AT&T Wireless 2011 Annual Report Download - page 79

AT&T Inc. 77
Beginning in 2013, as a result of federal healthcare reform, we
will begin contracting with a Medicare Part D plan on a group
basis to provide prescription drug benefits to certain Medicare
eligible retirees. This plan change resulted in the adoption of
plan amendments during the fourth quarter of 2011, and will
allow the Company to be eligible for greater Medicare Part D
plan subsidies over time.
Obligations and Funded Status
For defined benefit pension plans, the benefit obligation is
the “projected benefit obligation,” the actuarial present value,
as of our December 31 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 the valuation date.
NOTE 11. PENSION AND POSTRETIREMENT BENEFITS
Pension Benefits and Postretirement Benefits
Substantially all of our U.S. employees are covered by one
of our noncontributory pension and death benefit plans.
Our newly hired management employees participate in
a cash balance pension program, while longer-service
management employees participate in a pension program
that has a traditional pension formula (i.e., a stated
percentage of employees’ adjusted career income) and a
frozen cash balance, or a program that has a defined lump
sum formula. Nonmanagement 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 nonmanage ment employees can elect to receive their
pension benefits in either a lump sum payment or an annuity.
We also provide a variety of 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.
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
2011 2010 2011 2010
Benefit obligation at beginning of year $53,917 $50,850 $36,638 $36,225
Service cost – benefits earned during the period 1,186 1,075 362 348
Interest cost on projected benefit obligation 2,958 3,150 2,051 2,257
Amendments — 2 (1,830) (742)
Actuarial loss 2,972 4,224 478 1,046
Special termination benefits 27 101 4 7
Benefits paid (4,950) (5,485) (2,750) (2,536)
Other — — — 33
Benefit obligation at end of year $56,110 $53,917 $34,953 $36,638
The following table presents the change in the value of plan assets for the years ended December 31 and the plans’ funded
status at December 31:
Pension Benefits Postretirement Benefits
2011 2010 2011 2010
Fair value of plan assets at beginning of year $ 47,621 $46,873 $ 12,747 $ 11,513
Actual return on plan assets 2,238 6,230 (224) 1,472
Benefits paid1 (4,950) (5,485) (2,633) (244)
Contributions 1,000 — — —
Other (2) 3 — 6
Fair value of plan assets at end of year 45,907 47,621 9,890 12,747
Unfunded status at end of year2 $(10,203) $ (6,296) $(25,063) $(23,891)
1 At our discretion, certain postretirement benefits may be paid from AT&T cash accounts, which does not reduce Voluntary Employee Beneficiary Association (VEBA) assets.
Future benefit payments may be made from VEBA trusts and thus reduce those asset balances.
2 Funded status is not indicative of our ability to pay ongoing pension benefits or of our obligation to fund retirement trusts. Required pension funding is determined in accordance
with ERISA regulations.