

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. 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,	2018			2017			2018			2017
Service cost - Cost of services	$	59		$	55		$	26		$	29
Service cost - Selling, general and administrative expense	14			15			6			8
Service cost	$	73		$	70		$	32		$	37

Amortization of prior service cost (credit)	$	10		$	9		$	(244	)	$	(235	)
Expected return on plan assets	(329		)	(316		)	(11		)	(13		)
Interest cost	166			171			154			165
Other components	$	(153	)	$	(136	)	$	(101	)	$	(83	)

Total	$	(80	)	$	(66	)	$	(69	)	$	(46	)



	(dollars in millions)
	Pension						Health Care and Life
Six Months Ended June 30,	2018			2017			2018			2017
Service cost - Cost of services	$	117		$	110		$	52		$	58
Service cost - Selling, general and administrative expense	28			30			12			16
Service cost	$	145		$	140		$	64		$	74

Amortization of prior service cost (credit)	$	20		$	19		$	(488	)	$	(470	)
Expected return on plan assets	(658		)	(632		)	(22		)	(26		)
Interest cost	332			342			307			330
Other components	$	(306	)	$	(271	)	$	(203	)	$	(166	)

Total	$	(161	)	$	(131	)	$	(139	)	$	(92	)

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, 2018, we paid severance benefits of $0.1 billion and $0.3 billion, respectively. During the both the three and six months ended June 30, 2018, we recorded net pre-tax severance charges of $0.3 billion, exclusive of acquisition related severance charges. At June 30, 2018, we had a remaining severance liability of $0.6 billion, a portion of which includes future contractual payments to employees separated as of June 30, 2018.

Employer Contributions

During the six months ended June 30, 2018, we made a discretionary contribution of $1.0 billion to our qualified pension plans. As a result of the $1.0 billion and $3.4 billion discretionary pension contributions during the six months ended June 30, 2018 and 2017, respectively, we do not expect mandatory pension funding through December 31, 2018. During the three months ended June 30, 2018, we made a discretionary contribution of $0.7 billion to a retiree benefit account to fund health and welfare benefits. There was no contribution made to our nonqualified pension plans during the three and six months ended June 30, 2018. There have been no significant changes with respect to the nonqualified pension and other postretirement benefit plans contributions in 2018 as previously disclosed in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2017 included in our Current Report on Form 8-K dated May 1, 2018.

2018 Collective Bargaining Negotiations

We reached a tentative agreement 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 3, 2019 for four years until August 5, 2023. The collective bargaining agreements cover approximately 34,000 employees. The extension agreement is subject to ratification votes by the union members. We expect these votes to be completed by mid-August 2018.