Retirement – Related Benefits
The IBM Retirement Plans are designed to keep you in a financially secure place for life, providing monthly income after you’ve retired from IBM. Retirement plans are customized to fit your needs. There are two major retirement plans available to you and your spouse. One is a traditional pension plan, and the other is a retirement annuity plan. In addition to the two major programs, several supplemental retirement plans are also offered. The Supplemental plans are only available if you elect to contribute to them. These plans provide income in retirement and when taken with your regular monthly pension and annuity income, can provide a more secure retirement for you and your spouse.
Section 3: US Plans
✅ IBM Personal Pension Plan
This pension plan starts to kick in at age 60 and ends at age 70. The maximum benefit you can receive is 2.5 times your base salary. Your pension will be based on your final average salary and years of employment at IBM. If you retire early, you can receive 100% of your final average salary, but you will have to start receiving your monthly pension. The plan provides a monthly pension benefit for life.
✅ IBM 401(k) Plus plan
This plan is designed to help you create retirement savings. You may contribute up to 6% of your annual salary to the plan. Your contributions will be matched by IBM up to a certain limit. If you contribute more, the amount of the match is increased. The plan is a “defined contribution” plan, meaning you are not guaranteed a certain benefit after retirement. You, as the employee, have the final responsibility for investing your savings. Like the IBM Personal Pension Plan, the plan provides a monthly pension benefit.
✅ IBM Excess 401(k) Plus Plan
This plan is similar to the IBM 401(k) Plus plan, except that you must be at least 51 years old and have at least 15 years of employment with IBM. If you qualify, you can save up to 8% of your annual salary, and your employer will match your contributions up to an exact or certain limit. You must be at least 51 years old and have at least 15 years of employment with IBM, but you must contribute at least the maximum allowed ($15,000).
Non-pension Postretirement Benefit Plan
- U.S. Non Pension Post Retirement Plan
This plan is intended to provide supplemental income for you and your spouse when you first receive your retirement income. The plan provides for $1,000 per month for three years. After the three years, will reduce the payment to $1,000. You may elect to receive the benefits or have IBM continue making the payments directly to your bank. Payments under this plan will be made up to age 72.
✅ Discount Rate
The rebate or discount rate is the interest rate used to calculate the present value of your future pension payments. The discount rate is determined annually by using the U.S. Treasury auction rate. The discount rate is not currently available for non-U.S. pension benefits. The U.S. Internal Revenue Service (IRS) has indicated it will not issue regulations on this issue. The U.S. pension discount rate will be in the range of 5 to 7 percent. When you are receiving Social Security benefits, they should be used to reduce your pension payments. As a result of the change in the rules governing Social Security benefits, the discount rate will be approximately 5 percent.
✅ Expected Long-Term Returns on Plan Assets
If you are participating in the IBM Retirement Plans and decide to change your investment portfolio, you will be permitted to withdraw funds from your account without penalty. However, if you decide to sell your IBM stock, you will have to pay taxes on the gain. Since IBM stock has historically been a very safe investment and has earned a conservative income, it’s fair and reasonable to expect that it will continue to earn a conservative income for the foreseeable future. Your stock investments will provide a conservative income for many years. You should have sufficient tax-deferred assets to make up for any shortfalls in your income.
✅ Interest Crediting Rate
The interest crediting rate is used to calculate the interest on the deferred portion of your income. Most companies make a profit and earn a return on their investments, and this profit is typically included in your paychecks. When you leave IBM for retirement, you will no longer get a paycheck. Instead, you will get your pension checks and a portion of your deferred income.
✅ Healthcare Cost Trend Rate
The healthcare cost trend rate factor is used to determine how much your monthly pension benefits will be increased due to an increase in the cost of healthcare. This factor is not used to calculate the inflation adjustment to your income, and it is calculated separately and has no effect on your monthly pension.
✅ Contributions to IBM Retirement Plans
The contribution rate is the amount of money you can contribute to your retirement plan. If you contribute more than the maximum allowed, the amount of the contribution increases. IBM has designated several plans which allow you to contribute more than the maximum allowed. It would be best to choose the plan that best meets your needs. Options: A. to receive Social Security benefits B. to receive your deferred income C. to receive your employer’s match D. to receive a monthly pension benefit for life
✅ Expected Benefit Payments
The expected benefit payments are based upon the estimated monthly contribution rate and your pension plan selection. Social Security payments will reduce your benefit.
✅ Plan Assets
Your retirement plan assets are the assets that contribute to your plan and may be used to pay your pension. Your employer may make amount payments into your plan on your behalf. As your employer makes contributions to your plan, it will deduct the amount from your salary. Your plan allows you to borrow from it for your retirement. Your retirement plan assets are represented by IBM stock. Your employer owns the stock in your plan. The plan allows you to contribute stock to your plan up to the maximum allowed.
✅ Defined Benefit Pension Plans
Contributions to defined benefit pension plans are calculated based on the salary that IBM paid to you. Your contribution rate is determined by the percentage of salary you contribute, and your employer’s contribution is the same percentage of compensation that is deducted from your paycheck. Additional payroll deductions are made to help the plan with the expenses associated with the plan.
✅ Non pension Postretirement Benefit Plans
Contributions to non-pension postretirement benefit plans are based on your salary and the amount of money you contribute to the plan. The contribution rate is determined by the percentage of salary you contribute. The employer’s contribution is the same percentage of salary deducted from your paycheck. However, your employer’s matching contribution is not made to your pension plan.
✅ Expected Benefit Payments
The expected benefit payments are based upon your pension plan selection and the estimate of your contribution rate. Social Security payments will reduce your benefit. The discount rate is the interest rate used to calculate the present value of your future pension payments. The discount rate is determined annually by using the U.S. Treasury auction rate. The U.S. Internal Revenue Service (IRS) has indicated it will not issue regulations on this issue.
Final Thought – IBM Retirement
“Pensions are a fact of life, and you will receive them whether you like it or not.” IBM has a strong commitment to you as an employee, and IBM Retirement wants to provide you with a comfortable retirement. IBM Retirement is an important part of IBM’s Total Rewards program. It is important that you understand the IBM Retirement Plan. Please don’t be surprised if you start receiving pension payments.