Retirement-Related Benefits

6 Months Ended

Jun. 30, 2015

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 tables provide the pre-tax cost for all retirement-related plans

						Yr. to Yr.
(Dollars in millions)						Percent
For the three months ended June 30:		2015		2014		Change
Retirement-related plans – cost
	Defined benefit and contribution pension plans – cost	$	493	$	398		23.8	%
	Nonpension postretirement plans – cost		67		70		(3.5)
	Total	$	560	$	468		19.7	%


						Yr. to Yr.
(Dollars in millions)						Percent
For the six months ended June 30:		2015		2014		Change
Retirement-related plans – cost
	Defined benefit and contribution pension plans – cost	$	1,242	$	872		42.4	%
	Nonpension postretirement plans – cost		139		137		1.3
	Total	$	1,380	$	1,009		36.8	%

The following tables provide 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 June 30:		2015		2014		2015		2014
Service cost		$	—	$	—	$	116	$	118
Interest cost			507		551		270		394
Expected return on plan assets			(988)		(1,024)		(482)		(578)
Amortization of prior service costs/(credits)			2		2		(24)		(28)
Recognized actuarial losses			412		259		393		361
Curtailments and settlements			—		—		3		8
Multi-employer plans/other costs			—		—		8		16
Total net periodic pension (income)/cost of defined
	benefit plans		(67)		(211)		283		290
Cost of defined contribution plans			166		183		111		136
Total defined benefit and contribution plans cost recognized
	in the Consolidated Statement of Earnings	$	99	$	(28)	$	394	$	426

(Dollars in millions)		U.S. Plans				Non-U.S. Plans
For the six months ended June 30:		2015		2014		2015		2014
Service cost		$	—	$	—	$	224	$	233
Interest cost			1,014		1,106		541		785
Expected return on plan assets			(1,977)		(2,048)		(965)		(1,150)
Amortization of prior service costs/(credits)			5		5		(49)		(57)
Recognized actuarial losses			827		528		794		721
Curtailments and settlements			—		—		7		13
Multi-employer plan/other costs			—		—		256		95
Total net periodic pension (income)/cost of defined
	benefit plans		(131)		(409)		808		638
Cost of defined contribution plans			339		375		226		269
Total defined benefit and contribution plans cost recognized
	in the Consolidated Statement of Earnings	$	208	$	(35)	$	1,034	$	907

In March 2014, the Supreme Court of Spain issued a ruling in litigation involving IBM Spain’s defined benefit (DB) and defined contribution (DC) plans. As a result of this ruling, the company recorded a pre-tax retirement-related obligation of $148 million in 2014 ($55 million in the first quarter and $93 million in the second half) in selling, general and administrative (SG&A) expense in the Consolidated Statement of Earnings. The Constitutional Court denied IBM Spain’s requested leave to appeal the decision. In March 2015, the National Audience Court issued a ruling that, in part, required IBM to stop making DC contributions and also ruled that the company should promptly reinstate the DB plan. As a result of this ruling, in the first quarter of 2015, the company recorded an additional pre-tax retirement-related obligation of $230 million in SG&A in the Consolidated Statement of Earnings. This obligation is reflected in "Non-U.S. Plans - Multi-employer plans/other costs" in the six months ended June 30, 2015 table above. IBM Spain appealed that ruling and in May 2015, the National Audience Court dismissed the appeal. See note 12, "Contingencies" for additional information.

In 2015, the company expects to contribute to its non-U.S. defined benefit and multi-employer plans approximately $600 million, which will be mainly contributed to the defined benefit pension plans in the UK, Japan, the Netherlands and Spain. This amount represents the legally mandated minimum contribution. Total net contributions to the non-U.S. plans in the first six months of 2015 were $186 million.

The following tables provide the components of the cost/(income) 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 June 30:		2015		2014		2015		2014
Service cost		$	6	$	6	$	2	$	2
Interest cost			40		48		13		16
Expected return on plan assets			0		0		(2)		(2)
Amortization of prior service costs/(credits)			(2)		(2)		(1)		(1)
Recognized actuarial losses			9		0		2		3
Curtailments and settlements			0		0		0		0
Total nonpension postretirement plan cost recognized in
	Consolidated Statement of Earnings	$	53	$	53	$	14	$	17


(Dollars in millions)		U.S. Plan				Non-U.S. Plans
For the six months ended June 30:		2015		2014		2015		2014
Service cost		$	12	$	13	$	4	$	4
Interest cost			82		94		27		32
Expected return on plan assets			0		0		(4)		(5)
Amortization of prior service costs/(credits)			(4)		(4)		(3)		(3)
Recognized actuarial losses			20		0		5		5
Curtailments and settlements			0		0		0		0
Total nonpension postretirement plan cost recognized in
	Consolidated Statement of Earnings	$	109	$	103	$	29	$	34