AT&T Wireless 2006 Annual Report Download - page 73

2006 AT&T Annual Report : : 71
The plans’ weighted-average asset target and actual allocations as a percentage of plan assets, including the notional exposure of
future contracts by asset categories at December 31 are as follows:
Pension Assets Postretirement (VEBA) Assets
Target 2006 2005 Target 2006 2005
Equity securities
Domestic 35% – 45% 38% 41% 45% – 55% 51% 51%
International 15% – 25% 19 17 10% – 20% 22 16
Debt securities 20% – 30% 26 29 12% – 22% 18 28
Real estate 5% – 10% 8 6 3% – 9% 2 1
Other 5% – 10% 9 7 9% – 15% 7 4
Total 100% 100% 100% 100%
At December 31, 2006, the pension assets included 4.3 million
shares of AT&T common stock with a fair value of $152 and
AT&T bonds with a notional amount of $62 and fair value of
$68. As a result of our acquisition of BellSouth, pension assets
increased by 2.4 million shares of AT&T stock with a fair value
of $86 and AT&T bonds with a notional value of $16 and fair
value of $17. During 2006, the pension plans purchased $19
and sold $19 of AT&T bonds. Additionally, during 2006, the
pension plan purchased and sold AT&T common stock of $22
and $38, respectively. Pension plan holdings in AT&T securities
represented 0.3% of total plan assets at December 31, 2006.
At December 31, 2006, the VEBA assets included 1.6 million
shares of AT&T common stock with a fair value of $56 and
AT&T bonds with a notional amount and fair value of $5.
As a result of our acquisition of BellSouth, the VEBA assets
increased by 949,000 shares of AT&T stock with a fair value
of $34 and AT&T bonds with a notional and fair value of $3.
During 2006, the VEBAs purchased $1 of AT&T bonds and
$8 of AT&T common stock. VEBA holdings in AT&T securities
represented 0.4% of total plan assets at December 31, 2006.
Estimated Future Benefit Payments
Expected benefit payments are estimated using the same
assumptions used in determining our benefit obligation at
December 31, 2006. Because benefit payments will depend
on future employment and compensation levels, average
years employed and average life spans, among other factors,
changes in any of these factors could significantly affect these
expected amounts. The following table provides expected
benefit payments under our pension and postretirement plans:
Medicare
Pension Postretirement Subsidy
Benefits Benefits Receipts
2007 $ 4,920 $ 2,531 $ (120)
2008 4,711 2,652 (132)
2009 4,824 2,768 (143)
2010 4,840 2,859 (154)
2011 4,854 2,947 (164)
Years 2012 – 2016 23,705 15,022 (1,074)
Supplemental Retirement Plans
We also provide senior- and middle-management employees
with nonqualified, unfunded supplemental retirement and
savings plans. While these plans are unfunded, we have assets
in a designated nonbankruptcy remote trust that are used to
provide for these benefits. These plans include supplemental
pension benefits as well as compensation deferral plans, some
of which include a corresponding match by us based on a
percentage of the compensation deferral.
We use the same significant assumptions for the discount
rate and composite rate of compensation increase used in
determining the projected benefit obligation and the net
pension and postemployment benefit cost. The following
tables provide the plans’ benefit obligations and fair value of
assets at December 31 and the components of the supple-
mental retirement pension benefit cost. The net amounts
recorded as “Other noncurrent liabilities” on our Consolidated
Balance Sheets at December 31, 2006 and 2005 were $2,470
and $1,381, respectively.
At December 31, 2006 we increased our other noncurrent
liabilities $386 ($375 for net losses and $11 for prior service
costs) and decreased our other comprehensive income $240
(net of deferred taxes of $146) for the adoption of FAS 158
(see Note 1). Prior to our adoption of FAS 158, at December
31, 2005 we had recorded an additional minimum pension
liability as a direct charge to equity of $217 (net of deferred
taxes of $134), as the accumulated benefit obligation of
certain plans exceeded the recorded liability.
The following table provides information for our supple-
mental retirement plans with accumulated benefit obligations
in excess of plan assets:
2006 2005
Projected benefit obligation $(2,470) $(1,800)
Accumulated benefit obligation (2,353) (1,730)
Fair value of plan assets — —
The following table presents the components of net periodic
benefit cost (gains are denoted with parentheses and losses
are not):
2006 2005
Service cost – benefits earned
during the period $ 15 $ 8
Interest cost on projected
benefit obligation 108 73
Amortization of prior service cost 4 9
Recognized actuarial loss 29 23
Net supplemental retirement pension cost $156 $113
Deferred compensation expense was $39 in 2006, $46 in
2005 and $44 in 2004. Our deferred compensation liability,
included in “Other noncurrent liabilities,” was $996 at
December 31, 2006 and $574 at December 31, 2005.