Verizon Wireless 2014 Annual Report Download - page 67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
65
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
2012 $ 1,113 $ 396 $ (531) $ 32 $ 1,010
2013 1,010 134 (381) (6) 757
2014 757 531 (406) (7) 875
Severance, Pension and Benet (Credits) Charges
During 2014, we recorded net pre-tax severance, pension and benets
charges of approximately $7.5 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 5.0%
at December 31, 2013 to a weighted-average of 4.2% at December 31,
2014 ($5.2 billion), a change in mortality assumptions primarily driven by
the use of updated actuarial tables (RP-2014 and MP-2014) issued by the
Society of Actuaries in October 2014 ($1.8 billion) and revisions to the
retirement assumptions for participants and other assumption adjust-
ments, partially oset by the dierence between our estimated return on
assets of 7.25% and our actual return on assets of 10.5% ($0.6 billion). As
part of this charge, we recorded severance costs of $0.5 billion under our
existing separation plans.
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.
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
2015 $ 2,855 $ 1,481
2016 2,024 1,456
2017 1,937 1,452
2018 1,427 1,436
2019 1,396 1,398
2020-2024 6,890 6,996
Savings Plan and Employee Stock Ownership Plans
We maintain four leveraged employee stock ownership plans (ESOP).
We match a certain percentage of eligible employee contributions to
the savings plans with shares of our common stock from this ESOP. At
December 31, 2014, the number of allocated shares of common stock in
this ESOP was 61 million. There were no unallocated shares of common
stock in this ESOP at December 31, 2014. All leveraged ESOP shares are
included in earnings per share computations.
Total savings plan costs were $0.9 billion in 2014, $1.0 billion in 2013 and
$0.7 billion in 2012.
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.