Verizon Wireless 2012 Annual Report Download - page 76

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74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Estimated Future Benefit Payments
The benefit payments to retirees are expected to be paid as follows:
(dollars in millions)
Year Pension Benefits Health Care and Life
2013 $ 3,487 $ 1,662
2014 2,513 1,670
2015 2,315 1,665
2016 1,782 1,614
2017 1,686 1,567
2018–2022 6,703 7,174
Savings Plan and Employee Stock Ownership Plans
We maintain four leveraged employee stock ownership plans (ESOP).
Only one plan currently has unallocated shares. We match a certain per-
centage of eligible employee contributions to the savings plans with
shares of our common stock from this ESOP. At December 31, 2012, the
number of unallocated and allocated shares of common stock in this
ESOP was 711,000 and 64 million, respectively. All leveraged ESOP shares
are included in earnings per share computations.
Total savings plan costs were $0.7 billion in 2012, 2011 and 2010,
respectively.
Pension Annuitization
On October 17, 2012, we, along with our subsidiary Verizon Investment
Management Corp., and Fiduciary Counselors Inc., as independent fidu-
ciary of the Verizon Management Pension Plan (the Plan), entered into a
definitive purchase agreement with The Prudential Insurance Company
of America (Prudential) and Prudential Financial, Inc., pursuant to which
the Plan would purchase a single premium group annuity contract from
Prudential.
On December 10, 2012, upon issuance of the group annuity contract by
Prudential, Prudential irrevocably assumed the obligation to make future
annuity payments to approximately 41,000 Verizon management retirees
who began receiving pension payments from the Plan prior to January 1,
2010. The amount of each retiree’s annuity payment equals the amount
of such individual’s pension benefit. In addition, the group annuity con-
tract is intended to replicate the same rights to future payments, such as
survivor benefits, that are currently offered by the Plan.
We contributed approximately $2.6 billion to the Plan between
September 1, 2012 and December 31, 2012 in connection with the trans-
action so that the Plans funding percentage would not decrease as a
result of the transaction.
Severance Benefits
The following table provides an analysis of our actuarially determined
severance liability recorded in accordance with the accounting standard
regarding employers’ accounting for postemployment benefits:
(dollars in millions)
Year
Beginning
of Year
Charged to
Expense Payments Other End of Year
2010 $ 1,638 $ 1,217 $ (1,307) $ 21 $ 1,569
2011 1,569 32 (474) (14) 1,113
2012 1,113 396 (531) 32 1,010
Severance, Pension and Benefit Charges
During 2012, we recorded net pre-tax severance, pension and benefits
charges of approximately $7.2 billion primarily for our pension and post-
retirement plans in accordance with our accounting policy to recognize
actuarial gains and losses in the year in which they occur. The charges
were primarily driven by a decrease in our discount rate assumption used
to determine the current year liabilities from a weighted-average of 5% at
December 31, 2011 to a weighted-average of 4.2% at December 31, 2012
($5.3 billion) and revisions to the retirement assumptions for participants
and other assumption adjustments, partially offset by the difference
between our estimated return on assets of 7.5% and our actual return
on assets of 10% ($0.7 billion). As part of this charge, we also recorded
$1.0 billion related to the annuitization of pension liabilities, as described
above, as well as severance charges of $0.4 billion primarily for approxi-
mately 4,000 management employees.
During 2011, we recorded net pre-tax severance, pension and benefits
charges of approximately $6.0 billion for our pension and postretirement
plans in accordance with our accounting policy to recognize actuarial
gains and losses in the year in which they occur. The charges were pri-
marily driven by a decrease in our discount rate assumption used to
determine the current year liabilities from 5.75% at December 31, 2010 to
5% at December 31, 2011 ($5.0 billion); the difference between our esti-
mated return on assets of 8% and our actual return on assets of 5% ($0.9
billion); and revisions to the life expectancy of participants and other
adjustments to assumptions.
During 2010, we recorded net pre-tax severance, pension and benefits
charges of $3.1 billion. The charges during 2010 included remeasure-
ment losses of $0.6 billion, for our pension and postretirement plans in
accordance with our accounting policy to recognize actuarial gains and
losses in the year in which they occur. Additionally, in 2010, we reached
an agreement with certain unions on temporary enhancements to the
separation programs contained in their existing collective bargaining
agreements. These temporary enhancements were intended to help
address a previously declared surplus of employees and to help reduce
the need for layoffs. Accordingly, we recorded severance, pension and
benefits charges associated with approximately 11,900 union-repre-
sented employees who volunteered for the incentive offer. These charges
included $1.2 billion for severance for the 2010 separation programs
mentioned above and a planned workforce reduction of approximately
2,500 employees in 2011. In addition, we recorded $1.3 billion for pension
and postretirement curtailment losses and special termination benefits
due to the workforce reductions.