Employee Benefits

6 Months Ended

Jun. 30, 2022

Retirement Benefits [Abstract]

Employee Benefits

Note 8. Employee Benefits

We maintain non-contributory defined benefit pension plans for certain 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 current and future retirees. In accordance with our accounting policy for pension and other postretirement benefits, operating expenses include service costs associated with pension and other

postretirement benefits while other credits and/or charges based on actuarial assumptions, including projected discount rates, an estimated return on plan assets, and impact from health care trend rates are reported in Other income (expense), net. These estimates are updated in the fourth quarter to reflect actual return on plan assets and updated actuarial assumptions or upon a remeasurement event. The adjustment is 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 (Income)

The following table summarizes the components of net periodic benefit cost (income) 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,	2022		2021		2022		2021
Service cost - Cost of services	$	58	$	62	$	20	$	23
Service cost - Selling, general and administrative expense	8		9		4		5
Service cost	66		71		24		28
Amortization of prior service cost (credit)	15		15		(110)		(224)
Expected return on plan assets	(294)		(309)		(7)		(5)
Interest cost	114		99		83		73
Remeasurement loss (gain), net	198		(1,314)		—		—
Other components	33		(1,509)		(34)		(156)
Total	$	99	$	(1,438)	$	(10)	$	(128)

	(dollars in millions)
	Pension				Health Care and Life
Six Months Ended June 30,	2022		2021		2022		2021
Service cost - Cost of services	$	116	$	127	$	40	$	47
Service cost - Selling, general and administrative expense	16		18		7		10
Service cost	$	132	$	145	$	47	$	57
Amortization of prior service cost (credit)	$	30	$	30	$	(313)	$	(447)
Expected return on plan assets	(591)		(618)		(14)		(11)
Interest cost	224		194		166		145
Remeasurement loss (gain), net	198		(1,314)		—		—
Other components	$	(139)	$	(1,708)	$	(161)	$	(313)
Total	$	(7)	$	(1,563)	$	(114)	$	(256)

The service cost component of net periodic benefit cost (income) is recorded in Cost of services and Selling, general and administrative expense in the condensed consolidated statements of income while the other components, including mark-to-market adjustments, if any, are recorded in Other income (expense), net.

Severance Payments

During the three and six months ended June 30, 2022, we paid severance benefits of an insignificant amount and $122 million, respectively. At June 30, 2022, we had a remaining severance liability of $425 million, a portion of which includes future contractual payments to separated employees.

Employer Contributions

During both the three and six months ended June 30, 2022 and June 30, 2021, we made no contributions to our qualified pension plans and made insignificant contributions to our nonqualified pension plans. We do not expect mandatory pension funding through December 31, 2022. There have been no significant changes with respect to the nonqualified pension and other postretirement benefit plans contributions in 2022.

Remeasurement loss (gain), net

During both the three and six months ended June 30, 2022, we recorded a net pre-tax remeasurement loss of $198 million in our pension plans triggered by settlements, primarily driven by a $654 million charge resulting from the difference between our

estimated and actual return on assets, partially offset by a credit of $456 million mainly due to changes in our discount rate and changes in our lump sum interest rate assumptions used to determine the current year liabilities of our pension plans.

During both the three and six months ended June 30, 2021, we recorded a pre-tax remeasurement gain of $1.3 billion in our pension plans triggered by settlements, primarily driven by a $1.2 billion credit mainly due to changes in our discount rate and changes in our lump sum interest rate assumptions used to determine the current year liabilities of our pension plans and a $122 million credit resulting from the difference between our estimated and our actual return on assets.

2022 Collective Bargaining Negotiations

We reached tentative agreements with the Communications Workers of America and the International Brotherhood of Electrical Workers to extend our collective bargaining agreements that were due to expire on August 5, 2023 for three years until August 1, 2026. The collective bargaining agreements cover approximately 27,500 employees. The extension is subject to ratification votes by the union members. We expect these votes to be completed in the third quarter of 2022.