Pension Writeoffs

Low interest rates have caused large noncash charges at AT&T ($10 billion), Verizon Communications ($7 billion), and UPS ($3 billion). The low market interest rate caused the present value of pension liabilities to increase. In AT&T's case, a one percent change in the discount rate resulted in a $12 billion loss, which was partially offset by an increase in the value of the pension assets. The losses are accounting charges, which other than tax effects, will not directly affect cash flows.