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IBM To Pump $3 Billion Into U.S. Pension Fund

Improved showing by stock market prompt vendor to fully fund plan this year, rather than over three years.
The stock market's return to health prompted IBM this week to disclose that it plans to fully fund its U.S. pension plan through a $3 billion contribution, double what the company was originally considering for this year. It would be the first time since 1995 that IBM contributed to its U.S. pension plan, which represents about two-thirds of the company's total worldwide pension plans.

Earlier this year, IBM indicated its U.S. pension fund would be underfunded by $4.5 billion and that it would contribute $1.5 billion per year through 2005 to make up the difference. But IBM says equity markets have improved, pulling up the status of its pension fund as well. The company also says it will continue to invest about $5 billion in research and development for the year as well as spend money on companies and technology that further its E-business on-demand strategy.

"We view IBM's move as a positive one," says Philip Walker, a senior director at Fitch Ratings, an international market-rating agency. "They see a deficit and are taking responsibility for funding the plan."

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