Verizon Wireless 2013 Annual Report Download - page 64

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Estimated Future Benet Payments
The benet payments to retirees are expected to be paid as follows:
(dollars in millions)
Year Pension Benets Health Care and Life
2014 $ 2,980 $ 1,582
2015 2,280 1,574
2016 1,742 1,538
2017 1,666 1,506
2018 1,377 1,474
2019-2023 6,712 6,846
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, 2013, the
number of unallocated and allocated shares of common stock in this
ESOP was 163 thousand and 62 million, respectively. All leveraged ESOP
shares are included in earnings per share computations.
Total savings plan costs were $1.0 billion in 2013 and $0.7 billion in 2012
and 2011, respectively.
Pension Annuitization
On October 17, 2012, we, along with our subsidiary Verizon Investment
Management Corp., and Fiduciary Counselors Inc., as independent du-
ciary of the Verizon Management Pension Plan (the Plan), entered into a
denitive 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 benet. In addition, the group annuity con-
tract is intended to replicate the same rights to future payments, such as
survivor benets, that are currently oered 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 Plan’s funding percentage would not decrease as a
result of the transaction.
Severance Benets
The following table provides an analysis of our actuarially determined
severance liability recorded in accordance with the accounting standard
regarding employers’ accounting for postemployment benets:
(dollars in millions)
Year
Beginning
of Year
Charged to
Expense Payments Other End of Year
2011 $ 1,569 $ 32 $ (474) $ (14) $ 1,113
2012 1,113 396 (531) 32 1,010
2013 1,010 134 (381) (6) 757
Severance, Pension and Benet (Credits) Charges
During 2013, we recorded net pre-tax severance, pension and benets
credits of approximately $6.2 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 credits were
primarily driven by an increase in our discount rate assumption used to
determine the current year liabilities from a weighted-average of 4.2%
at December 31, 2012 to a weighted-average of 5.0% at December 31,
2013 ($4.3 billion), lower than assumed retiree medical costs and other
assumption adjustments ($1.4 billion) and the dierence between our
estimated return on assets of 7.5% at December 31, 2012 and our actual
return on assets of 8.6% at December 31, 2013 ($0.5 billion).
During 2012, we recorded net pre-tax severance, pension and benets
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 benets
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 dierence 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.