Lenovo 2015 Annual Report Download - page 135

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2014/15 Annual Report Lenovo Group Limited
DIRECTORS’ REPORT
RETIREMENT SCHEME ARRANGEMENTS (continued)
Defined Benefit Pensions Plans (continued)
United States of America (“US”) – Lenovo Pension Plan (continued)
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, 2015, an amount of US$6,729,364 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, 2015 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: 2.75%
– Expected return on plan assets: 2.75%
– Future salary increases: 3.00%
• The qualified plan was 56% funded at the actuarial valuation date.
• There was a net liability of US$49,852,072 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, 2015, an amount of Yen 1,046,238,599 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, 2015 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: 1.00%
– Expected return on plan assets: 1.00%
– Future salary increases: Age-group based
• The plan was 64% funded at the actuarial valuation date.
• There was a net liability of Yen 8,779,310,134 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).