|
8. Retirement-Related Benefits: The company offers defined benefit pension plans, defined contribution pension plans, as well as nonpension postretirement plans primarily consisting of retiree medical benefits. The following table provides the total retirement-related benefit plans’ impact on income before taxes:
|
|
|
|
|
|
|
Yr. to Yr. |
|
|
(Dollars in millions) |
|
|
|
|
|
Percent |
|
|
For the three months ended September 30: |
|
2012 |
|
2011 |
|
Change |
|
|
Retirement-related plans — cost |
|
|
|
|
|
|
|
|
Defined benefit and contribution pension plans — cost |
|
$ |
612 |
|
$ |
357 |
|
71.3 |
% |
|
Nonpension postretirement plans — cost |
|
86 |
|
87 |
|
(1.6 |
) |
|
Total |
|
$ |
698 |
|
$ |
444 |
|
57.0 |
% |
|
|
|
|
|
|
|
Yr. to Yr. |
|
|
(Dollars in millions) |
|
|
|
|
|
Percent |
|
|
For the nine months ended September 30: |
|
2012 |
|
2011 |
|
Change |
|
|
Retirement-related plans — cost |
|
|
|
|
|
|
|
|
Defined benefit and contribution pension plans — cost |
|
$ |
1,602 |
|
$ |
1,159 |
|
38.3 |
% |
|
Nonpension postretirement plans — cost |
|
260 |
|
261 |
|
(0.4 |
) |
|
Total |
|
$ |
1,862 |
|
$ |
1,419 |
|
31.2 |
% |
The following table provides the components of the cost/(income) for the company’s pension plans:
Cost/(Income) of Pension Plans
|
(Dollars in millions) |
|
U.S. Plans |
|
Non-U.S. Plans |
|
|
For the three months ended September 30: |
|
2012 |
|
2011 |
|
2012 |
|
2011 |
|
|
Service cost |
|
$ |
— |
|
$ |
— |
|
$ |
109 |
|
$ |
128 |
|
|
Interest cost |
|
549 |
|
614 |
|
439 |
|
467 |
|
|
Expected return on plan assets |
|
(1,011 |
) |
(1,011 |
) |
(570 |
) |
(641 |
) |
|
Amortization of prior service costs/(credits) |
|
2 |
|
2 |
|
(39 |
) |
(41 |
) |
|
Recognized actuarial losses |
|
333 |
|
205 |
|
255 |
|
240 |
|
|
Curtailments and settlements |
|
— |
|
— |
|
0 |
|
0 |
|
|
Multi-employer plans/other costs |
|
— |
|
— |
|
188 |
* |
21 |
|
|
Total net periodic pension (income)/cost of defined benefit plans |
|
(127 |
) |
(190 |
) |
381 |
|
173 |
|
|
Cost of defined contribution plans |
|
209 |
|
218 |
|
148 |
|
156 |
|
|
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings |
|
$ |
82 |
|
$ |
28 |
|
$ |
530 |
|
$ |
329 |
|
* Includes a $162 million charge related to litigation involving one of IBM UK’s defined benefit plans. See Note 12, “Contingencies,” and Note 14, “Subsequent Events,” for additional information.
|
(Dollars in millions) |
|
U.S. Plans |
|
Non-U.S. Plans |
|
|
For the nine months ended September 30: |
|
2012 |
|
2011 |
|
2012 |
|
2011 |
|
|
Service cost |
|
$ |
— |
|
$ |
— |
|
$ |
332 |
|
$ |
384 |
|
|
Interest cost |
|
1,647 |
|
1,842 |
|
1,332 |
|
1,391 |
|
|
Expected return on plan assets |
|
(3,033 |
) |
(3,032 |
) |
(1,723 |
) |
(1,904 |
) |
|
Amortization of prior service costs/(credits) |
|
7 |
|
7 |
|
(116 |
) |
(121 |
) |
|
Recognized actuarial losses |
|
998 |
|
614 |
|
770 |
|
727 |
|
|
Curtailments and settlements |
|
— |
|
— |
|
1 |
|
1 |
|
|
Multi-employer plan/other costs |
|
— |
|
— |
|
234 |
* |
94 |
|
|
Total net periodic pension (income)/cost of defined benefit plans |
|
(381 |
) |
(569 |
) |
831 |
|
572 |
|
|
Cost of defined contribution plans |
|
686 |
|
698 |
|
467 |
|
458 |
|
|
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings |
|
$ |
305 |
|
$ |
129 |
|
$ |
1,297 |
|
$ |
1,030 |
|
* Includes a $162 million charge related to litigation involving one of IBM UK’s defined benefit plans. See Note 12, “Contingencies,” and Note 14, “Subsequent Events,” for additional information.
In 2012, the company expects to contribute to its non-U.S. defined benefit plans approximately $700 million, which is the legally mandated minimum contribution. Total net contributions to the non-U.S. plans in the first nine months of 2012 were $476 million.
The following table provides the components of the cost for the company’s nonpension postretirement plans:
Cost of Nonpension Postretirement Plans
|
(Dollars in millions) |
|
U.S. Plan |
|
Non-U.S. Plans |
|
|
For the three months ended September 30: |
|
2012 |
|
2011 |
|
2012 |
|
2011 |
|
|
Service cost |
|
$ |
9 |
|
$ |
9 |
|
$ |
2 |
|
$ |
3 |
|
|
Interest cost |
|
50 |
|
59 |
|
16 |
|
17 |
|
|
Expected return on plan assets |
|
— |
|
— |
|
(2 |
) |
(3 |
) |
|
Amortization of prior service costs/(credits) |
|
— |
|
— |
|
(1 |
) |
(1 |
) |
|
Recognized actuarial losses |
|
8 |
|
— |
|
4 |
|
4 |
|
|
Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings |
|
$ |
67 |
|
$ |
68 |
|
$ |
19 |
|
$ |
20 |
|
|
(Dollars in millions) |
|
U.S. Plan |
|
Non-U.S. Plans |
|
|
For the nine months ended September 30: |
|
2012 |
|
2011 |
|
2012 |
|
2011 |
|
|
Service cost |
|
$ |
28 |
|
$ |
25 |
|
$ |
7 |
|
$ |
8 |
|
|
Interest cost |
|
150 |
|
177 |
|
48 |
|
51 |
|
|
Expected return on plan assets |
|
— |
|
— |
|
(7 |
) |
(8 |
) |
|
Amortization of prior service credits |
|
— |
|
— |
|
(3 |
) |
(3 |
) |
|
Recognized actuarial losses |
|
24 |
|
— |
|
13 |
|
11 |
|
|
Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings |
|
$ |
201 |
|
$ |
202 |
|
$ |
58 |
|
$ |
59 |
|
The company received a $21.5 million subsidy in the third quarter of 2012 and a $42.4 million subsidy for the first nine months of 2012 in connection with the Medicare Prescription Drug Improvement and Modernization Act of 2003. A portion of this amount is used by the company to reduce its obligation and expense related to the plan, and the remainder is contributed to the plan to reduce contributions required by the participants. For further information related to the Medicare Prescription Drug Act, see page 134 in the company’s 2011 Annual Report.
In the second quarter, the U.S. Congress passed the Surface Transportation Extension Act, also referred to as the Moving Ahead for Progress in the 21st Century Act, which included pension funding stabilization provisions. The company has evaluated the provisions of the new law and expects no material impacts. |