Employee Benefits

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Employee Benefits

Note 11. 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.

Pension and Other Postretirement Benefits

Pension and other postretirement benefits for certain employees are subject to collective bargaining agreements. Modifications in benefits have been bargained from time to time, and we may also periodically amend the benefits in the management plans. The following tables summarize benefit costs, as well as the benefit obligations, plan assets, funded status and rate assumptions associated with pension and postretirement health care and life insurance benefit plans.

Obligations and Funded Status

					(dollars in millions)
	Pension				Health Care and Life
At December 31,	2021		2020		2021		2020
Change in Benefit Obligations
Beginning of year	$	22,236	$	21,248	$	16,168	$	15,669
Service cost	282		305		112		110
Interest cost	394		505		289		429
Actuarial (gain) loss, net	(605)		2,308		(930)		887
Benefits paid	(816)		(842)		(929)		(927)
Curtailment and termination benefits	6		—		—		—
Settlements paid	(1,330)		(1,288)		—		—
End of year	20,167		22,236		14,710		16,168
Change in Plan Assets
Beginning of year	20,128		19,451		572		743
Actual return on plan assets	2,049		2,750		53		47
Company contributions	56		57		885		709
Benefits paid	(816)		(842)		(929)		(927)
Settlements paid	(1,330)		(1,288)		—		—
End of year	20,087		20,128		581		572
Funded Status - End of year	$	(80)	$	(2,108)	$	(14,129)	$	(15,596)

					(dollars in millions)
	Pension				Health Care and Life
At December 31,	2021		2020		2021		2020
Amounts recognized in the balance sheets
Noncurrent assets	$	376	$	5	$	—	$	—
Current liabilities	(55)		(63)		(748)		(721)
Noncurrent liabilities	(401)		(2,050)		(13,381)		(14,875)
Total	$	(80)	$	(2,108)	$	(14,129)	$	(15,596)
Amounts recognized in Accumulated other comprehensive loss (pre-tax)
Prior service cost (benefit)	$	402	$	463	$	(1,889)	$	(2,783)
Total	$	402	$	463	$	(1,889)	$	(2,783)

The accumulated benefit obligation for all defined benefit pension plans was $20.1 billion and $22.2 billion at December 31, 2021 and 2020, respectively.

Actuarial gain/loss, Net

The net actuarial gain in 2021 is primarily the result of a $1.1 billion gain due to an increase in our discount rate assumption used to determine the current year liabilities of our pension plans and postretirement benefit plans from a weighted-average of 2.6% at December 31, 2020 to a weighted-average of 2.9% at December 31, 2021.

The net actuarial loss in 2020 is primarily the result of a $3.2 billion loss due to a decrease in our discount rate assumption used to determine the current year liabilities of our pension plans and postretirement benefit plans from a weighted-average of 3.3% at December 31, 2019 to a weighted-average of 2.6% at December 31, 2020.

Plan Amendments

The reclassifications from the amounts recorded in Accumulated other comprehensive income (loss) as a result of collective bargaining agreements and plan amendments made in 2016, 2017 and 2018 resulted in a net decrease to net periodic benefit cost and net increase to pre-tax income of approximately $708 million during 2021, 2020 and 2019.

Information for pension plans with an accumulated benefit obligation in excess of plan assets follows:

	(dollars in millions)
At December 31,	2021		2020
Accumulated benefit obligation	$	456	$	22,116
Fair value of plan assets	—		20,064

Information for pension plans with a projected benefit obligation in excess of plan assets follows:

	(dollars in millions)
At December 31,	2021		2020
Projected benefit obligation	$	456	$	22,178
Fair value of plan assets	—		20,064

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
Years Ended December 31,	2021		2020		2019		2021		2020		2019
Service cost - Cost of services	$	247	$	245	$	202	$	94	$	89	$	78
Service cost - Selling, general and administrative expense	35		60		45		18		21		18
Service cost	282		305		247		112		110		96
Amortization of prior service cost (credit)	61		61		61		(894)		(966)		(971)
Expected return on plan assets	(1,234)		(1,186)		(1,130)		(22)		(28)		(37)
Interest cost	394		505		695		289		429		629
Remeasurement loss (gain), net	(1,419)		744		606		(960)		866		(480)
Other components	(2,198)		124		232		(1,587)		301		(859)
Total	$	(1,916)	$	429	$	479	$	(1,475)	$	411	$	(763)

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

Other pre-tax changes in plan assets and benefit obligations recognized in Other comprehensive (income) loss are as follows:

							(dollars in millions)
	Pension						Health Care and Life
At December 31,	2021		2020		2019		2021		2020		2019
Prior service cost (benefit)	$	—	$	—	$	—	$	—	$	—	$	(22)
Reversal of amortization items
Prior service cost (benefit)	(61)		(61)		(61)		894		966		971
Total recognized in Other comprehensive loss (income) (pre-tax)	$	(61)	$	(61)	$	(61)	$	894	$	966	$	949

Assumptions

The weighted-average assumptions used in determining benefit obligations follow:

	Pension				Health Care and Life
At December 31,	2021		2020		2021		2020
Discount Rate	3.00	%	2.60	%	2.90	%	2.50	%
Rate of compensation increases	3.00	%	3.00	%	N/A		N/A

N/A - not applicable

The weighted-average assumptions used in determining net periodic cost follow:

	Pension						Health Care and Life
At December 31,	2021		2020		2019		2021		2020		2019
Discount rate in effect for determining service cost	3.20	%	3.30	%	4.60	%	3.00	%	3.50	%	4.60	%
Discount rate in effect for determining interest cost	1.90		2.40		3.80		1.80		2.80		4.00
Expected return on plan assets	6.50		6.50		6.80		4.20		4.50		4.30
Rate of compensation increases	3.00		3.00		3.00		N/A		N/A		N/A

N/A - not applicable

In determining our pension and other postretirement benefit obligations, we used a weighted-average discount rate of 2.9% in 2021. The rates were selected to approximate the composite interest rates available on a selection of high-quality bonds available in the market at December 31, 2021. The bonds selected had maturities that coincided with the time periods during which benefits payments are expected to occur, were non-callable and available in sufficient quantities to ensure marketability (at least $300 million par outstanding).

In order to project the long-term target investment return for the total portfolio, estimates are prepared for the total return of each major asset class over the subsequent 10-year period. Those estimates are based on a combination of factors including the current market interest rates and valuation levels, consensus earnings expectations and historical long-term risk premiums. To determine the aggregate return for the pension trust, the projected return of each individual asset class is then weighted according to the allocation to that investment area in the trust’s long-term asset allocation policy.

The assumed health care cost trend rates are as follows:

	Health Care and Life
At December 31,	2021		2020		2019
Weighted-average healthcare cost trend rate assumed for next year	6.20	%	6.20	%	6.30	%
Rate to which cost trend rate gradually declines	4.50		4.50		4.50
Year the rate reaches the level it is assumed to remain thereafter	2029		2029		2027

Plan Assets

The Company’s overall investment strategy is to achieve a mix of assets that allows us to meet projected benefit payments while taking into consideration risk and return. While target allocation percentages will vary over time, the current target allocation for plan assets is designed so that 45% to 55% of the assets have the objective of achieving a return in excess of the growth in liabilities (comprised of public equities, private equities, real estate, hedge funds, high yield bonds and emerging market debt) and 44% to 54% of the assets are invested as liability hedging assets (where interest rate sensitivity of the liability hedging assets better match the interest rate sensitivity of the liability) and a maximum of 10% is in cash. This allocation will shift as funded status improves to a higher allocation of liability hedging assets. Target policies will be revisited periodically to ensure they are in line with fund objectives. Both active and passive management approaches are used depending on perceived market efficiencies and various other factors. Due to our diversification and risk control processes, there are no significant concentrations of risk, in terms of sector, industry, geography or company names.

Pension and healthcare and life plans assets do not include significant amounts of Verizon common stock.

Pension Plans

The fair values for the pension plans by asset category at December 31, 2021 are as follows:

	(dollars in millions)
Asset Category	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	1,221	$	1,208	$	13	$	—
Equity securities	2,482		2,463		19		—
Fixed income securities
U.S. Treasuries and agencies	1,785		1,652		133		—
Corporate bonds	4,046		123		3,923		—
International bonds	1,407		23		1,384		—
Other	695		—		695		—
Real estate	972		—		—		972
Other
Private equity	569		—		—		569
Hedge funds	224		—		114		110
Total investments at fair value	13,401		5,469		6,281		1,651
Investments measured at NAV	6,686
Total	$	20,087	$	5,469	$	6,281	$	1,651

The fair values for the pension plans by asset category at December 31, 2020 are as follows:

	(dollars in millions)
Asset Category	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	1,968	$	1,823	$	145	$	—
Equity securities	1,972		1,623		347		2
Fixed income securities
U.S. Treasuries and agencies	2,039		1,756		283		—
Corporate bonds	4,110		153		3,781		176
International bonds	1,548		17		1,511		20
Other	916		—		916		—
Real estate	757		—		—		757
Other
Private equity	414		—		—		414
Hedge funds	244		—		106		138
Total investments at fair value	13,968		5,372		7,089		1,507
Investments measured at NAV	6,160
Total	$	20,128	$	5,372	$	7,089	$	1,507

The following is a reconciliation of the beginning and ending balance of pension plan assets that are measured at fair value using significant unobservable inputs:

	(dollars in millions)
	Equity Securities		Corporate Bonds		International Bonds		Real Estate		Private Equity		Hedge Funds		Total
Balance at January 1, 2020	$	3	$	145	$	26	$	810	$	737	$	129	$	1,850
Actual gain (loss) on plan assets	5		(8)		3		146		57		1		204
Purchases (sales)	(7)		39		(9)		(146)		(134)		69		(188)
Transfers out	1		—		—		(53)		(246)		(61)		(359)
Balance at December 31, 2020	2		176		20		757		414		138		1,507
Actual gain (loss) on plan assets	(1)		(5)		—		(21)		(19)		1		(45)
Purchases (sales)	(1)		1		(4)		197		147		81		421
Transfers out	—		(172)		(16)		39		27		(110)		(232)
Balance at December 31, 2021	$	—	$	—	$	—	$	972	$	569	$	110	$	1,651

Health Care and Life Plans

The fair values for the other postretirement benefit plans by asset category at December 31, 2021 are as follows:

	(dollars in millions)
Asset Category	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	36	$	—	$	36	$	—
Equity securities	284		284		—		—
Fixed income securities
U.S. Treasuries and agencies	160		150		10		—
Corporate bonds	64		50		14		—
International bonds	14		10		4		—
Other	10		—		10		—
Total investments at fair value	568		494		74		—
Investments measured at NAV	13
Total	$	581	$	494	$	74	$	—

The fair values for the other postretirement benefit plans by asset category at December 31, 2020 are as follows:

	(dollars in millions)
Asset Category	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	40	$	—	$	40	$	—
Equity securities	178		178		—		—
Fixed income securities
U.S. Treasuries and agencies	83		83		—		—
Corporate bonds	54		54		—		—
International bonds	9		9		—		—
Total investments at fair value	364		324		40		—
Investments measured at NAV	208
Total	$	572	$	324	$	40	$	—

The following are general descriptions of asset categories, as well as the valuation methodologies and inputs used to determine the fair value of each major category of assets.

Cash and cash equivalents include short-term investment funds (less than 90 days to maturity), primarily in diversified portfolios of investment grade money market instruments and are valued using quoted market prices or other valuation methods. The carrying value of cash equivalents approximates fair value due to the short-term nature of these investments.

Investments in securities traded on national and foreign securities exchanges are valued by the trustee at the last reported sale prices on the last business day of the year or, if no sales were reported on that date, at the last reported bid prices. Government obligations, corporate bonds, international bonds and asset-backed debt are valued using matrix prices with input from independent third-party valuation sources. Over-the-counter securities are valued at the bid prices or the average of the bid and ask prices on the last business day of the year from published sources or, if not available, from other sources considered reliable such as multiple broker quotes.

Commingled funds not traded on national exchanges are priced by the custodian or fund's administrator at their net asset value (NAV). Commingled funds held by third-party custodians appointed by the fund managers provide the fund managers with a NAV. The fund managers have the responsibility for providing this information to the custodian of the respective plan.

The investment manager of the entity values venture capital, corporate finance and natural resource limited partnership investments. Real estate investments are valued at amounts based upon appraisal reports prepared by either independent real estate appraisers or the investment manager using discounted cash flows or market comparable data. Loans secured by mortgages are carried at the lesser of the unpaid balance or appraised value of the underlying properties. The values assigned to these investments are based upon available and current market information and do not necessarily represent amounts that might ultimately be realized. Because of the inherent uncertainty of valuation, estimated fair values might differ significantly from the values that would have been used had a ready market for the securities existed. These differences could be material.

Forward currency contracts, futures, and options are valued by the trustee at the exchange rates and market prices prevailing on the last business day of the year. Both exchange rates and market prices are readily available from published sources. These securities are classified by the asset class of the underlying holdings.

Hedge funds are valued by the custodian at NAV based on statements received from the investment manager. These funds are valued in accordance with the terms of their corresponding offering or private placement memoranda.

Commingled funds, hedge funds, venture capital, corporate finance, natural resource and real estate limited partnership investments for which

fair value is measured using the NAV per share as a practical expedient are not leveled within the fair value hierarchy but are included in total investments.

Employer Contributions

In 2021, we made no discretionary contribution to our qualified pension plans, $58 million of contributions to our nonqualified pension plans and $885 million of contributions to our other postretirement benefit plans. No qualified pension plans contributions are expected to be made in 2022. Nonqualified pension plans contributions are estimated to be approximately $60 million and contributions to our other postretirement benefit plans are estimated to be approximately $860 million in 2022.

Estimated Future Benefit Payments

The benefit payments to retirees are expected to be paid as follows:

			(dollars in millions)
Year	Pension Benefits		Health Care and Life
2022	$	2,049	$	906
2023	1,648		883
2024	1,097		862
2025	1,066		850
2026	1,034		840
2027 to 2031	5,097		4,139

Savings Plan and Employee Stock Ownership Plans

We maintain four leveraged employee stock ownership plans (ESOP). We match a certain percentage of eligible employee contributions to certain savings plans with shares of our common stock from this ESOP. At December 31, 2021, the number of allocated shares of common stock in this ESOP was 44 million. There were no unallocated shares of common stock in this ESOP at December 31, 2021. All leveraged ESOP shares are included in earnings per share computations.

Total savings plan costs were $690 million in 2021, $730 million in 2020 and $897 million in 2019.

Severance Benefits

The following table provides an analysis of our severance liability:

							(dollars in millions)
Year	Beginning of Year		Charged to Expense		Payments		Other		End of Year
2019	$	2,156	$	260	$	(1,847)	$	(4)	$	565
2020	565		309		(248)		(24)		602
2021	602		233		(258)		(29)		548

Severance, Pension and Benefits (Credits) Charges

During 2021, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur, we recorded net pre-tax pension and benefits credits of $2.4 billion in our pension and postretirement benefit plans. The credits were recorded in Other income (expense), net in our consolidated statement of income and were primarily driven by a credit of $1.1 billion due to an increase in our discount rate assumption used to determine the current year liabilities of our pension plans and postretirement benefit plans from a weighted-average of 2.6% at December 31, 2020 to a weighted-average of 2.9% at December 31, 2021, a credit of $847 million due to the difference between our estimated and our actual return on assets and a credit of $453 million due to other actuarial assumption adjustments. During 2021, we also recorded net pre-tax severance charges of $233 million in Selling, general and administrative expense in our consolidated statements of income.

During 2020, we recorded net pre-tax pension and benefits charges of $1.6 billion in our pension and postretirement benefit plans. The charges were recorded in Other income (expense), net in our consolidated statement of income and were primarily driven by a charge of $3.2 billion due to a decrease in our discount rate assumption used to determine the current year liabilities of our pension plans and postretirement benefit plans from a weighted-average of 3.3% at December 31, 2019 to a weighted-average of 2.6% at December 31, 2020, partially offset by a credit of $1.6 billion due to the difference between our estimated and our actual return on assets. During 2020, we also recorded net pre-tax severance charges of $309 million in Selling, general and administrative expense in our consolidated statements of income.

During 2019, we recorded net pre-tax pension and benefits charges of $126 million in our pension and postretirement benefit plans. The charges were recorded in Other income (expense), net in our consolidated statement of income and were primarily driven by a charge of $4.3 billion due to a decrease in our discount rate assumption used to determine the current year liabilities of our pension plans and postretirement benefits plans from a weighted-average of 4.4% at December 31, 2018 to a weighted-average of 3.3% at December 31, 2019, partially offset by a credit of $2.3 billion due to the difference between our estimated return on assets and our actual return on assets and a

credit of $1.9 billion due to other assumption adjustments, of which $1.6 billion related to healthcare claims experience. During 2019, we also recorded net pre-tax severance charges of $260 million in Selling, general and administrative expense in our consolidated statements of income.