notes to consolidated financial statements

Note 11 (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 our share of the cost for certain recent and future retirees. In accordance with our accounting policy for pension and other postretirement benefits, actuarial gains and losses are recognized in operating results in the year in which they occur. These gains and losses are measured annually as of December 31 or upon a remeasurement event.

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,

2011

 

2010

 

2011

 

2010

 

Change in Benefit Obligations

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

$

29,217

 

$

31,818

 

$

25,718

 

$

27,337

 

Service cost

 

307

 

 

353

 

 

299

 

 

305

 

Interest cost

 

1,590

 

 

1,797

 

 

1,421

 

 

1,639

 

Plan amendments

 

(485

)

 

(212

)

 

 

 

(2,580

)

Actuarial loss, net

 

3,360

 

 

748

 

 

1,687

 

 

826

 

Benefits paid

 

(2,564

)

 

(1,996

)

 

(1,756

)

 

(1,675

)

Termination benefits

 

 

 

687

 

 

 

 

 

Curtailment loss, net

 

 

 

61

 

 

 

 

132

 

Acquisitions and divestitures, net

 

 

 

(581

)

 

 

 

(266

)

Settlements paid

 

(843

)

 

(3,458

)

 

 

 

 

End of Year

$

30,582

 

$

29,217

 

$

27,369

 

$

25,718

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Plan Assets

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

$

25,814

 

$

28,592

 

$

2,945

 

$

3,091

 

Actual return on plan assets

 

1,191

 

 

3,089

 

 

63

 

 

319

 

Company contributions

 

512

 

 

138

 

 

1,376

 

 

1,210

 

Benefits paid

 

(2,564

)

 

(1,996

)

 

(1,756

)

 

(1,675

)

Settlements paid

 

(843

)

 

(3,458

)

 

 

 

 

Acquisitions and divestitures, net

 

 

 

(551

)

 

 

 

 

End of year

$

24,110

 

$

25,814

 

$

2,628

 

$

2,945

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funded Status

 

 

 

 

 

 

 

 

 

 

 

 

End of year

$

(6,472

)

$

(3,403

)

$

(24,741

)

$

(22,773

)



(dollars in millions)

 

Pension

 

Health Care and Life

 

At December 31,

2011

 

2010

 

2011

 

2010

 

Amounts recognized on the balance sheet

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent assets

$

289

 

$

398

 

$

 

$

 

Current liabilities

 

(195

)

 

(146

)

 

(735

)

 

(581

)

Noncurrent liabilities

 

(6,566

)

 

(3,655

)

 

(24,006

)

 

(22,192

)

Total

$

(6,472

)

$

(3,403

)

$

(24,741

)

$

(22,773

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts recognized in Accumulated Other
   Comprehensive Income (Pretax)

 

 

 

 

 

 

 

 

 

 

 

 

Prior Service Cost

$

(3

)

$

554

 

$

(510

)

$

(567

)

Total

$

(3

)

$

554

 

$

(510

)

$

(567

)


Under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, both of which became law in March 2010 (collectively the Health Care Act), beginning in 2013, Verizon and other companies that receive a subsidy under Medicare Part D to provide retiree prescription drug coverage will no longer receive a federal income tax deduction for the expenses incurred in connection with providing the subsidized coverage to the extent of the subsidy received. Because future anticipated retiree prescription drug plan liabilities and related subsidies are already reflected in Verizon’s financial statements, this change in law required Verizon to reduce the value of the related tax benefits recognized in its financial statements in the period during which the Health Care Act was enacted. As a result, Verizon recorded a one-time, non-cash income tax charge of $1.0 billion in the first quarter of 2010 to reflect the impact of this change.

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 $30.3 billion and $28.5 billion at December 31, 2011 and 2010, respectively.

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

(dollars in millions)

At December 31,

2011

 

2010

 

Projected benefit obligation

$

29,643

 

$

28,329

 

Accumulated benefit obligation

 

29,436

 

 

27,752

 

Fair value of plan assets

 

22,916

 

 

24,529