IBM 2007 Annual Report Download - page 116

114
Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
Management Discussion ..................................14
Consolidated Statements ..................................14
Notes ........................................................... 64
A-F ...................................................................64
G-M ..................................................................84
N-S ...................................................................94
T-W ........................................................... 102
T. Stock-Based Compensation ......................102
U. Retirement-Related Benefits .............. 105
V. Segment Information ................................116
W. Subsequent Events ....................................119
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 and their use of derivatives is usually limited to currency hedg-
ing, adjusting portfolio durations and reducing specific market risks.
There was no significant change in the investment strategies of these
plans during either 2007 or 2006.
EXPECTED CONTRIBUTIONS
Defined Benefit Pension Plans
It is the company’s general practice to fund amounts for pensions
sufficient 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 $447 million and
$1,769 million in cash to the material non-U.S. plans during the
years ended December 31, 2007 and 2006, respectively.
In 2008, 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.
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 ben-
efit plans, provides guidelines for measuring pension plan assets and
pension obligations for funding purposes and raises tax deduction limits
for contributions 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. No mandatory contribution is required for the PPP in 2008.
In 2008, the company estimates contributions to its non-U.S.
plans to be approximately $613 million, which will be mainly con-
tributed to defined benefit pension plans in Japan, the Netherlands,
Spain, Switzerland, Sweden and the United Kingdom. These 2008
contributions represent the legally mandated minimum contribu-
tions. The company could elect to contribute more than the legally
mandated amount based on market conditions or other factors.
Nonpension Postretirement Benefit Plan
The company made a $500 million voluntary cash contribution to
the U.S. nonpension postretirement benefit plan during the year
ended December 31, 2007. This advanced funding was made in addi-
tion to ongoing contributions of $347 million for the year ended
December 31, 2007, which were utilized to pay current year benefits.
The $500 million contribution will be used to fund benefit payments
in future periods.
EXPECTED BENEFIT PAYMENTS
Defined Benefit Pension Plan Expected Payments
The following table presents the total expected benefit payments to
defined benefit pension plan participants. These payments have been
estimated based on the same assumptions used to measure the plans’
PBO at December 31, 2007 and include benefits attributable to esti-
mated future compensation increases.
($ in millions)
QUALIFIED NON-QUALIFIED QUALIFIED NON-QUALIFIED TOTAL EXPECTED
U.S. PLAN U.S. PLAN NON-U.S. PLANS NON-U.S. PLANS BENEFIT
PAYMENTS PAYMENTS PAYMENTS PAYMENTS PAYMENTS
2008 $ 3,138 $ 81 $ 1,765 $ 359 $ 5,343
2009 3,188 83 1,815 354 5,440
2010 3,237 86 1,834 356 5,513
2011 3,273 90 1,882 357 5,602
2012 3,314 93 1,922 359 5,688
2013 – 2017 17,108 500 10,260 1,881 29,749
The 2008 expected benefit payments to defined benefit pension plan participants not covered by the respective plan assets (underfunded plans)
represent a component of Compensation and benefits, within Current liabilities, in the Consolidated Statement of Financial Position.