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Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of estimated future benefit payments

The estimated benefit payments provided below are based on actuarial assumptions using the demographics of the employee and retiree populations and have been reduced by estimated participant contributions.



	Pension Plans		Post-Retirement Benefit Plans	Medicare Part D Subsidy Receipts
	(Dollars in millions)
Estimated future benefit payments:
2014	$	1,036	352	(13	)
2015	1,002		341	(10	)
2016	990		329	(10	)
2017	977		319	(10	)
2018	962		308	(10	)
2019 - 2023	4,559		1,369	(40	)

Schedule of actuarial assumptions used to compute net periodic benefit expense

The actuarial assumptions used to compute the net periodic benefit expense for our qualified pension, non-qualified pension and post-retirement benefit plans are based upon information available as of the beginning of the year, as presented in the following table.



	Pension Plans						Post-Retirement Benefit Plans
	2013		2012		2011⁽¹⁾		2013		2012		2011⁽²⁾
Actuarial assumptions at beginning of year:
Discount rate	3.50% - 4.20%		4.25% - 5.10%		5.00% - 5.50%		3.60	%	4.60% - 4.80%		5.30	%
Rate of compensation increase	3.25	%	3.25	%	3.25	%	N/A		N/A		N/A
Expected long-term rate of return on plan assets	7.50	%	7.50	%	7.50% - 8.00%		7.30	%	6.00% - 7.50%		7.25	%
Initial health care cost trend rate	N/A		N/A		N/A		6.50% - 7.00%		8.00	%	8.50	%
Ultimate health care cost trend rate	N/A		N/A		N/A		4.50	%	5.00	%	5.00	%
Year ultimate trend rate is reached	N/A		N/A		N/A		2022		2018		2018

_______________________________________________________________________________

N/A-Not applicable


(1)	This column does not consider Qwest's actuarial assumptions for its pension plan as of the beginning of the year due to the acquisition date of April 1, 2011. Qwest had the following actuarial assumptions as of April 1, 2011: discount rate of 5.40%; expected long-term rate of return on plan assets 7.50%; and a rate of compensation increase of 3.50%.

(2)

This column does not consider Qwest's actuarial assumptions for its post-retirement benefit plan as of the beginning of the year due to the acquisition date of April 1, 2011. Qwest had the following actuarial assumptions as of April 1, 2011: discount rate of 5.30%; expected long-term rate of return on plan assets of 7.50%; initial health care cost trend rate of 7.50% and ultimate health care trend rate of 5.00% to be reached in 2016.

Schedule of components of net periodic pension income and post-retirement benefit expense

Net periodic post-retirement benefit expense (income), which includes the effects of the Qwest acquisition subsequent to April 1, 2011, included the following components:



	Post-Retirement Plans Years Ended December 31,
	2013			2012		2011 ⁽¹⁾
	(Dollars in millions)
Service cost	$	24		22		18
Interest cost	140			173		152
Expected return on plan assets	(39		)	(45	)	(41	)
Amortization of unrecognized prior service cost	—			—		(2	)
Amortization of unrecognized actuarial loss	4			—		—
Net periodic post-retirement benefit expense (income)	$	129		150		127

_______________________________________________________________________________


(1)	Includes $92 million related to the Qwest plans subsequent to the April 1, 2011 acquisition date.

Schedule of actuarial assumptions used to compute the funded status for the plans

The actuarial assumptions used to compute the funded status for the plans are based upon information available as of December 31, 2013 and 2012 and are as follows:



	Pension Plans				Post-Retirement Benefit Plans
	December 31,				December 31,
	2013		2012		2013		2012
Actuarial assumptions at end of year:
Discount rate	4.20% - 5.10%		3.25% - 4.20%		4.50	%	3.60	%
Rate of compensation increase	3.25	%	3.25	%	N/A		N/A
Initial health care cost trend rate	N/A		N/A		6.50% / 7.00%		6.75% / 7.50%
Ultimate health care cost trend rate	N/A		N/A		4.50	%	4.50	%
Year ultimate trend rate is reached	N/A		N/A		2022 / 2024		2022 / 2024

_______________________________________________________________________________

N/A-Not applicable

Schedule of change in benefit obligation



	Post-Retirement Benefit Plans Years Ended December 31,
	2013			2012		2011
	(Dollars in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	4,075		3,930		558
Service cost	24			22		18
Interest cost	140			173		152
Participant contributions	96			86		64
Plan amendments	141			—		31
Acquisitions	—			—		3,284
Direct subsidy receipts	13			19		22
Actuarial (gain) loss	(399		)	260		153
Benefits paid by company	(266		)	(268	)	(219	)
Benefits paid from plan assets	(136		)	(147	)	(133	)
Benefit obligation at end of year	$	3,688		4,075		3,930

Schedule of change in plan assets

The following tables summarize the change in the fair value of plan assets for the pension and post-retirement benefit plans:



	Pension Plans Years Ended December 31,
	2013			2012		2011
	(Dollars in millions)
Change in plan assets
Fair value of plan assets at beginning of year	$	12,321		11,814		3,732
Return on plan assets	810			1,476		479
Acquisitions	—			—		7,777
Employer contributions	146			32		587
Benefits paid from plan assets	(931		)	(1,001	)	(761	)
Fair value of plan assets at end of year	$	12,346		12,321		11,814

Schedule of gross notional exposure of the derivative instruments directly held by the plans

The gross notional exposure of the derivative instruments directly held by the plans is shown below. The notional amount of the derivatives corresponds to market exposure but does not represent an actual cash investment.



	Gross Notional Exposure
	Pension Plans			Post-Retirement Benefit Plans
	Years Ended December 31,
	2013		2012	2013	2012
	(Dollars in millions)
Derivative instruments:
Exchange-traded U.S. equity futures	$	95	302	16	30
Exchange-traded non-U.S. equity futures	—		1	—	—
Exchange-traded Treasury futures	3,011		1,763	—	—
Interest rate swaps	556		1,471	—	—
Credit default swaps	253		495	—	—
Foreign exchange forwards	938		726	29	21
Options	261		768	—	—

Schedule of the unfunded status of the benefit plans

The following table presents the unfunded status of the pensions and post-retirement benefit plans:



	Pension Plans					Post-Retirement Benefit Plans
	Years Ended December 31,					Years Ended December 31,
	2013			2012		2013		2012
	(Dollars in millions)
Benefit obligation	$	(13,401	)	(14,881	)	(3,688	)	(4,075	)
Fair value of plan assets	12,346			12,321		535		626
Unfunded status	(1,055		)	(2,560	)	(3,153	)	(3,449	)
Current portion of unfunded status	$	(5	)	(6	)	(154	)	(160	)
Non-current portion of unfunded status	$	(1,050	)	(2,554	)	(2,999	)	(3,289	)

Schedule of items not recognized as a component of net periodic benefits expense

The items not recognized as a component of net periodic benefits expense have been recorded on our consolidated balance sheets in accumulated other comprehensive loss:



	As of and for the Years Ended December 31,
	2012			Recognition of Net Periodic Benefits Expense		Deferrals		Net Change in AOCI		2013
	(Dollars in millions)
Accumulated other comprehensive loss:
Pension plans:
Net actuarial (loss) gain	$	(2,236	)	84		1,094		1,178		(1,058	)
Prior service (cost) benefit	(38		)	5		—		5		(33	)
Deferred income tax benefit (expense)	875			(34	)	(419	)	(453	)	422
Total pension plans	(1,399		)	55		675		730		(669	)
Post-retirement benefit plans:
Net actuarial (loss) gain	(446		)	4		405		409		(37	)
Prior service (cost) benefit	(22		)	—		(141	)	(141	)	(163	)
Deferred income tax benefit (expense)	179			(1	)	(100	)	(101	)	78
Total post-retirement benefit plans	(289		)	3		164		167		(122	)
Total accumulated other comprehensive loss	$	(1,688	)	58		839		897		(791	)

Schedule of estimated items to be recognized in 2013 as a component of net periodic benefit expense

The following table presents estimated items to be recognized in 2014 as a component of net periodic benefit expense of the pension, non-qualified pension and post-retirement benefit plans:



	Pension Plans			Post-Retirement Plans
	(Dollars in millions)
Estimated recognition of net periodic benefit expense in 2014:
Net actuarial loss	$	(17	)	—
Prior service cost	(5		)	(17	)
Deferred income tax benefit	8			6
Estimated net periodic benefit expense to be recorded in 2014 as a component of other comprehensive income (loss)	$	(14	)	(11	)

Pension Plans

Employee Benefits

Schedule of components of net periodic pension income and post-retirement benefit expense

Net periodic pension benefit (income) expense, which includes the effects of the Qwest acquisition subsequent to April 1, 2011, included the following components:



	Pension Plans Years Ended December 31,
	2013			2012		2011 ⁽¹⁾
	(Dollars in millions)
Service cost	$	91		87		70
Interest cost	544			625		560
Expected return on plan assets	(896		)	(847	)	(709	)
Settlements	—			—		1
Amortization of unrecognized prior service cost	5			4		2
Amortization of unrecognized actuarial loss	84			35		13
Net periodic pension benefit (income) expense	$	(172	)	(96	)	(63	)

_______________________________________________________________________________


(1)	Includes $58 million of income related to the Qwest plans subsequent to the April 1, 2011 acquisition date.

Schedule of change in benefit obligation

The following table summarizes the change in the benefit obligations for the pension and post-retirement benefit plans:



	Pension Plans Years Ended December 31,
	2013			2012		2011
	(Dollars in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	14,881		13,596		4,534
Service cost	91			87		70
Interest cost	544			625		560
Plan amendments	—			14		12
Acquisitions	—			—		8,267
Actuarial (gain) loss	(1,179		)	1,565		930
Benefits paid by company	(5		)	(5	)	(16	)
Benefits paid from plan assets	(931		)	(1,001	)	(761	)
Benefit obligation at end of year	$	13,401		14,881		13,596

Schedule of change in plan assets



	Post-Retirement Benefit Plans Years Ended December 31,
	2013			2012		2011
	(Dollars in millions)
Change in plan assets
Fair value of plan assets at beginning of year	$	626		693		54
Actual gain on plan assets	45			80		4
Acquisitions	—			—		768
Benefits paid from plan assets	(136		)	(147	)	(133	)
Fair value of plan assets at end of year	$	535		626		693

Schedule of fair value of the plans' assets by asset category



	Fair Value of Pension Plan Assets at December 31, 2012
	Level 1			Level 2	Level 3	Total
	(Dollars in millions)
Investment grade bonds (a)	$	830		1,555	—	$	2,385
High yield bonds (b)	—			1,303	59	1,362
Emerging market bonds (c)	199			396	—	595
Convertible bonds (d)	—			374	—	374
Diversified strategies (e)	—			655	—	655
U.S. stocks (f)	1,225			119	—	1,344
Non-U.S. stocks (g)	1,212			178	—	1,390
Emerging market stocks (h)	111			193	—	304
Private equity (i)	—			—	711	711
Private debt (j)	—			—	465	465
Market neutral hedge funds (k)	—			906	—	906
Directional hedge funds (k)	—			340	194	534
Real estate (l)	—			223	337	560
Derivatives (m)	(5		)	3	—	(2		)
Cash equivalents and short-term investments (n)	—			750	—	750
Total investments	$	3,572		6,995	1,766	12,333
Accrued expenses						(12		)
Total pension plan assets						$	12,321

The tables below presents the fair value of plan assets by category and the input levels used to determine those fair values at December 31, 2013. It is important to note that the asset allocations do not include market exposures that are gained with derivatives.



	Fair Value of Pension Plan Assets at December 31, 2013
	Level 1		Level 2		Level 3	Total
	(Dollars in millions)
Investment grade bonds (a)	$	813	1,504		—	$	2,317
High yield bonds (b)	—		1,265		26	1,291
Emerging market bonds (c)	196		367		—	563
Convertible bonds (d)	—		389		—	389
Diversified strategies (e)	—		723		—	723
U.S. stocks (f)	1,408		92		—	1,500
Non-U.S. stocks (g)	1,159		299		—	1,458
Emerging market stocks (h)	—		110		—	110
Private equity (i)	—		—		721	721
Private debt (j)	—		—		436	436
Market neutral hedge funds (k)	—		867		99	966
Directional hedge funds (k)	—		582		32	614
Real estate (l)	—		306		265	571
Derivatives (m)	—		(34	)	—	(34		)
Cash equivalents and short-term investments (n)	—		721		—	721
Total investments	$	3,576	7,191		1,579	12,346
Accrued expenses						—
Total pension plan assets						$	12,346



	Fair Value of Post-Retirement Plan Assets at December 31, 2013
	Level 1		Level 2	Level 3	Total
	(Dollars in millions)
Investment grade bonds (a)	$	21	56	—	$	77
High yield bonds (b)	—		56	—	56
Emerging market bonds (c)	—		37	—	37
Diversified strategies (e)	—		86	—	86
U.S. stocks (f)	56		—	—	56
Non-U.S. stocks (g)	58		—	—	58
Emerging market stocks (h)	—		12	—	12
Private equity (i)	—		—	40	40
Private debt (j)	—		—	5	5
Market neutral hedge funds (k)	—		35	—	35
Directional hedge funds (k)	—		14	—	14
Real estate (l)	—		22	12	34
Cash equivalents and short-term investments (n)	—		24	—	24
Total investments	$	135	342	57	534
Contribution Receivable					1
Total post-retirement plan assets					$	535

Summary of changes in fair value of defined benefit plans' Level 3 assets

The table below presents a rollforward of the pension plan assets valued using Level 3 inputs:



	Pension Plan Assets Valued Using Level 3 Inputs
	High Yield Bonds			Private Equity		Private Debt		Market Neutral Hedge Fund		Directional Hedge Funds		Real Estate		Total
	(Dollars in millions)
Balance at December 31, 2011	$	79		791		461		188		183		535		2,237
Net transfers	(12		)	—		—		(188	)	—		(105	)	(305	)
Acquisitions	1			70		120		—		—		18		209
Dispositions	(11		)	(109	)	(102	)	—		—		(121	)	(343	)
Actual return on plan assets:
Gains relating to assets sold during the year	—			3		1		—		—		—		4
Gains (losses) relating to assets still held at year-end	2			(44	)	(15	)	—		11		10		(36	)
Balance at December 31, 2012	59			711		465		—		194		337		1,766
Net transfers	—			—		—		—		(165	)	—		(165	)
Acquisitions	5			82		71		100		—		9		267
Dispositions	(43		)	(179	)	(144	)	—		(1	)	(97	)	(464	)
Actual return on plan assets:
Gains relating to assets sold during the year	12			68		18		—		—		11		109
(Losses) gains relating to assets still held at year-end	(7		)	39		26		(1	)	4		5		66
Balance at December 31, 2013	$	26		721		436		99		32		265		1,579

Post-Retirement Benefit Plans

Employee Benefits

Schedule of effects of a 100 basis point change in assumed health care cost rates

A change of 100 basis points in the assumed initial health care cost trend rate would have had the following effects in 2013:



	100 Basis Points Change
	Increase		(Decrease)
	(Dollars in millions)
Effect on the aggregate of the service and interest cost components of net periodic post-retirement benefit expense (consolidated statement of operations)	$	3	(3	)
Effect on benefit obligation (consolidated balance sheet)	87		(80	)

Schedule of fair value of the plans' assets by asset category



	Fair Value of Post-Retirement Plan Assets at December 31, 2013
	Level 1		Level 2	Level 3	Total
	(Dollars in millions)
Investment grade bonds (a)	$	21	56	—	$	77
High yield bonds (b)	—		56	—	56
Emerging market bonds (c)	—		37	—	37
Diversified strategies (e)	—		86	—	86
U.S. stocks (f)	56		—	—	56
Non-U.S. stocks (g)	58		—	—	58
Emerging market stocks (h)	—		12	—	12
Private equity (i)	—		—	40	40
Private debt (j)	—		—	5	5
Market neutral hedge funds (k)	—		35	—	35
Directional hedge funds (k)	—		14	—	14
Real estate (l)	—		22	12	34
Cash equivalents and short-term investments (n)	—		24	—	24
Total investments	$	135	342	57	534
Contribution Receivable					1
Total post-retirement plan assets					$	535



	Fair Value of Post-Retirement Plan Assets at December 31, 2012
	Level 1		Level 2	Level 3	Total
	(Dollars in millions)
Investment grade bonds (a)	$	22	86	—	$	108
High yield bonds (b)	—		90	—	90
Emerging market bonds (c)	—		40	—	40
Convertible bonds (d)	—		2	—	2
Diversified strategies (e)	—		72	—	72
U.S. stocks (f)	55		—	—	55
Non-U.S. stocks (g)	58		1	—	59
Emerging market stocks (h)	—		20	—	20
Private equity (i)	—		—	45	45
Private debt (j)	—		—	6	6
Market neutral hedge funds (k)	—		41	—	41
Directional hedge funds (k)	—		24	—	24
Real estate (l)	—		21	28	49
Cash equivalents and short-term investments (n)	5		21	—	26
Total investments	$	140	418	79	637
Accrued expenses					(1		)
Reimbursement accrual					(10		)
Total post-retirement plan assets					$	626

Summary of changes in fair value of defined benefit plans' Level 3 assets

The table below presents a rollforward of the post-retirement plan assets valued using Level 3 inputs:



	Post-Retirement Plan Assets Valued Using Level 3 Inputs
	Private Equity			Private Debt		Real Estate		Total
	(Dollars in millions)
Balance at December 31, 2011	$	60		8		26		94
Acquisitions	1			—		—		1
Dispositions	(15		)	(3	)	(1	)	(19	)
Actual return on plan assets:
Gains (losses) relating to assets sold during the year	4			2		(1	)	5
(Losses) gains relating to assets still held at year-end	(5		)	(1	)	4		(2	)
Balance at December 31, 2012	45			6		28		79
Acquisitions	1			—		—		1
Dispositions	(11		)	(1	)	(18	)	(30	)
Actual return on plan assets:
Gains (losses) relating to assets sold during the year	4			—		(1	)	3
Gains relating to assets still held at year-end	1			—		3		4
Balance at December 31, 2013	$	40		5		12		57