IBM 2006 Annual Report Download - page 111

Black
MAC
390 CG10
Equity securities include IBM common stock in the amounts of
$159 million (0.3 percent of total PPP plan assets) at December 31,
2006 and $139 million (0.3 percent of total PPP plan assets) at
December 31, 2005.
Outside the U.S., the investment objectives are similar, subject to
local regulations. In some countries, a higher percentage allocation to
fixed income securities is required. In others, the responsibility for
managing the investments typically lies with a board that may include
up to 50 percent of members elected by employees and retirees. This
can result in slight differences compared with the strategies previously
described. Generally, these non-U.S. funds do not invest in illiquid
assets, such as private equities, and their use of derivatives is usually
limited to currency hedging, adjusting portfolio durations and reduc-
ing specific market risks. There was no significant change in the
investment strategies of these plans during either 2006 or 2005.
Expected Contributions
DEFINED BENEFIT PENSION PLANS
It is the company’s general practice to fund amounts for pensions suf-
ficient to meet the minimum requirements set forth in applicable
employee benefits laws and local tax laws. From time to time, the
company contributes additional amounts as it deems appropriate.
The company contributed approximately $1,769 million and $561
million in cash to the material non-U.S. plans during the years ended
December 31, 2006 and 2005, respectively. During the year ended
December 31, 2005, the company contributed approximately $1,715
million in cash to the qualified portion of the PPP.
In 2007, the company is not legally required to make any contribu-
tions to the PPP. However, depending on market conditions, or other
factors, the company may elect to make discretionary contributions to
the qualified portion of the PPP during the year.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
109
The Pension Protection Act of 2006 (the Act), enacted into law in
2006, is a comprehensive reform package that, among other provisions,
increases pension funding requirements for certain U.S. defined benefit
plans, provides guidelines for measuring pension plan assets and pension
obligations for funding purposes and raises tax deduction limits for con-
tributions to retirement-related benefit plans. The additional funding
requirements by the Act apply to plan years beginning after December
31, 2007. The adoption of the Act is not expected to have a material
effect on the company’s minimum mandatory contributions to its PPP.
In 2007, the company estimates contributions to its non-U.S.
plans to be approximately $560 million, which will be mainly contrib-
uted to defined benefit pension plans in Germany, the Netherlands,
Spain, Switzerland, Sweden and the United Kingdom. These 2007
contributions represent legally mandated minimum contributions to
the company’s non-U.S. plans. The company could elect to contribute
more than the legally mandated amount based on market conditions
or other factors.
NONPENSION POSTRETIREMENT BENEFIT PLANS
The U.S. nonpension postretirement benefit plan is reviewed in
order to determine the amount of company contributions, if any. In
2007, the company expects its contributions to the U.S. nonpension
postretirement benefit plan will approximate the total expected ben-
efit payments.
Expected Benefit Payments
DEFINED BENEFIT PENSION PLAN EXPECTED PAYMENTS
The following table presents the total expected benefit payments to
defined benefit pension plan participants. These payments have been
estimated based on the same assumptions used to measure the plans’
PBO at December 31, 2006 and include benefits attributable to esti-
mated future compensation increases.
(Dollars in millions)
TOTAL
QUALIFIED NON-QUALIFIED QUALIFIED NON-QUALIFIED EXPECTED
U.S. PLAN U.S. PLAN NON-U.S. PLANS NON-U.S. PLANS BENEFIT
PAYMENTS PAYMENTS PAYMENTS PAYMENTS PAYMENTS
2007 $ ,* $  $, $  $ ,
2008 ,  ,  ,
2009 ,  ,  ,
2010 ,  ,  ,
2011 ,  ,  ,
2012-2016 ,  , , ,
* The 2007 total expected benefit payments to defined benefit pension plan participants of the qualified portion of the PPP include approximately $160 million of the $320 million related
to the PPP lawsuit settlement; the remaining settlement amount will be spread over a 10-year period starting in 2007. See note O, “Contingencies and Commitments,” on page 89 for
further information.
The 2007 expected benefit payments to defined benefit pension plan participants not covered by the respective plan assets represent a component
of Compensation and benefits, within Current liabilities, in the Consolidated Statement of Financial Position.