AT&T Wireless 2015 Annual Report Download - page 68

Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
66 | AT&T INC.
The components of income tax (benefit) expense are as follows:
2015 2014 2013
Federal:
Current $2,496 $1,610 $3,044
Deferred 3,828 2,060 5,783
6,324 3,670 8,827
State and local:
Current 72 (102) (132)
Deferred 671 (73) 596
743 (175) 464
Foreign:
Current 320 163 71
Deferred (382) (39) (34)
(62) 124 37
Total $7,005 $3,619 $9,328
“Income Before Income Taxes” in the Consolidated
Statements of Income included the following components
for the years ended December 31:
2015 2014 2013
U.S. income before income taxes $21,519 $10,244 $27,903
Foreign income (loss) before
income taxes (827) 111 147
Total $20,692 $10,355 $28,050
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:
2015 2014 2013
Taxes computed at federal
statutory rate $7,242 $3,624 $9,818
Increases (decreases) in income
taxes resulting from:
State and local income taxes – net
of federal income tax benefit 483 (113) 302
Connecticut wireline sale — 350 —
Loss of foreign tax credits in
connection with América Móvil sale — 386 —
Other – net (720) (628) (792)
Total $7,005 $3,619 $9,328
Effective Tax Rate 33.9% 34.9% 33.3%
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. 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.
We acquired DIRECTV on July 24, 2015. DIRECTV sponsors
a noncontributory defined benefit pension plan, which
provides benefits to most employees based on either years
of service and final average salary, or eligible compensation
while employed by DIRECTV. DIRECTV also maintains (1) a
postretirement benefit plan for those retirees eligible to
participate in health care and life insurance benefits generally
until they reach age 65 and (2) an unfunded nonqualified
pension plan for certain eligible employees. We have recorded
the fair value of the DIRECTV plans using assumptions and
accounting policies consistent with those disclosed by AT&T.
Upon acquisition, the excess of projected benefit obligation
over the plan assets was recognized as a liability and
previously existing deferred actuarial gains and losses and
unrecognized service costs or benefits were eliminated.
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. The lump sum value totaled approximately
$1,200 which was distributed in 2015. We recorded special
termination benefits of $149 as a result of the 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 also communicated an amendment
to our Medicare-eligible retirees that, beginning in 2015, AT&T
would 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 allowed
retirees to choose insurance with the terms, cost and
coverage that best fit their needs, while still receiving financial
support as determined by AT&T. Future changes in support,
if any, will be based on a number of factors such as business