Retirement-Related Benefits

9 Months Ended

Sep. 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 September 30:		2015		2014		Change
Retirement-related plans – cost
	Defined benefit and contribution pension plans – cost	$	505	$	408		23.9	%
	Nonpension postretirement plans – cost		68		67		0.3
	Total	$	573	$	475		20.6	%


						Yr. to Yr.
(Dollars in millions)						Percent
For the nine months ended September 30:		2015		2014		Change
Retirement-related plans – cost
	Defined benefit and contribution pension plans – cost	$	1,747	$	1,280		36.5	%
	Nonpension postretirement plans – cost		206		204		0.9
	Total	$	1,953	$	1,484		31.6	%

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 September 30:		2015		2014		2015		2014
Service cost		$	—	$	—	$	116	$	113
Interest cost			507		553		270		385
Expected return on plan assets			(988)		(1,024)		(481)		(565)
Amortization of prior service costs/(credits)			2		2		(24)		(28)
Recognized actuarial losses			414		264		392		351
Curtailments and settlements			—		—		11		7
Multi-employer plans/other costs			—		—		16		36
Total net periodic pension (income)/cost of defined
	benefit plans		(65)		(205)		300		300
Cost of defined contribution plans			162		179		109		133
Total defined benefit and contribution plans cost recognized
	in the Consolidated Statement of Earnings	$	96	$	(25)	$	409	$	433

(Dollars in millions)		U.S. Plans				Non-U.S. Plans
For the nine months ended September 30:		2015		2014		2015		2014
Service cost		$	—	$	—	$	339	$	346
Interest cost			1,521		1,659		810		1,170
Expected return on plan assets			(2,965)		(3,072)		(1,446)		(1,715)
Amortization of prior service costs/(credits)			7		7		(74)		(85)
Recognized actuarial losses			1,241		792		1,186		1,072
Curtailments and settlements			—		—		19		20
Multi-employer plan/other costs			—		—		272		131
Total net periodic pension (income)/cost of defined
	benefit plans		(196)		(614)		1,107		938
Cost of defined contribution plans			500		554		335		402
Total defined benefit and contribution plans cost recognized
	in the Consolidated Statement of Earnings	$	304	$	(60)	$	1,443	$	1,340

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; $20 million in the third quarter; and $73 million in the fourth quarter) 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. These obligations are reflected in "Non-U.S. Plans - Multi-employer plans/other costs" in the tables 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 nine months of 2015 were $271 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 September 30:		2015		2014		2015		2014
Service cost		$	6	$	7	$	2	$	1
Interest cost			41		47		12		16
Expected return on plan assets			—		—		(2)		(2)
Amortization of prior service costs/(credits)			(2)		(2)		(1)		(1)
Recognized actuarial losses			10		0		2		3
Curtailments and settlements			—		—		0		0
Total nonpension postretirement plan cost recognized in
	Consolidated Statement of Earnings	$	55	$	51	$	13	$	16


(Dollars in millions)		U.S. Plan				Non-U.S. Plans
For the nine months ended September 30:		2015		2014		2015		2014
Service cost		$	18	$	20	$	5	$	5
Interest cost			122		140		39		48
Expected return on plan assets			—		—		(5)		(7)
Amortization of prior service costs/(credits)			(6)		(6)		(4)		(4)
Recognized actuarial losses			29		0		7		8
Curtailments and settlements			—		—		0		0
Total nonpension postretirement plan cost recognized in
	Consolidated Statement of Earnings	$	164	$	154	$	42	$	50