RETIREMENT-RELATED BENEFITS (Tables)

12 Months Ended

Dec. 31, 2016

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:	2016			2015			2014			2016		2015		2014		2016		2015		2014
Defined benefit pension plans	$	(334	)	$	(284	)	$	(833	)	$	1,039	$	1,421	$	1,267	$	705	$	1,137	$	434
Retention Plan	17			23			15			—		—		—		17		23		15
Total defined benefit pension plans (income)/cost	$	(317	)	$	(261	)	$	(818	)	$	1,039	$	1,421	$	1,267	$	722	$	1,160	$	449
IBM 401(k) Plus Plan and non-U.S. plans	$	626		$	676		$	713		$	420	$	442	$	526	$	1,046	$	1,117	$	1,239
Excess 401(k)	24			21			14			—		—		—		24		21		14
Total defined contribution plans cost	$	650		$	697		$	727		$	420	$	442	$	526	$	1,070	$	1,138	$	1,253
Nonpension postretirement benefit plans cost	$	195		$	218		$	206		$	16	$	55	$	66	$	211	$	273	$	272
Total retirement-related benefits net periodic cost	$	527		$	654		$	115		$	1,475	$	1,918	$	1,859	$	2,003	$	2,572	$	1,974

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:	2016		2015		2016		2015		2016			2015
U.S. Plans
Overfunded plans
Qualified PPP	$	50,403	$	51,287	$	51,405	$	51,716	$	1,002		$	429
Underfunded plans
Excess PPP	$	1,509	$	1,522	$	—	$	—	$	(1,509	)	$	(1,522	)
Retention Plan	307		312		—		—		(307		)	(312		)
Nonpension postretirement benefit plan	4,470		4,652		26		71		(4,444		)	(4,582		)
Total underfunded U.S. plans	$	6,286	$	6,486	$	26	$	71	$	(6,260	)	$	(6,415	)
Non-U.S. Plans
Overfunded plans
Qualified defined benefit pension plans	$	17,614	$	16,766	$	19,647	$	18,070	$	2,032		$	1,304
Nonpension postretirement benefit plans	0		0		0		0		0			0
Total overfunded non-U.S. plans	$	17,614	$	16,766	$	19,647	$	18,070	$	2,032		$	1,304
Underfunded plans
Qualified defined benefit pension plans	$	21,447	$	22,039	$	16,374	$	17,677	$	(5,074	)	$	(4,362	)
Nonqualified defined benefit pension plans	5,919		5,911		—		—		(5,919		)	(5,911		)
Nonpension postretirement benefit plans	692		618		71		59		(622		)	(558		)
Total underfunded non-U.S. plans	$	28,059	$	28,568	$	16,445	$	17,737	$	(11,614	)	$	(10,832	)
Total overfunded plans	$	68,017	$	68,053	$	71,051	$	69,786	$	3,034		$	1,734
Total underfunded plans	$	34,344	$	35,054	$	16,470	$	17,807	$	(17,874	)	$	(17,247	)

* 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).

Changes in benefit obligations and 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
	2016			2015			2016			2015			2016			2015			2016			2015
Change in benefit obligation
Benefit obligation at January 1	$	53,120		$	56,643		$	44,717		$	49,834		$	4,652		$	5,053		$	618		$	817
Service cost	—			—			420			454			17			24			5			7
Interest cost	2,048			2,028			1,035			1,075			165			163			51			50
Plan participants’ contributions	—			—			30			34			50			52			—			—
Acquisitions/divestitures, net	—			—			(63		)	39			0			(8		)	0			0
Actuarial losses/(gains)	602			(1,920		)	3,217			(861		)	16			(204		)	16			(52		)
Benefits paid from trust	(3,430		)	(3,514		)	(1,792		)	(1,784		)	(400		)	(406		)	(5		)	(5		)
Direct benefit payments	(123		)	(117		)	(381		)	(402		)	(30		)	(23		)	(27		)	(26		)
Foreign exchange impact	—			—			(2,222		)	(3,907		)	—			—			35			(174		)
Medicare/Government subsidies	—			—			—			—			—			1			—			—
Amendments/curtailments/ settlements/other	—			—			20			235			—			0			0			0
Benefit obligation at December 31	$	52,218		$	53,120		$	44,981		$	44,717		$	4,470		$	4,652		$	692		$	618
Change in plan assets
Fair value of plan assets at January 1	$	51,716		$	55,772		$	35,748		$	39,543		$	71		$	16		$	59		$	84
Actual return on plan assets	3,118			(542		)	3,828			417			0			0			8			7
Employer contributions	—			—			464			474			305			409			0			0
Acquisitions/divestitures, net	—			—			(73		)	53			0			0			0			0
Plan participants’ contributions	—			—			30			34			50			52			—			—
Benefits paid from trust	(3,430		)	(3,514		)	(1,792		)	(1,784		)	(400		)	(406		)	(5		)	(5		)
Foreign exchange impact	—			—			(2,175		)	(3,004		)	—			—			9			(26		)
Amendments/curtailments/ settlements/other	—			—			(10		)*	14		*	—			—			0			(1		)
Fair value of plan assets at December 31	$	51,405		$	51,716		$	36,020		$	35,748		$	26		$	71		$	71		$	59
Funded status at December 31	$	(814	)	$	(1,405	)	$	(8,960	)	$	(8,969	)	$	(4,444	)	$	(4,582	)	$	(622	)	$	(558	)
Accumulated benefit obligation**	$	52,218		$	53,120		$	44,514		$	44,071		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 and $33 million returned during 2015. The remaining surplus in Brazil at December 31, 2016 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:	2016			2015			2016			2015			2016			2015			2016			2015
Prepaid pension assets	$	1,002		$	429		$	2,032		$	1,304		$	0		$	0		$	0		$	0
Current liabilities— compensation and benefits	(118		)	(116		)	(303		)	(297		)	(368		)	(320		)	(15		)	(11		)
Noncurrent liabilities— retirement and nonpension postretirement benefit obligations	(1,698		)	(1,718		)	(10,689		)	(9,976		)	(4,076		)	(4,262		)	(607		)	(547		)
Funded status—net	$	(814	)	$	(1,405	)	$	(8,960	)	$	(8,969	)	$	(4,444	)	$	(4,582	)	$	(622	)	$	(558	)

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
	2016			2015			2016			2015			2016			2015			2016			2015
Net loss at January 1	$	19,363		$	18,442		$	20,724		$	21,676		$	609		$	852		$	128		$	189
Current period loss/(gain)	1,173			2,576			1,251			661			16			(204		)	14			(51		)
Curtailments and settlements	—			—			(22		)	(33		)	—			—			20			0
Amortization of net loss included in net periodic (income)/cost	(1,314		)	(1,654		)	(1,408		)	(1,581		)	(20		)	(39		)	(9		)	(10		)
Net loss at December 31	$	19,222		$	19,363		$	20,544		$	20,724		$	605		$	609		$	154		$	128
Prior service costs/(credits) at January 1	$	101		$	110		$	(294	)	$	(386	)	$	30		$	23		$	(21	)	$	(26	)
Current period prior service costs/(credits)	—			—			—			(6		)	—			—			—			0
Curtailments and Settlements	—			—			0			—			—			—			18			—
Amortization of prior service (costs)/credits included in net periodic (income)/cost	(10		)	(10		)	106			98			7			7			5			5
Prior service costs/(credits) at December 31	$	90		$	101		$	(188	)	$	(294	)	$	37		$	30		$	1		$	(21	)
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)*	$	19,313		$	19,464		$	20,356		$	20,429		$	642		$	639		$	154		$	106

* 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	$	1,348	$	1,434		$	21		$	6
Prior service costs/(credits)	16		(93		)	(7		)	0
Transition (assets)/liabilities	—		0			—			0

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

($ in millions)

	2016				2015
	Benefit		Plan		Benefit		Plan
At December 31:	Obligation		Assets		Obligation		Assets
Plans with PBO in excess of plan assets	$	29,182	$	16,374	$	29,784	$	17,677
Plans with ABO in excess of plan assets	28,770		16,272		29,135		17,492
Plans with assets in excess of PBO	68,017		71,051		68,053		69,786

Pension Plans

RETIREMENT-RELATED BENEFITS

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:	2016			2015			2014			2016			2015			2014
Service cost	$	—		$	—		$	—		$	420		$	454		$	449
Interest cost	2,048			2,028			2,211			1,035			1,075			1,533
Expected return on plan assets	(3,689		)	(3,953		)	(4,096		)	(1,867		)	(1,919		)	(2,247		)
Amortization of transition assets	—			—			—			0			0			0
Amortization of prior service costs/ (credits)	10			10			10			(106		)	(98		)	(111		)
Recognized actuarial losses	1,314			1,654			1,056			1,408			1,581			1,400
Curtailments and settlements	—			—			—			22			35			26
Multi-employer plans/other costs*	—			—			—			126			293			217
Total net periodic (income)/cost	$	(317	)	$	(261	)	$	(818	)	$	1,039		$	1,421		$	1,267

* The non-U.S. plans amount includes $56 million, $233 million and $148 million related to the IBM Spain pension litigation for 2016, 2015 and 2014, respectively. See page 142 for additional information.

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
	2016		2015		2014		2016		2015		2014
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31
Discount rate	4.00	%	3.70	%	4.50	%	2.40	%	2.34	%	3.32	%
Expected long-term returns on plan assets	7.00	%	7.50	%	8.00	%	5.53	%	5.67	%	6.08	%
Rate of compensation increase	N/A		N/A		N/A		2.40	%	2.49	%	2.52	%
Weighted-average assumptions used to measure benefit obligations at December 31
Discount rate	3.80	%	4.00	%	3.70	%	1.80	%	2.40	%	2.34	%
Rate of compensation increase	N/A		N/A		N/A		2.45	%	2.40	%	2.49	%

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, 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 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, 2015. 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)	$	11,210		$	1	$	—	$	11,211		$	4,631		$	0	$	—	$	4,631
Equity mutual funds (2)	99			—		—		99			90			—		—		90
Fixed income
Government and related (3)	—			9,854		—		9,854			—			7,482		16		7,499
Corporate bonds (4)	—			17,088		2		17,090			—			1,896		4		1,899
Mortgage and asset-backed securities	—			633		10		643			—			6		—		6
Fixed income mutual funds (5)	313			—		—		313			38			—		—		38
Insurance contracts	—			—		—		—			—			1,079		—		1,079
Cash and short-term investments (6)	244			2,305		—		2,549			142			422		—		564
Real estate	—			—		—		—			—			—		411		411
Derivatives (7)	(82		)	2		—		(80		)	(1		)	481		—		480
Other mutual funds (8)	—			—		—		—			115			—		—		115
Subtotal	11,784			29,884		12		41,680			5,016			11,366		431		16,812
Investments measured at net asset value using the NAV practical expedient (9)	—			—		—		10,179			—			—		—		18,986
Other (10)	—			—		—		(143		)	—			—		—		(50		)
Fair value of plan assets	$	11,784		$	29,884	$	12	$	51,716		$	5,016		$	11,366	$	431	$	35,748

(1) Represents U.S. and international securities. The U.S. Plan includes IBM common stock of $34 million, representing 0.1 percent of the U.S. Plan assets. Non-U.S. Plans include IBM common stock of $14 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 $23 million, representing 0.04 percent of the U.S. Plan assets. Non-U.S. plans include IBM corporate bonds of $1 million representing 0.004 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

Total expected benefit payments

($ in millions)

									Total
	Qualified		Nonqualified		Qualified		Nonqualified		Expected
	U.S. Plan		U.S. Plans		Non-U.S. Plans		Non-U.S. Plans		Benefit
	Payments		Payments		Payments		Payments		Payments
2017	$	3,519	$	120	$	1,689	$	306	$	5,634
2018	3,519		121		1,705		301		5,646
2019	3,504		121		1,730		312		5,668
2020	3,589		122		1,741		358		5,809
2021	3,525		123		1,783		376		5,806
2022—2026	16,970		594		9,077		2,121		28,762

U.S. Pension Plans

RETIREMENT-RELATED BENEFITS

Reconciliation of the beginning and ending balances of Level 3 assets

($ in millions)

				Mortgage
				and Asset-
	Corporate			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

($ in millions)

				Mortgage
				and Asset-
	Corporate			Backed
	Bonds			Securities			Total
Balance at January 1, 2015	$	4		$	20		$	24
Return on assets held at end of year	0			0			0
Return on assets sold during the year	1			0			1
Purchases, sales and settlements, net	(5		)	(2		)	(7		)
Transfers, net	2			(8		)	(6		)
Balance at December 31, 2015	$	2		$	10		$	12

Non-US Pension Plans

RETIREMENT-RELATED BENEFITS

Reconciliation of the beginning and ending balances of Level 3 assets

($ in millions)

	Government		Corporate			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

($ in millions)

	Government			Corporate
	and Related			Bonds		Real Estate			Total
Balance at January 1, 2015	$	32		$	1	$	411		$	444
Return on assets held at end of year	(2		)	0		28			26
Return on assets sold during the year	0			0		42			42
Purchases, sales and settlements, net	(10		)	3		(51		)	(58		)
Transfers, net	—			—		—			—
Foreign exchange impact	(3		)	0		(20		)	(23		)
Balance at December 31, 2015	$	16		$	4	$	411		$	431

Nonpension Postretirement Plans

RETIREMENT-RELATED BENEFITS

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

($ in millions)

	Nonpension Postretirement Benefit Plans
	U.S. Plan									Non-U.S. Plans
For the year ended December 31:	2016			2015			2014			2016			2015			2014
Service cost	$	17		$	24		$	26		$	5		$	7		$	7
Interest cost	165			163			187			51			50			63
Expected return on plan assets	0			0			0			(6		)	(7		)	(9		)
Amortization of transition assets	—			—			—			0			0			0
Amortization of prior service costs/ (credits)	(7		)	(7		)	(7		)	(5		)	(5		)	(5		)
Recognized actuarial losses	20			39			0			9			10			11
Curtailments and settlements	—			—			—			(38		)	0			0
Total net periodic cost	$	195		$	218		$	206		$	16		$	55		$	66

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

	Nonpension Postretirement Benefit Plans
	U.S. Plan						Non-U.S. Plans
	2016		2015		2014		2016		2015		2014
Weighted-average assumptions used to measure net periodic cost for the year ended December 31
Discount rate	3.70	%	3.40	%	4.10	%	7.06	%	7.51	%	7.78	%
Expected long-term returns on plan assets	N/A		N/A		N/A		9.95	%	10.17	%	10.22	%
Weighted-average assumptions used to measure benefit obligations at December 31
Discount rate	3.60	%	3.70	%	3.40	%	8.26	%	7.06	%	7.51	%

N/A—Not applicable

Total expected benefit payments

($ in millions)

							Total
			Qualified		Nonqualified		Expected
	U.S. Plan		Non-U.S. Plans		Non-U.S. Plans		Benefit
	Payments		Payments		Payments		Payments
2017	$	396	$	6	$	30	$	432
2018	397		6		32		435
2019	403		6		34		443
2020	405		6		37		448
2021	395		7		39		441
2022—2026	1,743		36		219		1,998