Lenovo 2013 Annual Report Download - page 107

2012/13 Annual Report Lenovo Group Limited 105
Retirement Scheme Arrangements (continued)
Defined Benefit Pensions Plans (continued)
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, 2013, an amount of EUROS 1,316,531 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, 2013 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: 2.75%
– Future salary increases: Age-group based
– Future pension increases: 1.75%
• The plan was 64% funded at the actuarial valuation date.
• There was a net liability of EUROS 12,159,631 under this plan at the actuarial valuation date.
Defined Contribution Plans
United States of America (“US”) – Lenovo Savings Plan
US 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% of the employee’s contribution
up to the first 6% 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% 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 three-year vesting.
Forfeitures of Company contributions arising from employees who leave before they are fully vested are used to reduce future
Lenovo contributions. For the period April 1, 2012 to March 31, 2013, the amount of forfeitures accumulated was US$266,500
while an amount of US$327,932 had been used to reduce Company contributions, leaving US$23,555 at March 31, 2013 to be
used to reduce Company 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, 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.