AT&T Wireless 2006 Annual Report Download - page 69

2006 AT&T Annual Report : : 67
In subsequent periods, net periodic pension and postemploy-
ment cost for BellSouth, BellSouth’s 40% economic interest in
AT&T Mobility and ATTC will exclude any amortization of either
the unrecognized loss or the unrecognized prior service cost
existing at the date of the merger. However, the funding of
these plans is not directly affected by the mergers. The basis
of funding, over time, will reflect the past amendments and
losses that underlie those amounts. As they are reflected in
the funding process, contributions will, in some periods,
exceed the net pension cost, and that will reduce the liability
(unfunded accrued pension cost) recognized at the date of
acquisition.
Pension Benefits
Substantially all of our U.S. employees are covered by one of
our noncontributory pension and death benefit plans. Many of
our management employees participate in pension plans that
have a traditional pension formula (i.e., a stated percentage
of employees’ adjusted career income) and a frozen cash
balance or defined lump sum formula. Effective January 15,
2005, the management pension plan for those employees was
amended to freeze benefit accruals previously earned under a
cash balance formula. Each employee’s existing cash balance
continues to earn interest at a variable annual rate. After this
change, those management employees, at retirement, may
elect to receive the portion of their pension benefit derived
under the cash balance or defined lump sum as a lump sum
or an annuity. The remaining pension benefit, if any, will be
paid as an annuity if its value exceeds a stated monthly
amount. ATTC, BellSouth and AT&T Mobility management
employees participate in cash balance pension plans. Non-
management employees’ pension benefits are generally
calculated using one of two formulas; benefits are based on a
flat dollar amount per year according to job classification or
are calculated under a cash balance plan that is based on an
initial cash balance amount and a negotiated, annual pension
band and interest credits. Most nonmanagement employees
can elect to receive their pension benefits in either a lump
sum payment or an annuity.
At December 31, 2006, certain defined pension plans
formerly sponsored by ATTC and AT&T Mobility were merged
in to the AT&T Pension Benefit Plan.
Postretirement Benefits
We provide certain medical, dental and life insurance benefits
to certain retired employees under various plans and accrue
actuarially determined postretirement benefit costs as active
employees earn these benefits.
Obligations and Funded Status
For defined benefit pension plans, the benefit obligation is the
“projected benefit obligation,” the actuarial present value, as
of the measurement date, of all benefits attributed by the
pension benefit formula to employee service rendered to that
date. The amount of benefit to be paid depends on a number
of future events incorporated into the pension benefit formula,
including estimates of the average life of employees/survivors
and average years of service rendered. It is measured based
on assumptions concerning future interest rates and future
employee compensation levels.
For postretirement benefit plans, the benefit obligation is
the “accumulated postretirement benefit obligation,” the
actuarial present value as of a date of all future benefits
attributed under the terms of the postretirement benefit plan
to employee service rendered to that date.
The following table presents this reconciliation and shows the change in the projected benefit obligation for the years ended
December 31:
Pension Benefits Postretirement Benefits
2006 2005 2006 2005
Benefit obligation at beginning of year $46,176 $28,189 $35,225 $25,114
Service cost – benefits earned during the period 1,050 804 435 390
Interest cost on projected benefit obligation 2,507 1,725 1,943 1,496
Amendments — (2) — (442)
Actuarial loss (gain) (1,499) 1,182 (3,386) 613
Special termination benefits 25 15 2 2
Curtailments — — — (77)
Benefits paid (3,958) (2,679) (1,772) (1,234)
Transferred from AT&T Mobility 635 — 209 —
Transferred from BellSouth 11,013 — 11,461 —
Transferred from ATTC — 16,942 — 9,129
Other — — 20 234
Benefit obligation at end of year $55,949 $46,176 $44,137 $35,225