IBM 2014 Annual Report Download - page 133

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
132
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 com-
pany 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 con-
tributions 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 Excess 401(k) Plus Plan
Effective January 1, 2008, the company replaced the IBM Execu-
tive Deferred Compensation Plan, an unfunded, nonqualified,
defined contribution plan, with the IBM Excess 401(k) Plus Plan
(Excess 401(k)), an unfunded, nonqualified defined contribution
plan. Employees whose eligible compensation is expected to
exceed the IRS compensation limit for qualified plans are eligible
to participate in the Excess 401(k). The purpose of the Excess
401(k) is to provide benefits that would be provided under the quali-
fied IBM 401(k) Plus Plan if the compensation limits did not apply.
Amounts deferred into the Excess 401(k) are record-keeping
(notional) accounts and are not held in trust for the participants.
Participants in the Excess 401(k) may invest their notional accounts
in investments which mirror the primary investment options avail-
able under the 401(k) Plus Plan. Participants in the Excess 401(k)
are also eligible to receive company match and automatic contribu-
tions on eligible compensation deferred into the Excess 401(k) and
on compensation earned in excess of the Internal Revenue Code
pay limit once they have completed one year of service. Through
June 30, 2009, eligible participants also received transition cred-
its. Amounts deferred into the Excess 401(k), including company
contributions are recorded as liabilities in the Consolidated State-
ment of Financial Position. Effective January 1, 2013, matching and
automatic contributions are recorded once annually at the end of
the year. In order to receive such contributions each year, a partici-
pant 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.
Nonpension Postretirement Benefit Plan
U.S. Nonpension Postretirement Plan
The company sponsors a defined benefit nonpension postretire-
ment benefit plan that provides medical and dental benefits to
eligible U.S. retirees and eligible dependents, as well as life insur-
ance for eligible U.S. retirees. Effective July 1, 1999, the company
established a Future Health Account (FHA) for employees who
were more than five years from retirement eligibility. Employees
who were within five years of retirement eligibility are covered
under the company’s prior retiree health benefits arrangements.
Under either the FHA or the prior retiree health benefit arrange-
ments, there is a maximum cost to the company for retiree health
benefits. Effective January 1, 2014, the company amended the plan
to establish a Health Reimbursement Arrangement (HRA) for each
Medicare-eligible plan retiree, surviving spouse and long-term
disability plan participant who is eligible for company-subsidized
coverage and who enrolls in an individual plan under the Medi-
care Exchange. The company also amended its life insurance plan.
Employees retiring on or after January 1, 2015 are not eligible for
life insurance.
Since January 1, 2004, new hires, as of that date or later, are
not eligible for company-subsidized nonpension postretirement
benefits.
Non-U.S. Plans
Certain subsidiaries and branches outside the United States spon-
sor defined benefit and/or defined contribution plans that cover
substantially all regular employees. The company deposits funds
under various fiduciary-type arrangements, purchases annui-
ties under group contracts or provides reserves for these plans.
Benefits under the defined benefit plans are typically based either
on years of service and the employee’s compensation (generally
during a fixed number of years immediately before retirement) or
on annual credits. The range of assumptions that are used for
the non-U.S. defined benefit plans reflect the different economic
environments within the various countries.
In addition, certain of the company’s non-U.S. subsidiaries
sponsor nonpension postretirement benefit plans that provide
medical and dental benefits to eligible non-U.S. retirees and eligible
dependents, as well as life insurance for certain eligible non-U.S.
retirees. However, most non-U.S. retirees are covered by local
government-sponsored and -administered programs.