Frontier Communications 2008 Annual Report Download - page 88

Download and view the complete annual report

Please find page 88 of the 2008 Frontier Communications annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 99

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99

Citigroup Above-Median Pension Curve, the general movement of interest rates and the changes in those rates
from one period to the next. This rate can change from year-to-year based on market conditions that impact
corporate bond yields. Our discount rate was 6.50% at year-end 2008 and 2007.
The expected long-term rate of return on plan assets is applied in the determination of periodic pension
and postretirement benefit cost as a reduction in the computation of the expense. In developing the expected
long-term rate of return assumption, we considered published surveys of expected market returns, 10 and 20
year actual returns of various major indices, and our own historical 5-year, 10-year and 20-year investment
returns. The expected long-term rate of return on plan assets is based on an asset allocation assumption of 35%
to 55% in fixed income securities, 35% to 55% in equity securities and 5% to 15% in alternative investments.
We review our asset allocation at least annually and make changes when considered appropriate. Our asset
return assumption is made at the beginning of our fiscal year. In 2008, we did not change our expected long-
term rate of return from the 8.25% used in 2007. Our pension plan assets are valued at actual market value as
of the measurement date. The measurement date used to determine pension and other postretirement benefit
measures for the pension plan and the postretirement benefit plan is December 31.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans” (SFAS No. 158). We adopted SFAS No. 158 prospectively on December 31,
2006. SFAS No. 158 requires that we recognize all obligations related to defined benefit pensions and other
postretirement benefits. SFAS No. 158 also requires that we quantify the plans’ funded status as an asset or a
liability on our consolidated balance sheets.
SFAS No. 158 requires that we measure the plan’s assets and obligations that determine our funded status
as of the end of the fiscal year. We are also required to recognize as a component of Other Comprehensive
Income “OCI” the changes in funded status that occurred during the year that are not recognized as part of net
periodic benefit cost as explained in SFAS No. 87, “Employers’ Accounting for Pensions,” or SFAS No. 106,
“Employers’ Accounting for Postretirement Benefits Other Than Pensions.”
Based on the funded status of our defined benefit pension and postretirement benefit plans as of December
31, 2006, we reported a gain (net of tax) to our AOCI of $41.4 million, a decrease of $66.1 million to accrued
pension obligations and an increase of $24.7 million to accumulated deferred income taxes. Our adoption of
SFAS No. 158 on December 31, 2006, had no impact on our earnings. The following tables present details
about our pension plans.
F-37
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements