In Reply to: IBM to fund US pension fund deficit posted by Trundler on 05 December 2002 at 10:22:28:
: 04 December 2002
:
: News > w3 News > Top Stories >
:
: 10 Minutes with ... John Joyce
: IBM to fund U.S. pension program
: IBM today announced plans to contribute approximately $3 billion to fund the company's U.S. pension plan. The
: contribution is designed to cover the difference between the plan's current assets and projections of future
: benefit obligations. The exact amount and structure of the contribution will be determined by the end of the
: year. (Read the press release here for more details.)
: John Joyce, senior vice president and chief financial officer, spoke with w3 today to explain this commitment
: and what it means for IBMers.
: Q. Can you tell us what we're doing with the U.S. pension fund, and why?
: In simplest terms, we're making a substantial investment in the long-term well-being of our pension funds by
: planning to restore the U.S. pension plan to fully funded status. We currently have a $3-billion "gap." We want
: to fund it and put it behind us.
: Over the past two years, the decline in the equity markets has caused problems for companies of all shapes and
: sizes. Some companies will deal with this issue over a period of several years. However, because of the strength
: of our cash flow and our balance sheet, we have chosen to put the largest part of this "gap" behind us now.
: When I spoke to analysts recently, I told them that we were considering contributing up to $1.5 billion a year to
: the U.S. pension fund through 2005. At that time, the U.S. fund was underfunded by approximately $4.5 billion.
: The equity markets have since recovered somewhat, and so has the status of our pension plans.
: Q. Is this something we're required to do?
: Actually, no. However, not only is this in the best interests of our retirees and employees, but shareholders also
: benefit because by stepping up to the funding gap now, we decrease uncertainty about the future.
: Because of our strong cash flows and the strength of our business, we're in a position to address this deficit
: now. Let me tell you, there are a lot of companies facing similar deficits that wish they had the financial
: flexibility to do what we're announcing today.
: There's another point I'd like to make here. IBM is one of the very few companies in the IT industry that even
: offers employees a pension program. Others don't do it; they don't see a need to make this sort of commitment
: to their employees. I think our pension program is a real differentiator for IBM.
: Q. Do we have similar plans to restore the fully funded status of our pension plans in EMEA, AP and the
: other Americas countries?
: Actually, we have been contributing to many of these plans for a number of years and we will continue to fund
: them over time. These contributions have totaled as much as $500 million in recent years while, at the same
: time, we were not contributing to the U.S. pension plan.
: The fact that a few non-U.S. plans are underfunded has no implications on our meeting our obligations to
: retirees worldwide. Our retirees should have no concerns.
: We manage each of our pension funds individually, in accordance with local laws and regulations. These funds
: are continuously monitored to protect the interests of retirees and employees and we contribute to them as
: conditions warrant.
: The U.S. plan represents more than two-thirds of our pension assets and commitments, so it makes sense to
: take this action now. While some country plans will remain somewhat underfunded going into 2003, this move
: gives us greater flexibility to execute our multi-year funding strategy and address those issues as needed in the
: future.
: Q. How will this contribution be funded? For example, will it limit our ability to invest in current
: businesses or to make acquisitions in 2003?
: We'll decide the final amount and composition of our contribution at the end of the year, when we have a fuller
: understanding of several variables like the performance of capital markets and interest rates. I anticipate that,
: at current levels, we'll make half the investment in cash and half in IBM stock.
: The pension plan contribution will have no impact on operating budgets in 2003. We will continue to invest
: aggressively in R&D and capital expenditures, and we will continue to look for acquisitions that support our
: e-business on demand strategy.
: Q. Is funding the pension plan an extraordinary event?
: It's important to understand that funding the pension plan is not an extraordinary or unusual event. It's part of
: doing business. What's unusual is that the stock market run of the last decade made it unnecessary to
: contribute to the U.S. plan since 1995. And as I mentioned, we have been contributing to non-U.S. plans during
: that period.
I have extracted one sentence from above which may give us all
some hope. At least it is in writing and in the public domain.
The fact that a few non-U.S. plans are underfunded has no
implications on our meeting our obligations to retirees
worldwide. Our retirees should have no concerns.