8.	Employee Benefits

 

We maintain non-contributory defined benefit pension plans for many of our employees. In addition, we maintain postretirement health care and life insurance plans for our retirees and their dependents, which are both contributory and non-contributory, and include a limit on our share of the cost for certain recent and future retirees. In accordance with our accounting policy for pension and other postretirement benefits, operating expenses include pension and benefit related credits and/or charges based on actuarial assumptions, including projected discount rates and an estimated return on plan assets. These estimates are updated in the fourth quarter or upon a remeasurement event to reflect actual return on plan assets and updated actuarial assumptions. The adjustment will be recognized in the income statement during the fourth quarter or upon a remeasurement event pursuant to our accounting policy for the recognition of actuarial gains and losses.

Net Periodic Benefit Cost

The following table summarizes the benefit (income) cost related to our pension and postretirement health care and life insurance plans:

 

(dollars in millions)		Pension								Health Care and Life
Three Months Ended June 30,		2014				2013				2014				2013
Service cost		$	82			$	98			$	64			$	79
Amortization of prior service cost (credit)			(2	)			2				(64	)			(61	)
Expected return on plan assets			(295	)			(311	)			(40	)			(36	)
Interest cost			259				251				277				274
Remeasurement gain, net			–				(237	)			–				–
Net periodic benefit (income) cost		$	44			$	(197	)		$	237			$	256

 

(dollars in millions)		Pension								Health Care and Life
Six Months Ended June 30,		2014				2013				2014				2013
Service cost		$	163			$	197			$	129			$	159
Amortization of prior service cost (credit)			(4	)			3				(127	)			(123	)
Expected return on plan assets			(590	)			(622	)			(81	)			(72	)
Interest cost			518				501				554				548
Remeasurement gain, net			–				(237	)			–				–
Net periodic benefit (income) cost		$	87			$	(158	)		$	475			$	512

Pension Remeasurement

During the three and six months ended June 30, 2013, we recorded net pre-tax pension remeasurement credits of approximately $0.2 billion, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. The pension remeasurement credits relate to settlements for employees who received lump-sum distributions. The credits were primarily driven by an approximately 75 basis point increase in our discount rate assumption used to determine the current year liabilities of one of our pension plans. The change in discount rate resulted in a gain of $0.3 billion, partially offset by a loss resulting from the difference between our expected return on assets assumption of 7.5% at December 31, 2012 and our annualized actual return on assets of 7.2% at June 30, 2013, as well as other losses ($0.1 billion). Our weighted-average discount rate assumption increased from 4.2% at December 31, 2012 to 5.0% at June 30, 2013.

Severance Payments

During the three and six months ended June 30, 2014, we paid severance benefits of $0.1 billion and $0.3 billion, respectively. At June 30, 2014, we had a remaining severance liability of $0.5 billion, a portion of which includes future contractual payments to employees separated as of June 30, 2014.

Employer Contributions

During the three and six months ended June 30, 2014, we contributed $0.4 billion and $0.9 billion, respectively, to our other postretirement benefit plans. During the three and six months ended June 30, 2014, we contributed $0.6 billion and $0.8 billion, respectively, to our qualified pension plans. The contributions to our nonqualified pension plans were not material during the three and six months ended June 30, 2014. There have been no material changes with respect to the qualified and nonqualified pension contributions in 2014 as previously disclosed in Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2013.