AT&T Wireless 2010 Annual Report Download - page 86

Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
84 AT&T Inc.
to a pension trust for the benefit of plan participants.
We maintain VEBA trusts to partially fund postretirement
benefits; however, there are no ERISA or regulatory
requirements that these postretirement benefit plans
be funded annually.
The principal investment objectives are to ensure the
availability of funds to pay pension and postretirement
benefits as they become due under a broad range of future
economic scenarios, to maximize long-term investment return
with an acceptable level of risk based on our pension and
postretirement obligations, and to be broadly diversified
across and within the capital markets to insulate asset values
against adverse experience in any one market. Each asset
class has broadly diversified characteristics. Substantial biases
toward any particular investing style or type of security are
sought to be avoided by managing the aggregation of all
accounts with portfolio benchmarks. Asset and benefit
obligation forecasting studies are conducted periodically,
generally every two to three years, or when significant
changes have occurred in market conditions, benefits,
participant demographics or funded status. Decisions
regarding investment policy are made with an understanding
of the effect of asset allocation on funded status, future
contributions and projected expenses. The current asset
allocation policy and risk level for the pension plan and
VEBA assets are based on a study completed and approved
during 2009.
The plans’ weighted-average asset targets 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:
A one percentage-point change in the assumed combined
medical and dental cost trend rate would have the following
effects:
One Percentage- One Percentage-
Point Increase Point Decrease
Increase (decrease) in total of
service and interest cost components $ 312 $ (252)
Increase (decrease) in accumulated
postretirement benefit obligation 3,606 (2,973)
Prior to August 2009, a majority of our labor contracts
contained an annual dollar cap for nonmanagement retirees
who retire during the term of the labor contract. However,
we waived the cap during the relevant contract periods
and thus did not collect contributions from those retirees.
We have similarly waived the cap for nonmanagement
retirees who retired prior to inception of the labor contract.
We did not account for the cap in the value of our
accumulated postretirement benefit obligation (i.e., we
assumed the cap would be waived for all future contract
periods). In August 2009, the Company announced that
the annual dollar caps would be enforced for some groups
beginning in 2010, with alternative uncapped plans available.
We have accounted for participants moving to these
alternative plans.
Plan Assets
Plan assets consist primarily of private and public equity,
government and corporate bonds, and real assets (real estate
and natural resources). The asset allocations of the pension
plans are maintained to meet ERISA requirements. Any plan
contributions, as determined by ERISA regulations, are made
Pension Assets Postretirement (VEBA) Assets
Target 2010 2009 Target 2010 2009
Equity securities:
Domestic 25% – 35% 29% 34% 37% – 47% 42% 39%
International 10% – 20% 15 16 29% – 39% 34 27
Fixed income securities 30% – 40% 34 30 9% – 19% 14 20
Real assets 6% – 16% 9 8 0% – 6% 1 2
Private equity 4% – 14% 12 10 0% – 9% 4 4
Other 0% – 5% 1 2 1% – 11% 5 8
Total 100% 100% 100% 100%