By Josh Beckerman And Vipal Monga
AT&T Inc. on Friday said it would take a $7.9 billion charge
for pension-related costs at least partially because people are
living longer.
The telecommunications giant said the losses were in part due to
"updated mortality assumptions" in addition to a decrease in the
rate it uses to measure its pension obligations.
The nonprofit Society of Actuaries recently updated its
mortality tables for the first time since 2000 to reflect the
longer lifespans, estimating today's retirees will live about two
years longer than in 2000. That means companies will have to sock
away more money to pay benefits for those added years.
Mercer LLC estimates that corporate pension liabilities totaled
about $2 trillion at the end of 2013. The increased life expectancy
will add about 7% to the pension obligations on balance sheets,
according to consulting firm Aon Hewitt. The increased costs may be
enumerated in the coming weeks as companies report earnings.
AT&T, along with about 30 other companies, in the past few
years has switched to mark-to-market pension accounting to make it
easier for investors to gauge plan performance.
With the switch, pension gains and losses flow into earnings
sooner than under the old rules, which are still in effect and
allow companies to smooth out the impact over several years.
Companies that switch to valuing assets at up-to-date market
prices may incur more volatility in their earnings, but it offers a
more current picture of a pension plan's health.
A year ago, AT&T posted a $7.6 billion pretax gain tied to
pension accounting.
AT&T also said it would take a $2.1 billion noncash charge
in the fourth quarter after it determined that certain copper
assets won't be necessary to support future network activity,
because of lower demand for legacy voice and data services and the
move toward new technology. It said those copper assets will be
abandoned in place.
Companies like AT&T and Verizon Communications Inc. have
been replacing copper-based technologies in their networks with
faster, Internet-based technologies that run over fiber-optic
lines.
Write to Josh Beckerman at josh.beckerman@wsj.com
Access Investor Kit for AT&T, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US00206R1023
Access Investor Kit for Marsh & McLennan Cos., Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US5717481023