Verizon 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 2007 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 2007 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 Obligation Beginning of year.. Service cost.... Interest cost Plan amendments Actuarial (gain) loss, net. Benefits paid..... Termination benefits. 2007 Pension Health Care and Life 2006 2007 2006 $34,159 442 1,975 - 123 (4,204) $35,540 581 $27,330 354 $ 26,783 1,995 - (282) (2,762) 47 1,592 - (409) (1,561) 356 1,499 50 152 (1,564) 14 Acquisitions and divestitures, net 477 40 Settlements. (1,437) End of year. $32,495 $34,159 $ 27,306 $ 27,330 Change in Plan Assets Beginning of year.... $41,509 $39,227 $ 4,303 $ 4,275 Actual return on plan assets.. 4,591 5,536 352 Company contributions 737 568 1,048 493 1,099 Benefits paid.... (4,204) (2.762) (1,561) (1,564) Settlements (1,437) Acquisitions and divestitures, net 26 377 - End of year.. $42,659 $41,509 $ 4,142 $ 4,303 Funded Status End of year. $10,164 $ 7,350 $(23,164) $(23,027)