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DIRECTORS’ REPORT
Lenovo Group Limited 2012/13 Annual Report
104
Retirement Scheme Arrangements (continued)
Defined Benefit Pensions Plans (continued)
United States of America (“US”) – Lenovo Pension Plan
The Company provides US 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, 2013, an amount of US$2,701,893 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, 2013 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: 3.50%
– Expected return on plan assets: 3.50%
– Future salary increases: 3.00%
• The qualified plan was 59% funded at the actuarial valuation date.
• There was a net liability of US$33,403,842 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, 2013, an amount of Yen 442,705,658 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, 2013 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: 1.75%
– Expected return on plan assets: 1.75%
– Future salary increases: Age-group based
• The plan was 88% funded at the actuarial valuation date.
• There was a net liability of Yen 1,283,259,931 under this plan at the actuarial valuation date.