Lenovo 2012 Annual Report Download - page 98

2011/12 Annual Report Lenovo Group Limited
96
DIRECTORS’ REPORT
Defined Benefit Pensions Plans (continued)
United States of America (“US”) – Lenovo Pension Plan
The Company provides U.S. regular, full-time and part-time employees who were employed by IBM prior to being hired by the
CompanyandwhoweremembersoftheIBMPersonalPensionPlan(“PPP”)withnon-contributorydefinedbenefitpensionbenefits
via the Lenovo Pension Plan. The plan is frozen to new entrants.
The Lenovo Pension Plan consists of a tax-qualified plan and a non-tax-qualified (non-qualified) plan. The qualified plan is funded
by company contributions to an irrevocable trust fund, which is held for the sole benefit of participants and beneficiaries. The non-
qualified plan, which provides benefits in excess of US Internal Revenue Service limitations for tax-qualified plans, is unfunded.
Pension benefits are calculated using a five year average final pay formula that determines benefits based on a participant’s salary
and years of service, including prior service with IBM. The benefit is reduced by the amount of the IBM PPP benefit accrued to
May 1, 2005, which will be paid by IBM’s trust.
For the year ended March 31, 2012, an amount of US$2,244,366 was charged to the income statement with respect to the
qualified and non-qualified plans.
The principal results of the most recent actuarial valuation of the plan at March 31, 2012 were the following:
• TheactuarialvaluationwaspreparedbyFidelity.TheactuariesinvolvedarefullyqualifiedundertherequirementsofUSlaw.
• TheactuarialmethodusedwastheProjectedUnitCreditCostmethodandtheprincipalactuarialassumptionswere:
– Discount rate: 3.75%
– Expected return on plan assets: 3.75%
– Future salary increases: 3.00%
• Thequalifiedplanwas62%fundedattheactuarialvaluationdate.
• TherewasadeficitofUS$28,565,358underthequalifiedplanforthisreasonattheactuarialvaluationdate.
Japan – Pension Plan
The Company operates a hybrid plan that consists of a defined contribution up to the annual tax-deductible limit plus a cash
balance plan with contributions of 7% of pay. The plan is funded by company contributions to a qualified pension fund, which is
held for the sole benefit of participants and beneficiaries.
For the year ended March 31, 2012, an amount of Yen 351,157,911 was charged to the income statement with respect to this
plan.
The principal results of the most recent actuarial valuation of the plan at March 31, 2012 were the following:
• TheactuarialvaluationwaspreparedbyJPActuaryConsultingCo.,Ltd.Theactuariesinvolvedarefullyqualifiedunderthe
requirements of Japanese law.
• TheactuarialmethodusedwastheProjectedUnitCreditCostmethodandtheprincipalactuarialassumptionswere:
– Discount rate: 2.00%
– Expected return on plan assets: 2.00%
– Future salary increases: Age-group based
• Theplanwas86%fundedattheactuarialvaluationdate.
• TherewasadeficitofYen1,335,219,551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.