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Retirement-Related Benefits (Tables)
 12 Months Ended
Dec. 31, 2014
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block  
Retirement-related benefits net periodic (income)/cost in the Consolidated Statement of Earnings
($ in millions)
U.S. PlansNon-U.S. PlansTotal
For the year ended December 31:201420132012201420132012201420132012
Defined benefit pension plans$(833)$(223)$(526)$1,267$1,396$1,040$434$1,173$515
Retention Plan152118———152118
Total defined benefit pension plans
(income)/cost$(818)$(202)$(507)$1,267$1,396$1,040$449$1,195$533
IBM 401(k) Plus Plan and
non-U.S. plans$713$785$857$526$575$621$1,239$1,361$1,478
Excess 401(k)142429———142429
Total defined contribution plans cost$727$809$885$526$575$621$1,253$1,384$1,506
Nonpension postretirement benefit
plans cost$206$218$268$66$79$82$272$298$350
Total retirement-related benefits
net periodic cost$115$826$646$1,859$2,051$1,743$1,974$2,876$2,389
Summary of the total projected benefit obligation (PBO) for defined benefit plans, accumulated postretirement benefit obligation (APBO) for nonpension postretirement benefit plans (benefit obligations), fair value of plan assets and the associated funded status
($ in millions)
Benefit ObligationsFair Value of Plan AssetsFunded Status*
At December 31:201420132014201320142013
U.S. Plans
Overfunded plans
Qualified PPP$54,708$49,315$55,772$53,954$1,065$4,639
Underfunded plans
Excess PPP$1,602$1,425$—$—$(1,602)$(1,425)
Retention Plan334294——(334)(294)
Nonpension postretirement benefit plan5,0534,63316177(5,037)(4,456)
Total underfunded U.S. plans$6,989$6,352$16$177$(6,973)$(6,175)
Non-U.S. Plans
Overfunded plans
Qualified defined benefit pension plans$16,794$9,336$17,888$10,240$1,094$904
Nonpension postretirement benefit plans1110111101
Total overfunded non-U.S. plans$16,804$9,346$17,898$10,251$1,094$905
Underfunded plans
Qualified defined benefit pension plans$26,278$32,697$21,655$29,223$(4,623)$(3,474)
Nonqualified defined benefit pension plans6,7626,587——(6,762)(6,587)
Nonpension postretirement benefit plans8068227381(733)(741)
Total underfunded non-U.S. plans$33,846$40,106$21,729$29,304$(12,118)$(10,802)
Total overfunded plans$71,512$58,661$73,671$64,205$2,159$5,544
Total underfunded plans$40,836$46,458$21,745$29,481$(19,091)$(16,977)

* Funded status is recognized in the Consolidated Statement of Financial Position as follows: Asset amounts as prepaid pension assets; (Liability) amounts as compensation and benefits (current liability) and retirement and nonpension postretirement benefit obligations (noncurrent liability).
Changes in benefit obligations and plan assets
($ in millions)
Defined Benefit Pension PlansNonpension Postretirement Benefit Plans
U.S. PlansNon-U.S. PlansU.S. PlanNon-U.S. Plans
20142013201420132014201320142013
Change in benefit obligation
Benefit obligation at January 1$51,034$56,810$48,620$49,319$4,633$5,282$832$1,019
Service cost——4495012635710
Interest cost2,2111,9801,5331,5241871646360
Plan participants’ contributions——374261191——
Acquisitions/divestitures, net——(90)890(2)00
Actuarial losses/(gains)6,968(4,344)6,662(362)548(481)38(89)
Benefits paid from trust(3,455)(3,303)(1,985)(1,920)(388)(557)(5)(6)
Direct benefit payments(114)(108)(465)(464)(37)(43)(26)(28)
Foreign exchange impact——(5,073)(115)——(91)(89)
Medicare/Government subsidies————2330——
Amendments/curtailments/
settlements/other——1466015(1)(44)
Benefit obligation at December 31$56,643$51,034$49,834$48,620$5,053$4,633$817$832
Change in plan assets
Fair value of plan assets at January 1$53,954$53,630$39,464$38,058$177$433$92$119
Actual return on plan assets5,2743,6265,5792,5150095
Employer contributions——46544916611000
Acquisitions/divestitures, net——(59)350—00
Plan participants’ contributions——374261191——
Benefits paid from trust(3,455)(3,303)(1,985)(1,920)(388)(557)(5)(6)
Foreign exchange impact——(4,049)121——(11)(14)
Amendments/curtailments/
settlements/other——93*164*——0(12)
Fair value of plan assets at
December 31$55,772$53,954$39,543$39,464$16$177$84$92
Funded status at December 31$(871)$2,920$(10,291)$(9,157)$(5,037)$(4,456)$(733)$(740)
Accumulated benefit obligation**$56,643$51,034$47,516$47,806N/AN/AN/AN/A

* Includes the reinstatement of certain plan assets in Brazil due to government rulings in 2011 and 2013 allowing certain previously restricted plan assets to be returned to IBM. The assets will be returned to IBM monthly over a three-year period, starting June 2011 and September 2013 respectively, with approximately $122 million returned during 2014. The remaining surplus in Brazil at December 31, 2014 remains excluded from total plan assets due to continued restrictions imposed by the government on the use of those plan assets.

 **     Represents the benefit obligation assuming no future participant compensation increases.

 N/A—Not applicable
Net funded status
($ in millions)
Defined Benefit Pension PlansNonpension Postretirement Benefit Plans
U.S. PlansNon-U.S. PlansU.S. PlanNon-U.S. Plans
At December 31:20142013201420132014201320142013
Prepaid pension assets$1,065$4,639$1,095$912$0$0$0$1
Current liabilities—
compensation and benefits(111)(107)(326)(364)(381)(256)(13)(16)
Noncurrent liabilities—retirement
and nonpension postretirement
benefit obligations(1,825)(1,612)(11,060)(9,705)(4,656)(4,200)(720)(725)
Funded status—net$(871)$2,920$(10,291)$(9,157)$(5,037)$(4,456)$(733)$(740)
Pre-tax net loss and prior service costs/(credits) and transition (assets)/liabilities recognized in other comprehensive income/(loss) and the changes in pre-tax net loss, prior service costs/(credits) and transition (assets)/liabilities recognized in accumulated other comprehensive income/(loss)
($ in millions)
Defined Benefit Pension PlansNonpension Postretirement Benefit Plans
U.S. PlansNon-U.S. PlansU.S. PlanNon-U.S. Plans
20142013201420132014201320142013
Net loss at January 1$13,709$19,488$19,777$22,188$304$806$161$269
Current period loss/(gain)5,789(3,989)3,324(814)548(480)38(85)
Curtailments and settlements——(25)3——10
Amortization of net loss included in
net periodic (income)/cost(1,056)(1,790)(1,400)(1,600)0(21)(11)(23)
Net loss at December 31$18,442$13,709$21,676$19,777$852$304$189$161
Prior service costs/(credits) at January 1$120$130$(496)$(614)$15$—$(32)$(6)
Current period prior service costs/(credits)——(1)0—150(31)
Amortization of prior service (costs)/
credits included in net periodic
(income)/cost(10)(10)1111197—55
Prior service costs/(credits) at
December 31$110$120$(386)$(496)$23$15$(26)$(32)
Transition (assets)/liabilities at January 1$—$—$0$0$—$—$0$0
Amortization of transition assets/
(liabilities) included in net periodic
(income)/cost——00——00
Transition (assets)/liabilities at
December 31$—$—$0$0$—$—$0$0
Total loss recognized in accumulated
other comprehensive income/(loss)*$18,552$13,829$21,290$19,281$875$319$163$129

*            See note L, “Equity Activity,” on pages 118 through 121 for the total change in AOCI, and the Consolidated Statement of Comprehensive Income for the components of net periodic (income)/cost, including the related tax effects, recognized in OCI for the retirement-related benefit plans.

Pre-tax estimated net loss, estimated prior service costs/(credits) and estimated transition (assets)/liabilities of the retirement-related benefit plans that will be amortized from accumulated other comprehensive income/(loss) into net periodic (income)/cost and recorded in the Consolidated Statement of Earnings in next year
($ in millions)
Defined BenefitNonpension Postretirement
Pension PlansBenefit Plans
U.S. PlansNon-U.S. PlansU.S. PlanNon-U.S. Plans
Net loss$1,659$1,693$43$11
Prior service costs/(credits)10(98)(7)(5)
Transition (assets)/liabilities––––
Defined benefit pension plans' major asset categories and their associated fair value

The following table presents the company’s defined benefit pension plans’ asset classes and their associated fair value at December 31, 2014. The U.S. Plan consists of the Qualified PPP and the Non-U.S. Plans consist of all plans sponsored by the company’s subsidiaries.

($ in millions)
U.S. PlanNon-U.S. Plans
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Equity
Equity securities(a)$11,527$1$—$11,528$5,652$—$—$5,652
Equity commingled/mutual funds(b)(c)852,277—2,3621267,415—7,540
Fixed income
Government and related(d)—7,883—7,883—8,159328,191
Corporate bonds(e)—18,828418,832—2,06312,063
Mortgage and asset-backed securities—56720587—238—238
Fixed income commingled/
mutual funds(b)(f)3123,1182953,725879,715—9,802
Insurance contracts—————1,053—1,053
Cash and short-term investments(g)3452,304—2,650158393—551
Hedge funds—1,4748892,362—745—745
Private equity(h)——3,2873,287——513513
Private real estate(h)——2,9422,942——664664
Derivatives(i)(55)3—(53)2846—848
Other commingled/mutual funds(b)(j)————331,5132201,766
Subtotal12,21436,4557,43756,1066,05632,1391,42939,625
Other(k)———(333)———(82)
Fair value of plan assets$12,214$36,455$7,437$55,772$6,056$32,139$1,429$39,543

  • Represents U.S. and international securities. The U.S. Plan includes IBM common stock of $55 million, representing 0.1 percent of the U.S. Plan assets. Non-U.S. Plans include IBM common stock of $21 million, representing 0.1 percent of the non-U.S. Plans assets.
  • Commingled funds represent pooled institutional investments.
  • Invests in predominantly equity securities.
  • Includes debt issued by national, state and local governments and agencies.
  • The U.S. Plan includes IBM corporate bonds of $10 million, representing 0.02 percent of the U.S. Plan assets. Non-U.S. plans include IBM corporate bonds of $4 million representing 0.01 percent of the non-U.S. Plan assets.
  • Invests in predominantly fixed-income securities.
  • Includes cash and cash equivalents and short-term marketable securities.
  • Primarily includes limited partnerships.
  • Includes interest rate derivatives, forwards, exchange traded and other over-the-counter derivatives.
  • Invests in both equity and fixed-income securities.
  • Represents net unsettled transactions, relating primarily to purchases and sales of plan assets.

The following table presents the company’s defined benefit pension plans’ asset classes and their associated fair value at December 31, 2013. The U.S. Plan consists of the Qualified PPP and the Non-U.S. Plans consist of all plans sponsored by the company’s subsidiaries.

($ in millions)
U.S. PlanNon-U.S. Plans
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Equity
Equity securities(a)$15,929$—$—$15,929$6,489$—$—$6,489
Equity commingled/mutual funds(b)(c)2162,593—2,8091328,325—8,457
Fixed income
Government and related(d)—7,09317,094—8,682428,724
Corporate bonds (e)—14,639514,644—1,88141,885
Mortgage and asset-backed securities—69119709—8—8
Fixed income commingled/
mutual funds(b)(f)2217162741,211758,596—8,670
Insurance contracts—————1,196—1,196
Cash and short-term investments(g)4271,915—2,343154451—605
Hedge funds—1,3688602,228—740—740
Private equity(h)——3,7713,771——410410
Private real estate(h)——3,0383,038——655655
Derivatives(i)16—71150—151
Other commingled/mutual funds(b)(j)————361,518—1,554
Subtotal16,79529,0217,96853,7846,88631,5471,11039,544
Other(k)———170———(80)
Fair value of plan assets$16,795$29,021$7,968$53,954$6,886$31,547$1,110$39,464

  • Represents U.S. and international securities. The U.S. Plan includes IBM common stock of $83 million, representing 0.2 percent of the U.S. Plan assets. Non-U.S. Plans include IBM common stock of $31 million, representing 0.1 percent of the non-U.S. Plans assets.
  • Commingled funds represent pooled institutional investments.
  • Invests in predominantly equity securities.
  • Includes debt issued by national, state and local governments and agencies.
  • The U.S. Plan includes IBM corporate bonds of $9 million, representing 0.02 percent of the U.S. Plan assets. Non-U.S. plans include IBM corporate bonds of $1 million representing 0.001 percent of the non-U.S. Plan assets.
  • Invests in predominantly fixed-income securities.
  • Includes cash and cash equivalents and short-term marketable securities.
  • Includes limited partnerships and venture capital partnerships.
  • Primarily includes interest rate derivatives and, to a lesser extent, forwards, exchange traded and other over-the-counter derivatives.
  • Invests in both equity and fixed-income securities.
  • Represents net unsettled transactions, relating primarily to purchases and sales of plan assets.
Defined benefit pension plans with accumulated benefit obligations (ABO) in excess of plan assets
20142013
BenefitPlanBenefitPlan
At December 31:ObligationAssetsObligationAssets
Plans with PBO in excess of plan assets$34,976$21,655$41,003$29,223
Plans with ABO in excess of plan assets33,14820,68040,31529,213
Plans with assets in excess of PBO71,50173,66058,65164,194
Defined Benefit Pension Plans  
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block  
Components of net periodic (income)/cost of the company's retirement-related benefit plans
($ in millions)
Defined Benefit Pension Plans
U.S. PlansNon-U.S. Plans
For the year ended December 31:201420132012201420132012
Service cost$—$—$—$449$501$443
Interest cost2,2111,9802,1961,5331,5241,779
Expected return on plan assets(4,096)(3,981)(4,043)(2,247)(2,195)(2,303)
Amortization of transition assets———000
Amortization of prior service costs/(credits)101010(111)(119)(154)
Recognized actuarial losses1,0561,7901,3311,4001,6001,027
Curtailments and settlements———2600
Multi-employer plans/other costs*———21785247
Total net periodic (income)/cost$(818)$(202)$(507)$1,267$1,396$1,040
Assumptions used to measure the net periodic (income)/cost and benefit obligations
Defined Benefit Pension Plans
U.S. PlansNon-U.S. Plans
201420132012201420132012
Weighted-average assumptions used to measure net
periodic (income)/cost for the year ended December 31
Discount rate4.50%3.60%4.20%3.32%3.23%4.28%
Expected long-term returns on plan assets8.00%8.00%8.00%6.08%6.21%6.26%
Rate of compensation increaseN/AN/AN/A2.52%2.51%2.43%
Weighted-average assumptions used to measure
benefit obligations at December 31
Discount rate3.70%4.50%3.60%2.34%3.32%3.23%
Rate of compensation increaseN/AN/AN/A2.49%2.52%2.51%

N/A—Not applicable
Total expected benefit payments
($ in millions)
QualifiedNonqualifiedQualifiedNonqualifiedTotal Expected
U.S. PlanU.S. PlansNon-U.S. PlansNon-U.S. PlansBenefit
PaymentsPaymentsPaymentsPaymentsPayments
2015$3,4491131,8493485,758
20163,4761151,8543445,790
20173,4921171,8803485,837
20183,5011181,9113575,887
20193,4581201,9493745,901
2020–202417,56660710,2902,06030,523
Nonpension Postretirement Plans  
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block  
Components of net periodic (income)/cost of the company's retirement-related benefit plans
($ in millions)
Nonpension Postretirement Benefit Plans
U.S. PlanNon-U.S. Plans
For the year ended December 31:201420132012201420132012
Service cost$26$35$36$7$10$14
Interest cost187164200636064
Expected return on plan assets0(1)—(9)(9)(9)
Amortization of transition assets———000
Amortization of prior service costs/(credits)(7)——(5)(5)(4)
Recognized actuarial losses02132112317
Curtailments and settlements———000
Total net periodic cost$206$218$268$66$79$82

* The 2014 Non-U.S. plans amount includes $148 million related to the IBM Spain pension litigation and the 2012 Non-U.S. plans amount includes $162 million related to the IBM UK pension litigation. See page 136 for additional information.

Assumptions used to measure the net periodic (income)/cost and benefit obligations
Nonpension Postretirement Benefit Plans
U.S. PlanNon-U.S. Plans
201420132012201420132012
Weighted-average assumptions used to measure
net periodic cost for the year ended December 31
Discount rate4.10%3.30%3.90%7.78%6.43%7.37%
Expected long-term returns on plan assetsN/A%0.35%N/A10.22%9.01%9.01%
Weighted-average assumptions used to measure
benefit obligations at December 31
Discount rate3.40%4.10%3.30%7.51%7.78%6.43%
N/A—Not applicable
Total expected benefit payments
($ in millions)
Total
QualifiedNonqualifiedExpected
U.S. PlanNon-U.S. PlansNon-U.S. PlansBenefit
PaymentsPaymentsPaymentsPayments
2015$426$8$31$465
2016405835448
2017410938457
2018412941463
20194121044466
2020–20241,871592572,187
U.S. Defined Benefit Pension Plans  
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block  
Reconciliation of the beginning and ending balances of Level 3 assets
($ in millions)
Mortgage
and Asset-Fixed Income
GovernmentCorporateBackedCommingled/HedgePrivatePrivate
and RelatedBondsSecuritiesMutual FundsFundsEquityReal EstateTotal
Balance at January 1, 2014$1$5$19$274$860$3,771$3,038$7,968
Return on assets held at end of year—002128(10)197238
Return on assets sold during the year—00——332199531
Purchases, sales and settlements, net—0(3)——(807)(492)(1,302)
Transfers, net(1)(1)4————2
Balance at December 31, 2014$—$4$20$295$889$3,287$2,942$7,437
($ in millions)
Mortgage
and Asset-Fixed Income
GovernmentCorporateBackedCommingled/HedgePrivatePrivate
and RelatedBondsSecuritiesMutual FundsFundsEquityReal EstateTotal
Balance at January 1, 2013$6$11$45$267$756$4,085$2,861$8,032
Return on assets held at end of year00(1)71041,1048892,103
Return on assets sold during the year000—0(528)(412)(939)
Purchases, sales and settlements, net(5)30—0(891)(301)(1,194)
Transfers, net0(8)(26)————(33)
Balance at December 31, 2013$1$5$19$274$860$3,771$3,038$7,968
Non-U.S. Defined Benefit Pension Plans  
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block  
Reconciliation of the beginning and ending balances of Level 3 assets
($ in millions)
Other
GovernmentCorporatePrivatePrivateCommingled/
and RelatedBondsEquityReal EstateMutual FundsTotal
Balance at January 1, 2014$42$4$410$655$—$1,110
Return on assets held at end of year30268326138
Return on assets sold during the year0046(12)—34
Purchases, sales and settlements, net(8)(3)75(13)104155
Transfers, net——0—102102
Foreign exchange impact(5)0(45)(49)(12)(110)
Balance at December 31, 2014$32$1$513$664$220$1,429
($ in millions)
GovernmentCorporatePrivatePrivate
and RelatedBondsEquityReal EstateTotal
Balance at January 1, 2013$76$5$353$609$1,042
Return on assets held at end of year(12)013322
Return on assets sold during the year1018(3)16
Purchases, sales and settlements, net(24)(1)2611
Foreign exchange impact20121529
Balance at December 31, 2013$42$4$410$655$1,110