Executive compensation

2016 Pension benefits narrative

The 2016 Pension Benefits Tables show the number of years of credited service, present value of accumulated benefit and payments during the last fiscal year for each eligible named executive officer under the IBM U.S. defined benefit pension plan and the IBM Germany Vorsorgeplan, as applicable. Mrs. Rometty, Mr. Schroeter and Dr. Kelly have pension benefits under the U.S. defined benefit pension plan; Mr. Jetter has a pension benefit under the IBM Germany Vorsorgeplan, a defined benefit pension plan, and Mr. Clementi does not have a benefit under any IBM defined benefit pension plan.

U.S. Qualified Plan and Nonqualified Plan Descriptions — General

The IBM Personal Pension Plan consists of a tax-qualified plan and a non-tax qualified plan. Effective January 1, 2008, the non-tax qualified plan was renamed the IBM Excess Personal Pension Plan and is referred to herein as the Nonqualified Plan, and the tax-qualified plan is referred to as the Qualified Plan. The combined plan is referred to herein as the IBM Personal Pension Plan. Effective January 1, 2005, the IBM Personal Pension Plan was closed to new participants.

Plan Description

IBM U.S. Personal Pension Plan (Qualified Plan)

Purpose of the Qualified Plan

Material Terms and Conditions: Pension Credit Formula under the Qualified Plan

Material Terms and Conditions: Personal Pension Account Formula under the Qualified Plan

Compensation Elements Included in Calculations

Qualified Plan Funding

Policy Regarding Extra Years of Credited Service

IBM U.S. Excess Personal Pension Plan (Nonqualified Plan)

Purpose of the Nonqualified Plan

Material Terms and Conditions of the Nonqualified Plan

Nonqualified Plan Funding

Policy Regarding Extra Years of Credited Service

Available Forms of Payment

Pension Credit Formula

Personal Pension Account

  Maximum Lump Sum
Name Qualified Plan Nonqualified Plan Total Available Lump Sum
V.M. Rometty $462,268 N/A $462,268
M.J. Schroeter 62,190 $21,191 83,381
J.E. Kelly III 447,797 973,744 1,421,541

Annual Pension Benefits

The annual pension benefit that was earned as of December 31, 2007, and that is payable as a single life annuity beginning at normal retirement age for each of the eligible named executive officers is below. Because Mr. Schroeter and Dr. Kelly will receive a lump sum payment for their Nonqualified Plan benefits, no amount is represented for them in the Nonqualified Plan column below:

  Annual Pension Benefit at
Normal Retirement Age
Name Qualified Plan Nonqualified Plan Total Benefit
V.M. Rometty $82,083 $342,761 $424,844
M.J. Schroeter 5,578 N/A 5,578
J.E. Kelly III 33,681 N/A 33,681

Present Value of Accumulated Benefit

2016 Pension Benefits Table

As noted in the Introduction and Purpose to the 2016 Retention Plan Narrative, the 2016 Pension Benefits Table does not include amounts reflected in the 2016 Retention Plan Table.

Name
(a)
Plan Name
(b)
Number of Years Credited Service(1)
(#)
(c)
Present Value of Accumulated Benefit(2)
($)
(d)
Payments During Last Fiscal Year
($)
(e)
V.M. Rometty Qualified Plan 26 $1,000,374 $0
  Nonqualified Plan   4,177,322 0
  Total Benefit   $5,177,696 $0
M.J. Schroeter Qualified Plan 4 $48,749 $0
  Nonqualified Plan   16,128 0
  Total Benefit   $64,877 $0
J.E. Kelly III Qualified Plan 27 $436,803 $0
  Nonqualified Plan   929,588 0
  Total Benefit   $1,366,391 $0

(1) Reflects years of credited service as of December 31, 2007, which was the date accruals under the Qualified Plan and the Nonqualified Plan stopped. Each of the named executive officers in this table has nine additional years of service with IBM after that date.

(2) While the accruals under the Qualified Plan and the Nonqualified Plan stopped on December 31, 2007, the value of the Qualified Plan and Nonqualified Plan benefits for the eligible named executive officers will continue to change based on their ages and the assumptions used to calculate the present value of the accumulated benefit.

 

Assumptions to determine present value as of December 31, 2016 for each eligible named executive officer:

Assumptions to determine present value as of December 31, 2015:

IBM Germany Pension Plan

Plan Description

Material Terms and Conditions

  1. Achievable pension — which is calculated based on years of service up to age 62 and creditable salary as of December 12, 2008;
  2. Vested pension — vested part of the achievable pension is calculated by multiplying the achievable pension by the ratio where the numerator is the years of service up to the conversion and the denominator is the employee’s years of service until the employee has reached age 62; plus
  3. Growing vested pension — the portion of the benefit that continues to increase until a pensionable event occurs. The increase is determined based on individual salaries up to the relevant key date as compared to December 12, 2008.

Payment of the Plan Benefits

  1. he terminates employment at age 67 (retirement pension);
  2. he terminates employment after age 60 but prior to age 67 (early retirement pension) — between 60 and 62 with deductions; or
  3. he terminates employment prior to age 67 and receives a full and indefinite disability pension from the statutory pension insurance or a similar institution.

The Prior Benefit and the New Benefit have different payment rules.

Payment of Prior Benefit

Payment of New Benefit

Compensation Elements Included in Calculations

Plan Funding

Policy Regarding Extra Years of Credited Service

2016 Pension Benefits Table — IBM Germany Pension Plan

Name
(a)
Plan Name
(b)
Number of Years Credited Service(1)
(#)
(c)
Present Value of Accumulated Benefit(2)
($)
(d)
Payments During Last Fiscal Year
($)
(e)
M. Jetter IBM Vorsorgeplan 30 $7,558,623 $0

(1) Reflects years of credited service as of January 31, 2015, which was the date that Mr. Jetter’s employment with IBM Germany ended. Mr. Jetter has almost two years of service with IBM after that date.

(2) While the contributions under the IVP stopped on January 31, 2015, the value of Mr. Jetter’s benefit will continue to change based on his age and the assumptions used to calculate the present value of the accumulated benefit. The present value of Mr. Jetter’s accumulated benefit as of December 31, 2016 was €7,187,052 and the exchange rate from euros to U.S. dollars was 1.0517.

 

Assumptions to determine present value as of December 31, 2016 for Mr. Jetter:

Assumptions to determine present value as of December 31, 2015 for Mr. Jetter: