Big Blue Erases Pension Red Ink

January 2, 2003 ( - IBM says it has restored its US pension plan to a fully-funded status, thanks to some $3.95 billion in contributions.

IBM chief financial officer John Joyce has said that the company isn’t required by regulators to fill the shortfall in the plan, but that it was in the best interests of shareholders and employees for IBM to do so.

Gap Bridge

IBM’s contribution was a combination of $2.09 billion in cash, with the remaining 47.1% funded with 24,037,354 shares of IBM stock.   IBM had announced its intention to return the plan to funded status on December 4 (see I BM Announces Pension Funding ).   The final contribution was, however, more than the $3 billion estimated by the company in early December, as the performance of capital markets weighed on the value of the pension plan’s assets.

On the other hand, IBM said the gap in the fund had shrunk due to stock market gains from the $4.5 billion shortfall it had first identified in October.   In September, Morgan Stanley analyst Rebecca Runkle had said the plan’s funding status could drop as low as 80% to 75% by the end of next year – and that coming up with the difference would effectively do away with IBM’s total cash and cash equivalents and cut into earnings (see  Analyst Warns of IBM Pension Pounding ).