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 certain 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 our consolidated statement of income during the fourth quarter or upon a remeasurement event pursuant to our accounting policy for the recognition of actuarial gains and losses.

Net Periodic 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 March 31,		2017				2016				2017				2016
Service cost		$	70			$	80			$	37			$	61
Amortization of prior service cost (credit)			10				(1	)			(235	)			(73	)
Expected return on plan assets			(316	)			(271	)			(13	)			(15	)
Interest cost			171				186				165				224
Remeasurement loss, net			–				165				–				–
Net periodic benefit (income) cost		$	(65	)		$	159			$	(46	)		$	197

Severance, Pension and Benefit Charges

During the three months ended March 31, 2016, we recorded a net pre-tax pension remeasurement charge 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 charge relates to settlements for employees who received lump-sumdistributions in one of Verizon’s seven defined benefit pension plans. The pension remeasurement charge was primarily driven by a decrease in our discount rate assumption used to determine the current year liabilities of this pension plan. Our weighted-average  discount rate assumption decreased from 4.60% at December 31, 2015 to 4.21% at March 31, 2016.

Severance Payments

During the three months ended March 31, 2017, we paid severance benefits of $0.2 billion. At March 31, 2017, we had a remaining severance liability of $0.5 billion, a portion of which includes future contractual payments to employees separated as of March 31, 2017.

Employer Contributions

During the three months ended March 31, 2017, we contributed $3.6 billion to our qualified pension plans, which included $3.4 billion of discretionary contributions. The discretionary contribution together with previous estimates of $0.6 billion for minimum contributions result in an expected $4.0 billion in pension funding to qualified plans in 2017. The contributions to our nonqualified pension plans were not material during the three months ended March 31, 2017. There have been no material changes with respect to the nonqualified pension and other postretirement benefit plans contributions in 2017 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, 2016.