Notes to Consolidated Financial Statements

NOTE 15 (1 of 3)

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 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.

Refer to Note 1 for a discussion of the adoption of SFAS No. 158, which was effective December 31, 2006.

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.

As of June 30, 2006, Verizon management employees no longer earned pension benefits or earned service towards the company retiree medical subsidy. In addition, new management employees hired after December 31, 2005 are not eligible for pension benefits and managers with less than 13.5 years of service as of June 30, 2006 are not eligible for company-subsidized retiree healthcare or retiree life insurance benefits. Beginning July 1, 2006, management employees receive an increased company match on their savings plan contributions.

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,

2007

 

2006

 

2007

 

2006

 

Change in Benefit

Obligations

Beginning of year

$

34,159

 

$

35,540

 

$

27,330

 

$

26,783

 

Service cost

 

442

 

 

581

 

 

354

 

 

356

 

Interest cost

 

1,975

 

 

1,995

 

 

1,592

 

 

1,499

 

Plan amendments

 

 

 

 

 

 

 

50

 

Actuarial (gain) loss, net

 

123

 

 

(282

)

 

(409

)

 

152

 

Benefits paid

 

(4,204

)

 

(2,762

)

 

(1,561

)

 

(1,564

)

Termination benefits

 

 

 

47

 

 

 

 

14

 

Acquisitions and divestitures, net

 

 

 

477

 

 

 

 

40

 

Settlements

 

 

 

(1,437

)

 

 

 

 

End of year

$

32,495

 

$

34,159

 

$

27,306

 

$

27,330

 

 

Change in Plan Assets

Beginning of year

$

41,509

 

$

39,227

 

$

4,303

 

$

4,275

 

Actual return on plan assets

 

4,591

 

 

5,536

 

 

352

 

 

493

 

Company contributions

 

737

 

 

568

 

 

1,048

 

 

1,099

 

Benefits paid

 

(4,204

)

 

(2,762

)

 

(1,561

)

 

(1,564

)

Settlements

 

 

 

(1,437

)

 

 

 

 

Acquisitions and divestitures, net

 

26

 

 

377

 

 

 

 

 

End of year

$

42,659

 

$

41,509

 

$

4,142

 

$

4,303

 

 

Funded Status

 

End of year

$

10,164

 

$

7,350

 

$

(23,164

)

$

(23,027

)

 

Amounts recognized on

the balance sheet

Noncurrent assets

$

13,745

 

$

12,058

 

$

 

$

 

Current liabilities

 

(130

)

 

 

 

(360

)

 

 

Noncurrent liabilities

 

(3,451

)

 

(4,708

)

 

(22,804

)

 

(23,027

)

Total

$

10,164

 

$

7,350

 

$

(23,164

)

$

(23,027

)

 

Amounts recognized in

Accumulated Other
Comprehensive Loss
(Pre-tax)

Actuarial loss, net

$

13

 

$

1,428

 

$

6,040

 

$

6,799

 

Prior service cost

 

932

 

 

975

 

 

3,636

 

 

4,029

 

Total

$

945

 

$

2,403

 

$

9,676

 

$

10,828

 

Changes in benefit obligations were caused by factors including changes in actuarial assumptions and settlements.

The accumulated benefit obligation for all defined benefit pension plans was $31,343 million and $32,724 million at December 31, 2007 and 2006, respectively.

Information for pension plans with an accumulated benefit obligation in excess of plan assets follows:

(dollars in millions)

At December 31,

2007

 

2006

 

 

Projected benefit obligation

$

11,001

 

$

11,495

 

Accumulated benefit obligation

 

10,606

 

 

11,072

 

Fair value of plan assets

 

8,868

 

 

8,288