Substantially all of our employees are covered by one of our noncontributory pension plans. We also provide certain medical, dental, life insurance, and death benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs as active employees earn these benefits. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to meet the plans' obligations to provide benefits to employees upon their retirement.

In July 2014, the U.S. Department of Labor (DOL) published in the Federal Register their final retroactive approval of our September 9, 2013 voluntary contribution of a preferred equity interest in AT&T Mobility II LLC, the primary holding company for our wireless business, to the trust used to pay pension benefits under our qualified pension plans. The preferred equity interest had a value of $9,114 at September 30, 2014. The trust is entitled to receive cumulative cash distributions of $560 per annum, which will be distributed quarterly in equal amounts and will be accounted for as contributions. We distributed $420 to the trust during the nine months ended September 30, 2014. So long as we make the distributions, the terms of the preferred interest will impose no limitations on our ability to declare a dividend, or repurchase shares. This preferred equity interest is a plan asset under ERISA and is recognized as such in the plan's separate financial statements. However, because the preferred equity interest is not unconditionally transferable to an unrelated party, it is not reflected in plan assets in our consolidated financial statements and instead has been eliminated in consolidation.

We recognize actuarial gains and losses on pension and postretirement plan assets in our operating results at our annual measurement date of December 31, unless earlier remeasurements are required. The following table details pension and postretirement benefit costs included in operating expenses in the accompanying consolidated statements of income, expense credits are denoted with parentheses. A portion of these expenses is capitalized as part of internal construction projects, providing a small reduction in the net expense recorded.

	Three months ended				Nine months ended
	September 30,				September 30,
	2014		2013		2014		2013
Pension cost:
Service cost – benefits earned during the period	$	282	$	331	$	846	$	991
Interest cost on projected benefit obligation		661		608		1,984		1,822
Expected return on assets		(849)		(828)		(2,549)		(2,484)
Amortization of prior service credit		(24)		(25)		(71)		(71)
Net pension cost	$	70	$	86	$	210	$	258

Postretirement cost:
Service cost – benefits earned during the period	$	59	$	95	$	175	$	286
Interest cost on accumulated postretirement benefit obligation		365		389		1,094		1,168
Expected return on assets		(165)		(177)		(491)		(533)
Amortization of prior service credit		(362)		(263)		(1,086)		(788)
Net postretirement (credit) cost	$	(103)	$	44	$	(308)	$	133

Combined net pension and postretirement (credit) cost	$	(33)	$	130	$	(98)	$	391

Our combined net pension and postretirement cost decreased $163 in the third quarter and $489 for the first nine months of 2014. The decrease reflects higher amortization of prior service credits due to plan changes, including changes to future costs for continued retiree healthcare coverage. The decrease also reflects increasing corporate bond rates, which contributed to lower service cost and higher interest costs.

Our fourth-quarter 2014 results will include the effects of settlement accounting for a portion of our pension plan. Due in part to our 2013 enhanced retirement offer and other distributions, lump sum distributions from the plan during 2014 exceeded service and interest costs in early October.

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental retirement pension benefits cost, which is not included in the table above, was $29 in the third quarter of 2014, of which $27 was interest cost, and $87 for the first nine months, of which $82 was interest cost. In 2013, net supplemental retirement pension benefits cost was $27 in the third quarter, of which $25 was interest cost, and $82 for the first nine months, of which $76 was interest cost.