## Postretirement Benefits

The company and its U.S. subsidiaries have medical, dental, and life insurance plans for retirees, the estimated costs of which are fully accrued and funded with an independent trustee at the time an employee retires. These costs amounted to $12 million, $222 million, and $129 million in 1985, 1984, and 1983, respectively. Costs in 1985 were lower than in 1984 primarily because significantly fewer employees retired in 1985. Favorable investment fund performance also contributed to the reduction in costs.

Certain of the company's non-U.S. subsidiaries have similar plans for retirees. However, many retirees outside the U.S. are covered by government-sponsored and administered programs. As a result, the costs of company-sponsored programs outside the U.S. are not significant.

### Other Liabilities

Other liabilities consist principally of indemnity and retirement plan reserves for non-U.S. employees.

### Stock Purchase Plan

The 1981 Employees Stock Purchase Plan enables employees who are not participants in a stock option plan to purchase IBM's capital stock through payroll deductions of up to 10% of eligible compensation. The price an employee pays for a share of stock is 85% of the average market price on the date the employee has accumulated enough money to buy a share. During 1985, employees purchased 5,095,810 shares, all of which were treasury shares, for which $560 million was paid to IBM. At December 31, 1985, 13,666,470 reserved unissued shares remain available for purchase under the Plan.

### Stock Option Plans

The stock option plans provide for granting officers and other key employees options to purchase IBM's capital stock at 100% of the market price on the day of grant. Options have a maximum duration of 10 years and may be exercised in up to four annual installments, commencing one year from the date of grant.

The plans are administered by the Executive Compensation Committee of the Board of Directors. The Committee may, at its discretion, grant Stock Appreciation Rights (SARs) to holders of options. Such rights offer optionees the alternative of electing not to exercise the related stock option, but to receive instead an amount in cash, stock, or a combination of cash and stock equivalent to the difference between the option price and the average market price of IBM stock on the date of exercising the right.

The plans also provide, subject to Committee approval, that payment by the optionee upon exercise of an option may be made using IBM stock as well as cash.

The following table summarizes stock option transactions during 1985:

| Number of Shares |
| --- |
| Under Option | Available for Option |
| Balance at January 1, 1985 | 14,104,664 | 3,454,935 |
| Options granted | 2,970,001 | (2,970,001) |
| Options terminated | (149,569) | 99,318 |
| Options cancelled—SARs exercised | (329,405) | — |
| Options exercised | (2,680,043) | — |
| Balance at December 31, 1985 | 13,915,648 | 584,252 |
| Exercisable at December 31, 1985 | 8,758,604 | — |

The options exercised during 1985 were at an average option price of $63.13 per share. The 13,915,648 shares under option at December 31, 1985, are at option prices ranging from $40.28 to $130.82 per share.