Frontier Communications 2010 Annual Report Download - page 94

The OPEB plan’s weighted average asset allocations at December 31, 2010 and 2009 by asset category are
as follows:
2010 2009
Asset category:
Equity securities ........................................................ 0% 0%
Debt securities.......................................................... 99% 100%
Cash and other.......................................................... 1% 0%
Total................................................................. 100% 100%
The OPEB plan’s expected benefit payments over the next 10 years are as follows:
($ in thousands)
Year
Gross
Benefits
Medicare Part D
Subsidy Total
2011 $ 14,264 $ 449 $ 13,815
2012 17,601 658 16,943
2013 21,132 894 20,238
2014 24,526 1,181 23,345
2015 27,660 1,479 26,181
2016-2020 170,944 11,825 159,119
Total $276,127 $16,486 $259,641
Our expected contribution to the plan in 2011 is $13.8 million.
For purposes of measuring year-end benefit obligations, we used, depending on medical plan coverage for
different retiree groups, an 8.0% 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 $1.6 million and the effect on the accumulated
postretirement benefit obligation for health benefits would be $31.6 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 $(1.4) million and the effect on the accumulated
postretirement benefit obligation for health benefits would be $(27.6) million.
In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Act)
became law. The Act introduced 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 $5,000. We have determined that the
Company-sponsored postretirement healthcare plans that provide prescription drug benefits are actuarially
equivalent to the Medicare Prescription Drug benefit. The impact of the federal subsidy has been incorporated
into the calculation.
The amounts in accumulated other comprehensive income that have not yet been recognized as
components of net periodic benefit cost at December 31, 2010 and 2009 are as follows:
($ in thousands) 2010 2009 2010 2009
Pension Plan OPEB
Net actuarial loss $349,298 $374,390 $ 64,598 $ 53,010
Prior service cost/(credit) (34) (233) (51,229) (31,456)
Total $349,264 $374,157 $ 13,369 $ 21,554
F-35
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements