America Online 2015 Annual Report Download - page 68

Net Periodic Cost
The following table summarizes the benefit (income) cost related to our pension and postretirement health care and life insurance plans:
(dollars in millions)
Pension Health Care and Life
Years Ended December31, 2015 2014 2013 2015 2014 2013
Service cost $ 374 $ 327 $ 395 $ 324 $ 258 $ 318
Amortization of prior service cost (credit) (5) (8) 6 (287) (253) (247)
Expected return on plan assets (1,270) (1,181) (1,245) (101) (161) (143)
Interest cost 969 1,035 1,002 1,117 1,107 1,095
Remeasurement (gain) loss, net (209) 2,380 (2,470) (2,659) 4,615 (3,989)
Net periodic benet (income) cost (141) 2,553 (2,312) (1,606) 5,566 (2,966)
Curtailment and termination benets – 11 4 – – –
Total $ (141) $ 2,564 $ (2,308) $ (1,606) $ 5,566 $ (2,966)
Other pre-tax changes in plan assets and benefit obligations recognized in other comprehensive (income) loss are as follows:
(dollars in millions)
Pension Health Care and Life
At December31, 2015 2014 2015 2014
Prior service cost $ – $ (89) $ (45) $ (413)
Reversal of amortization items
Prior service cost 5 8 287 253
Total recognized in other comprehensive (income) loss (pre-tax) $ 5 $ (81) $ 242 $ (160)
The estimated prior service cost for the defined benefit pension plans that will be amortized from Accumulated other comprehensive income
(loss) into net periodic benefit (income) cost over the next fiscal year is not significant. The estimated prior service cost for the defined benefit
postretirement plans that will be amortized from Accumulated other comprehensive income into net periodic benefit (income) cost over the next
fiscal year is $0.3billion.
Assumptions
The weighted- average assumptions used in determining benefit obligations follow:
Pension Health Care and Life
At December31, 2015 2014 2015 2014
Discount Rate 4.60% 4.20% 4.60% 4.20%
Rate of compensation increases 3.00 3.00 N/A N/A
The weighted- average assumptions used in determining net periodic cost follow:
Pension Health Care and Life
At December31, 2015 2014 2013 2015 2014 2013
Discount Rate 4.20% 5.00% 4.20% 4.20% 5.00% 4.20%
Expected return on plan assets 7.25 7.25 7.50 4.80 5.50 5.60
Rate of compensation increases 3.00 3.00 3.00 N/A N/A N/A
Effective January1, 2016, we changed the method we use to estimate
the interest component of net periodic benefit cost for pension and
other postretirement benefits. Historically, we estimated the interest
cost component utilizing a single weighted- average discount rate
derived from the yield curve used to measure the benefit obligation at
the beginning of the period. We have elected to utilize a full yield curve
approach in the estimation of interest cost by applying the specific
spot rates along the yield curve used in the determination of the benefit
obligation to the relevant projected cash flows. We have made this
change to provide a more precise measurement of interest cost by
improving the correlation between projected benefit cash flows to the
corresponding spot yield curve rates. We will account for this change
as a change in accounting estimate and accordingly will account for
it prospectively. We estimate the impact of this change on our con-
solidated GAAP results for the first quarter of 2016 will be a reduction
of the interest cost component of net periodic benefit cost and an
increase to Net income by approximately $0.1billion. However, at this
time the estimated impact of this change on the remaining 2016 interim
periods and for annual 2016 results cannot be reasonably estimated
because it is possible that in the future there may be changes to
underlying assumptions, including an interim remeasurement of our
benefit obligations, which could result in different estimates. The use
of the full yield curve approach does not impact how we measure our
total benefit obligations at year end or our annual net periodic benefit
cost as any change in the interest cost component is completely offset
by the actuarial gain or loss measured at year end which is immedi-
ately recognized in the income statement. Accordingly, this change in
estimate will not impact our income from continuing operations, net
income or earnings per share as measured on an annual basis.
66 Verizon Communications Inc. and Subsidiaries
Notes to Consolidated Financial Statements continued