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