Employee Benefits

12 Months Ended

Dec. 31, 2022

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 or upon a remeasurement event, to reflect actual return on plan assets and updated actuarial assumptions. 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,	2022		2021		2022		2021
Change in Benefit Obligations
Beginning of year	$	20,167	$	22,236	$	14,710	$	16,168
Service cost	246		282		94		112
Interest cost	544		394		332		289
Plan amendments	427		—		4		—
Actuarial gain, net	(3,865)		(605)		(3,297)		(930)
Benefits paid	(782)		(816)		(736)		(929)
Curtailment and termination benefits	2		6		—		—
Settlements paid	(1,370)		(1,330)		—		—
End of year	15,369		20,167		11,107		14,710
Change in Plan Assets
Beginning of year	20,087		20,128		581		572
Actual return on plan assets	(4,249)		2,049		(87)		53
Company contributions	53		56		692		885
Benefits paid	(782)		(816)		(736)		(929)
Settlements paid	(1,370)		(1,330)		—		—
End of year	13,739		20,087		450		581
Funded Status - End of year	$	(1,630)	$	(80)	$	(10,657)	$	(14,129)

					(dollars in millions)
	Pension				Health Care and Life
At December 31,	2022		2021		2022		2021
Amounts recognized in the balance sheets
Non-current assets	$	4	$	376	$	—	$	—
Current liabilities	(48)		(55)		(718)		(748)
Non-current liabilities	(1,586)		(401)		(9,939)		(13,381)
Total	$	(1,630)	$	(80)	$	(10,657)	$	(14,129)
Amounts recognized in Accumulated other comprehensive loss (pre-tax)
Prior service cost (benefit)	$	747	$	402	$	(1,355)	$	(1,889)
Total	$	747	$	402	$	(1,355)	$	(1,889)

The accumulated benefit obligation for all defined benefit pension plans was $15.3 billion and $20.1 billion at December 31, 2022 and 2021, respectively.

Actuarial Gain, Net

The net actuarial gain in 2022 is primarily the result of a $7.0 billion gain ($4.1 billion gain in the pension plan and $2.9 billion gain in our postretirement benefit plans) 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 2.9% at December 31, 2021 to a weighted-average of 5.2% at December 31, 2022.

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.

Plan Amendments

In July 2022, union members ratified the extension of our collective bargaining agreements with the Communications Workers of America and the International Brotherhood of Electrical Workers for three years, from August 5, 2023 until August 1, 2026. Amendments triggered by the collective bargaining negotiations were made to certain pension plans for certain union-represented employees. The impact of the plan amendments was an increase in our defined benefit pension plans plan obligations of approximately $427 million, which has been recorded as a net decrease to Accumulated other comprehensive income (loss) of $317 million (net of taxes of $110 million). The annual impact of the amount recorded in Accumulated other comprehensive income (loss) that will be reclassified to net periodic benefit cost is minimal.

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 $390 million during 2022 and $708 million during 2021 and 2020.

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

	(dollars in millions)
At December 31,	2022		2021
Accumulated benefit obligation	$	15,286	$	456
Fair value of plan assets	13,694		—

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

	(dollars in millions)
At December 31,	2022		2021
Projected benefit obligation	$	15,328	$	456
Fair value of plan assets	13,694		—

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,	2022		2021		2020		2022		2021		2020
Service cost - Cost of services	$	216	$	247	$	245	$	79	$	94	$	89
Service cost - Selling, general and administrative expense	30		35		60		15		18		21
Service cost	246		282		305		94		112		110
Amortization of prior service cost (credit)	82		61		61		(530)		(894)		(966)
Expected return on plan assets	(1,119)		(1,234)		(1,186)		(27)		(22)		(28)
Interest cost	544		394		505		332		289		429
Remeasurement loss (gain), net	1,505		(1,419)		744		(3,182)		(960)		866
Curtailment and termination benefits	2		—		—		—		—		—
Other components	1,014		(2,198)		124		(3,407)		(1,587)		301
Total	$	1,260	$	(1,916)	$	429	$	(3,313)	$	(1,475)	$	411

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,	2022		2021		2020		2022		2021		2020
Reversal of amortization items
Prior service cost (benefit)	$	(82)	$	(61)	$	(61)	$	530	$	894	$	966
Total recognized in Other comprehensive loss (income) (pre-tax)	$	(82)	$	(61)	$	(61)	$	530	$	894	$	966

Assumptions

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

	Pension				Health Care and Life
At December 31,	2022		2021		2022		2021
Discount Rate	5.20	%	3.00	%	5.20	%	2.90	%
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,	2022		2021		2020		2022		2021		2020
Discount rate in effect for determining service cost	3.80	%	3.20	%	3.30	%	3.20	%	3.00	%	3.50	%
Discount rate in effect for determining interest cost	3.20		1.90		2.40		2.30		1.80		2.80
Expected return on plan assets	6.70		6.50		6.50		4.90		4.20		4.50
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 5.2% in 2022. 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, 2022. 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,	2022		2021		2020
Weighted-average healthcare cost trend rate assumed for next year	6.60	%	6.20	%	6.20	%
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	2031		2029		2029

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 41% to 51% 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 55% to 65% 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 bonds or common stock.

Pension Plans

The fair values for the pension plans by asset category at December 31, 2022 are as follows:

	(dollars in millions)
Asset Category	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	817	$	779	$	38	$	—
Equity securities	332		318		14		—
Fixed income securities
U.S. Treasuries and agencies	1,541		1,312		229		—
Corporate bonds	2,413		13		2,400		—
International bonds	528		10		518		—
Other	711		4		707		—
Real estate	1,002		—		—		1,002
Other
Private equity	569		—		—		569
Hedge funds	88		—		36		52
Total investments at fair value	8,001		2,436		3,942		1,623
Investments measured at NAV	5,738
Total	$	13,739	$	2,436	$	3,942	$	1,623

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 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, 2021	$	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
Actual gain on plan assets	—		—		—		19		30		19		68
Purchases (sales)	—		—		—		14		(11)		6		9
Transfers out	—		—		—		(3)		(19)		(83)		(105)
Balance at December 31, 2022	$	—	$	—	$	—	$	1,002	$	569	$	52	$	1,623

Health Care and Life Plans

The fair values for the other postretirement benefit plans by asset category at December 31, 2022 are as follows:

	(dollars in millions)
Asset Category	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	30	$	1	$	29	$	—
Equity securities	252		252		—		—
Fixed income securities
U.S. Treasuries and agencies	101		82		19		—
Corporate bonds	35		25		10		—
International bonds	12		9		3		—
Other	11		—		11		—
Total investments at fair value	441		369		72		—
Investments measured at NAV	9
Total	$	450	$	369	$	72	$	—

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 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 2022, we made no discretionary contribution to our qualified pension plans, $53 million of contributions to our nonqualified pension plans and $692 million of contributions to our other postretirement benefit plans. No mandatory qualified pension plans contributions are expected or required to be made in 2023. In 2023, we expect discretionary qualified pension plan contributions to be approximately $200 million, nonqualified pension plan contributions are estimated to be insignificant and contributions to our other postretirement benefit plans are estimated to be approximately $820 million.

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
2023	$	1,679	$	867
2024	1,583		863
2025	1,578		854
2026	1,553		845
2027	937		837
2028 to 2032	4,628		4,082

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, 2022, the number of allocated shares of common stock in this ESOP was 43 million. There were no unallocated shares of common stock in this ESOP at December 31, 2022. All leveraged ESOP shares are included in earnings per share computations.

Total savings plan costs were $620 million in 2022, $690 million in 2021 and $730 million in 2020.

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
2020	$	565	$	309	$	(248)	$	(24)	$	602
2021	602		233		(258)		(29)		548
2022	548		319		(214)		—		653

Severance, Pension and Benefits (Credits) Charges

During 2022, 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 $1.7 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 $7.0 billion due to an increase in our discount rate assumption used to determine the current year liabilities of our pension plans ($4.1 billion) and postretirement benefit plans ($2.9 billion) from a weighted-average of 2.9% at December 31, 2021 to a weighted-average of 5.2% at December 31, 2022, a charge of $5.5 billion due to the difference between our estimated and our actual return on assets and a credit of $206 million due to other actuarial assumption adjustments. During 2022, we also recorded net pre-tax severance charges of $319 million in Selling, general and administrative expense in our consolidated statements of income.

During 2021, 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.