RETIREMENT-RELATED BENEFITS (Tables)

12 Months Ended

Dec. 31, 2017

RETIREMENT-RELATED BENEFITS

Summary of total retirement-related benefits net periodic (income)/cost in the Consolidated Statement of Earnings

($ in millions)

	U.S. Plans								Non-U.S. Plans						Total
For the year ended December 31:	2017		2016			2015			2017		2016		2015		2017		2016		2015
Defined benefit pension plans	$	237	$	(334	)	$	(284	)	$	1,315	$	1,039	$	1,421	$	1,552	$	705	$	1,137
Retention Plan	16		17			23			—		—		—		16		17		23
Total defined benefit pension plans (income)/cost	$	253	$	(317	)	$	(261	)	$	1,315	$	1,039	$	1,421	$	1,568	$	722	$	1,160
IBM 401(k) Plus Plan and non-U.S. plans	$	616	$	626		$	676		$	404	$	420	$	442	$	1,020	$	1,046	$	1,117
Excess 401(k)	26		24			21			—		—		—		26		24		21
Total defined contribution plans cost	$	643	$	650		$	697		$	404	$	420	$	442	$	1,046	$	1,070	$	1,138
Nonpension postretirement benefit plans cost	$	180	$	195		$	218		$	62	$	16	$	55	$	242	$	211	$	273
Total retirement-related benefits net periodic cost	$	1,076	$	527		$	654		$	1,781	$	1,475	$	1,918	$	2,857	$	2,003	$	2,572

Summary of the total PBO for defined benefit plans, APBO for nonpension postretirement benefit plans, fair value of plan assets and associated funded status

($ in millions)

	Benefit Obligations				Fair Value of Plan Assets				Funded Status*
At December 31:	2017		2016		2017		2016		2017			2016
U.S. Plans
Overfunded plans
Qualified PPP	$	50,602	$	50,403	$	52,694	$	51,405	$	2,092		$	1,002
Underfunded plans
Excess PPP	$	1,532	$	1,509	$	—	$	—	$	(1,532	)	$	(1,509	)
Retention Plan	310		307		—		—		(310		)	(307		)
Nonpension postretirement benefit plan	4,184		4,470		18		26		(4,165		)	(4,444		)
Total underfunded U.S. plans	$	6,026	$	6,286	$	18	$	26	$	(6,007	)	$	(6,260	)
Non-U.S. Plans
Overfunded plans
Qualified defined benefit pension plans	$	19,537	$	17,614	$	22,088	$	19,647	$	2,551		$	2,032
Nonpension postretirement benefit plans	0		0		0		0		0			0
Total overfunded non-U.S. plans	$	19,537	$	17,614	$	22,088	$	19,647	$	2,551		$	2,032
Underfunded plans
Qualified defined benefit pension plans	$	23,046	$	21,447	$	18,711	$	16,374	$	(4,336	)	$	(5,074	)
Nonqualified defined benefit pension plans	6,527		5,919		—		—		(6,527		)	(5,919		)
Nonpension postretirement benefit plans	732		692		70		71		(663		)	(622		)
Total underfunded non-U.S. plans	$	30,306	$	28,059	$	18,780	$	16,445	$	(11,526	)	$	(11,614	)
Total overfunded plans	$	70,139	$	68,017	$	74,782	$	71,051	$	4,643		$	3,034
Total underfunded plans	$	36,332	$	34,344	$	18,799	$	16,470	$	(17,533	)	$	(17,874	)

*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).

Components of net periodic (income)/cost of the company's retirement-related benefit plans

($ in millions)

	Defined Benefit Pension Plans
	U.S. Plans									Non-U.S. Plans
For the year ended December 31:	2017			2016			2015			2017			2016			2015
Service cost	$	—		$	—		$	—		$	410		$	420		$	454
Interest cost	1,913			2,048			2,028			837			1,035			1,075
Expected return on plan assets	(3,014		)	(3,689		)	(3,953		)	(1,325		)	(1,867		)	(1,919		)
Amortization of transition assets	—			—			—			0			0			0
Amortization of prior service costs/(credits)	16			10			10			(97		)	(106		)	(98		)
Recognized actuarial losses	1,337			1,314			1,654			1,507			1,408			1,581
Curtailments and settlements	—			—			—			19			22			35
Multi-employer plans/other costs*	—			—			—			(36		)	126			293
Total net periodic (income)/cost	$	253		$	(317	)	$	(261	)	$	1,315		$	1,039		$	1,421

($ in millions)

	Nonpension Postretirement Benefit Plans
	U.S. Plan									Non-U.S. Plans
For the year ended December 31:	2017			2016			2015			2017			2016			2015
Service cost	$	14		$	17		$	24		$	6		$	5		$	7
Interest cost	154			165			163			57			51			50
Expected return on plan assets	0			0			0			(7		)	(6		)	(7		)
Amortization of transition assets	—			—			—			0			0			0
Amortization of prior service costs/(credits)	(7		)	(7		)	(7		)	0			(5		)	(5		)
Recognized actuarial losses	20			20			39			7			9			10
Curtailments and settlements	—			—			—			0			(38		)	0
Total net periodic cost	$	180		$	195		$	218		$	62		$	16		$	55

*Multi-employer plans costs were $40 million, $43 million and $40 million for 2017, 2016, and 2015, respectively. The non-U.S. plans amounts include a gain of $91 million in 2017 related to the IBM UK litigation and retirement-related obligations of $56 million and $233 million related to the IBM Spain pension litigation for 2016, and 2015, respectively.

Changes in benefit obligations

($ in millions)

	Defined Benefit Pension Plans												Nonpension Postretirement Benefit Plans
	U.S. Plans						Non-U.S. Plans						U.S. Plan						Non-U.S. Plans
	2017			2016			2017			2016			2017			2016			2017			2016
Change in benefit obligation
Benefit obligation at January 1	$	52,218		$	53,120		$	44,981		$	44,717		$	4,470		$	4,652		$	692		$	618
Service cost	—			—			410			420			14			17			6			5
Interest cost	1,913			2,048			837			1,035			154			165			57			51
Plan participants’ contributions	—			—			28			30			54			50			—			—
Acquisitions/divestitures, net	—			—			24			(63		)	0			0			0			0
Actuarial losses/(gains)	1,895			602			520			3,217			(98		)	16			(3		)	16
Benefits paid from trust	(3,460		)	(3,430		)	(1,865		)	(1,792		)	(385		)	(400		)	(6		)	(5		)
Direct benefit payments	(123		)	(123		)	(384		)	(381		)	(24		)	(30		)	(30		)	(27		)
Foreign exchange impact	—			—			4,657			(2,222		)	—			—			18			35
Amendments/curtailments/ settlements/other	—			—			(96		)	20			—			—			(1		)	0
Benefit obligation at December 31	$	52,444		$	52,218		$	49,111		$	44,981		$	4,184		$	4,470		$	732		$	692
Change in plan assets
Fair value of plan assets at January 1	$	51,405		$	51,716		$	36,020		$	35,748		$	26		$	71		$	71		$	59
Actual return on plan assets	4,749			3,118			2,583			3,828			0			0			6			8
Employer contributions	—			—			368			464			394			305			0			0
Acquisitions/divestitures, net	—			—			(28		)	(73		)	0			0			0			0
Plan participants’ contributions	—			—			28			30			54			50			—			—
Benefits paid from trust	(3,460		)	(3,430		)	(1,865		)	(1,792		)	(385		)	(400		)	(6		)	(5		)
Foreign exchange impact	—			—			3,694			(2,175		)	—			—			(1		)	9
Amendments/curtailments/ settlements/other	—			—			(2		)*	(10		)*	(70		)	—			(1		)	0
Fair value of plan assets at December 31	$	52,694		$	51,405		$	40,798		$	36,020		$	18		$	26		$	70		$	71
Funded status at December 31	$	250		$	(814	)	$	(8,312	)	$	(8,960	)	$	(4,165	)	$	(4,444	)	$	(663	)	$	(622	)
Accumulated benefit obligation**	$	52,444		$	52,218		$	47,974		$	44,514		N/A			N/A			N/A			N/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. Return of assets to IBM over a three-year period began June 2011 and September 2013 respectively, with approximately $23 million returned in 2016. There were no assets returned during 2017. The remaining surplus in Brazil at December 31, 2017 is 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

Changes in plan assets

($ in millions)

	Defined Benefit Pension Plans												Nonpension Postretirement Benefit Plans
	U.S. Plans						Non-U.S. Plans						U.S. Plan						Non-U.S. Plans
	2017			2016			2017			2016			2017			2016			2017			2016
Change in benefit obligation
Benefit obligation at January 1	$	52,218		$	53,120		$	44,981		$	44,717		$	4,470		$	4,652		$	692		$	618
Service cost	—			—			410			420			14			17			6			5
Interest cost	1,913			2,048			837			1,035			154			165			57			51
Plan participants’ contributions	—			—			28			30			54			50			—			—
Acquisitions/divestitures, net	—			—			24			(63		)	0			0			0			0
Actuarial losses/(gains)	1,895			602			520			3,217			(98		)	16			(3		)	16
Benefits paid from trust	(3,460		)	(3,430		)	(1,865		)	(1,792		)	(385		)	(400		)	(6		)	(5		)
Direct benefit payments	(123		)	(123		)	(384		)	(381		)	(24		)	(30		)	(30		)	(27		)
Foreign exchange impact	—			—			4,657			(2,222		)	—			—			18			35
Amendments/curtailments/ settlements/other	—			—			(96		)	20			—			—			(1		)	0
Benefit obligation at December 31	$	52,444		$	52,218		$	49,111		$	44,981		$	4,184		$	4,470		$	732		$	692
Change in plan assets
Fair value of plan assets at January 1	$	51,405		$	51,716		$	36,020		$	35,748		$	26		$	71		$	71		$	59
Actual return on plan assets	4,749			3,118			2,583			3,828			0			0			6			8
Employer contributions	—			—			368			464			394			305			0			0
Acquisitions/divestitures, net	—			—			(28		)	(73		)	0			0			0			0
Plan participants’ contributions	—			—			28			30			54			50			—			—
Benefits paid from trust	(3,460		)	(3,430		)	(1,865		)	(1,792		)	(385		)	(400		)	(6		)	(5		)
Foreign exchange impact	—			—			3,694			(2,175		)	—			—			(1		)	9
Amendments/curtailments/ settlements/other	—			—			(2		)*	(10		)*	(70		)	—			(1		)	0
Fair value of plan assets at December 31	$	52,694		$	51,405		$	40,798		$	36,020		$	18		$	26		$	70		$	71
Funded status at December 31	$	250		$	(814	)	$	(8,312	)	$	(8,960	)	$	(4,165	)	$	(4,444	)	$	(663	)	$	(622	)
Accumulated benefit obligation**	$	52,444		$	52,218		$	47,974		$	44,514		N/A			N/A			N/A			N/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. Return of assets to IBM over a three-year period began June 2011 and September 2013 respectively, with approximately $23 million returned in 2016. There were no assets returned during 2017. The remaining surplus in Brazil at December 31, 2017 is 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

Accumulated benefit obligation

($ in millions)

	Defined Benefit Pension Plans												Nonpension Postretirement Benefit Plans
	U.S. Plans						Non-U.S. Plans						U.S. Plan						Non-U.S. Plans
	2017			2016			2017			2016			2017			2016			2017			2016
Change in benefit obligation
Benefit obligation at January 1	$	52,218		$	53,120		$	44,981		$	44,717		$	4,470		$	4,652		$	692		$	618
Service cost	—			—			410			420			14			17			6			5
Interest cost	1,913			2,048			837			1,035			154			165			57			51
Plan participants’ contributions	—			—			28			30			54			50			—			—
Acquisitions/divestitures, net	—			—			24			(63		)	0			0			0			0
Actuarial losses/(gains)	1,895			602			520			3,217			(98		)	16			(3		)	16
Benefits paid from trust	(3,460		)	(3,430		)	(1,865		)	(1,792		)	(385		)	(400		)	(6		)	(5		)
Direct benefit payments	(123		)	(123		)	(384		)	(381		)	(24		)	(30		)	(30		)	(27		)
Foreign exchange impact	—			—			4,657			(2,222		)	—			—			18			35
Amendments/curtailments/ settlements/other	—			—			(96		)	20			—			—			(1		)	0
Benefit obligation at December 31	$	52,444		$	52,218		$	49,111		$	44,981		$	4,184		$	4,470		$	732		$	692
Change in plan assets
Fair value of plan assets at January 1	$	51,405		$	51,716		$	36,020		$	35,748		$	26		$	71		$	71		$	59
Actual return on plan assets	4,749			3,118			2,583			3,828			0			0			6			8
Employer contributions	—			—			368			464			394			305			0			0
Acquisitions/divestitures, net	—			—			(28		)	(73		)	0			0			0			0
Plan participants’ contributions	—			—			28			30			54			50			—			—
Benefits paid from trust	(3,460		)	(3,430		)	(1,865		)	(1,792		)	(385		)	(400		)	(6		)	(5		)
Foreign exchange impact	—			—			3,694			(2,175		)	—			—			(1		)	9
Amendments/curtailments/ settlements/other	—			—			(2		)*	(10		)*	(70		)	—			(1		)	0
Fair value of plan assets at December 31	$	52,694		$	51,405		$	40,798		$	36,020		$	18		$	26		$	70		$	71
Funded status at December 31	$	250		$	(814	)	$	(8,312	)	$	(8,960	)	$	(4,165	)	$	(4,444	)	$	(663	)	$	(622	)
Accumulated benefit obligation**	$	52,444		$	52,218		$	47,974		$	44,514		N/A			N/A			N/A			N/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. Return of assets to IBM over a three-year period began June 2011 and September 2013 respectively, with approximately $23 million returned in 2016. There were no assets returned during 2017. The remaining surplus in Brazil at December 31, 2017 is 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 Plans												Nonpension Postretirement Benefit Plans
	U.S. Plans						Non-U.S. Plans						U.S. Plan						Non-U.S. Plans
At December 31:	2017			2016			2017			2016			2017			2016			2017			2016
Prepaid pension assets	$	2,092		$	1,002		$	2,551		$	2,032		$	0		$	0		$	0		$	0
Current liabilities— compensation and benefits	(120		)	(118		)	(323		)	(303		)	(353		)	(368		)	(17		)	(15		)
Noncurrent liabilities—retirement and nonpension postretirement benefit obligations	(1,722		)	(1,698		)	(10,541		)	(10,689		)	(3,812		)	(4,076		)	(646		)	(607		)
Funded status—net	$	250		$	(814	)	$	(8,312	)	$	(8,960	)	$	(4,165	)	$	(4,444	)	$	(663	)	$	(622	)

Pre-tax net loss and prior service costs/(credits) and transition (assets)/liabilities recognized in OCI and changes in pre-tax net loss, prior service costs/(credits) and transition (assets)/liabilities recognized in AOCI

($ in millions)

	Defined Benefit Pension Plans												Nonpension Postretirement Benefit Plans
	U.S. Plans						Non-U.S. Plans						U.S. Plan						Non-U.S. Plans
	2017			2016			2017			2016			2017			2016			2017			2016
Net loss at January 1	$	19,222		$	19,363		$	20,544		$	20,724		$	605		$	609		$	154		$	128
Current period loss/(gain)	159			1,173			(740		)	1,251			(99		)	16			(2		)	14
Curtailments and settlements	—			—			(22		)	(22		)	—			—			0			20
Amortization of net loss included in net periodic (income)/cost	(1,337		)	(1,314		)	(1,507		)	(1,408		)	(20		)	(20		)	(7		)	(9		)
Net loss at December 31	$	18,045		$	19,222		$	18,275		$	20,544		$	486		$	605		$	145		$	154
Prior service costs/(credits) at January 1	$	90		$	101		$	(188	)	$	(294	)	$	37		$	30		$	1		$	(21	)
Curtailments, settlements and other	—			—			1			0			—			—			2			18
Amortization of prior service (costs)/credits included in net periodic (income)/cost	(16		)	(10		)	97			106			7			7			0			5
Prior service costs/(credits) at December 31	$	74		$	90		$	(90	)	$	(188	)	$	45		$	37		$	3		$	1
Transition (assets)/liabilities at January 1	$	—		$	—		$	0		$	0		$	—		$	—		$	0		$	0
Amortization of transition assets/(liabilities) included in net periodic (income)/cost	—			—			0			0			—			—			0			0
Transition (assets)/liabilities at December 31	$	—		$	—		$	0		$	0		$	—		$	—		$	0		$	0
Total loss recognized in accumulated other comprehensive income/(loss)*	$	18,119		$	19,313		$	18,184		$	20,356		$	531		$	642		$	147		$	154

*See note L, “Equity Activity,” 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 that will be amortized from AOCI into net periodic (income)/cost in the next fiscal year

($ in millions)

	Defined Benefit					Nonpension Postretirement
	Pension Plans					Benefit Plans
	U.S. Plans		Non-U.S. Plans			U.S. Plan			Non-U.S. Plans
Net loss	$	1,538	$	1,464		$	9		$	6
Prior service costs/(credits)	16		(81		)	(7		)	0
Transition (assets)/liabilities	—		0			—			0

Assumptions used to measure the net periodic (income)/cost and year-end benefit obligations

	Defined Benefit Pension Plans
	U.S. Plans						Non-U.S. Plans
	2017		2016		2015		2017		2016		2015
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31
Discount rate	3.80	%	4.00	%	3.70	%	1.80	%	2.40	%	2.34	%
Expected long-term returns on plan assets	5.75	%	7.00	%	7.50	%	3.77	%	5.53	%	5.67	%
Rate of compensation increase	N/A		N/A		N/A		2.45	%	2.40	%	2.49	%
Weighted-average assumptions used to measure benefit obligations at December 31
Discount rate	3.40	%	3.80	%	4.00	%	1.76	%	1.80	%	2.40	%
Rate of compensation increase	N/A		N/A		N/A		2.41	%	2.45	%	2.40	%

N/A—Not applicable

	Nonpension Postretirement Benefit Plans
	U.S. Plan						Non-U.S. Plans
	2017		2016		2015		2017		2016		2015
Weighted-average assumptions used to measure net periodic cost for the year ended December 31
Discount rate	3.60	%	3.70	%	3.40	%	8.26	%	7.06	%	7.51	%
Expected long-term returns on plan assets	N/A		N/A		N/A		10.47	%	9.95	%	10.17	%
Weighted-average assumptions used to measure benefit obligations at December 31
Discount rate	3.30	%	3.60	%	3.70	%	7.28	%	8.26	%	7.06	%

N/A—Not applicable

Defined benefit pension plans' asset classes 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, 2017. 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. Plan										Non-U.S. Plans
	Level 1		Level 2			Level 3		Total			Level 1		Level 2		Level 3		Total
Equity
Equity securities (1)	$	2,215	$	0		$	—	$	2,215		$	3,508	$	0	$	—	$	3,508
Equity mutual funds (2)	108		—			—		108			24		—		—		24
Fixed income
Government and related (3)	—		19,762			—		19,762			—		10,103		8		10,111
Corporate bonds (4)	—		17,864			372		18,236			—		2,000		—		2,000
Mortgage and asset-backed securities	—		619			4		623			—		5		—		5
Fixed income mutual funds (5)	338		—			—		338			86		—		—		86
Insurance contracts	—		—			—		—			—		1,366		—		1,366
Cash and short-term investments (6)	100		1,903			—		2,004			221		606		—		827
Real estate	—		—			—		—			—		—		356		356
Derivatives (7)	21		(4		)	—		17			20		744		—		764
Other mutual funds (8)	—		—			—		—			60		—		—		60
Subtotal	2,782		40,144			376		43,302			3,918		14,824		365		19,107
Investments measured at net asset value using the NAV practical expedient (9)	—		—			—		9,537			—		—		—		21,744
Other (10)	—		—			—		(145		)	—		—		—		(52		)
Fair value of plan assets	$	2,782	$	40,144		$	376	$	52,694		$	3,918	$	14,824	$	365	$	40,798

(1) Represents U.S. and international securities. The U.S. Plan includes IBM common stock of $14 million, representing 0.03 percent of the U.S. Plan assets. Non-U.S. Plans include IBM common stock of $7 million, representing 0.02 percent of the non-U.S. Plans assets.

(2) Invests in predominantly equity securities.

(3) Includes debt issued by national, state and local governments and agencies.

(4) The U.S. Plan includes IBM corporate bonds of $1 million, representing 0.002 percent of the U.S. Plan assets. Non-U.S. plans include IBM corporate bonds of $1 million representing 0.002 percent of the non-U.S. Plan assets.

(5) Invests predominantly in fixed income securities.

(6) Includes cash, cash equivalents and short-term marketable securities.

(7) Includes interest rate derivatives, forwards, exchange traded and other over-the-counter derivatives.

(8) Invests in both equity and fixed-income securities.

(9) Investments measured at fair value using the net asset value (NAV) per share (or its equivalent) as a practical expedient, including commingled funds, hedge funds, private equity and real estate partnerships.

(10) 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, 2016. 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. Plan									Non-U.S. Plans
	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Equity
Equity securities (1)	$	5,778	$	1	$	—	$	5,779		$	4,080	$	0	$	—	$	4,080
Equity mutual funds (2)	93		—		—		93			35		—		—		35
Fixed income
Government and related (3)	—		14,897		—		14,897			—		7,577		16		7,593
Corporate bonds (4)	—		18,063		101		18,164			—		2,045		1		2,045
Mortgage and asset-backed securities	—		652		5		656			—		4		—		4
Fixed income mutual funds (5)	359		—		—		359			22		—		—		22
Insurance contracts	—		—		—		—			—		1,137		—		1,137
Cash and short-term investments (6)	55		1,927		—		1,982			294		707		—		1,001
Real estate	—		—		—		—			—		—		294		294
Derivatives (7)	18		20		—		38			43		752		—		796
Other mutual funds (8)	—		—		—		—			114		—		—		114
Subtotal	6,303		35,560		106		41,969			4,589		12,223		310		17,122
Investments measured at net asset value using the NAV practical expedient (9)	—		—		—		9,641			—		—		—		18,946
Other (10)	—		—		—		(205		)	—		—		—		(48		)
Fair value of plan assets	$	6,303	$	35,560	$	106	$	51,405		$	4,589	$	12,223	$	310	$	36,020

(1) Represents U.S. and international securities. The U.S. Plan includes IBM common stock of $28 million, representing 0.1 percent of the U.S. Plan assets. Non-U.S. Plans include IBM common stock of $15 million, representing 0.04 percent of the non-U.S. Plans assets.

(2) Invests in predominantly equity securities.

(3) Includes debt issued by national, state and local governments and agencies.

(4) The U.S. Plan includes IBM corporate bonds of $4 million, representing 0.01 percent of the U.S. Plan assets. Non-U.S. plans include IBM corporate bonds of $1 million representing 0.003 percent of the non-U.S. Plan assets.

(5) Invests in predominantly fixed-income securities.

(6) Includes cash and cash equivalents and short-term marketable securities.

(7) Includes interest rate derivatives, forwards, exchange traded and other over-the-counter derivatives.

(8) Invests in both equity and fixed-income securities.

(9) Investments measured at fair value using the net asset value (NAV) per share (or its equivalent) as a practical expedient, including commingled funds, hedge funds, private equity and real estate partnerships.

(10) Represents net unsettled transactions, relating primarily to purchases and sales of plan assets.

Reconciliation of the beginning and ending balances of Level 3 assets

The following tables present the reconciliation of the beginning and ending balances of Level 3 assets for the years ended December 31, 2017 and 2016 for the U.S. Plan.

($ in millions)

			Mortgage and
	Corporate		Asset-Backed
	Bonds		Securities			Total
Balance at January 1, 2017	$	101	$	5		$	106
Return on assets held at end of year	12		0			11
Return on assets sold during the year	1		0			1
Purchases, sales and settlements, net	259		(1		)	258
Balance at December 31, 2017	$	372	$	4		$	376

($ in millions)

				Mortgage and
	Corporate			Asset-Backed
	Bonds			Securities			Total
Balance at January 1, 2016	$	2		$	10		$	12
Return on assets held at end of year	(3		)	0			(2		)
Return on assets sold during the year	0			1			1
Purchases, sales and settlements, net	103			(5		)	99
Transfers, net	(2		)	(2		)	(3		)
Balance at December 31, 2016	$	101		$	5		$	106

The following tables present the reconciliation of the beginning and ending balances of Level 3 assets for the years ended December 31, 2017 and 2016 for the non-U.S. Plans.

($ in millions)

	Government			Corporate		Private Real
	and Related			Bonds		Estate			Total
Balance at January 1, 2017	$	16		$	1	$	294		$	310
Return on assets held at end of year	2			0		24			26
Return on assets sold during the year	(3		)	0		(1		)	(4		)
Purchases, sales and settlements, net	(2		)	0		9			7
Transfers, net	(6		)	0		—			(6		)
Foreign exchange impact	2			0		30			31
Balance at December 31, 2017	$	8		$	—	$	356		$	365

($ in millions)

	Government		Corporate			Private Real
	and Related		Bonds			Estate			Total
Balance at January 1, 2016	$	16	$	4		$	411		$	431
Return on assets held at end of year	1		0			(22		)	(21		)
Return on assets sold during the year	0		0			35			35
Purchases, sales and settlements, net	0		(3		)	(68		)	(72		)
Transfers, net	0		—			—			0
Foreign exchange impact	0		0			(62		)	(63		)
Balance at December 31, 2016	$	16	$	1		$	294		$	310

Total expected benefit payments

Defined Benefit Pension Plan Expected Payments

($ in millions)

	Qualified		Nonqualified		Qualified		Nonqualified		Total Expected
	U.S. Plan		U.S. Plans		Non-U.S. Plans		Non-U.S. Plans		Benefit
	Payments		Payments		Payments		Payments		Payments
2018	$	3,528	$	123	$	1,879	$	338	$	5,868
2019	3,510		122		1,898		340		5,870
2020	3,581		124		1,913		380		5,997
2021	3,579		125		1,939		418		6,061
2022	3,486		123		1,981		439		6,029
2023–2027	16,673		588		9,936		2,388		29,585

Nonpension Postretirement Benefit Plan Expected Payments

($ in millions)

			Qualified		Nonqualified		Total Expected
	U.S. Plan		Non-U.S. Plans		Non-U.S. Plans		Benefit
	Payments		Payments		Payments		Payments
2018	$	373	$	6	$	35	$	414
2019	382		6		38		426
2020	390		7		40		437
2021	387		7		43		437
2022	372		7		46		425
2023–2027	1,623		37		285		1,945

Defined benefit pension plans with accumulated benefit obligations (ABO) in excess of plan assets

($ in millions)

	2017				2016
	Benefit		Plan		Benefit		Plan
At December 31:	Obligation		Assets		Obligation		Assets
Plans with PBO in excess of plan assets	$	31,416	$	18,711	$	29,182	$	16,374
Plans with ABO in excess of plan assets	27,751		15,607		28,770		16,272
Plans with assets in excess of PBO	70,139		74,782		68,017		71,051