Verizon Wireless 2012 Annual Report Download - page 72

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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 ben-
efits, operating expenses include pension and benefit related charges
based on actuarial assumptions, including projected discount rates and
an estimated return on plan assets. These estimates are updated in the
fourth quarter to reflect actual return on plan assets and updated actu-
arial assumptions. The adjustment is recognized in the income statement
during the fourth quarter or upon a remeasurement event pursuant to
our accounting policy for the recognition of actuarial gains/losses.
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, 2012 2011 2012 2011
Change in Benefit
Obligations
Beginning of year $ 30,582 $ 29,217 $ 27,369 $ 25,718
Service cost 358 307 359 299
Interest cost 1,449 1,590 1,284 1,421
Plan amendments 183 (485) (1,826) –
Actuarial loss, net 6,074 3,360 1,402 1,687
Benefits paid (2,735) (2,564) (1,744) (1,756)
Annuity purchase (8,352) – – –
Settlements paid (786) (843) – –
End of Year $ 26,773 $ 30,582 $ 26,844 $ 27,369
Change in Plan Assets
Beginning of year $ 24,110 $ 25,814 $ 2,628 $ 2,945
Actual return on plan assets 2,326 1,191 312 63
Company contributions 3,719 512 1,461 1,376
Benefits paid (2,735) (2,564) (1,744) (1,756)
Settlements paid (786) (843) – –
Annuity purchase (8,352) – – –
End of year $ 18,282 $ 24,110 $ 2,657 $ 2,628
Funded Status
End of year $ (8,491) $ (6,472) $ (24,187) $ (24,741)
(dollars in millions)
Pension Health Care and Life
At December 31, 2012 2011 2012 2011
Amounts recognized on the
balance sheet
Noncurrent assets $ 236 $ 289 $ – $ –
Current liabilities (129) (195) (766) (735)
Noncurrent liabilities (8,598) (6,566) (23,421) (24,006)
Total $ (8,491) $ (6,472) $ (24,187) $ (24,741)
Amounts recognized in
Accumulated Other
Comprehensive Income
(Pretax)
Prior Service Cost $ 181 $ (3) $ (2,247) $ (510)
Total $ 181 $ (3) $ (2,247) $ (510)
See Note 12 (“Taxes”) for details regarding the impact of 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.
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.
During 2012, we reached agreements with the Communications Workers
of America and the International Brotherhood of Electrical Workers on
new, three-year contracts that cover approximately 43,000 Wireline
employees. This resulted in the adoption of plan amendments which will
result in lower other postretirement benefit costs in 2013 and beyond.
The accumulated benefit obligation for all defined benefit pension plans
was $26.5 billion and $30.3 billion at December 31, 2012 and 2011,
respectively.
Information for pension plans with an accumulated benefit obligation in
excess of plan assets follows:
(dollars in millions)
At December 31, 2012 2011
Projected benefit obligation $ 26,351 $ 29,643
Accumulated benefit obligation 26,081 29,436
Fair value of plan assets 17,623 22,916