AT&T Wireless 2014 Annual Report Download - page 64

Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
62 | AT&T INC.
Other longer-service management employees participate in
pension programs that have a traditional pension formula
(i.e., a stated percentage of employees’ adjusted career
income). Other longer-service nonmanagement employees’
pension benefits are generally calculated using one of two
formulas: a flat dollar amount applied to years of service
according to job classification or a cash balance plan with
negotiated annual pension band credits as well as interest
credits. Most nonmanagement employees can elect to
receive their pension benefits in either a lump sum payment
or an annuity. Effective January 1, 2015, the pension plan
was amended so that new management hires are no longer
eligible for the plan.
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.
In December 2014, we announced an opportunity for
certain management employees who are retirement eligible
as of March 31, 2015 to elect an enhanced, full lump sum
payment option of their accrued pension if they retire on or
before March 31, 2015. Eligible participants are required to
accept the offer by March 6, 2015. Our 2015 results will
include special termination benefits as a result of this offer.
In October 2013, we offered an opportunity for certain
retirement-eligible employees to elect a full lump sum
payment of their accrued pension if they retired as of
December 30, 2013. The lump sum value was calculated
using the August 2012 discount rates for some pension
programs and was equal to the cash balance amount for
the management new hire pension program. The lump sum
value totaled approximately $2,700, which was distributed
in 2014. We recorded special termination benefits of $15
in 2014 and $250 in 2013 as a result of this offer.
In October 2013, as part of our 2014 annual benefits
enrollment process, we communicated an amendment to
our Medicare-eligible retirees that beginning in 2015 AT&T
will provide access to retiree health insurance coverage
that supplements government-sponsored Medicare through
a private insurance marketplace. The plan was further
amended in 2014 to include access to dental benefits
through the private insurance marketplace. This new
approach will allow retirees to choose insurance with
the terms, cost and coverage that best fits their needs,
while still receiving financial support as determined by
AT&T. We expect that the cost to AT&T for retiree
medical coverage in 2015 will be comparable to 2014.
Future changes in support, if any, will be based on a
number of factors such as business conditions, government
actions, marketplace changes and the general consumer
inflation rate.
We file income tax returns in the U.S. federal jurisdiction
and various state, local and foreign jurisdictions. As a large
taxpayer, our income tax returns are regularly audited
by the Internal Revenue Service (IRS) and other taxing
authorities. The IRS has completed field examinations of our
tax returns through 2010. All audit periods prior to 2003
are closed for federal examination purposes. Contested
issues from our 2003 through 2010 returns are at various
stages of resolution with the IRS Appeals Division; we are
unable to estimate the impact the resolution of these issues
may have on our UTBs.
The components of income tax (benefit) expense are as
follows:
2014 2013 2012
Federal:
Current $1,609 $3,043 $ 451
Deferred – net 1,904 5,692 2,256
3,513 8,735 2,707
State, local and foreign:
Current 61 (61) 702
Deferred – net (132) 550 (509)
(71) 489 193
Total $3,442 $9,224 $2,900
A reconciliation of income tax expense (benefit) and the
amount computed by applying the statutory federal income
tax rate (35%) to income from continuing operations before
income taxes is as follows:
2014 2013 2012
Taxes computed at federal
statutory rate $3,486 $9,722 $3,654
Increases (decreases) in
income taxes resulting from:
State and local income taxes –
net of federal income
tax benefit (127) 294 85
Connecticut wireline sale 325 — —
Loss of foreign tax credits
in connection with
América Móvil sale 386 — —
Other – net (628) (792) (839)
Total $3,442 $9,224 $2,900
Effective Tax Rate 34.6% 33.2% 27.8%
NOTE 12. PENSION AND POSTRETIREMENT BENEFITS
Pension Benefits and Postretirement Benefits
Substantially all of our U.S. employees are covered by one
of our noncontributory pension plans. The majority of our
newly hired employees, longer-service management and
some nonmanagement employees participate in cash
balance pension programs that include annual or monthly
credits based on salary as well as an interest credit.