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Employee Benefits | 3 Months Ended
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Mar. 31, 2024
Retirement Benefits [Abstract] |
Employee Benefits |
Note 8. 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, 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 and upon a remeasurement event pursuant to our accounting policy for the recognition of actuarial gains and losses. 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
Three Months Ended March 31, | 2024 |  | 2023 |  | 2024 |  | 2023
Service cost - Cost of services | $ | 41 |  |  | $ | 46 |  |  | $ | 11 |  |  | $ | 11 |
Service cost - Selling, general and administrative expense | 7 |  |  | 7 |  |  | 2 |  |  | 2 |
Service cost | $ | 48 |  |  | $ | 53 |  |  | $ | 13 |  |  | $ | 13 |
Amortization of prior service cost (credit) | $ | 28 |  |  | $ | 28 |  |  | $ | (32) |  |  | $ | (105) |
Expected return on plan assets | (208) |  |  | (253) |  |  | (7) |  |  | (7) |
Interest cost | 157 |  |  | 188 |  |  | 135 |  |  | 136 |
Remeasurement gain, net | (73) |  |  | — |  |  | — |  |  | — |
Other components | $ | (96) |  |  | $ | (37) |  |  | $ | 96 |  |  | $ | 24 |
Total | $ | (48) |  |  | $ | 16 |  |  | $ | 109 |  |  | $ | 37 |
The service cost component of net periodic benefit cost (income) is recorded in Cost of services and Selling, general and administrative expense in the condensed consolidated statements of income while the other components, including mark-to-market adjustments, if any, are recorded in Other income, net. During the three months ended March 31, 2024, we updated the expected return on plan assets assumption for our pension plans from 7.50% at December 31, 2023 to 8.00% based upon the expected market returns from the March 31, 2024 asset allocation. Pension Annuitization On February 29, 2024, we entered into two separate commitment agreements, one by and between the Company, State Street Global Advisors Trust Company (“State Street”), as independent fiduciary of the Verizon Management Pension Plan and Verizon Pension Plan for Associates (the “Pension Plans”), and The Prudential Insurance Company of America (“Prudential”), and one by and between the Company, State Street and RGA Reinsurance Company (“RGA”), under which the Pension Plans purchased nonparticipating single premium group annuity contracts from Prudential and RGA, respectively, to settle approximately $5.9 billion of benefit liabilities of the Pension Plans. The purchase of the group annuity contracts closed on March 6, 2024. The group annuity contracts primarily cover a population that includes 56,000 retirees who commenced benefit payments from the Pension Plans prior to January 1, 2023 (“Transferred Participants”). Prudential and RGA each irrevocably guarantee and assume the sole obligation to make future payments to the Transferred Participants as provided under their respective group annuity contracts, with direct payments beginning July 1, 2024. The aggregate amount of each Transferred Participant’s payment under the group annuity contracts will be equal to the amount of each individual’s payment under the Pension Plans. The purchase of the group annuity contracts was funded directly by transferring $5.7 billion of assets of the Pension Plans. The Company made additional contributions to the Pension Plans prior to the closing date of the transaction, as discussed below. With these contributions, the funded ratio of each of the Pension Plans does not change as a result of this transaction. During the three months ended March 31, 2024, we recorded a net pre-tax settlement gain as a result of this transaction, as discussed below. Pension plan assets and liabilities are primarily presented within Employee benefit obligations in our condensed consolidated balance sheets. Severance Payments During the three months ended March 31, 2024, we paid severance benefits of $118 million. At March 31, 2024, we had a remaining severance liability of $456 million, a portion of which includes future contractual payments to separated employees. Employer Contributions During the three months ended March 31, 2024, we made discretionary contributions to the Pension Plans in the aggregate amount of $365 million. During the three months ended March 31, 2023, we made no contributions to our qualified pension plans. During the three months ended March 31, 2024 and March 31, 2023, we made insignificant contributions to our nonqualified pension plans. No mandatory qualified pension plans contributions are expected or required through December 31, 2024. No significant changes are expected with respect to the nonqualified pension and other postretirement benefit plans contributions in 2024. Remeasurement gain, net During the three months ended March 31, 2024, we recorded a net pre-tax remeasurement gain of $73 million in our pension plans due to a net pre-tax settlement gain of $200 million resulting from the pension annuitization transaction discussed above, partially offset by a net pre-tax remeasurement loss of $127 million triggered by settlements. The net pre-tax remeasurement loss recorded for the three months ended March 31, 2024, was primarily driven by a $613 million charge resulting from the difference between our estimated and actual return on assets, partially offset by a credit of $486 million due to changes in our discount rate assumption used to determine the current year liabilities of our pension plans.

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