IBM 2012 Annual Report Download - page 121

120 Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
120
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 calcu-
lates 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. Effective January 1,
2013, matching and automatic contributions are made once annually
at the end of the year. In order to receive such contributions each year,
a participant must be employed on December 15 of the plan year.
However, if a participant separates from service prior to December
15, and has completed certain service and/or age requirements,
then the participant will be eligible to receive such matching and
automatic contributions following separation from service.
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 per-
cent discount off the average market price on the day of purchase
through payroll deductions of up to 10 percent of eligible compensa-
tion. Eligible compensation includes any compensation received by
the employee during the year. The ESPP provides for offering peri-
ods 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 partici-
pants 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 1.6 million, 1.9 million and 2.4 million
shares under the ESPP during the years ended December 31, 2012,
2011 and 2010, 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 out-
standing and is included in the weighted-average outstanding shares
for purposes of computing basic and diluted earnings per share.
Approximately 3.8 million, 5.4 million and 7.2 million shares were
available for purchase under the ESPP at December 31, 2012, 2011
and 2010, 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 pen-
sion 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.