REG - AT & T Inc. - 2015 10-K <Origin Href="QuoteRef">T.N</Origin> - Part 10
01/04/2016 16:03
- Part 10: For the preceding part double click ID:nRSZ3512Qi
table presents the components of net periodic benefit cost:
Pension Benefits Postretirement Benefits
2015 2014 2013 2015 2014 2013
Service cost - benefits earned during the period $ 1,212 $ 1,134 $ 1,321 $ 222 $ 233 $ 352
Interest cost on projected benefit obligation 1,902 2,470 2,429 967 1,458 1,532
Expected return on assets (3,317) (3,380) (3,312) (421) (653) (706)
Amortization of prior service credit (103) (94) (94) (1,278) (1,448) (1,161)
Actuarial (gain) loss (373) 5,419 (5,013) (1,632) 2,093 (2,738)
Net pension and postretirement (credit) cost $ (679) $ 5,549 $ (4,669) $ (2,142) $ 1,683 $ (2,721)
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
The following table presents the after-tax changes in benefit obligations recognized in OCI and the after-tax prior service
credits that were amortized from OCI into net periodic benefit costs:
Pension Benefits Postretirement Benefits
2015 2014 2013 2015 2014 2013
Balance at beginning of year $ 575 $ 583 $ 641 $ 6,257 $ 6,812 $ 4,766
Prior service (cost) credit 1 45 - 45 383 2,765
Amortization of prior service credit (64) (58) (58) (792) (898) (719)
Reclassification to income of prior service credit - 5 - - (40) -
Total recognized in other comprehensive (income) loss (63) (8) (58) (747) (555) 2,046
Balance at end of year $ 512 $ 575 $ 583 $ 5,510 $ 6,257 $ 6,812
The estimated prior service credits that will be amortized from accumulated OCI into net periodic benefit cost over the
next fiscal year are $103 ($64 net of tax) for pension and $1,277 ($792 net of tax) for postretirement benefits.
Assumptions
In determining the projected benefit obligation and the net pension and postretirement benefit cost, we used the following
significant weighted-average assumptions:
Pension Benefits Postretirement Benefits
2015 2014 2013 2015 2014 2013
Weighted-average discount rate for determining projected benefit obligation at December 31 4.60 % 4.30 % 5.00 % 4.50 % 4.20 % 5.00 %
Discount rate in effect for determining service cost 4.60 % 5.00 % 4.30 % 4.60 % 5.00 % 4.30 %
Discount rate in effect for determining interest cost1 3.30 % 4.60 % 4.30 % 3.30 % 5.00 % 4.30 %
Long-term rate of return on plan assets 7.75 % 7.75 % 7.75 % 5.75 % 7.75 % 7.75 %
Composite rate of compensation increase for determining projected benefit obligation 3.10 % 3.00 % 3.00 % 3.10 % 3.00 % 3.00 %
Composite rate of compensation increase for determining net pension cost (benefit) 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 %
1 Weighted-average discount rate of 5.00% in effect for pension costs from January 1, 2014 through September 30, 2014.
Discount rates in effect of 4.90% for service cost and 3.50% for interest cost from October 1, 2014 through December 31, 2014.
A discount rate of 5.00% was used for postretirement costs for the year ended December 31, 2014.
We recognize gains and losses on pension and postretirement plan assets and obligations immediately in our operating
results. These gains and losses are measured annually as of December 31 and accordingly will be recorded during the fourth
quarter, unless earlier remeasurements are required.
Discount Rate Our assumed weighted-average discount rate for pension and postretirement benefits of 4.60% and 4.50%
respectively, at December 31, 2015, reflects the hypothetical rate at which the projected benefit obligation could be
effectively settled or paid out to participants. We determined our discount rate based on a range of factors, including a
yield curve composed of the rates of return on several hundred high-quality, fixed income corporate bonds available at the
measurement date and corresponding to the related expected durations of future cash outflows. These bonds were all rated at
least Aa3 or AA- by one of the nationally recognized statistical rating organizations, denominated in U.S. dollars, and
neither callable, convertible nor index linked. For the year ended December 31, 2015, when compared to the year ended
December 31, 2014, we increased our pension discount rate by 0.30%, resulting in a decrease in our pension plan benefit
obligation of $1,977 and increased our postretirement discount rate 0.30%, resulting in a decrease in our postretirement
benefit obligation of $854. For the year ended December 31, 2014, we decreased our pension discount rate by 0.70%,
resulting in an increase in our pension plan benefit obligation of $4,854 and decreased our postretirement discount rates
by 0.80%, resulting in an increase in our postretirement benefit obligation of $2,786.
We utilize a full yield curve approach in the estimation of the service and interest components of net periodic benefit
costs for pension and other postretirement benefits. Under this approach, we apply discounting using individual spot rates
from a yield curve composed of the rates of return on several hundred high-quality, fixed income corporate bonds available
at the measurement date. These spot rates align to each of the projected benefit obligations and service cost cash flows.
The service cost component relates to the active participants in the plan, so the relevant cash flows on which to apply the
yield curve are considerably longer in duration on average than the total projected benefit obligation cash flows, which
also include benefit payments to retirees. Interest cost is computed by multiplying each spot rate by the corresponding
discounted projected benefit obligation cash flows. The full yield curve approach reduces any actuarial gains and losses
based upon interest rate expectations (e.g., built-in gains in interest cost in an upward sloping yield curve scenario), or
gains and losses merely resulting from the timing and magnitude of cash outflows associated with our benefit obligations.
Neither the annual measurement of our total benefit obligations nor annual net benefit cost is affected by the full yield
curve approach. For our pension benefits, the single effective interest rate used for periodic service and interest costs
during 2015 are 4.60% and 3.30%, respectively. For our postretirement benefits, the single effective interest rate used for
periodic service and interest costs during 2015 are 4.60% and 3.30%.
Expected Long-Term Rate of Return Our expected long-term rate of return on pension plan assets is 7.75% for 2016 and 2015.
Our expected long-term rate of return on postretirement plan assets is 5.75% for 2016 and 2015. Our long-term rates of
return reflect the average rate of earnings expected on the funds invested, or to be invested, to provide for the benefits
included in the projected benefit obligations. In setting the long-term assumed rate of return, management considers
capital markets future expectations and the asset mix of the plans' investments. Actual long-term return can, in relatively
stable markets, also serve as a factor in determining future expectations. We consider many factors that include, but are
not limited to, historical returns on plan assets, current market information on long-term returns (e.g., long-term bond
rates) and current and target asset allocations between asset categories. The target asset allocation is determined based
on consultations with external investment advisers. If all other factors were to remain unchanged, we expect that a 0.50%
decrease in the expected long-term rate of return would cause 2016 combined pension and postretirement cost to increase
$232. However, any differences in the rate and actual returns will be included with the actuarial gain or loss recorded in
the fourth quarter when our plans are remeasured.
Composite Rate of Compensation Increase Our expected composite rate of compensation increase cost of 3.10% in 2015 and
3.00% in 2014 reflects the long-term average rate of salary increases.
Mortality Tables At December 31, 2015 we updated our assumed mortality rates to reflect our best estimate of future
mortality, which decreased our pension obligation by $859 and decreased our postretirement obligations by $274. At December
31, 2014 we updated our assumed mortality rates, which increased our pension obligation by $1,442 and increased our
postretirement obligations by $53.
Healthcare Cost Trend Our healthcare cost trend assumptions are developed based on historical cost data, the near-term
outlook and an assessment of likely long-term trends. Due to historical experience, updated expectations of healthcare
industry inflation and recent prescription drug cost experience, our 2016 assumed annual healthcare prescription drug cost
trend for non-Medicare eligible participants will increase to 6.25%, trending to our ultimate trend rate of 4.50% in 2023
and for Medicare-eligible participants will remain at an assumed annual and ultimate trend rate of 4.50%. This change in
assumption increased our obligation by $23. In 2015 our assumed annual healthcare prescription drug cost trend rate for
non-Medicare eligible participants was 6.00%, trending to our ultimate trend rate of 4.50% in 2021. Medicare-eligible
retirees who receive access to retiree health insurance coverage through a private insurance marketplace are not subject to
assumed healthcare trend. In addition to the healthcare cost trend in 2015, we assumed an annual 2.50% growth in
administrative expenses and an annual 3.00% growth in dental claims.
A one percentage-point change in the assumed combined medical and dental cost trend rate would have the following effects:
One Percentage- One Percentage-
Point Increase Point Decrease
Increase (decrease) in total of service and interest cost components $ 58 $ (51)
Increase (decrease) in accumulated postretirement benefit obligation 660 (590)
Plan Assets
Plan assets consist primarily of private and public equity, government and corporate bonds, and real assets (real estate
and natural resources). The asset allocations of the pension plans are maintained to meet ERISA requirements. Any plan
contributions, as determined by ERISA regulations, are made to a pension trust for the benefit of plan participants. As
part of our voluntary contribution of the Mobility preferred equity interest, we will contribute $735 of cash distributions
during 2016. We do not have additional significant required contributions to our pension plans for 2016.
We maintain VEBA trusts to partially fund postretirement benefits; however, there are no ERISA or regulatory requirements
that these postretirement benefit plans be funded annually.
The principal investment objectives are to ensure the availability of funds to pay pension and postretirement benefits as
they become due under a broad range of future economic scenarios, to maximize long-term investment return with an
acceptable level of risk based on our pension and postretirement obligations, and to be broadly diversified across and
within the capital markets to insulate asset values against adverse experience in any one market. Each asset class has
broadly diversified characteristics. Substantial biases toward any particular investing style or type of security are
sought to be avoided by managing the aggregation of all accounts with portfolio benchmarks. Asset and benefit obligation
forecasting studies are conducted periodically, generally every two to three years, or when significant changes have
occurred in market conditions, benefits, participant demographics or funded status. Decisions regarding investment policy
are made with an understanding of the effect of asset allocation on funded status, future contributions and projected
expenses. The current asset allocation policy and risk level for the pension plan and VEBA assets is based on studies
completed and approved during 2013 and 2015, respectively, and is reflected in the table below.
The plans' weighted-average asset targets and actual allocations as a percentage of plan assets, including the notional
exposure of future contracts by asset categories at December 31, are as follows:
Pension Assets Postretirement (VEBA) Assets
Target 2015 2014 Target 2015 2014
Equity securities:
Domestic 20 % - 30 % 22 % 23 % 21 % - 31 % 26 % 29 %
International 10 % - 20 % 15 14 9 % - 19 % 14 20
Fixed income securities 35 % - 45 % 40 38 29 % - 39 % 34 29
Real assets 6 % - 16 % 10 11 0 % - 6 % 1 1
Private equity 4 % - 14 % 12 12 0 % - 7 % 2 3
Other 0 % - 5 % 1 2 17 % - 27 % 23 18
Total 100 % 100 % 100 % 100 %
At December 31, 2015, AT&T securities represented less than 0.5% of assets held by our pension plans and 6% of assets
(primarily common stock) held by our VEBA trusts included in these financial statements.
Investment Valuation
Investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. See "Fair Value Measurements" for
further discussion.
Investments in securities traded on a national securities exchange are valued at the last reported sales price on the last
business day of the year. If no sale was reported on that date, they are valued at the last reported bid price. Investments
in securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities
with similar characteristics or discounted cash flows. Shares of registered investment companies are valued based on quoted
market prices, which represent the net asset value of shares held at year-end. Over-the-counter (OTC) securities are valued
at the bid price or the average of the bid and asked price on the last business day of the year from published sources
where available and, if not available, from other sources considered reliable. Depending on the types and contractual terms
of OTC derivatives, fair value is measured using valuation techniques, such as the Black-Scholes option pricing model,
simulation models or a combination of various models.
Common/collective trust funds, pooled separate accounts and other commingled (103-12) investment entities are valued at
quoted redemption values that represent the net asset values of units held at year-end which management has determined
approximates fair value.
Alternative investments, including investments in private equity, real estate, natural resources (included in real assets),
mezzanine and distressed debt (included in partnerships/joint ventures), limited partnership interests, certain fixed
income securities and hedge funds do not have readily available market values. These estimated fair values may differ
significantly from the values that would have been used had a ready market for these investments existed, and such
differences could be material. Alternative investments not having an established market are valued at fair value as
determined by the investment managers. Private equity, mezzanine and distressed investments are often valued initially by
the investment managers based upon cost. Thereafter, investment managers may use available market data to determine
adjustments to carrying value based upon observations of the trading multiples of public companies considered comparable to
the private companies being valued. Such market data used to determine adjustments to accounts for cash flows and
company-specified issues include current operating performance and future expectations of the investments, changes in
market outlook, and the third-party financing environment. Private equity partnership holdings may also include publicly
held equity investments in liquid markets that are marked-to-market at quoted public values, subject to adjustments for
large positions held. Real estate and natural resource direct investments are valued either at amounts based upon appraisal
reports prepared by independent third-party appraisers or at amounts as determined by internal appraisals performed by the
investment manager, which are reasonable as determined by the review of an external valuation consultant. Fixed income
securities valuation is based upon pricing provided by an external pricing service when such pricing is available. In the
event a security is too thinly traded or narrowly held to be priced by such a pricing service, or the price furnished by
such external pricing services is deemed inaccurate, the managers will then solicit broker/dealer quotes (spreads or
prices). In cases where such quotes are available, fair value will be determined based solely upon such quotes provided.
Managers will typically use a pricing matrix for determining fair value in cases where an approved pricing service or a
broker/dealer is unable to provide a fair valuation for specific fixed-rate securities such as many private placements. New
fixed-rate securities will be initially valued at cost at the time of purchase. Thereafter, each bond will be assigned a
spread from a pricing matrix that will be added to current Treasury rates. The pricing matrix derives spreads for each bond
based on external market data, including the current credit rating for the bonds, credit spreads to Treasuries for each
credit rating, sector add-ons or credits, issue-specific add-ons or credits as well as call or other options.
Purchases and sales of securities are recorded as of the trade date. Realized gains and losses on sales of securities are
determined on the basis of average cost. Interest income is recognized on the accrual basis. Dividend income is recognized
on the ex-dividend date.
Non-interest bearing cash and overdrafts are valued at cost, which approximates fair value.
Fair Value Measurements
See Note 10 for a discussion of fair value hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value.
The following tables set forth by level, within the fair value hierarchy, the pension and postretirement assets and
liabilities at fair value as of December 31, 2015:
Pension Assets and Liabilities at Fair Value as of December 31, 2015
Level 1 Level 2 Level 3 Total
Non-interest bearing cash $ 160 $ - $ - $ 160
Interest bearing cash - 25 - 25
Foreign currency contracts - 25 - 25
Equity securities:
Domestic equities 8,315 4 - 8,319
International equities 4,287 - - 4,287
Fixed income securities:
Asset-backed securities - 403 1 404
Mortgage-backed securities - 792 - 792
Collateralized mortgage-backed securities - 278 - 278
Collateralized mortgage obligations/REMICS - 345 - 345
Corporate and other fixed income instruments and funds 65 8,274 373 8,712
Government and municipal bonds 75 4,495 - 4,570
Private equity funds - - 4,926 4,926
Real estate and real assets - - 4,357 4,357
Commingled funds - 5,522 2 5,524
Securities lending collateral 512 3,538 - 4,050
Receivable for variation margin 13 - - 13
Assets at fair value 13,427 23,701 9,659 46,787
Investments sold short and other liabilities at fair value (824) (12) - (836)
Total plan net assets at fair value $ 12,603 $ 23,689 $ 9,659 $ 45,951
Other assets (liabilities)1 (3,756)
Total Plan Net Assets $ 42,195
1 Other assets (liabilities) include amounts receivable, accounts payable and net adjustment for securities lending payable.
Postretirement Assets and Liabilities at Fair Value as of December 31, 2015
Level 1 Level 2 Level 3 Total
Non-interest bearing cash $ 2 $ - $ - $ 2
Interest bearing cash 220 1,292 - 1,512
Foreign currencies 4 - - 4
Equity securities:
Domestic equities 1,187 - - 1,187
International equities 869 - - 869
Fixed income securities:
Asset-backed securities - 35 2 37
Collateralized mortgage-backed securities - 120 13 133
Collateralized mortgage obligations - 45 - 45
Corporate and other fixed income instruments and funds - 389 - 389
Government and municipal bonds - 617 - 617
Commingled funds - 1,681 1 1,682
Private equity assets - - 155 155
Real assets - - 81 81
Securities lending collateral 6 189 - 195
Futures Contracts 1 - - 1
Total plan net assets at fair value $ 2,289 $ 4,368 $ 252 $ 6,909
Other assets (liabilities) 1 (238)
Total Plan Net Assets $ 6,671
1 Other assets (liabilities) include amounts receivable, accounts payable and net adjustment for securities lending payable.
The tables below set forth a summary of changes in the fair value of the Level 3 pension and postretirement assets for the
year ended December 31, 2015:
Pension Assets Equities Fixed Income Funds Private Equity Funds Real Estate and Real Assets Total
Balance at beginning of year $ - $ 444 $ 5,399 $ 4,845 $ 10,688
Realized gains (losses) (1) 29 426 416 870
Unrealized gains (losses) 1 (16) 132 (114) 3
Transfers in - - - 19 19
Transfers out - - (19) - (19)
Purchases - 29 436 474 939
Sales - (110) (1,448) (1,283) (2,841)
Balance at end of year $ - $ 376 $ 4,926 $ 4,357 $ 9,659
Postretirement Assets Fixed Income Funds Private Equity Funds Real Assets Total
Balance at beginning of year $ 3 $ 218 $ 96 $ 317
Realized gains (losses) - (16) (2) (18)
Unrealized gains (losses) - 24 (1) 23
Transfers in 15 - 25 40
Transfers out (1) - (25) (26)
Purchases - 30 1 31
Sales (1) (101) (13) (115)
Balance at end of year $ 16 $ 155 $ 81 $ 252
The following tables set forth by level, within the fair value hierarchy, the pension and postretirement assets and
liabilities at fair value as of December 31, 2014:
Pension Assets and Liabilities at Fair Value as of December 31, 2014
Level 1 Level 2 Level 3 Total
Non-interest bearing cash $ 45 $ - $ - $ 45
Interest bearing cash - 127 - 127
Foreign currency contracts - 25 - 25
Equity securities:
Domestic equities 8,613 74 - 8,687
International equities 4,805 171 - 4,976
Fixed income securities:
Asset-backed securities - 610 1 611
Mortgage-backed securities - 1,741 - 1,741
Collateralized mortgage-backed securities - 418 - 418
Collateralized mortgage obligations/REMICS - 531 - 531
Corporate and other fixed income instruments and funds 97 7,210 441 7,748
Government and municipal bonds 145 4,876 - 5,021
Private equity funds - - 5,399 5,399
Real estate and real assets - - 4,845 4,845
Commingled funds - 5,823 2 5,825
Securities lending collateral 310 3,140 - 3,450
Receivable for variation margin 6 - - 6
Purchased options 1 - - 1
Assets at fair value 14,022 24,746 10,688 49,456
Investments sold short and other liabilities at fair value (650) (260) - (910)
Total plan net assets at fair value $ 13,372 $ 24,486 $ 10,688 $ 48,546
Other assets (liabilities)1 (3,383)
Total Plan Net Assets $ 45,163
1 Other assets (liabilities) include amounts receivable, accounts payable and net adjustment for securities lending payable.
Postretirement Assets and Liabilities at Fair Value as of December 31, 2014
Level 1 Level 2 Level 3 Total
Interest bearing cash $ 278 $ 1,198 $ - $ 1,476
Equity securities:
Domestic equities 1,606 - - 1,606
International equities 1,405 - - 1,405
Fixed income securities:
Asset-backed securities - 46 - 46
Collateralized mortgage-backed securities - 113 - 113
Collateralized mortgage obligations - 50 1 51
Corporate and other fixed income instruments and funds - 397 - 397
Government and municipal bonds - 614 1 615
Commingled funds - 1,960 1 1,961
Private equity assets - - 218 218
Real assets - - 96 96
Securities lending collateral - 173 - 173
Total plan net assets at fair value $ 3,289 $ 4,551 $ 317 $ 8,157
Other assets (liabilities)1 (311)
Total Plan Net Assets $ 7,846
1 Other assets (liabilities) include amounts receivable, accounts payable and net adjustment for securities lending payable.
The tables below set forth a summary of changes in the fair value of the Level 3 pension and postretirement assets for the
year ended December 31, 2014:
Pension Assets Equities Fixed Income Funds Private Equity Funds Real Estate and Real Assets Total
Balance at beginning of year $ - $ 547 $ 5,724 $ 5,194 $ 11,465
Realized gains (losses) - 41 696 806 1,543
Unrealized gains (losses) - (1) (76) (246) (323)
Transfers in - - - 22 22
Transfers out - (3) (22) - (25)
Purchases 1 55 531 678 1,265
Sales (1) (195) (1,454) (1,609) (3,259)
Balance at end of year $ - $ 444 $ 5,399 $ 4,845 $ 10,688
Postretirement Assets Fixed Income Funds Private Equity Funds Real Assets Total
Balance at beginning of year $ 26 $ 309 $ 111 $ 446
Realized gains (losses) - 45 (3) 42
Unrealized gains (losses) 1 (29) 11 (17)
Transfers out (1) - - (1)
Purchases - 6 - 6
Sales (23) (113) (23) (159)
Balance at end of year $ 3 $ 218 $ 96 $ 317
Estimated Future Benefit Payments
Expected benefit payments are estimated using the same assumptions used in determining our benefit obligation at December
31, 2015. Because benefit payments will depend on future employment and compensation levels, average years employed,
average life spans, and payment elections, among other factors, changes in any of these factors could significantly affect
these expected amounts. The following table provides expected benefit payments under our pension and postretirement plans:
Pension Benefits Postretirement Benefits
2016 $ 4,705 $ 2,024
2017 4,424 1,995
2018 4,294 1,973
2019 4,198 1,939
2020 4,155 1,894
Years 2021 - 2025 19,886 8,884
Supplemental Retirement Plans
We also provide certain senior- and middle-management employees with nonqualified, unfunded supplemental retirement and
savings plans. While these plans are unfunded, we have assets in a designated nonbankruptcy remote trust that are
independently managed and used to provide for these benefits. These plans include supplemental pension benefits as well as
compensation-deferral plans, some of which include a corresponding match by us based on a percentage of the compensation
deferral.
We use the same significant assumptions for the composite rate of compensation increase in determining our projected
benefit obligation and the net pension and postemployment benefit cost. Our discount rates of 4.4% at December 31, 2015 and
4.1% at December 31, 2014 were calculated using the same methodologies used in calculating the discount rate for our
qualified pension and postretirement benefit plans. The following tables provide the plans' benefit obligations and fair
value of assets at December 31 and the components of the supplemental retirement pension benefit cost. The net amounts are
recorded as "Other noncurrent liabilities" on our consolidated balance sheets.
The following table provides information for our supplemental retirement plans with accumulated benefit obligations in
excess of plan assets at December 31:
2015 2014
Projected benefit obligation $ (2,444) $ (2,458)
Accumulated benefit obligation (2,372) (2,410)
Fair value of plan assets - -
The following tables present the components of net periodic benefit cost and other changes in plan assets and benefit
obligations recognized in OCI:
Net Periodic Benefit Cost 2015 2014 2013
Service cost - benefits earned during the period $ 9 $ 7 $ 9
Interest cost on projected benefit obligation 77 109 101
Amortization of prior service cost (credit) 1 (1) -
Actuarial (gain) loss (36) 243 (106)
Net supplemental retirement pension cost $ 51 $ 358 $ 4
Other Changes Recognized in Other Comprehensive Income 2015 2014 2013
Prior service (cost) credit $ (1) $ (11) $ (1)
Amortization of prior service cost (credit) 1 (1) -
Total recognized in other comprehensive (income) loss (net of tax) $ - $ (12) $ (1)
The estimated prior service credit for our supplemental retirement plan benefits that will be amortized from accumulated
OCI into net periodic benefit cost over the next fiscal year is $1.
Deferred compensation expense was $122 in 2015, $121 in 2014 and $122 in 2013. Our deferred compensation liability,
included in "Other noncurrent liabilities," was $1,221 at December 31, 2015, and $1,156 at December 31, 2014.
Contributory Savings Plans
We maintain contributory savings plans that cover substantially all employees. Under the savings plans, we match in cash or
company stock a stated percentage of eligible employee contributions, subject to a specified ceiling. There are no
debt-financed shares held by the Employee Stock Ownership Plans, allocated or unallocated.
Our match of employee contributions to the savings plans is fulfilled with purchases of our stock on the open market or
company cash. Benefit cost is based on the cost of shares or units allocated to participating employees' accounts and was
$653, $654 and $654 for the years ended December 31, 2015, 2014 and 2013.
NOTE 13. SHARE-BASED PAYMENTS
Under our various plans, senior and other management employees and nonemployee directors have received nonvested stock and
stock units. In conjunction with the acquisition of DIRECTV, restricted stock units issued under DIRECTV plans were
converted to AT&T shares. The shares will vest over a period of one to four years in accordance with the terms of those
plans. We do not intend to issue any additional grants under the DIRECTV plans. Any future grants will be made under the
AT&T plans.
We grant performance stock units, which are nonvested stock units, based upon our stock price at the date of grant and
award them in the form of AT&T common stock and cash at the end of a three-year period, subject to the achievement of
certain performance goals. We treat the cash portion of these awards as a liability. We grant forfeitable restricted stock
and stock units, which are valued at the market price of our common stock at the date of grant and vest typically over a
two- to ten-year period. We also grant other nonvested stock units and award them in cash at the end of a three-year
period, subject to the achievement of certain market based conditions. As of December 31, 2015, we were authorized to issue
up to approximately 109 million shares of common stock (in addition to shares that may be issued upon exercise of
outstanding options or upon vesting of performance stock units or other nonvested stock units) to officers, employees and
directors pursuant to these various plans.
We account for our share-based payment arrangements based on the fair value of the awards on
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