, the company
replaced the then-effective SRP with the current SRP. Some partici-
pants in the previous SRP will still be eligible for benefits under that
prior plan if those benefits are greater than the benefits provided
under the current plan.
In December 2005, the company approved an amendment to the
SRP, which provides that no further benefits will accrue for active
participants after December 31, 2007.
DEFINED CONTRIBUTION PLANS
IBM Savings Plan
U.S. regular, full-time and part-time employees are eligible to par-
ticipate in the IBM Savings Plan, which is a qualified defined contribu-
tion plan under section 401(k) of the Internal Revenue Code. For
participants hired prior to January 1, 2005, the company matches 50
percent of their contributions up to the first 6 percent of eligible com-
pensation. For participants hired or rehired on or after January 1,
2005, who have completed one year of service, the company matches
100 percent of their contributions up to the first 6 percent of eligible
compensation. These participants participate in the 401(k) Pension
Plan offered through the IBM Savings Plan. The company’s matching
contributions vest immediately, and participants are always fully vested
in their own contributions. All contributions, including the company
match, are made in cash in accordance with the participants’ invest-
ment elections. There are no minimum amounts that must be invested
in company stock, and there are no restrictions on transferring
amounts out of the company stock to another investment choice.
In January 2006, the company announced its intention to amend
the plan effective January 1, 2008. The announced change will con-
sist of two components: an automatic contribution for all eligible
U.S. employees and an increase in the amount of company matching
contribution for all eligible U.S. employees hired on or before
December 31, 2004.
Consolidated Statements ......................................................... 
Notes .....................................................................................
A-G ......................................................................................... 
H-M ......................................................................................... 
N-S .......................................................................................... 
T-X .......................................................................................... 
T. Rental Expense and Lease Commitments ....................... 
U. Stock-Based Compensation ............................................ 
V. Retirement-Related Benefits ......................................... 
W. Segment Information.................................................... 
X. Subsequent Events ........................................................ 
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