Pension And Postretirement Benefits

9 Months Ended

Sep. 30, 2023

Retirement Benefits [Abstract]

Pension And Postretirement Benefits

NOTE 6. PENSION AND POSTRETIREMENT BENEFITS

Many 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. 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 provide benefits described in the plans to employees upon their retirement. We do not have significant funding requirements in 2023.

We recognize actuarial gains and losses on pension and postretirement plan assets in our consolidated results as a component of “Other income (expense) – net” at our annual measurement date of December 31, unless earlier remeasurements are required.

On April 26, 2023, AT&T and State Street Global Advisors Trust Company, as independent fiduciary of the AT&T Pension Benefit Plan (Plan), entered into a commitment agreement with subsidiaries of Athene Holding Ltd. (Athene) under which AT&T agreed to purchase nonparticipating single premium group annuity contracts that would transfer to Athene approximately $8,050 of the Plan’s defined benefit pension obligations related to certain retirees, participants and beneficiaries under the Plan.

The purchase of the group annuity contracts closed on May 3, 2023, covering approximately 96,000 AT&T participants and beneficiaries (Transferred Participants). Under the group annuity contracts, Athene, through its wholly-owned subsidiaries Athene Annuity and Life Company and Athene Annuity & Life Assurance Company of New York, made an irrevocable commitment, and is solely responsible, to pay the pension benefits of each Transferred Participant beginning with their August 2023 pension payments. The transaction does not change the amount of pension benefits payable to the Transferred Participants.

The purchase of the group annuity contracts was funded directly by assets of the Plan via the pension trust underlying the Plan and required no cash or asset contributions by AT&T. We transferred approximately $8,050 of pension benefit obligation and related plan assets upon close of the transaction and recognized a pre-tax pension settlement gain of $363. The funded status of the Plan did not materially change due to this transaction.

This transaction with Athene is considered a settlement for accounting purposes and requires us to remeasure our pension plan assets and obligations at each remaining quarter-end in 2023. The third quarter 2023 remeasurement resulted in the recognition of an actuarial gain of $71 in the third quarter and an actuarial loss of $218 for the first nine months of 2023.

As part of our remeasurement, the weighted-average discount rate used to measure our pension benefit obligation was approximately 5.90% at September 30, 2023 compared to 5.20% at June 30, 2023, an increase of 70 basis points. The discount rates in effect for determining pension service and interest costs after our September 30 remeasurement are 5.90% and 5.70%, respectively. The remeasurement also reflects actual returns on pension plan assets of (1.10)% (nine-month rate) relative to our expected long-term rate of 7.50% (annual rate). Similar to 2023, in 2022 we were required to follow settlement accounting and remeasure our pension benefit plan assets and obligations at each remaining quarter end.

The following table details qualified pension and postretirement benefit costs included in the accompanying consolidated statements of income. The service cost component of net periodic pension (credit) cost is recorded in operating expenses in the consolidated statements of income while the remaining components are recorded in “Other income (expense) – net.”

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Pension cost:
Service cost – benefits earned during the period	$	122	$	141	$	365	$	488
Interest cost on projected benefit obligation	416		481		1,448		1,216
Expected return on assets	(570)		(740)		(1,999)		(2,410)
Amortization of prior service credit	(33)		(33)		(100)		(100)
Net pension (credit) cost before remeasurement	(65)		(151)		(286)		(806)
Actuarial (gain) loss	(71)		(216)		218		(2,573)
Settlement (gain) loss	—		—		(363)		—
Net pension (credit) cost	$	(136)	$	(367)	$	(431)	$	(3,379)
Postretirement cost:
Service cost – benefits earned during the period	$	5	$	7	$	17	$	25
Interest cost on accumulated postretirement benefit obligation	85		75		255		201
Expected return on assets	(32)		(23)		(98)		(88)
Amortization of prior service credit	(618)		(697)		(1,854)		(1,861)
Net postretirement (credit) cost before remeasurement	(560)		(638)		(1,680)		(1,723)
Actuarial (gain) loss	—		(1,084)		—		(1,084)
Net postretirement (credit) cost	$	(560)	$	(1,722)	$	(1,680)	$	(2,807)
Combined net pension and postretirement (credit) cost	$	(696)	$	(2,089)	$	(2,111)	$	(6,186)

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental pension benefits costs not included in the table above were $19 and $13 in the third quarter and $56 and $37 for the first nine months of 2023 and 2022, respectively, predominantly due to higher interest costs.