2011 IBM benefits summary

Table of contents2011 IBM benefits summary Eligibility About your health and disability benefits Medical choices IBM PPO (preferred provider organization) IBM PPO Plus IBM Exclusive Provider Organization IBM High Deductible PPO with Health Savings Account Health Maintenance Organization 2011 Medical benefits: Comparing options 2011 Medical benefits: Comparing plan features Care Advantage Program Managed Mental Healthcare Program Prescription drug benefits Medical options comparison chartprescription drugs Dental choices IBM Dental Plus IBM Dental Basic CIGNA Dental Maintenance Alternative (DMA) Vision choices IBM Vision Plan Vision Discount Card Employee Monthly Contributions Disability coverage Short-Term Disability Income Plan Long-Term Disability Plan Other IBM Benefits Programs New Hire Healthy Living Rebate Employee Assistance Program Health Care Spending Account Dependent Care Spending Account Special benefits and services Special Care for Children Assistance Plan Adoption Assistance Program Lifeworks IBM Leave of Absence Programs Life insurance, survivor benefits and other options IBM-provided insurance and survivor benefits Group Life Insurance Survivor Health Benefit Transitional Medical Program (TMP) Travel Accident Insurance Plan Optional insurance opportunities Group Universal Life Insurance Program Long-Term Care Insurance Program Access to post-employment health care Time for leisure activities Holiday Plan Vacation Plan Capital accumulation and investment IBM 401(k) Plus Plan Employees Stock Purchase Plan IBM MoneySmart Disclaimer 3 3 3 3 3 3 4 4 4 5 6 6 6 7 7 8 8 8 8 9 9 9 9 10 10 10 10 10 10 11 11 11 11 11 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 14 14 15 15 15

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IBM has implemented policies and practices to appropriately protect the privacy of your personal health information. Personal health information you provide will be handled in accordance with IBM Corporate Instruction HR113 98/11:Protection of Employee Information and the IBM Guidelines for the Protection of Employee Information. To obtain a copy of these documents, please contact the IBM Employee Services Center. The benefits described in this brochure are for IBM regular employees.

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2011 IBM benefits summaryIBM offers a competitive benefits program, designed to help employees build a solid financial foundation to meet a diverse array of needs health care, retirement security, income protection and personal interests. Key features: A health benefits portfolio that provides strong support for employee well-being and preventive care, comprehensive coverage to meet a range of medical situations, and solid protection against the cost of serious injury or illness. A retirement program that helps build future financial security through a leading-edge 401(k) plan and other capital accumulation programs. Income protection in case of serious illness, injury or death, including life insurance and disability benefits. Opportunity to follow leisure pursuits through vacation, personal leave and holiday plans. Eligibility You are eligible for all applicable benefit programs, except the IBM Employee Stock Purchase Plan, beginning with your first day of employment. Health care coverage (medical, dental and vision) is available for you, your spouse or eligible domestic partner, eligible children and other dependents. IBM requires documentation to support the eligibility of any dependent enrolled in an IBM benefit plan. If you do not provide sufficient documentation to the IBM plan administrator in a timely fashion following your dependents enrollment, that dependent will lose IBM coverage and will remain ineligible for future coverage. About your health and disability benefits IBM provides a range of options, to allow employees to design a personalized program that meets their personal or family circumstances. You can enroll in benefits when you first join IBM, and youll have the opportunity to review and change your benefits each year during the enrollment period, usually held in the fall. Employees pay for their share of benefit coverage through payroll deductions. IBMs medical options include: IBM Preferred Provider Organization (PPO) IBM PPO Plus IBM Exclusive Provider Organization (EPO) IBM High Deductible PPO with Health Savings Account (HSA) and Health maintenance organizations (HMOs), where available. IBM also offers up to three dental options in most locations, along with vision care coverage and flexible spending accounts. Coverage under the IBM PPO, IBM High Deductible PPO with HSA and IBM Dental Basic is available to full-time employees at no cost for employee-only coverage. Employees who decline medical or dental benefits, or both, can receive a no-coverage credit of up to $35 per month. IBM offers service-based disability benefits. Those with less than five years of service receive company-paid short-term benefits of 100% of pay for the first three months of disability, and 662/3% of pay for the second three months. Employee-paid long-term disability insurance is available for purchase with before-tax dollars. After five years of service, employees receive company-paid short-term disability of 100% of pay for six months, and long-term disability insurance of 50% percent of pay, with the opportunity to purchase additional coverage using before-tax dollars. More detail about IBMs full program of health, retirement and income protection benefits follows.

Medical choicesIBM PPO (preferred provider organization) The IBM PPO has a broad nationwide network of providers that provide care at discounted rates and offers the flexibility to receive care out-ofnetwork at higher costs. It offers strong coverage for prevention, wellness and routine medical care, including in-network eligible, routine preventive screenings and preventive office visits at no cost. Additionally, care provided by your innetwork primary care physician is covered at 100%. You may see any provider you choose without obtaining a referral. If you reach the annual out-of-pocket maximum, the plan will pay 100% of your in-network medical expenses for the remainder of the year. Coverage through the IBM PPO is available to all full-time employees at no cost for 2011. IBM PPO Plus The IBM PPO Plus offers the same broad network of providers that is available through the IBM PPO, along with the flexibility to seek care out-of-network at a higher cost (a deductible may apply). You may see any provider you choose without obtaining a referral. Under PPO Plus, you'll pay a higher monthly contribution for coverage and with no innetwork deductible potentially lower overall

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costs for care. If you reach the annual out-ofpocket maximum, the plan will pay 100% of your eligible medical expenses for the remainder of the plan year. It offers strong coverage for prevention, wellness and routine medical care. There is no charge for in-network eligible, routine preventive services. Care provided by your innetwork primary care physician will be covered at 100%. IBM Exclusive Provider Organization The IBM Exclusive Provider Organization (EPO) offers some of the features of an HMO, with the coinsurance-based cost structure found in most preferred provider organizations (PPOs). The IBM Exclusive Provider Organization is an "innetwork-only" option, which means you must use network doctors, hospitals and other facilities to receive benefits. Participants pay coinsurance for most services and fixed copayments for higher cost services, such as inpatient hospital care, outpatient surgery and emergency room visits. You may see any network provider that you choose without a referral. In addition to the preventive and routine care coverage offered by the IBM PPO options, the IBM Exclusive Provider Organization offers significant protection for serious or chronic medical conditions. Additionally, care provided by your in-network primary care physician will be covered at 100%. IBM High Deductible PPO with Health Savings Account The IBM High Deductible PPO with Health Savings Account is similar to the IBM PPO option. It is a high-deductible option that offers a unique featurea health savings accountwhich you can use to pay for eligible current out-ofpocket medical costs or save for your future health care expenses. For participants who enroll in the Health Savings Account, IBM will contribute up to $500 in 2011. Employees may contribute up to an additional $2,550 per individual ($5,650 per family) to this account. Like the other IBM PPO options, there is no charge for in-network eligible, routine preventive services. However, to comply with Internal Revenue Service (IRS) regulations for Health Savings Accounts (HSAs), all other services (with the exception of certain preventive prescription drugs) are subject to the deductible. Under this plan, primary care will be covered at 100% after the deductible has been satisfied.

The IBM High Deductible PPO with Health Savings Account features other provisions that conform with recent HSA guidelinesfor example, the deductible amount itself meets the IRS requirement for a high deductible plan. The deductible and out-of-pocket maximums also work differently under the IBM High Deductible PPO with Health Saving Account, particularly if you enroll dependents in this option. If you enroll for employee-only coverage, you must first meet the individual deductible amount ($2,079) before the plan pays benefits. If you enroll one or more dependents in the IBM High Deductible PPO with Health Savings Account option, you are responsible for meeting the family deductible ($4,158) before receiving benefits from the plan, even if only one of the individuals covered seeks care during the year. Similarly, your medical expenses must exceed the family out-of-pocket maximum for the year before the plan will begin paying 100% of your covered medical expenses for the remainder of the year. Other conditions and limitations may apply. A Health Savings Account is different from a Health Care Spending Account in that unused contributions to a Health Savings Account simply roll over to the next yearthey are not forfeited. It is also important to note that you may enroll in either the IBM Health Care Spending Account or the IBM High Deductible PPO with Health Savings Account for 2011, but not both. Coverage through the IBM High-Deductible PPO with HSA is available to all full-time employees at no cost for 2011. Health maintenance organization A health maintenance organization (HMO) provides comprehensive, coordinated health care services for a fixed prepaid fee through a network of providers. Participants are typically responsible for copayments for physician visits and other services. Generally, you arent covered for services outside the network, except for emergencies. When you enroll in an HMO, you select a primary care physician (PCP) to coordinate your care.

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2011 Medical benefits: Comparing options

IBM PPO

IBM PPO Plus

IBM EPO

IBM High Deductible PPO with HSA High Deductible Preferred Provider Organization with Health Savings Account (HSA) Moderately managed

Typical HMO

Plan type

Preferred Provider Organization

Preferred Provider Organization

Exclusive Provider Organization

Health Maintenance Organization

Level of managed care

Moderately managed

Moderately managed

Highly managed

Highly managed

Key features

You may obtain care from in- and out-ofnetwork providers; youll receive the highest level of benefits if you use network providers. No charge for eligible innetwork preventive services. No charge for primary care office visits

Same structure and flexibility as IBM PPO, higher cost for coverage in exchange for deductible free innetwork care, including hospital services. No charge for eligible innetwork preventive services. No charge for primary care office visits

You may obtain care through a network of providers; no coverage if you go out of network. No charge for eligible in-network preventive services. No charge for primary care office visits

You may obtain care from in- and out-of-network providers; HSA lets you use tax-free dollars to pay for current or save for future health care needs; IBM will contribute up to $500 in 2011. No charge for eligible in-network preventive services. No charge for primary care office visits after deductible is satisfied.

You may obtain care through a network of providers to receive benefits; no coverage if you go out of network.

Primary care physician (PCP) Referral

Not required

Not required

Not required

Not required

PCP is required to coordinate all your care.

Filing claims

You file claims for outof-network care only

You file claims for outof-network care only

No claim form to file

You file claims for out-ofnetwork care only

No claim form to file

Primary Care Care provided by your in-network primary care physician will be covered at 100% under the IBM PPO, IBM PPO Plus and IBM EPO options. Under the IBM High Deductible PPO with HSA, primary care will be covered at 100% after the deductible has been satisfied, Primary care physicians include general practitioners, internists, family practitioners and pediatricians. Keep in mind that the doctor may perform tests or request other services (e.g. lab) that will have a separate charge that may be subject to the deductible and applicable coinsurance.

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2011 Medical benefits: Comparing plan features

Plan Feature

IBM PPO

IBM PPO Plus

IBM EPO

IBM High Deductible PPO with HSA $2,079/$4,158 (combined in- and out-of-network)

Typical HMO None

Annual deductible (individual/family)

In-network: $964/$2,892 Out-of-network: $1,686/$5,238 In-network: No charge Out-of-network: You pay 45% Deductible-free In-network: No charge for PCP; You pay 25% for SCP Deductible free Out-of-Network: You pay 45% after deductible

In-network: none Out-of-network: $1,686/$5,238

None

Routine Preventive Services

In-network: No charge Out-of-network: You pay 45% Deductible free In-network: No charge for PCP; You pay 25% for SCP Deductible free Out-of Network: You pay 45% after deductible

No charge

In-network: No charge Out-of-network: You pay 45% Deductible free In-Network: No charge for PCP after deductible; You pay 20% for SCP after deductible Out-of-Network: You pay 45% after deductible In-network: You pay 30% after deductible Out-of-network: You pay 45% after deductible

Varies by HMO

Other Office Visits

No charge for PCP; You pay 25% for SCP

Varies by HMO

Hospital, Out-patient Surgery

In-network: You pay 20% after deductible Out-of-network: You pay 45% after deductible

In-network: You pay 20% Deductible-free Out-of-network: You pay 45% after deductible

$589 copay inpatient per admission Outpatient: You pay 25% per admission.; Outpatient nonsurgical facility: you pay 20% Unlimited

Varies by HMO

Lifetime Benefit Maximum Annual out-ofpocket maximum (includes deductible)

Unlimited

Unlimited

Unlimited

Unlimited

In-network: $6,425/$11,566 Out-of-network: $11,789 /$21,217

In-network: $4,278/$6,417 Out-of-network: $11,789 /$21,217

$5,894/$10,609

In-network: $5,950/$11,789 Out-of-network: $12,573/$18,860

Varies by HMO

Care Advantage Program The IBM PPO, IBM PPO Plus, IBM EPO and IBM High Deductible PPO with Health Savings Account plans feature the Care Advantage Program, designed to help manage employees health care services. This program includes oneon-one outreach and support to those with serious illness and other complex medical situations. Care coordinators registered nurses employed by each of the regional health plans and available 24 hours a day, 7 days a week will provide precertification for inpatient hospital admission, medical consulting services, assistance and support to IBM medical plan participants and their families. Access to expert assistance in managing chronic conditions is also available through Care Advantages condition management program, administered by Alere, formerly Matria Healthcare. Support is provided for those with

asthma, congestive heart failure, coronary artery disease, depression and diabetes. Managed Mental Health Care Program The Managed Mental Health Care Program provides comprehensive inpatient and outpatient treatment for emotional and psychological problems, substance abuse and related conditions. Participants have access to a network of licensed psychiatrists, psychologists, social workers, psychiatric nurses, and mental health and substance-abuse facilities. Pre-certification is required to receive the highest level of reimbursement. Services are available to employees and their dependents enrolled in IBM PPO, IBM PPO Plus, IBM Exclusive Provider Organization and IBM High Deductible PPO with Health Savings Account.

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Prescription drug benefits Under IBM PPO, IBM PPO Plus, IBM EPO, and the IBM High Deductible PPO with Health Savings Account, prescription drugs are provided by Medco through the IBM Managed Pharmacy Program. Employees can save money on retail and home-delivery prescription drugs when a prescription is filled through a Medco participating pharmacy or through the Medco Pharmacy, Medcos home delivery pharmacy. Employees will be charged a coinsurance fee for prescriptions received from both retail pharmacies and Medcos mail order pharmacy. Coinsurance and per prescription maximums may vary. Refer to the prescription drug chart for details.

Under the IBM High Deductible PPO with Health Savings Account, prescription drug benefits, with the exception of preventive drugs, are subject to the plan deductible.

Prescription Drug Coverage the maximum you pay: Traditional Medications Generic Formulary Brand Non-Formulary Brand Specialty Medications Generic Formulary Brand Non-Formulary Brand Retail Pharmacy 20% up to $22 20% up to $71 45% up to $143 Mail Order 20% up to $24 20% up to $160 45% up to $322 Non-Participating Pharmacies 30% of actual cost 30% of actual cost 55% of actual cost

20% up to $24 20% up to $77 45% up tp $155

20% up to $26 20% up to $173 45% up to $349

30% of actual cost 30% of actual cost 55% of actual cost

GenericsAdvantage The GenericsAdvantage component of the IBM Managed Pharmacy Program reduces your out-ofpocket costs when you buy generic instead of brand name prescription drugs. If a generic equivalent (identical active ingredient) is available and you choose a brand name drug instead, you will pay the full generic coinsurance plus the difference in cost between the generic and brand name drug. The per prescription maximum will not apply as it usually would for Medco participating pharmacies and mail order prescriptions. However, if your physician validates it is clinically indicated for you to use the brand name drug, you will only pay the brand name coinsurance (and not the difference in cost). In those few cases where a particular brand name drug is comparably priced with a generic in the same class of drugs, prior authorization will not be required for that drug. Prior authorization will still be required for other brand name drugs in that class; otherwise they will not be covered. Specialty Medications If you require a prescription for a specialty medication, your doctor will first need to contact a Medco pharmacist for authorization to confirm that the treatment complies with standard clinical guidelines. This requirement will help ensure that you receive proper drug, dose and treatment based on your diagnosis. Note: For participants in fully insured HMOs, prescription drug benefits are provided through the HMO and vary by plan. See your Health Plan Detail Sheets for details.

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Dental choicesNot everyones dental needs are the same. Some employees may visit the dentist only twice a year for checkups; others may require more extensive work every year. The IBM Personal Benefits Program offers up to three different dental coverage options to meet these varying needs. IBM Dental Basic This option covers preventive, diagnostic and basic restorative dental care. There is no coverage for major restorative care or orthodontia. Employees have the flexibility to use any eligible dentist. However, employees can receive a higher level of benefits if they use a network provider. If employees use an in-network dentist, the plan covers preventive care at 100% (including up to two routine exams per year). For minor restorative care, employees will pay 20% of a specially negotiated fee, with no deductible. If employees use an out-of-network dentist or live in an area where a network dentist is not available, they pay 20% of the U&P rate plus any amount above the U&P rate for covered preventive and minor restorative care expenses. There is no annual deductible. IBM Dental Basic pays benefits up to an annual benefit maximum of $500 per covered individual. There is no lifetime benefit maximum. IBM Dental Plus This option covers a broad range of dental services, including preventive, diagnostic, basic and major restorative care, and orthodontia. Although employees have the flexibility to use any eligible dentist, they can receive a higher level of benefits if they use a network provider. If employees use a dentist in the network, the plan covers preventive care at 100% (including up to two routine exams per year). For all other eligible expenses, employees pay a percentage of specially negotiated fees, with no deductible, as follows: 20% for minor restorative care 35% for major restorative care 50% for orthodontia treatment up to a lifetime maximum of $2,500 If employees use an out-of-network dentist or live in an area where a network dentist is not available, they will pay a percentage of the usual and prevailing (U&P) rate, plus any amount above the U&P rate, after meeting a $50-per. person annual deductible (waived for preventive care) as follows: 20% for preventive and minor restorative care (no deductible for preventive care) 35% for major restorative care 50% for orthodontia treatment up to a lifetime maximum of $2,500 IBM Dental Plus pays benefits up to an annual maximum of $2,000 per covered individual. There is no lifetime maximum benefit except for orthodontic treatment benefitsup to $2,500 per covered individualwhich is not counted toward the annual maximum. CIGNA Dental Maintenance Alternative With the CIGNA Dental Maintenance Alternative (DMA) also known as the CIGNA Dental Health Maintenance Organization, or DHMO, employees receive dental care from dentists and other providers who are part of an organized network. A DMA is similar to an HMO in its managed-care approach. It offers lower out-of-pocket costs for most services, with no deductible to meet and no claim forms to file. Participants must select a primary care dentist to coordinate care. Generally, employees are not covered for care received outside the CIGNA DMA (or DHMO) network.

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Vision choicesIBM Vision Plan The IBM Vision Plan provides coverage for standard eye exams at 100% coverage if employees use an eye doctor who participates in the network. Or they can go out-of-network and see the provider of their choice. With out-ofnetwork care, reimbursement is based on a schedule of benefits. 2011 Employee monthly contributions EmployeeMedical IBM PPO IBM PPO Plus IBM High Deductible PPO/Health Savings Account IBM EPO HMO Dental IBM Dental Basic IBM Dental Plus CIGNA DMA Vision Plan Discount Card $0 $65 $0 $75 Varies $0 $29 $13 $11.35 No charge(1)

VSP Vision Discount Card Employees can receive a free vision discount card, which allows them to save money each time they buy frames, lenses, contact lenses, or other eyewear purchased through specific vision care centers. Employees pay no monthly contributions for the card, but must enroll to receive it.

Additional cost for: Spouse or domestic partner$151 $216 $56 $226 Varies $20 $49 $32 $11.35 No charge

Each child (2)$84 $116 $37 $121 Varies $13 $32 $20 $11.35 No charge

Notes:(1) Employee monthly contributions apply to regular, full-time employees as of January 1, 2011 and may be subject to change.(2) Employees pay for each child they cover separately, up to six children. If they choose to cover more than six children, there is no additional cost.

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Disability coverageShort-Term Disability Income Plan The Short-Term Disability (STD) Income Plan provides employees with salary continuation for each day they are absent due to illness or injury, up to a maximum of 26 weeks in a period of 12 consecutive months. You are eligible for this coverage on your first day of employment. Employees with less than five years of service will receive: 13 weeks at 100% of pay Additional 13 weeks at 66 2/3% of pay Employees with five or more years of services will receive: 26 weeks at 100% of pay The benefits provided under this plan are offset with any Social Security Disability Income or Workers Compensation payments, or both. To receive STD benefits, employees may be asked to provide supporting documentation. In the event employees become totally disabled, they receive maximum benefits under this plan before benefits begin under the Long-Term Disability (LTD) Plan. Long-Term Disability Plan This plan provides employees with important income protection if they become sick or injured for an extended period of time. For employees with less than five years of service, the plan offers the following options: No coverage 50% of pay, employee-paid with before-tax dollars 66 2/3% of pay, employee-paid, with before- tax dollars If you do not choose an LTD coverage option when you enroll, you will be automatically enrolled in the 50% LTD option. For employees with five or more years of service, the plan offers the following options: 50 percent of pay (employer-paid) Buy-up to 66 2/3 percent of pay (employee-paid with before-tax dollars) Coverage is offset with other sources of disability income, such as Social Security Disability Income or Workers Compensation, or both. The LTD period begins on the date immediately following the expiration of the STD Income Plan coverage.

Other IBM benefit programsNew Hire Healthy Living Rebate IBM offers a $150 Healthy Living Rebate to encourage and support newly hired employees who want to take steps to identify their preventive care needs and personal health risks. To receive the New Hire Healthy Living Rebate, employees must enroll to participate in this program when making initial benefits enrollment elections and then complete the online program which includes the following steps by Dec. 31, 2011: Completion of an online Health Risk Assessment. Initiating use of your online Personal Health Record. Accessing IBMs Wellness for Life Web site and learning which wellness tools would be most valuable for you this year. If you elect to participate, youll receive an e-mail after your benefits enrollment period ends with detailed information about program requirements and how to get started.. The New Hire Healthy Living Rebate program is available online at the Health Management Center, provided by WebMD for IBM, accessible through NetBenefits. Employee Assistance Program All benefits-eligible participants and their eligible family members have access to the Employee Assistance Program (EAP), which offers up to eight counseling sessions per situation per year at no cost to you. This benefit is available regardless of your benefits plan, or even if you elect No Coverage through IBM. To access the EAP, call OptumHealth Behavioral Solutions referral line at 800-445-9720 (TTY: 800-5255668), available 24 hours a day, 7 days a week, and staffed by licensed mental health professionals with clinical experience in treating a range of mental health and substance abuse care needs.

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Health Care Spending Account Active employees can elect to use the Health Care Spending Account to set aside up to $5,100 per year ($425 a month) for eligible health care expenses. Contributions are deducted from each paycheck on a before-tax basis. These expenses, which otherwise might be paid with after-tax dollars, can include deductibles, copayments and other unreimbursed medical, dental, vision and hearing expenses. Expenses for eligible family members can also be reimbursed, even if they are not covered under the employees benefits. The Internal Revenue Service (IRS) has established a number of regulations governing such plans. For example, the account cannot be used to pay premiums for coverage under other health care plans. Also, any money remaining in the account must be forfeited if it is not used for expenses incurred during the plan year. Employees who participate in the Health Care Spending Account and are also enrolled in the IBM PPO, IBM PPO Plus, IBM Exclusive Provider Organization or certain HMOs will receive a Health Debit Card a stored value card that will enable them to pay their portion of the cost of eligible prescription drugs through automatic deduction from their Health Care Spending Account. When employees use this card at a participating retail pharmacy or through home delivery, their Health Care Spending Account will be debited for the copay or coinsurance amount when prescription drugs are purchased. Using the Health Debit Card will eliminate the need for employees to file claims to receive reimbursement for out-of-pocket prescription drug costs. Reminder: You may enroll in either the Health Care Spending Account or the IBM PPO/Health Savings Account, but not both. Dependent Care Spending Account The Dependent Care Spending Account (DCSA) lets employees allocate before-tax dollars to an account to help pay for eligible dependent care expenses. Based on federal tax legislation, the plan is an alternative to the tax credit allowed for child and dependent care expenses. Highlights of the plan are as follows:

Before each plan year, employees can elect to set aside an amount of money based on their estimated dependent care expenses. Participation is allowed if employees need dependent care to enable themselves and their spouses to work, or themselves to work and their spouses to attend school full-time. The amount elected is deducted from their paychecks before taxes. An annual maximum of $5,000 can be set aside for dependent care. Any unused money set aside is forfeited.

Special benefits and servicesSpecial Care for Children Assistance Plan The Special Care for Children Assistance Plan (SCCAP) provides financial assistance outside the scope of the medical and dental plans for the care of a child with a mental or physical disability, or both, or a child with a developmental or learning disorder. Each case is individually reviewed to determine eligibility for assistance. Upon approval, reimbursement is provided for a portion of the eligible charges incurred, up to a lifetime maximum of $50,000 per child or until the child attains the age of 26, or until the child is no longer eligible under the IBM Medical and Dental Benefits Plans, whichever comes first. The following types of treatment and services may be eligible for coverage under SCCAP: Special education facilities Independent practitioners and services Academic remediation Evaluation and testing Special devices Adoption Assistance Program The Adoption Assistance Program provides financial assistance toward expenses incurred in the adoption of minor children. Employees are eligible for this benefit from the first day of employment. The program covers 80% of eligible expenses up to a maximum of $2,500 per adoption per family. Eligible expenses include: Adoption agency fees Placement fees Lawyers and other required legal fees Hospital expenses (while both birth mother and infant are in the hospital).

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LifeWorks To help employees balance personal and professional responsibilities, IBM offers LifeWorks, a free resource and referral program to help employees organize time, find child care, plan an adoption, plan budgets, adjust to changes at work, obtain elder care referral services and more. IBM Leaves of Absence Program The IBM Leaves of Absence (LOA) Program provides employees unpaid time away from work for an extended period. Employees can request an LOA for a variety of circumstances such as dependent care or continuing education. Eligibility for voluntary LOAs (for example, personal leaves, Peace Corps leaves or continuing education) is based on business needs and satisfactory job performance. Voluntary LOAs are granted based on management approval. In some situations, time off is required by law, such as military leave or Family and Medical Leave Act time off. While they are participating in the LOA Program, in most cases, employees will be eligible for similar benefit plans and programs as other regular employees. The cost for coverage will remain the same unless changes are made to existing coverage.

by the IRS as taxable income (referred to as imputed income) and employees are responsible for the associated taxes. Survivor Health Benefit When an eligible employee dies, coverage for eligible survivors can continue under the Transitional Medical Program (TMP) for up to 36 months from the date coverage ends under IBM, should the survivor elect to enroll in TMP. Coverage and contributions for a surviving spouse and eligible dependents are determined by the plan in effect at the time of the employees death, and may be modified thereafter. Transitional Medical Program The Transitional Medical Program (TMP) is a health care continuation of coverage program available to participants of the IBM plans when eligibility for IBM health care benefits ceases. TMP satisfies the requirements of federal legislation (COBRA), which gives continuation rights to employees and their dependents who lose coverage due to certain qualifying events (for example, termination, divorce, death, loss of dependent eligibility). Under TMP, for a limited time, employees can continue coverage equivalent to that which they had been receiving as an IBM benefits recipient or covered dependent. Employees pay for coverage at 102% of the group rate. In some instances, the coverage may be subsidized for a period of time. Travel Accident Insurance Plan Provides insurance benefits if employees are traveling away from their job locations or homes on authorized company business. Eligibility starts with the first day of employment. The plan provides benefits up to five times annual eligible compensation ($50,000 minimum) for accidental bodily injuries that result in death, dismemberment or loss of sight. Optional insurance opportunities Group Universal Life Insurance Program Employees have the opportunity to apply for term-life coverage for themselves or their eligible family members, or both, under the Group Universal Life (GUL) Insurance Program. Employees enrolled in this program may receive coverage up to eight times their annual base salaries. Coverage for spouse is available up to $200,000 and child rider coverage for $10,000 is available for each eligible child. Optional Accidental Death and Dismemberment (AD&D) coverage, which doubles the basic coverage in the event of accidental death, is available for employees and their spouses. Employees must apply for GUL.

Life insurance, survivor benefits and other optionsIBM provides, at no cost to the employee, life insurance and business travel accident insurance. Employees also have the option to purchase additional life and long-term care insurance at group rates. Additionally, health care coverage for surviving spouses and eligible surviving dependents is provided for a period of time. The insurance provided by IBM, as well as optional insurance opportunities, are summarized in the following sections. IBM-provided insurance and survivor benefits Group Life Insurance The IBM Group Life Insurance (GLI) benefit equals one times an employees annual eligible compensation, up to a maximum of $1 million. The IBM GLI plan includes a feature for terminally ill employees to have access to onehalf of their benefits (up to $50,000), with the remaining benefit paid to the beneficiary as a lump sum. Although the GLI plan is offered to all IBM employees at no cost, the value of the premiums for coverage above $50,000 is viewed

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Eligible employees who apply within the first 90 days of hire may receive coverage of two times their annual base pay, not to exceed $750,000, with no medical evidence and coverage of greater than two times annual base pay with simplified evidence of good health. For financial-planning purposes, GUL has a capital accumulation feature that offers an opportunity to earn tax-deferred interest on cash contributions made while insured. Based on age and each $1,000 of life insurance coverage, employees are allowed to deposit cash in the form of an additional premium, which then earns tax-deferred interest. The GUL program is administered and underwritten by The Prudential Insurance Company of America. This program is not endorsed by IBM.

Those who are eligible for access can continue IBM health care coverage for themselves and eligible dependents by paying full retiree group rates. There is no time limit or maximum coverage period; however, election of coverage is a one-time enrollment opportunity. If coverage is not elected within the specified enrollment period immediately following retirement from IBM, employees are considered to have declined access coverage and they waive the right to any future election of coverage.

Time for leisure activitiesHoliday Plan IBM provides 12 holidays each year; six days are observed nationally: New Years Day Memorial Day Independence Day Labor Day Thanksgiving Day Christmas Day The other six holidays vary by location based on operating requirements or local custom. At least one of these is considered a personal-choice day. Vacation Plan The Vacation Plan is based on years of service. Scheduling is based on business and personal preference. Employees can take vacation any time during the year in weeks, days or half-days.IBM service Weeks of vacation 3 4

Long-Term Care Insurance Program Optional long-term care insurance provides valuable financial protection to employees and their families by covering a wide range of services associated with chronic illness or disability, such as Alzheimers disease. Employees have the opportunity to purchase long-term care insurance that will pay benefits for long-term care services up to a lifetime maximum of $848,625. The Long-Term Care Insurance Program, specifically developed for IBM by John Hancock Mutual Life Insurance Company, includes the following features: Guaranteed acceptance for employees who enroll within 90 days of hire Favorable group rates for all enrollees including spouse, retirees, parents and parents-in-law Note: Insurance for other than the employee requires proof of insurability. Reimbursement for a range of services, including nursing home care, home health care, adult day care, alternate care facilities and respite care Choice of four daily maximum coverage options $155, $235, $345 or $465 per day Inflation adjustment feature Access to post-employment health care Newly hired employees will have access to postretirement IBM health care coverage if certain age and service requirements are met. Employees will be eligible for access if they leave IBM at age 55 with at least five years of service, and their age plus service equals 65 (Rule of 65).

Less than 10 years 10 or more years

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Capital accumulation and investmentIBM 401(k) Plus Plan With IBM 401(k) Plus, employees have at least three ways to save: before-tax, after-tax, or through a Roth 401(k) option or all three. Each option has different advantages for you and different tax consequences. Savings are automatically deducted from your paycheck, and you decide how to invest them. Save before-tax: Subject to an IRS annual contribution limit that can change each year, you can save up to 80% of your eligible pay before taxes are deducted. When you use this savings feature, IBM matches your savings; plus, you lower your taxable income. You will pay income tax on this savings and any investment growth when you withdraw the money. Save after-tax: You can also save up to 10% of your eligible pay on an after-tax basis, to provide further flexibility. You do not have to first reach the IRS savings limit to use this option. With this feature, you contribute after taxes have been deducted, while any investment growth on those amounts is tax deferred. That means you will not owe taxes on any investment growth until you withdraw the money, when its taxed as ordinary income. Roth 401(k): This feature allows you to save on an after-tax basis now but any investment growth on your contribution is completely tax-free when you withdraw the money at a later date, assuming certain requirements are met. (Your Roth 401(k) account must be at least five years old when you withdraw it, and you must take the money after you reach age 59 to qualify for this tax treatment). Your Roth 401(k) contributions are eligible to receive IBM matching contributions. IBM matching contributions on the sum of your before-tax and Roth 401(k) contributions will not exceed 5% of your pay. Withdrawals of IBM matching contributions are not tax-free. Together, the sum of your Roth 401(k) and before-tax 401(k) contributions may not exceed the maximum IRS annual contribution. Key features of IBM 401(k) Plus Plan are: Eligible on date of hire Automatically enrolled into the before-tax 401(k) at 5% of eligible earnings after approximately one month on payroll, if no action takenTier 4:

May increase contribution up to 80% of pre-tax earnings (subject to IRS limits) or may stop participation at any time After one year of service, IBM will: Contribute 1% to employees account regardless of their savings levels Match 100% of the first 5% and matched funds will be immediately vested Rollovers from former employers pre-tax qualified plan are allowed Loan provision is available Key provisions include: 32 primary investment options to select from, along with access to approximately 200 brand-name mutual funds through a Mutual Fund Window Several distribution methods Disability protection insurance (enrollment only during Fall Annual Enrollment Period) Secure Internet account access and transactions 401(k) Plus Plan Investment Options

Tier 1: Life Cycle Funds

Target Date: 2050, 2045, 2040, 2035, 2030, 2025, 2020, 2015, 2010, 2005 Life Strategy: Income Plus Conservative Moderate Aggressive

Tier 2: Core Funds

Stable Value Inflation-Protected Bond Total Bond Market Total Stock Market Index Total International Stock Market Index Real Estate Investment Trust Index International Real Estate Index Long-Term Corporate Bond High Yield & Emerging Market Bond Fund Large Company Index Large-Cap Value Index Large-Cap Growth Index Small/Mid-Cap Stock Index Small-Cap Value Index Small-Cap Growth Index European Stock Index Pacific Stock Index IBM Stock Mutual Fund Window 5 Families, nearly 200 funds

Tier 3: Expanded Choice Funds

Please read the IBM 401(k) Plus Plan Summary Plan Description for important information.

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Employees Stock Purchase Plan This plan gives employees an opportunity to purchase IBM stock through payroll deductions. Key provisions of the plan include: Employees may authorize up to 10% of eligible compensation, up to certain plan and regulatory limits, for the purchase of IBM stock through payroll deductions.

Employees can buy stock at a 5% discount off of themarket price on the date the shares are purchased. As a general rule, individuals who are active, regular employees of IBM or any of its eligible subsidiaries will be eligible to participate at the beginning of the offering period following their date of hire. (Dates of offering are normally January 1 and July 1.) More details on the plan can be found in the plan prospectus, which will be provided to you by your IBM HR manager. All IBM employees can also access the prospectus on the IBM intranet at w3.ibm.com/hr/global/espp. .

IBM MoneySmartIBM MoneySmart is a comprehensive program providing financial education and planning for U.S. employees. The program includes one-on-one phone counseling with MoneySmart coaches credentialed financial representatives who are specially trained in IBM programs and benefits. IBM has partnered with two leading financial firms - The Ayco Company, L.P.,a Goldman Sachs Company, and Fidelity Investments to help employees with financial decision-making on a range of issues, including retirement and estate planning, debt management, college savings, tax strategies and others.

Important Legal Information: This document is intended to provide highlights of certain benefit plans in which you may be eligible to participate. Complete details are found in the official plan documents, which are the complete and exclusive statement of the Companys obligations under the plan. The official plan documents shall govern in the event of a conflict between information contained in these are other documents and statements. The plan administrator retains exclusive authority and discretion to interpret the terms of the benefit plans and programs described herein. The Company reserves the right, in its sole discretion, to amend, change, suspend or terminate any benefit or other plan, program, practice or policy of the company at any time. The Company does not have any obligation to, and nothing contained in this document shall be construed as creating an express or implied obligation or promise on the part of the Company to, maintain, continue to offer, or make available such plans, programs, practices or policies. Eligibility to participate in a plan or program or receipt of benefits does not constitute a promise or right of continued employment or render any person an employee of IBM.

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