Frontier Communications 2008 Annual Report Download - page 92

The plans’ weighted average asset allocations at December 31, 2008 and 2007 by asset category are as
follows:
2008 2007
Asset category:
Equity securities . ....................................................... 0% 0%
Debt securities . . . ....................................................... 100% 100%
Cash and other. . . ....................................................... 0% 0%
Total............................................................... 100% 100%
The plans’ expected benefit payments over the next 10 years are as follows:
($ in thousands)
Year
Gross
Benefits
Medicare Part D
Subsidy Total
2009........ $ 13,137 $ 397 $ 12,740
2010........ 13,578 464 13,114
2011........ 14,146 533 13,613
2012........ 14,314 647 13,667
2013........ 14,657 748 13,909
2014–2018 . . 75,959 5,330 70,629
Total $145,791 $8,119 $137,672
Our expected contribution to the plans in 2009 is $12.7 million.
For purposes of measuring year-end benefit obligations, we used, depending on medical plan coverage for
different retiree groups, a 9% annual rate of increase in the per-capita cost of covered medical benefits,
gradually decreasing to 5% in the year 2017 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 $0.7 million and the effect on the accumulated
postretirement benefit obligation for health benefits would be $10.0 million. 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 $(0.6) million and the effect on the accumulated
postretirement benefit obligation for health benefits would be $(8.7) million.
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 $5,000. We have determined that the
Company-sponsored postretirement healthcare plans that provide prescription drug benefits are actuarially
equivalent to the Medicare Prescription Drug benefit. The impact of the federal subsidy has been incorporated
into the calculation.
The amounts in accumulated other comprehensive income that have not yet been recognized as
components of net periodic benefit cost at December 31, 2008 and 2007 are as follows:
($ in thousands)
2008 2007 2008 2007
Pension Plan OPEB
Net actuarial loss .................................. $377,183 $135,627 $ 47,252 $ 49,154
Prior service cost/(credit) .......................... (1,097) (1,351) (39,207) (46,862)
Total. ............................................. $376,086 $134,276 $ 8,045 $ 2,292
F-41
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements