Verizon Wireless 2011 Annual Report Download - page 72

70
nOtEs tO cOnsOlidatEd Financial statEMEnts continued
NOTE 11
EMPLOYEE BENEFITS
We maintain non-contributory defined benefit pension plans for many
of our employees. In addition, we maintain postretirement health care
and life insurance plans for our retirees and their dependents, which are
both contributory and non-contributory, and include a limit on our share
of the cost for certain recent and future retirees. In accordance with our
accounting policy for pension and other postretirement benefits, actu-
arial gains and losses are recognized in operating results in the year in
which they occur. These gains and losses are measured annually as of
December 31 or upon a remeasurement event.
Pension and Other Postretirement Benefits
Pension and other postretirement benefits for many of our employees
are subject to collective bargaining agreements. Modifications in benefits
have been bargained from time to time, and we may also periodically
amend the benefits in the management plans. The following tables
summarize benefit costs, as well as the benefit obligations, plan assets,
funded status and rate assumptions associated with pension and postre-
tirement health care and life insurance benefit plans.
Obligations and Funded Status
(dollars in millions)
Pension Health Care and Life
At December 31, 2011 2010 2011 2010
Change in Benefit
Obligations
Beginning of year $ 29,217 $ 31,818 $ 25,718 $ 27,337
Service cost 307 353 299 305
Interest cost 1,590 1,797 1,421 1,639
Plan amendments (485) (212) –(2,580)
Actuarial loss, net 3,360 748 1,687 826
Benefits paid (2,564) (1,996) (1,756) (1,675)
Termination benefits –687 ––
Curtailment loss, net –61 –132
Acquisitions and
divestitures, net –(581) –(266)
Settlements paid (843) (3,458) ––
End of Year $ 30,582 $ 29,217 $ 27,369 $ 25,718
Change in Plan Assets
Beginning of year $ 25,814 $ 28,592 $ 2,945 $ 3,091
Actual return on plan assets 1,191 3,089 63 319
Company contributions 512 138 1,376 1,210
Benefits paid (2,564) (1,996) (1,756) (1,675)
Settlements paid (843) (3,458) ––
Acquisitions and
divestitures, net –(551) ––
End of year $ 24,110 $ 25,814 $ 2,628 $ 2,945
Funded Status
End of year $ (6,472) $ (3,403) $ (24,741) $ (22,773)
(dollars in millions)
Pension Health Care and Life
At December 31, 2011 2010 2011 2010
Amounts recognized on the
balance sheet
Noncurrent assets $ 289 $ 398 $ – $ –
Current liabilities (195) (146) (735) (581)
Noncurrent liabilities (6,566) (3,655) (24,006) (22,192)
Total $ (6,472) $ (3,403) $ (24,741) $ (22,773)
Amounts recognized in
Accumulated Other
Comprehensive Income
(Pretax)
Prior Service Cost $ (3) $ 554 $ (510) $ (567)
Total $ (3) $ 554 $ (510) $ (567)
Under the Patient Protection and Affordable Care Act and the Health Care
and Education Reconciliation Act of 2010, both of which became law in
March 2010 (collectively the Health Care Act), beginning in 2013, Verizon
and other companies that receive a subsidy under Medicare Part D to
provide retiree prescription drug coverage will no longer receive a fed-
eral income tax deduction for the expenses incurred in connection with
providing the subsidized coverage to the extent of the subsidy received.
Because future anticipated retiree prescription drug plan liabilities and
related subsidies are already reflected in Verizon’s financial statements,
this change in law required Verizon to reduce the value of the related
tax benefits recognized in its financial statements in the period during
which the Health Care Act was enacted. As a result, Verizon recorded a
one-time, non-cash income tax charge of $1.0 billion in the first quarter
of 2010 to reflect the impact of this change.
Beginning in 2013, as a result of federal health care reform, Verizon will
no longer file for the Retiree Drug Subsidy (RDS) and will instead contract
with a Medicare Part D plan on a group basis to provide prescription drug
benefits to Medicare eligible retirees. This change to our Medicare Part D
strategy resulted in the adoption of plan amendments during the fourth
quarter of 2010 which will allow the company to be eligible for greater
Medicare Part D plan subsidies over time.
The accumulated benefit obligation for all defined benefit pension plans
was $30.3 billion and $28.5 billion at December 31, 2011 and 2010,
respectively.
Information for pension plans with an accumulated benefit obligation in
excess of plan assets follows:
(dollars in millions)
At December 31, 2011 2010
Projected benefit obligation $ 29,643 $ 28,329
Accumulated benefit obligation 29,436 27,752
Fair value of plan assets 22,916 24,529