IBM 2011 Annual Report Download - page 123

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies 121
In connection with vesting and release of RSUs and PSUs,
the tax benefits realized by the company for the years ended
December 31, 2011, 2010 and 2009 were $283 million, $293 million
and $156 million, respectively.
IBM Employees Stock Purchase Plan
The company maintains a non-compensatory Employees Stock
Pur chase Plan (ESPP). The ESPP enables eligible participants to
purchase full or fractional shares of IBM common stock at a 5 percent
discount off the average market price on the day of purchase through
payroll deductions of up to 10 percent of eligible compensation. Eligible
compensation includes any compensation received by the employee
during the year. The ESPP provides for offering periods during which
shares may be purchased and continues as long as shares remain
available under the ESPP, unless terminated earlier at the discretion
of the Board of Directors. Individual ESPP participants are restricted
from purchasing more than $25,000 of common stock in one
calendar year or 1,000 shares in an offering period.
Employees purchased 1.9 million, 2.4 million and 3.2 million shares
under the ESPP during the years ended December 31, 2011, 2010
and 2009, 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 outstanding
and is included in the weighted-average outstanding shares for
purposes of computing basic and diluted earnings per share.
Approximately 5.4 million, 7.2 million and 9.6 million shares were
available for purchase under the ESPP at December 31, 2011, 2010
and 2009, respectively.
Note S.
Retirement-Related Benefits
Description of Plans
IBM sponsors defined benefit pension plans and defined contribution
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 dependents.
U.S. Plans
Defined Benefit Pension Plans
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. Prior to 2008, the IBM
Personal Pension Plan consisted of a tax qualified (qualified) plan
and a non-tax qualified (nonqualified) plan. Effective January 1, 2008,
the nonqualified plan was renamed the Excess Personal Pension
Plan (Excess PPP) and the qualified plan is now referred to as the
Qualified PPP. The combined plan is now referred to as the PPP.
The Qualified PPP is funded by company contributions to an
irrevocable trust fund, which is held for the sole benefit of participants
and beneficiaries. The Excess PPP, which is unfunded, provides
benefits in excess of IRS limitations for qualified plans.
Benefits provided to the PPP participants are calculated using
benefit formulas that vary based on the participant. The first method
uses a five-year, final pay formula that determines benefits based
on salary, years of service, mortality and other participant-specific
factors. 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.
Benefit accruals under the IBM Personal Pension Plan ceased
December 31, 2007 for all participants.
U.S. Supplemental Executive Retention Plan
The company also sponsors a nonqualified U.S. Supplemental
Executive Reten tion Plan (Retention Plan). The Retention Plan, which
is unfunded, provides benefits to eligible U.S. executives based on
average earnings, years of service and age at termination of employment.
Benefit accruals under the Retention Plan ceased December 31,
2007 for all participants.
Defined Contribution Plans
IBM 401(k) Plus Plan
U.S. regular, full-time and part-time employees are eligible to
participate in the IBM 401(k) Plus Plan, which is a qualified defined
contribution plan under section 401(k) of the Internal Revenue Code.
Effective January 1, 2008, under the IBM 401(k) Plus Plan, eligible
employees receive a dollar-for-dollar match of their contributions
up to 6 percent of eligible compensation for those hired prior to
January 1, 2005, and up to 5 percent of eligible compensation for
those hired on or after January 1, 2005. In addition, eligible employees
receive automatic contributions from the company equal to 1, 2 or
4 percent of eligible compensation based on their eligibility to
participate in the PPP as of December 31, 2007. Employees receive
automatic contributions and matching contributions after the
completion of one year of service. Further, through June 30, 2009,
IBM contributed transition credits to eligible participants’ 401(k) Plus
Plan accounts. The amount of the transition credits was based on a
participant’s age and service as of June 30, 1999.
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 and
invested in accordance with participants’ investment elections. There
are no minimum amounts that must be invested in company stock,
and there are no restrictions on transferring amounts out of company
stock to another investment choice, other than excessive trading
rules applicable to such investments.