Lenovo 2011 Annual Report Download - page 66

2010/11 Annual Report Lenovo Group Limited 69
Defined Benefit Pensions Plans (continued)
Japan – Pension Plan (continued)
• TheactuarialmethodusedwastheProjectedUnitCreditCostmethodandtheprincipalactuarialassumptionswere:
– Discount rate: 2.25%
– Expected return on plan assets: 3.25%
– Future salary increases: Age-group
based
• Theplanwas81%fundedattheactuarialvaluationdate.
• TherewasadeficitofYen1,692,057,993underthisplanattheactuarialvaluationdate.
Germany – Pension Plan
The Company operates a hybrid plan that provides a defined contribution for some participants and a final pay defined benefit for
other participants, depending on which former IBM plan they were in.
Employees hired by IBM before January 1, 1992 have a defined benefit based on a final pay formula. Employees hired from 1992
to 1999 have a combination of a defined benefit based on a final pay formula and a defined contribution plan with employee
required contributions of 7% of pay above the social security ceiling and a 100% company match. Employees hired in or after 2000
have a combination of a cash balance plan with an employer contribution of 2.95% of pay below the social security ceiling, and a
voluntary defined contribution plan where employees can contribute specific amounts through salary sacrifice.
The plan is partially funded by company and employee contributions to an insured support fund with DBV-Winterthur up to the
maximum tax-deductible limits. In line with standard practice in Germany, the remainder is unfunded (book reserve).
For the year ended March 31, 2011, an amount of EUROS 1,456,927 was charged to the income statement with respect to this
plan.
The principal results of the most actuarial valuation of the plan at March 31, 2011 were the following:
• TheactuarialvaluationwaspreparedbyKern,Mauch&Kollegen.TheactuariesinvolvedarefullyqualifiedunderGermanlaw.
• TheactuarialmethodusedwastheProjectedUnitCreditCostmethodandtheprincipalactuarialassumptionswere:
– Discount rate: 4.25%
– Future salary increases: Age-group based
– Future pension increases: 1.75%
• Theplanwas64%fundedattheactuarialvaluationdate.
• TherewasadeficitofEUROS8,309,780underthisplanattheactuarialvaluationdate.
Defined Contribution Plans
United States of America (“US”) – Lenovo Savings Plan
U.S. regular, full-time and part-time employees are eligible to participate in the Lenovo Savings Plan, which is a tax-qualified
defined contribution plan under section 401(k) of the Internal Revenue Code. The Company matches 50 percent of the employee’s
contribution up to the first 6 percent of the employee’s eligible compensation. In addition, for employees who have also completed
one year of service and who do not participate in the Lenovo Pension Plan, the Company provides a profit sharing contribution of 5
percent of eligible compensation. Employee contributions are voluntary. All contributions, including the Company match, are made
in cash, in accordance with the participants’ investment elections.
The Company match is immediately vested. However the 5% Company profit sharing contribution is subject to 3 years vesting.
Forfeitures of Company contributions arising from employees who leave before they are fully vested in Company contributions
are used to reduce future Lenovo contributions. For the period April 1, 2010 to March 31, 2011, the amount of forfeitures was
US$413,943, US$161,629 of which had been used to reduce Lenovo contributions, leaving US$705,655 at March 31, 2011 to be
used to reduce Lenovo contributions in the future.
US Lenovo Executive Deferred Compensation Plan
The Company also maintains an unfunded, non-qualified, defined contribution plan, the Lenovo Executive Deferred Compensation
Plan (“EDCP”), which allows eligible executives to defer compensation, and to receive Company matching contributions, with
respect to amounts in excess of Internal Revenue Service limits for tax-qualified plans. Compensation deferred under the plan, as
well as Company matching contributions are recorded as liabilities.
Deferred compensation amounts may be directed by participants into an account that replicates the return that would be received
had the amounts been invested in similar Lenovo Savings Plan investment options. Company matching contributions, are directed
to participant accounts and fluctuate based on changes in the stock prices of the underlying investment portfolio.