1. How well funded is AT&T's pension plan? Has this amount changed year over year? What has driven these changes (in terms of both plan assets and liabilities)?
2. What amounts reflected on AT&T's balance sheet are related to the pension plan?

The remaining pension benefit, if any will Do paid as an annuity if its value exceeds a stated monthly amount. Management employees of former ATTC. Bellsouth and AT&T Mobility participate in cash balance pension plans. Nonmanagement employees' pension benefits are generally calculated using one of two formulas: benefits are based on a flat dollar amount per year according to job classification or are calculated under a cash balance plan that is based on an initial cash balance amount and a negotiated annual pension band and interest credits. Most nonmanagement employees can elect to receive their pension benefits in either a lump sum payment or an annuity. At November 1, 2008. BellSouth pension plans and U.S. Domestic Participant T bargained were merged in the AT&T Pension Benefit Plan. At December 31. 2007. defined pension plans formerly sponsored by Ameritech Publishing Ventures and ATST Mobility were merged in the AT&T Pension Benefit Plan. At December 31. 2006, certain defined pension plans formerly sponsored by ATTC and AT&T Mobility were also merged into the AT&T Pension Benefit Plan. Postretirement Benefits We provide a variety of medical dental and life insurance benefits to certain retired employees under various plans and accrue actuarially-determined postretirement benefit costs as active employees ear these benefits. Obligations and Funded Status For defined benefit pension plans, the benefit obligation NOTE 11. PENSION AND POSTRETIREMENT BENEFITS is the "projected benefit obligation" the actuarial present Pansion Bonofits value, as of our December 31 measurement date of all Substantially all of our U.S. employees are covered by one of benefits attributed by the pension benefit formula to our noncontributory pension and death benefit plans. Many of employee service rendered to that date. The amount of our management employees participate in pension plans that benefit to be paid depends on a number of future events have a traditional pension formula (i.e, a stated percentage of incorporated into the pension benefit formula, including employees adjusted career income) and a frozen cash balance estimates of the average life of employees/survivors and or defined lump sum formula In 2005, the management average years of service rendered, It is measured based pension plan for those employees was amended to freeze on assumptions concerning future interest rates and future benefit accruals previously eamed under a cash balance employee compensation levels. formula. Each employee's existing cash balance continues to For postretirement benefit plans. the benefit obligation earn interest at a variable annual rate. After this change, those is the "accumulated postretirement benefit obligation" the management employees, at retirement, may elect to receive actuarial present value as of a date of all future benefits the portion of their pension benefit derived under the cash attributed under the terms of the postretirement benefit balance of defined lump sum as a lump sum or an annuity. plan to employee service rendered to that date. The following table presents this reconciliation and shows the change in the projected benefit obligation for the years ended December 31: ension Bencle Postretirement Benches 2008 2007 2008 2007 Benefit obligation at beginning of year $53 522 $55.949 $40.385 544.137 Service cost - benefits earned during the period 1,173 1 25T 429 511 Interest cost on projected benefit obligation 3,319 3.220 2550 2.508 Amendments (15) 246 Actuarial loss (gain) (1,450) (2.044) (3,406) (4,752) Special termination benefits 70 56 5 Settlements (15) Benefits paid (5.795) (5,312) (2.540) (2,316) Other (2) 165 120 210 Benefit obligation at end of year $50.822 $53.527 $37.531 540.385Select Financial Data for AT&T Notes to Consolidated Financial Statements (continued) Dollars in millions except per share amounts The following table prosents the change in the value of plan assets for the years ended December 31 and the plans' funded status at Docomber 31: Pension Bencite Pouredrement Benches 2008 2007 2008 2007 Fair value of plan assets at beginning of year $ 70.810 569 284 $ 16.999 17.145 Actual return on plan assets (18.190] 6,833 (4.688) 1,209 Benefits paid' (5.795) (5,312) (2.301) [1.694) Contributions 165 255 Other Fair value of plan assets at end of year $ 46.828 $70810 $ 10.175 $ 16.999 Funded (unfunded) status at and of years $ (3.994) 517.289 $[27.356) (23.386) "At our discretion cortain postretirement benefits are paid bom Aff cash accounts and do not seduce ciunitary Employee Banglic assets. Future berwin payments may be made from VEBA trusts and thus reduce those asset balances. Funded status Is not Indicative of our ability to pay ongoing pension benefits nor of our obligation to fund retirement trusts. Requited pontion funding Is determined In aces cerdance with ERISA regulations Amounts recognized on our consolidated balance shoots at Amounts included in our accumulated other comprehensive December 31 are Listed Delow; Income that have not yet been recognized in net periodic bonofit cost at December 31 are listed below; Pornlon Benefits Posuredramon Benefits 2008 2007 200 2007 Pension Benefits Postretirement Benefit Postemployment 2008 2007 2008 2007 benefit - 517,288 5 S Net loss $23.004 5 661 $ 3.695 $ 1,125 Current portion of Prior service cost employee benefit [benefit) 562 722 (1.999) (2.355) obligation (729) (249) Total $23.566 $1.383 $ 1,696 $(1.230] Employee benefit obligation (3.994) (26,627) (23,137) The accumulated benefit obligation for our pension plans Net amount recognized $(3,994) $17,288 S[27.356) 5[23.386) represents the actuarial present value of benefits based on Included In Accounts payable and accrued Isbilltion employee service and compensation as of a certain date and Included in "Postemployment Danait obligation" does not include an assumption about future compensation levels. The accumulated benefit obligation for our pension plans was $40,610 at December 31, 2008, and $51,357 at December 31, 2007. Not Porlodic Benefit Cost and Other Amounts Recognized In Other Comprehensive Income Our combined net pension and postretirement cost recognized in our consolidated statements of income was $324, $1,078 and $1.635 for the years ended December 31. 2008, 2007 and 2006. The following tables present the components of net periodic benefit obligation cost and other changes in plan assets and benefit obligations recognized in other comprehensive income: Net Periodic Benerit Cost Pension Benefits Postretirement Benefits 2000 2007 2006 2000 200 2006 Service cost - benefits earned during the period $ 1,173 $ 1,257 $ 1,050 429 5 511 5 435 Interest cost on projected benefit obligation 3.319 3.220 2,507 2.550 2.508 1943 Expected return on plan assets (5.602) (5,460) (3,989) (1,327) (1,340) (935) Amortization of prior service cost (benefit) and transition asset 133 142 149 (360) (359) 359) Recognized actuarial loss 10 241 361 (1) 294 473 Net pension and postretirement cost (benefit) (967) $ (608) $ $ 1, 291 5 1,686 51,557 During 2008 200T and 2004 the Modicaro Prescription Drug mination Act of 7007 radu onofit cost by 5261 5343 and $349 This affect Is Included In several line Home Sixova.Other Changes In Plan Assets and Benefit Obligations Recognized In Other Comprehensive Income Pension Benefits Postretirement Benefits 2000 2007 2006 2008 200% Net loss (gain] $13,857 5(2.131) $2.650 $1.716 $12 525) $ 3,404 Prior service cost (credit) (16) 130 32 (28) (1.655) Amortization of net loss (gain) 154 181 Amortization of prior service cost 83 TB [222) (223) Total recognized in net pension and postretirement cost and other comprehensive income $13.028 5(1760) $3037 $1,526 5(2595) $ 1.749 The estimated net loss and prior service cost for pension compared with not using this methodology. This methodology benefits that will be amortized from accumulated other did not have a significant effect on our 2008, 2007 and 2006 comprehensive income into net periodic benefit cost combined net pension and postretirement benefits. Should the over the next fiscal year are $665 and $111, respectively. securities markets decline or medical and prescription drug The estimated prior service benefit for postretirement costs increase at a rate greater than assumed, we would benefits that will be amortized from accumulated other expect increasing annual combined net pension and comprehensive income into net periodic benefit cost over postretirement costs for the next several years. Additionally the next fiscal year is $360. should actual experience differ from actuarial assumptions combined not pension and postretirement cost would be Assumptions affected in future years. in determining the projected benefit obligation and the Discount Rate Our assumed discount rate of 7.00%% at not pension and postemployment benefit cost. we used December 31. 2008, reflects the hypothetical rate at which the following significant weighted-average assumptions the projected benefit obligations could be effectively settled 3006 or paid out to participants on that date. We determined our 3008 3001 discount rate based on a range of factors including a yield Discount rate for determining curve comprised of the rates of return on high-quality projected benefit obligation fixed-income corporate bonds available at the measurement at December 31 7.00% 650% 6.00% date and the related expected duration for the obligations. Discount rate in effect for For the year ended December 31. 2008, we increased our determining net cost (benefit)' 6.50% 6.00% 5.75% discount rate by 0.50% resulting in a decrease in our pension Long-term rate of return plan benefit obligation of $2176 and a decrease in our on plan assets B.50% 8.50% 8.50% postretirement benefit obligation of $2.154, For the year Composite rate of compensation ended December 31, 2007, we increased our discount rate increase for determining by 0.50% resulting in a decrease in our pension plan benefit projected benefit obligation obligation of $2.353 and a decrease in our postretirement and met pension cost (benefit) 4.00% benefit obligation of $2.492. Should actual experience Discount rate in affect for determining not cast (bonote) of Bousouth and AINT Hobut differ from actuarial assumptions the projected pension benefit obligation and net pension cost and accumulated postretirement benefit obligation and postretirement Approximately 10% of pension and postretirement costs are benefit cost would be affected in future years. capitalized as part of construction labor providing a small Expected Long-Term Rate of Return Our expected long- reduction in the not expense recorded. While we will continue term rate of return on plan assets of 8.50% for 2009 and our cost-control efforts, certain factors, such as investment 2008 reflects the average rate of earnings expected on the returns, depend largely on trends in the U.S. securities markets funds invested or to be invested to provide for the benefits and the general U.S. economy. In particular uncertainty in the included in the projected benefit obligations. In setting the securities markets and U.S. economy could result in investment long-term assumed rate of return, management considers returns less than those assumed. GAAP requires that actual capital markets future expectations and the asset mix of the gains and losses on pension and postretirement plan assets plans' investments. Actual long-term return can in relatively be recognized in the MRVA equally over a period of not more table markets also serve as a factor in determining future than five years. We use a methodology. allowed under GAAP expectations. However the dramatic adverse market under which we hold the MRVA to within 20% of the actual conditions in 2008 have skewed traditional measure of fair value of plan assets which can have the effect of long-term return such as the 10-year return which was accelerating the recognition of excess actual gains and losses 4.21%% through 2008, compared with 9.10% through 2007. into the MRVA to less than five years. Due to investment losses The severity of the 2008 losses will make the 10-year return on plan assets experienced in the last year, we expect this less of a relevant factor in future expectations. Based on the methodology to contribute approximately $1577 to our future expectations for the target asset mix, this assumption combined not pension and postretirement cost in 2009 as will remain unchanged for 2009. We consider many factorsPension Assets Postretirement (VEBA) Assets Target 2008 Target 2008 Equity securities Domestic 33% - 43% 34% 39% 34% - 44% 39% 49% International 13% - 23% 16 18 16% - 26% 21 24 Debt securities 23% - 33% 30 20% - 30% 25 Real estate 6% - 12% 11 ON - 6% 3 Other 4% - 10% 9% - 15% 12 Total 100%% 100% 100% At December 31, 2008, AT&T securities represented less than one half of a percent of assets held by our pension plans and VEBA trusts. Estimated Future Benefit Payments The following table provides information for our Expected benefit payments are estimated using the same supplemental retirement plans with accumulated benefit assumptions used in determining our benefit obligation at obligations in excess of plan assets: December 31, 2008. Because benefit payments will depend on future employment and compensation levels, average 2008 2007 years employed and average life spans, among other factors. Projected benefit obligation $(2.114) $(2.301) changes in any of these factors could significantly affect Accumulated benefit obligation (2,023) (2.155) these expected amounts. The following table provides Fair value of plan assets expected benefit payments under our pension and postretirement plans: The following tables present the components of not periodic benefit cost and other changes in plan assets and benefit Medicare obligations recognized in other comprehensive income: Pension Postredrement Subsidy Rccolpts Net Periodic Benefic Cos 2008 2007 2009 5 5,018 $ 2.588 $ (121) Service cost - benefits earned 2010 4,713 2,686 (131) $ 13 $ 16 2011 1.655 during the period 2.769 (140) Interest cost on projected 2012 4503 2,794 155) benefit obligation 141 147 2013 4.484 2.819 (170) 20,717 Amortization of prior service cost 6 Years 2014 - 2016 14,180 [1086) Recognized actuarial loss 21 27 Net supplemental retirement pension cost 5181 196 Supplemental Retirement Plans We also provide senior- and middle-management employees with nonqualified unfunded supplemental retirement and Other Changes Recognized in savings plans. While these plans are unfunded, we have Other Comprehensive Income 2008 200T assets in a designated nonbankruptcy remote trust that Net loss (gain) $(66) 6(60 are independently managed and used to provide for those Prior service cost (credit) 11 benefits. At the end of 2008, we concluded the severity Amortization of net loss (gain] 11 15 of decline in the latter half of 2008 had led to an other- Amortization of prior service cost than-temporary decline in the value of these assets, Total recognized in net supplemental writing them down $332, recording the amount in other pension cost and other income and expense. Sales within the trust also generated comprehensive income $(51) (31) 5180 in net realized losses in 2008. These plans include supplemental pension benefits as well as compensation FAS 158 required pro pectin application for fiscal yours anding after December 13 2006. deferral plans, some of which include a corresponding The estimated net loss and prior service cost for our match by us based on a percentage of the compensation supplemental retirement plan benefits that will be amortized doforral. from accumulated other comprehensive income into net We use the same significant assumptions for the discount periodic benefit cost over the next fiscal year are $11 and rate and composite rate of compensation increase used in $5, respectively. determining the projected benefit obligation and the net Deferred compensation expense was $54 in 2008. $106 in pension and postemployment benefit cost. The following 2007 and $39 in 2006. Our deferred compensation liability tables provide the plans' benefit obligations and fair value included in "Other noncurrent liabilities" was $1054 at of assets at December 31 and the components of the December 31, 2008, and $1,116 at December 31, 2007. supplemental retirement pension benefit cost. The net amounts recorded as "Other noncurrent liabilities" on our consolidated balance sheets at December 31, 2008 and 2007 were $2 114 and $2.301, respectively.Notes to Consolidated Financial Statements (continued) Dollars In millions except por share amounts Non-U.S. Plans Other Changes Recognized In As part of our ATTC acquisition, we acquired certain non-U.S. Other Comprehensive Income 2000 2007 operations that have varying types of pension programs Net loss (gain) $70 $(105] providing benefits for substantially all of their employees and. Amortization of net loss (gain) (2) (2) to a limited group. postemployment benefits. The following Amortization of prior service cost table provides the plans' benefit obligations and fair value of Total recognized in net pension cost assets and a statement of the funded status at December 31. and other comprehensive income $68 S(107) The net amounts recorded as "Postemployment benefit ending after Docamber 15, 200 obligation" on our consolidated balance sheets at December 31, 2008 and 2007 were $(7) and $(48). The estimated net gain that will be amortized from respectively. accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $13. 2008 2007 Benefit obligations at end of year $(786) $[1,016) Contributory Savings Plans Fair value of plan assets 793 1,064 We maintain contributory savings plans that cover substantially [Unfunded) benefit obligation all employees. Under the savings plans, we match in cash or company stock a stated percentage of eligible employee The following table provides information for certain non-U.S. contributions, subject to a specified ceiling. There are no defined-benefit pension plans with plan assets in excess of debt-financed shares hold by the Employee Stock Ownership accumulated benefit obligations: Plans, allocated or unallocated. Our match of employee contributions to the savings 2008 2007 plans is fulfilled with purchases of our stock on the open Projected benefit obligation $785 $1,015 market or company cash. Benefit cost is based on the Accumulated benefit obligation 700 892 cost of shares or units allocated to participating employees' Fair value of plan assets 793 1064 accounts and was $664 5633 and $412 for the years ended December 31, 2008, 2007 and 2006. In determining the projected benefit obligation for certain non-U.S. defined-benefit pension plans, we used the following significant weighted-average assumptions: 2008 2007 Discount rate for determining projected benefit obligation at December 31 6.20% 5.57% Discount rate in effect for determining net cost (benefit] 5.57% 4.86% Long-term rate of return on plan assets 6.13% 6.15% Composite rate of compensation increase for determining projected benefit obligation at December 31 4.06% 4.25% Composite rate of compensation increase for determining net pension cost 1.25% 1.36% The following tables present the components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income Net Periodic Benefit COST 2008 2007 Service cost - benefits canned during the period $ 25 $ 25 Interest cost on projected benefit obligation 54 52 Expected return on assets (60) (54) Amortization of prior service cost (5] (1) Net pension cost $ 14 $ 22 Source: AT&T Inc. Form 10-K, 2006