7.	Employee Benefits

We maintain non-contributory defined benefit pension plans for many of our employees. In addition, we maintain postretirement health care and life insurance plans for our retirees and their dependents, which are both contributory and non-contributory, and include a limit on our share of the cost for certain recent and future retirees. In accordance with our accounting policy for pension and other postretirement benefits, operating expenses include pension and benefit related credits and/or charges based on actuarial assumptions, including projected discount rates and an estimated return on plan assets. These estimates are updated in the fourth quarter to reflect actual return on plan assets and updated actuarial assumptions. The adjustment will be 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

The following table summarizes the benefit (income) cost related to our pension and postretirement health care and life insurance plans:


(dollars in millions)	Pension						Health Care and Life

Three Months Ended September 30,	2013			2012			2013			2012
Service cost	$	99		$	89		$	79		$	92
Amortization of prior service cost (credit)		2			(1	)		(62	)		(8	)

Subtotal		101			88			17			84
Expected return on plan assets		(311	)		(442	)		(36	)		(44	)
Interest cost		251			362			273			327

Net periodic benefit cost	$	41		$	8		$	254		$	367


(dollars in millions)	Pension						Health Care and Life

Nine Months Ended September 30,	2013			2012			2013			2012
Service cost	$	296		$	268		$	238		$	277
Amortization of prior service cost (credit)		5			(3	)		(185	)		(26	)

Subtotal		301			265			53			251
Expected return on plan assets		(933	)		(1,327	)		(108	)		(129	)
Interest cost		752			1,086			821			980

Subtotal		120			24			766			1,102
Remeasurement (gain) loss, net		(237	)		–			–			–

Net periodic benefit (income) cost	$	(117	)	$	24		$	766		$	1,102

Pension Remeasurement

During the second quarter of 2013, we recorded net pretax pension remeasurement credits of approximately $0.2 billion, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. The pension remeasurement credits relate to settlements for employees who received lump-sum distributions. The credits were primarily driven by an approximately 75 basis point increase in our discount rate assumption used to determine the current year liabilities of one of our pension plans. The change in discount rate resulted in a gain of $0.3 billion, partially offset by a loss resulting from the difference between our expected return on assets assumption of 7.5% at December 31, 2012 and our annualized actual return on assets of 7.2% at June 30, 2013, as well as other losses ($0.1 billion). Our weighted-average discount rate assumption increased from 4.2% at December 31, 2012 to 5.0% at June 30, 2013.

During the three months ended September 30, 2013, as a result of the settlements noted above, we performed a pension remeasurement in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur. This remeasurement was not material to our condensed consolidated statement of income for the period.

Severance Payments

During the three and nine months ended September 30, 2013, we paid severance benefits of $0.1 billion and $0.3 billion, respectively. At September 30, 2013, we had a remaining severance liability of $0.7 billion, a portion of which includes future contractual payments to employees separated as of September 30, 2013.

Employer Contributions

During the three and nine months ended September 30, 2013, we contributed $0.4 billion and $1.1 billion to our other postretirement benefit plans, respectively. The contributions to our qualified pension plans were not material during the three and nine months ended September 30, 2013. During the three and nine months ended September 30, 2013, we contributed an immaterial amount and $0.1 billion to our nonqualified pension plans, respectively. There have been no material changes to the estimated qualified and nonqualified pension contributions in 2013 as previously disclosed in Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2012.