Pension And Postretirement Benefits

3 Months Ended

Mar. 31, 2018

Pension and Other Postretirement Benefits Disclosure [Text Block]

NOTE 6. PENSION AND POSTRETIREMENT BENEFITS

Many of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to provide benefits described in the plans to employees upon their retirement.

In 2013, we made a voluntary contribution of a preferred equity interest in AT&T Mobility II LLC, the primary holding company for our domestic wireless business, to the trust used to pay pension benefits under our qualified pension plans. The preferred equity interest had a value of $8,944 at March 31, 2018. The trust is entitled to receive cumulative cash distributions of $560 per annum, which are distributed quarterly by AT&T Mobility II LLC to the trust, in equal amounts and accounted for as contributions. We distributed $140 to the trust during the three months ended March 31, 2018. So long as we make the distributions, we will have no limitations on our ability to declare a dividend or repurchase shares. This preferred equity interest is a plan asset under ERISA and is recognized as such in the plan’s separate financial statements. However, because the preferred equity interest is not unconditionally transferable to an unrelated party, it is not reflected in plan assets in our consolidated financial statements and instead has been eliminated in consolidation.

We recognize actuarial gains and losses on pension and postretirement plan assets in our consolidated results as a component of other income (expense) – net at our annual measurement date of December 31, unless earlier remeasurements are required. During the first quarter of 2018, a substantive plan change involving the frequency of future health reimbursement account credit increases was communicated to our retirees. This plan change resulted in additional prior service credits recognized in other comprehensive income, reducing our liability by $752. Such credits amortize through earnings over a period approximating the average service period to full eligibility. The plan change also triggered a remeasurement of our postretirement benefit obligation, resulting in an actuarial gain of $930 recognized in the first quarter of 2018, for a total reduction in our liability of $1,682.

The following table details pension and postretirement benefit costs included in the accompanying consolidated statements of income. The service cost component of net periodic pension cost (benefit) is recorded in operating expenses in the consolidated statements of income while the remaining components are recorded in other income (expense) – net. Service costs are eligible for capitalization as part of internal construction projects, providing a small reduction in the net expense recorded.

	Three months ended
	March 31,
	2018		2017
Pension cost:
Service cost – benefits earned during the period	$	291	$	282
Interest cost on projected benefit obligation		487		484
Expected return on assets		(760)		(783)
Amortization of prior service credit		(30)		(31)
Net pension (credit) cost	$	(12)	$	(48)

Postretirement cost:
Service cost – benefits earned during the period	$	29	$	41
Interest cost on accumulated postretirement benefit obligation		191		222
Expected return on assets		(77)		(80)
Amortization of prior service credit		(397)		(336)
Actuarial (gain) loss		(930)		-
Net postretirement (credit) cost	$	(1,184)	$	(153)

Combined net pension and postretirement (credit) cost	$	(1,196)	$	(201)

As part of our first-quarter 2018 remeasurement, we increased the weighted-average discount rate used to measure our postretirement benefit obligation to 4.10%. The discount rate in effect for determining postretirement service and interest costs after remeasurement is 4.30% and 3.70%, respectively. As a result of our plan change and remeasurement, the total estimated prior service credits that will be amortized from accumulated OCI into net periodic benefit cost over the remainder of 2018 is $1,237 ($933 net of tax) for postretirement benefits.

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. For the first quarter ended 2018 and 2017, net supplemental pension benefits costs not included in the table above were $21 and $22.