2013 IBM Benefits Enrollment Guide for IBM Retirees Not Eligible for Medicare

October 2012

Dear IBM Retiree or Benefit Recipient,

Welcome to annual enrollment. This is the time of year when you can make changes to your IBM health benefits.

This year there are relatively few plan changes, including the following: • The Health Savings Account contribution limits have increased for 2013. (See page 7.) • The in-network level of benefits for the IBM Vision Plan will only be available if you use a

provider in the Anthem Blue View Vision network. (See page 6.) • There are a few HMOs for which the contributions will increase at a greater rate than average

(See page 4.)

As health care costs continue to rise nationally, we continue to look for ways to help keep costs as low as possible. For example, we continue to offer a contribution-free medical option through the IBM High Deductible PPO option at no cost for retiree-only coverage to most retirees, and there will be no change to annual deductible and out-of-pocket maximum amounts for 2013.

In addition, most of you will again save on your monthly contributions — about $192 in premiums this year — as a result of IBM’s decision to participate in The Early Retiree Reinsurance Program (ERRP). The government subsidy, however, will not be available in 2014, so I want to be up front in letting you know this means many of you will see increased costs. I share the table below, as an example, to help put this into perspective for you:

2013 Monthly costs with ERRP

What 2013 Monthly costs would be without ERRP

Estimated 2014 monthly costs without ERRP and with health care trend (an assumption of

health care cost inflation of 8%) $333 $349 $417

(25% increase over 2013 monthly costs with ERRP)

We will consider ways to mitigate the increase through plan design changes, for example.

As a physician, I understand how hard it can be to optimize your quality of life when there is a health concern or threat of one. I encourage you to build a strong relationship with your primary care physician and consider your doctor as a partner when it comes to health care. We believe that kind of relationship can result in better health experiences and increase the likelihood that preventive services and screenings will occur when needed.

Like everything else we do to achieve success in our personal life, optimizing your health can be enhanced through a deep commitment to your goals. I ask that you make a healthier lifestyle one of your goals and commit to a healthier way of living today. Regular practices like physical activity, healthy food selections, and effective stress management — when coupled with guidance from your physician — all help to put you on the path to success.

Sincerely,

Kyu Rhee, MD, MPP Vice President, IBM Integrated Health Services

Guide to 2013 IBM Benefits Enrollment for Retirees Not Eligible for Medicare

Enrollment Period: Thursday, Oct. 25 – Friday, Nov. 16, 2012

In addition to information in this guide, complete details and resources you’ll need to research and select your coverage for 2013 are available to you online 24/7 on netbenefits.com/ibm. If you have questions or need assistance, call the IBM Employee Services Center at 800-796-9876 (TTY: 800-426-6537) on business days (excluding holidays recognized by the New York Stock Exchange) between 8:30 a.m. and 8:30 p.m. Eastern time to speak with a service representative.

Ensure Your E-mail Address on Record is Up to Date When you log on to netbenefits.com/ibm, take a few minutes to provide your e-mail address or update it if needed. Click the Your Profile link at the top of any page, then the E-Mail Settings link and follow the online prompts.

Keeping your e-mail address on record up to date helps ensure that you receive information about your IBM benefits promptly. Having your current e-mail address on file also significantly contributes to IBM’s ability to communicate with retirees electronically and decrease our reliance on printed materials, which is more environmentally friendly and cost-effective.

WHAT’S INSIDE

At a Glance: Summary of Changes for 2013 ............................................ 3

What’s New for 2013 and Important Reminders

• Medical .......................................................................................... 4

• Prescription Drug Coverage .......................................................... 5

• Dental............................................................................................ 6

• Vision ............................................................................................ 6

• Health Savings Account ................................................................ 7

When You’re Ready to Enroll ................................................................... 8

Information about IBM Medical Coverage and Medicare .......................... 9

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At a Glance: Summary of Changes for 2013

HMO Contribution Increases Some HMOs will have higher than average increases in costs for coverage; for details, see page 4.

IBM Managed Pharmacy Program Prior Authorizations Effective January 1, 2013, approximately 50 medications will be added to the list of drugs requiring prior authorization before they will be covered; see page 5 for more information.

IBM-Vision Plan: Important Reminder About In-Network Coverage Beginning Jan. 1, 2013, the in-network level of benefits for the IBM-Vision Plan will only be available if you use a provider in the Anthem Blue View Vision network. Learn more on page 6.

2013 Health Savings Account Contributions On page 7, you’ll find information about 2013 contribution limits.

If You Choose No Coverage Choose the No Coverage option only if you do not want IBM health benefits coverage for 2013. If you decline coverage, you can enroll again in next year’s annual enrollment period for retirees, typically each fall, or if you experience a qualified status change during the year.

Note: Participants in the Special Retiree Medical Option and those in Access-Only who are not currently enrolled in IBM retiree health benefits are not eligible to enroll for 2013 or during future enrollment periods. They are permanently ineligible for IBM retiree health benefits. Participants in these programs who are currently enrolled in IBM retiree health benefits are eligible for coverage in 2013; however, if they choose to discontinue their coverage in 2013, they will become permanently ineligible for IBM retiree health benefits in the future.

Requirements for Eligible Dependents As a reminder, your dependents’ eligibility for coverage depends on your retirement date.

• If you retired on or before Dec. 31, 2004, you may enroll your dependents who met dependent eligibility guidelines as of Dec. 31, 2004.

• If you retired on or after Jan. 1, 2005, you may enroll your dependents who met dependent eligibility guidelines as of your retirement date.

In either case, you may not enroll dependents you gain — for example, a new spouse, or a dependent child acquired by birth, adoption or marriage — after these dates.

Important Reminder: If you cover a dependent who is eligible for Medicare, that individual must be enrolled in Medicare Part A and Part B. Medicare will provide their primary coverage, and the IBM plan will provide their secondary coverage.

For more information, please review the dependent eligibility information in About Your Benefits: Post-Employment, available in the Reference Library on netbenefits.com/ibm. If you have specific questions about a dependent’s eligibility or need to remove a dependent who no longer qualifies for IBM health benefits coverage, please call the IBM Employee Services Center.

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WHAT’S NEW FOR 2013 AND IMPORTANT REMINDERS

MEDICAL

HMO Cost Increases IBM has communicated regularly with HMO participants the past few years about challenges in the HMO marketplace. For a time, HMOs — with their approach to managing care and controlling costs — helped contain health care inflation while offering quality care at a predictable price. Some HMOs continue to offer this value. However, some HMOs have been unable to do so in recent years, as costs have been increasing with changing market conditions, due to the increased use of advanced and expensive medical diagnostic procedures and treatment, an aging population with higher health care costs, and the increased use of prescription drugs.

In closing our 2013 health plan negotiation cycle, IBM identified some HMOs that will increase participant contributions significantly for next year:

• Oxford EPO NY • UHC of Northern California • Optimum Choice

During annual enrollment, please take advantage of the opportunity to research and consider all of the IBM medical options available to you. Nearly all options include the preventive benefits and care management features that HMO participants value. Going forward, IBM will continue to evaluate our HMO offerings and make health plan decisions based on the best interests of IBM and our participants.

Important Reminders

Contribution-Free Medical Coverage Remains In 2013, the IBM High Deductible PPO will be available at no cost for retiree-only coverage. (Please note: This does not apply for retirees eligible for the Special Retiree Medical Option (SRMO) or Access-Only, and retirees eligible for benefits under the Future Health Account.)

For coverage information — including medical services, prescription drugs and mental health and substance abuse care services — for each of your medical options, refer to the enclosed Health Benefit Comparison Charts and Health Plan Detail Sheets.

Annual Deductible and Out-of-Pocket Maximums Once again, annual medical deductibles and out-of-pocket maximums remain the same. For the Low and Medium Deductible PPO options, the mental health and substance abuse annual out-of-pocket maximums are equal to and shared with the medical out-of-pocket maximums. Please refer to the enclosed Health Benefit Comparison Charts for details.

Transition of Care If your health plan administrator is changing or you are selecting a new medical option for 2013, and you or one of your covered dependents is currently undergoing treatment for certain serious medical conditions or prenatal/maternity care, you may be eligible to continue receiving in-network benefits. The transition period will be for a limited period of time if your doctor does not belong to your new plan network. Contact your new plan administrator at the start of 2013 for more information.

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Medical ID Cards You will receive a new medical ID card(s) for 2013 if you select a new medical option or your healthplan administrator is changing. ID cards will be mailed between December and mid-January. If you have questions about ID cards, please contact the plan administrator directly.

Note: There is no separate ID card for Mental Health/Substance Abuse benefits provided under the IBM Managed Mental Health Care Program, administered by Optum, by United Behavioral Health. Contact information for the plan administrator is located on the back of your medical plan ID card.

Changes to the Health Management Center Web SiteThe Health Management Center provided by WebMD will continue to offer the health plan selection assistance tools during the fall annual enrollment period. However, other features on the Web site will no longer be available after Dec. 31, 2012, due to low utilization. Online health tools and information will instead be available on the medical plan vendor Web sites.

Personal Health Record: Action Required One of the features that will no longer be available on the Health Management Center Web site is the Personal Health Record tool. If you have a Personal Health Record and wish to retain your stored information, you must complete the following before Dec. 31, 2012:

• Log on to netbenefits.com/ibm. • From the homepage, click Tools and Resources in the WebMD call out box. • On the Health Management Center homepage click Health Record in the left-hand

navigation. • Click Print on the right side of the page. This gives you an option to open a PDF full

“Health Record Detail Report,” which can be saved or printed.

Please keep in mind that this is personal, protected health information, and to help ensure privacy, consider printing from a printer that is not connected to a network (i.e., a personal, at-home, local printer).

For your privacy, any information stored in your Personal Health Record will be permanently destroyed after Dec. 31, 2012. If you wish to establish a new personal health record, you may want to consider similar online tools, which may be available on your medical plan vendor’s Web site or through other publically available sources.

PRESCRIPTION DRUG COVERAGE

Drugs Requiring Prior Authorization under the IBM Managed Pharmacy ProgramThe IBM Managed Pharmacy Program, like most other large employer plans, utilizes a process to ensure that patients are using the best medication to treat their particular condition (right dose, right indication, right patient). This process requires patients to obtain “prior authorization” from the Pharmacy Benefit Manager, CVS Caremark, before their prescription is filled under the benefit program.

Effective Jan. 1, 2013, approximately 50 medications will be added to the list of drugs requiring “prior authorization” before they will be covered. If you are currently taking one or more of these medications, you will receive additional information from CVS Caremark about steps to take to obtain the prior authorization before your first fill in 2013, or you may call CVS Caremark Customer Care directly at 855-465-0030. For a complete list of the more than 250 drugs requiring prior authorization in 2013, please refer to the IBM Managed Pharmacy Program List of Medications Requiring Prior Authorization, available in the Reference Library on netbenefits.com/ibm.

Prescription Drug ID CardsIf your prescription drug benefits are currently provided through the IBM Managed Pharmacy Program, you will not receive a new ID card for 2013. Only newly enrolled participants in the IBM Managed Pharmacy Program will receive a new prescription ID card from CVS Caremark in late December.

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DENTAL

Dental ID Cards You will receive a new dental ID card if you enroll with a new dental plan administrator for 2013.

For information about IBM dental options, refer to About Your Benefits: Post Employment (the Summary Plan Description) available in the Reference Library on netbenefits.com/ibm.

VISION

IBM-Vision Plan: Important Reminder About In-Network Coverage Anthem Blue View Vision provided a “grace period” in 2012, which allowed for an in-network level of benefits to be paid for all eligible services — even those received from VSP providers who were not members of the Anthem Blue View Vision network. The grace period allowed time for IBMers to nominate their VSP providers to the Anthem network.

Beginning Jan. 1, 2013, the in-network level of benefits for the IBM-Vision Plan will only be available if you use a provider in the Anthem Blue View Vision network.

Blue View Vision offers you one of the largest vision care networks in the industry, with over 50,000 participating providers. Blue View Vision’s network also includes convenient retail locations, many with evening and weekend hours, including LensCrafters®, Sears OpticalSM, Target Optical®, JCPenney® Optical and many Pearle Vision® locations. Best of all, when you receive care from a Blue View Vision participating provider, you can maximize your benefits and money-saving discounts.

Contact Anthem Blue View Vision directly for more information: • Online: Visit anthem.com/preenrollment (Employer ID = IBM). • By phone: Call 855-765-4552 toll-free.

For detailed coverage information you may also refer to the Anthem Blue View Vision Chart available in the Reference Library on netbenefits.com/ibm.

If you have questions about discounts available under the EyeMed Discount Card, contact EyeMed Vision Care at 855-245-0621.

Vision ID Cards You will only receive a new vision ID card or vision discount card if you enroll in a new vision plan option for 2013.

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HEALTH SAVINGS ACCOUNT

Health Savings Account Contribution Limits Increase for 2013 If you enroll in the IBM High Deductible PPO with HSA, you may contribute up to $3,250 to a health savings account in 2013, and $6,450 if more than one individual is enrolled, according to IRS rules. If you are between the ages of 55 and 65, you can make an additional “catch-up” contribution of up to $1,000 in 2013.

For more details about health savings accounts, select the HSA Learn More link from your online Benefit Elections page. You may also refer to About Your Benefits: Post-Employment (the Summary Plan Description) or the Health Savings Account Participant Information for Non-Medicare Retirees document, both available in the Reference Library on netbenefits.com/ibm.

Employee Assistance Program As a reminder, you and your 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 Optum’s clinical referral line at 800-445-9720 (TTY: Dial 711, then enter 800-445-9720), available 24 hours a day, seven 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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WHEN YOU’RE READY TO ENROLL

Thursday, Oct. 25 – Friday, Nov. 16, 2012

You can enroll or make changes to your coverage online via NetBenefits.

1 Log on to netbenefits.com/ibm.

2 From the Health & Insurance menu, select Health & Insurance Overview, then Get Started to begin your enrollment.

3 When you’re satisfied with your elections, select Save Your Benefits on the Benefit Elections page; your elections will not be saved otherwise.

4 The elections listed will be recorded as your new coverage and displayed on a confirmation screen. Save the confirmation number and print the page for your records. The confirmation screen will also direct you to any follow-up activities to complete your enrollment.

You can also call the IBM Employee Services Center at 800-796-9876 to speak with a service representative on business days (excluding holidays recognized by the New York Stock Exchange) between 8:30 a.m. and 8:30 p.m. Eastern time.

Special Service Numbers

• Deaf and Hard of Hearing Access: 800-426-6537, available on business days (excluding holidays recognized by the New York Stock Exchange) between 8:30 a.m. and 6:00 p.m. Eastern time.

• Overseas Access: Dial your country’s toll-free AT&T Direct® access number, and then enter 800-796-9876. In the U.S., call 800-331-1140 to obtain AT&T Direct access numbers. From anywhere in the world, access numbers are available at att.com/traveler or from your local operator.

Confirmation of Your 2013 Benefits

• If you enroll or make changes to your benefits for 2013, you will receive a confirmation statement in the mail after you complete your enrollment. If you enroll online and provide an e-mail address, you will also receive an e-mail confirming the date and time you successfully completed your online enrollment, with a link to netbenefits.com/ibm, where you can view your elected coverage for 2013.

• If you do not enroll or make changes, your Personal Fact Sheet will be the confirmation of your benefits for 2013. You will not receive a separate confirmation statement in the mail.

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IMPORTANT INFORMATION ABOUT IBM MEDICAL COVERAGE AND MEDICARE

Please keep in mind that when you (or your covered dependent) becomes eligible for Medicare, either because of turning 65 years of age or because of a disability, you (or your dependent) are required to enroll in both Medicare Part A and Part B. IBM coverage will be paid secondary to Medicare coverage.

Additionally, when you reach age 65 or otherwise become eligible for Medicare, you will no longer be eligible for your current IBM medical option.

• If you (or your covered dependent) become eligible for Medicare due to reaching age 65: You will automatically receive enrollment materials with information about IBM medical options for those eligible for Medicare by mail from the IBM Employee Services Center approximately 60 days before you (or your covered dependent) reach age 65. These materials will include the deadline for enrolling in an IBM medical option for retirees eligible for Medicare as well as enrollment instructions.

• If you (or your covered dependent) become eligible for Medicare due to disability: You must call the IBM Employee Services Center at 800-796-9876 to report your Medicare A and Part B effective date. After you call and report your (or your covered dependent’s) Medicare effective date, you will receive enrollment materials with information about IBM medical options for those eligible for Medicare by mail from the IBM Employee Services Center. These materials will include the deadline for enrolling in an IBM medical option for retirees and/or dependents eligible for Medicare as well as enrollment instructions.

If you enroll by the deadline listed in your enrollment materials, your new medical plan will be effective as of the date of your Medicare Part A and Part B effective date.

If you select an IBM Medical Supplement option, it will provide secondary coverage after Medicare for the Medicare eligible member and continue to pay as primary for the non-Medicare member(s) enrolled in your plan. If you select a Medicare Advantage plan option, that plan will provide your Medicare coverage directly.

If you do not enroll in Medicare or a Medicare Advantage plan at the time you become eligible for Medicare:

• You will be enrolled in the IBM Medical/Prescription Drug Supplement Plan as default coverage.

• Social Security will assess a lifetime penalty, which will be added to your future Medicare Part B premiums.*

• Any benefits payable from your medical coverage through IBM will be reduced by the amount that the IBM Plan assumes would have been paid by Medicare Part A or Part B, whether or not you are actually enrolled in Medicare.*

*Note: Also applies for covered dependents who do not enroll in Medicare when first eligible.

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Important Information for Those Enrolled in an HMO If you are enrolled in an HMO that also offers a plan for Medicare-eligible participants (commonly referred to as a Medicare Advantage plan) at the time you become eligible for Medicare and wish to be covered by that plan, you must actively enroll.

In order to enroll, you must: • Call the IBM Employee Services Center to select the HMO’s plan for Medicare-eligible

participants as your new medical option; • Contact the HMO you elected to request enrollment forms; and • Complete enrollment forms that must be submitted to the Centers for Medicare &

Medicaid Services (CMS).

Detailed instructions will be included in the enrollment materials you will receive at the time you become eligible for Medicare.

If you do not complete each required step in the process, IBM is not permitted to enroll you in the HMO’s plan for Medicare-eligible participants. Instead, you will be enrolled in the IBM Medical/Prescription Drug Supplement option as default coverage.

For more information, please refer to: • The Medicare & You Guide, available at www.medicare.gov. • The “Medicare Carve Out” section of About Your Benefits: Post Employment, your Summary

Plan Description, available in the Reference Library on netbenefits.com/ibm.

If you have questions or if you do not receive enrollment materials before you reach age 65, please call the IBM Employee Services Center.

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This enrollment guide is intended to provide an overview of certain plans and programs in which you may participate. It is not an official Summary Plan Description and does not provide full details. Complete details are found in the formal plan documents, which are the complete and exclusive statement of the company’s obligations under the plan. The official plan documents shall govern in the event of a conflict between information contained in these or other documents and statements. The plan administrator retains exclusive authority and discretion to interpret the terms of the benefits 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 enrollment guide 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.

IBM and its affiliated companies do not endorse any HMO or other provider, or represent or warrant the quality of care they provide. The decision to choose any health plan option or use any provider is the participant’s responsibility.

Not all of the plans and programs within this enrollment guide pertain to all of IBM’s affiliated companies. For more information, contact the IBM Employee Services Center at 800-796-9876 (TTY for deaf and hard of hearing: 800-426-6537).

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