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 June 30,				2017				2016				2017				2016
Service cost				$	70			$	76			$	37			$	52
Amortization of prior service cost (credit)					9				3				(235	)			(113	)
Expected return on plan assets					(316	)			(257	)			(13	)			(13	)
Interest cost					171				170				165				197
Remeasurement loss, net					-				1,257				-				2,293
Net periodic benefit (income) cost				$	(66	)		$	1,249			$	(46	)		$	2,416
(dollars in millions)				Pension								Health Care and Life
Six Months Ended June 30,				2017				2016				2017				2016
Service cost				$	140			$	156			$	74			$	113
Amortization of prior service cost (credit)					19				2				(470	)			(186	)
Expected return on plan assets					(632	)			(528	)			(26	)			(28	)
Interest cost					342				356				330				421
Remeasurement loss, net					-				1,422				-				2,293
Net periodic benefit (income) cost				$	(131	)		$	1,408			$	(92	)		$	2,613

Severance, Pension and Benefit Charges

During the three and six months ended June 30, 2017, we recorded a pre-tax severance charge of approximately $0.6 billion primarily in connection with the acquisition of Yahoo’s operating business.

During the three months ended June 30, 2016, we recorded net pre-tax pension and benefit remeasurement charges of approximately $3.6 billion in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. These charges were comprised of a net pre-tax pension and benefit remeasurement charge of $0.8 billion measured as of April 1, 2016 related to curtailments in three of our defined benefit pension plans and one of our other postretirement benefit plans, a net pre-tax pension and benefit remeasurement charge of $2.7 billion measured as of May 31, 2016 in two defined benefit pension plans and three other postretirement benefit plans as a result of our accounting for the contractual healthcare caps and bargained for changes, and a net pre-tax pension and benefit remeasurement charge of $0.1 billion measured as of May 31, 2016 related to settlements for employees who received lump-sum distributions in three of Verizon’s defined benefit pension plans. The pension and benefit remeasurement charges were primarily driven by a decrease in our discount rate assumption used to determine the current year liabilities of our pension and other postretirement benefit plans ($2.7 billion) and updated healthcare cost trend rate assumptions ($0.9 billion). Our weighted-average discount rate assumption decreased from 4.60% at December 31, 2015 to 3.99% at May 31, 2016.

During the six months ended June 30, 2016, we also recorded a net pre-tax pension and benefit remeasurement charge of $0.2 billion related to settlements for employees who received lump-sum distribution in one of Verizon’s defined benefit pension plans.

Severance Payments

During the three and six months ended June 30, 2017, we paid severance benefits of $0.2 billion and $0.4 billion, respectively. At June 30, 2017, we had a remaining severance liability of $0.7 billion, a portion of which includes future contractual payments to employees separated as of June 30, 2017.

Employer Contributions

During the three and six months ended June 30, 2017, we contributed $0.2 billion and $3.8 billion, respectively, to our qualified pension plans, which included $3.4 billion of discretionary contributions during the six months ended June 30, 2017. 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 insignificant during the three and six months ended June 30, 2017, respectively. There have been no significant 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.