Lenovo 2014 Annual Report Download - page 117
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115
2013/14 Annual Report Lenovo Group Limited
RETIREMENT SCHEME ARRANGEMENTS (continued)
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, 2014, an amount of US$5,851,046 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, 2014 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 67% funded at the actuarial valuation date.
• There was a net liability of US$28,179,186 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, 2014, an amount of Yen 494,440,913 was charged to the income statement with
respect to this plan.