Frontier Communications 2006 Annual Report Download - page 91

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The plan’s weighted average asset allocations at December 31, 2006 and 2005 by asset category are as follows:
2006 2005
Asset category:
Equity securities ............................ 0% 0%
Debt securities .............................. 100% 100%
Cash and other .............................. 0% 0%
Total ................................. 100% 100%
The plan’s expected benefit payments by year are as follows:
Year
Gross
Benefits
Medicare
D Subsidy Total
($ in thousands)
2007 ......................... $ 10,069 $ 346 $ 9,723
2008 ......................... 10,386 395 9,991
2009 ......................... 10,757 455 10,302
2010 ......................... 11,129 510 10,619
2011 ......................... 11,648 — 11,648
2012 - 2016 .................... 59,857 — 59,857
Total ......................... $ 113,846 $ 1,706 $ 112,140
Our expected contribution to the plan in 2007 is $9,723,000.
For purposes of measuring year-end benefit obligations, we used, depending on medical plan coverage for
different retiree groups, a 9.0% annual rate of increase in the per-capita cost of covered medical benefits,
gradually decreasing to 5% in the year 2015 and remaining at that level thereafter. The effect of a 1% increase in
the assumed medical cost trend rates for each future year on the aggregate of the service and interest cost
components of the total postretirement benefit cost would be $620,000 and the effect on the accumulated
postretirement benefit obligation for health benefits would be $8,816,000. The effect of a 1% decrease in the
assumed medical cost trend rates for each future year on the aggregate of the service and interest cost
components of the total postretirement benefit cost would be $(517,000) and the effect on the accumulated
postretirement benefit obligation for health benefits would be $(7,844,000).
In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Act)
became law. The Act introduces a prescription drug benefit under Medicare. It includes a federal subsidy to
sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the
Medicare Part D benefit. The amount of the federal subsidy is based on 28% of an individual beneficiary’s
annual eligible prescription drug costs ranging between $250 and $5,000. We have determined that the
Company-sponsored postretirement healthcare plans that provide prescription drug benefits are actuarially
equivalent to the Medicare Prescription Drug benefit. The impact of the federal subsidy has been incorporated
into the calculation.
The amounts in accumulated other comprehensive income that have not yet been recognized as components
of net periodic benefit cost at December 31, 2006 are as follows:
($ in thousands) Pension Plan OPEB
Net actuarial loss ..................................... $ 148,854 $ 39,869
Prior service cost ..................................... (1,606) (53,572)
Total ........................................... $ 147,248 $ (13,703)
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