International Business Machines Corp., Armonk, N.Y., increased the fixed-income target allocation and reduced the equities target in its U.S. defined benefit plan, the company disclosed in a 10-Q filing with the SEC on Tuesday.
The company initiated the change in March, the filing said, increasing the target to fixed income to 79% from 70% and dropping equities to 12% from 20%.
The change “is designed to reduce the risk associated with the potential negative impact that equity markets might have on the funded status of the U.S. defined benefit plan,” the filing said.
The third target category of “other investments” will remain unchanged at 10%. How the additional 1% that fixed income gained will be funded could not be immediately learned.
The filing also said the change in target allocation is “expected to reduce the 2018 expected long-term rate of return on assets” to 5.25% from 5.75%.
As of Dec. 31, U.S. pension plan assets totaled $51.4 billion, while projected benefit obligations totaled $52.22 billion, for a funding ratio of 98.4%, according to IBM's most recent 10-K filing with the Securities and Exchange Commission. IBM does not expect to make any contributions to the plan in 2017.
An IBM spokesman could not be immediately reached to provide further information.