Notes to Consolidated Financial Statements
Note 12 (1 of 4)
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 the Company’s share of the cost for certain recent and future retirees. We also sponsor defined contribution savings plans to provide opportunities for eligible employees to save for retirement on a tax-deferred basis. We use a measurement date of December 31 for our pension and postretirement health care and life insurance plans. See Note 1 regarding the change in accounting for benefit plans.
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 postretirement health care and life insurance benefit plans.
Obligations and Funded Status
(dollars in millions) |
||||||||||||
|
Pension |
|
Health Care and Life |
|
||||||||
At December 31, |
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Change in Benefit Obligations |
||||||||||||
Beginning of year |
$ |
31,818 |
|
$ |
30,394 |
|
$ |
27,337 |
|
$ |
27,096 |
|
Service cost |
|
353 |
|
|
384 |
|
|
305 |
|
|
311 |
|
Interest cost |
|
1,797 |
|
|
1,924 |
|
|
1,639 |
|
|
1,766 |
|
Plan amendments |
|
(212 |
) |
|
– |
|
|
(2,580 |
) |
|
(5 |
) |
Actuarial (gain) loss, net |
|
748 |
|
|
2,056 |
|
|
826 |
|
|
(469 |
) |
Benefits paid |
|
(1,996 |
) |
|
(2,565 |
) |
|
(1,675 |
) |
|
(1,740 |
) |
Termination benefits |
|
687 |
|
|
75 |
|
|
– |
|
|
18 |
|
Curtailment (gain) loss, net |
|
61 |
|
|
1,245 |
|
|
132 |
|
|
352 |
|
Acquisitions and divestitures, net |
|
(581 |
) |
|
192 |
|
|
(266 |
) |
|
8 |
|
Settlements paid |
|
(3,458 |
) |
|
(1,887 |
) |
|
– |
|
|
– |
|
End of year |
$ |
29,217 |
|
$ |
31,818 |
|
$ |
25,718 |
|
$ |
27,337 |
|
|
||||||||||||
Change in Plan Assets |
||||||||||||
Beginning of year |
$ |
28,592 |
|
$ |
27,791 |
|
$ |
3,091 |
|
$ |
2,555 |
|
Actual return on plan assets |
|
3,089 |
|
|
4,793 |
|
|
319 |
|
|
638 |
|
Company contributions |
|
138 |
|
|
337 |
|
|
1,210 |
|
|
1,638 |
|
Benefits paid |
|
(1,996 |
) |
|
(2,565 |
) |
|
(1,675 |
) |
|
(1,740 |
) |
Settlements paid |
|
(3,458 |
) |
|
(1,887 |
) |
|
– |
|
|
– |
|
Acquisitions and divestitures, net |
|
(551 |
) |
|
123 |
|
|
– |
|
|
– |
|
End of year |
$ |
25,814 |
|
$ |
28,592 |
|
$ |
2,945 |
|
$ |
3,091 |
|
|
||||||||||||
Funded Status |
|
|
|
|
|
|
|
|
|
|
|
|
End of year |
$ |
(3,403 |
) |
$ |
(3,226 |
) |
$ |
(22,773 |
) |
$ |
(24,246 |
) |
(dollars in millions) |
||||||||||||
|
Pension |
|
Health Care and Life |
|
||||||||
At December 31, |
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amounts recognized on the balance sheet |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets |
$ |
398 |
|
$ |
3,141 |
|
$ |
– |
|
$ |
– |
|
Current liabilities |
|
(146 |
) |
|
(139 |
) |
|
(581 |
) |
|
(542 |
) |
Noncurrent liabilities |
|
(3,655 |
) |
|
(6,228 |
) |
|
(22,192 |
) |
|
(23,704 |
) |
Total |
$ |
(3,403 |
) |
$ |
(3,226 |
) |
$ |
(22,773 |
) |
$ |
(24,246 |
) |
|
||||||||||||
Amounts recognized in Accumulated |
||||||||||||
Other Comprehensive Loss (Pretax) |
||||||||||||
Prior service cost |
$ |
554 |
|
$ |
999 |
|
$ |
(567 |
) |
$ |
2,667 |
|
Total |
$ |
554 |
|
$ |
999 |
|
$ |
(567 |
) |
$ |
2,667 |
|
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 $28.5 billion and $30.8 billion at December 31, 2010 and 2009, respectively.
Information for pension plans with an accumulated benefit obligation in excess of plan assets follows:
(dollars in millions) |
||||||
At December 31, |
2010 |
|
2009 |
|
||
|---|---|---|---|---|---|---|
Projected benefit obligation |
$ |
28,329 |
|
$ |
28,719 |
|
Accumulated benefit obligation |
|
27,752 |
|
|
28,128 |
|
Fair value of plan assets |
|
24,529 |
|
|
22,352 |
|