Verizon Communications Inc. reports the following pension and health care benefits footnote as part of its \(10-\mathrm{K}\) report.

a. Describe what is meant by service cost and interest cost.

b. What payments did retirees receive during fiscal 2012 from the pension and health care plans? What is the source of funds to make payments to retirees?

c. Show the computation of Verizon's 2012 funded status for both the pension and health care plans.

d. What expense does Verizon's income statement report for both its pension and health care plans?

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At December 31 (dollars in millions) Change in Benefit Obligations Beginning of year. Service cost. Interest cost. Plan amendments Actuarial loss, net.. Benefits paid Annuity purchase. Settlements paid End of year... Change in Plan Assets Beginning of year.... Actual return on plan assets. Company contributions Benefits paid... Settlements paid Annuity purchase. End of year.. Funded Status End of year. **** ***** Pension 2012 $30,582 358 1,449 183 6,074 (2,735) (8,352) (786) $26,773 $24,110 2,326 3,719 (2,735) (786) (8,352) $18,282 $ (8,491) 2011 $29,217 307 1,590 (485) 3,360 (2,564) (843) $30,582 $25,814 1,191 512 (2,564) (843) $24,110 $ (6,472) Healthcare 2012 $ 27,369 359 1,284 (1,826) 1,402 (1,744) $ 26,844 $ 2,628 312 1,461 (1,744) $ 2,657 $(24,187) 2011 $ 25,718 299 1,421 1,687 (1,756) $ 27,369 $ 2,945 63 1,376 (1,756) $ 2,628 $(24,741)