8-KRegulation FDExhibits & Filings

VERIZON COMMUNICATIONS INC 8-K Report, Regulation FD Disclosure (Oct 17, 2012)

Filed October 17, 2012For Securities:VZ

Summary

Verizon Communications Inc. (VZ) announced on October 17, 2012, a significant move to de-risk its pension obligations. The company, through its pension plan, has entered into an agreement to purchase a single premium group annuity contract from Prudential Insurance Company of America for approximately $7.5 billion. This transaction will effectively transfer the responsibility for paying pension benefits to around 41,000 retired Verizon management employees who began receiving payments before January 1, 2010, to Prudential. This de-risking strategy aims to reduce the volatility associated with managing these long-term pension liabilities on Verizon's balance sheet. Verizon anticipates making substantial contributions, approximately $2.5 billion in total (including a September 2012 contribution), to ensure the pension plan remains adequately funded post-transaction. The company expects this transaction to close in December 2012, subject to customary closing conditions.

Key Highlights

  • 1Verizon to settle approximately $7.5 billion of pension liabilities through an annuity contract with Prudential.
  • 2The agreement covers pension payments for approximately 41,000 Verizon management retirees receiving benefits before January 1, 2010.
  • 3Prudential will assume the obligation to make future annuity payments, replicating current benefit levels and rights.
  • 4Retirees will not need to take any action; benefits will continue without interruption.
  • 5Verizon expects to contribute approximately $2.5 billion to the pension plan in connection with the transaction.
  • 6The transaction is anticipated to close in December 2012, subject to closing conditions.
  • 7This move is a de-risking strategy to reduce financial volatility related to pension obligations.

Frequently Asked Questions

The primary purpose is to de-risk Verizon's pension obligations by transferring the responsibility for paying approximately $7.5 billion in pension liabilities to Prudential Insurance Company of America. This reduces the company's exposure to market fluctuations and longevity risks associated with these pension plans.

No, the pension benefits for affected retirees will not change. The group annuity contract with Prudential is intended to replicate the same benefit amounts and rights, including survivor benefits, that retirees currently receive from the Verizon Management Pension Plan.

Retirees do not need to take any action. Their pension payments will continue without interruption, and the transition to Prudential for payment will be seamless.

By transferring these liabilities, Verizon aims to reduce the volatility on its balance sheet and its long-term financial commitments. The company is making additional contributions to the plan to ensure it remains well-funded, indicating a commitment to the plan's stability during this transition.