Frontier Communications 2012 Annual Report Download - page 95

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2012 2011
Asset category:
Equity securities . ....................................................... 43% 45%
Debt securities . . . ....................................................... 40% 40%
Alternative investments .................................................. 14% 14%
Cash and other. . . ....................................................... 3% 1%
Total............................................................... 100% 100%
The plan’s expected benefit payments over the next 10 years are as follows:
($ in thousands)
Year Amount
2013 $ 113,424
2014 120,836
2015 128,624
2016 134,922
2017 138,759
2018-2022 729,847
Total $1,366,412
We made total net cash contributions to our pension plan for 2012 of $28.6 million, consisting of net cash
payments of $18.3 million in the third quarter and $10.3 million in the fourth quarter. These pension
contributions reflect the positive impact of funding rate changes contained in the Highway Investment Act of
2012 and guidance from the IRS on August 16, 2012 related to valuation rates, and on September 11, 2012
related to lump sum methodologies.
We made contributions to our pension plan of approximately $76.7 million in 2011, consisting of cash
payments of $18.6 million and, as described below, the contribution of real property with a fair value of $58.1
million.
On September 8, 2011, the Company contributed four administrative properties to its qualified defined
benefit pension plan. None of the buildings were under state regulation that required individual PUC approval.
The pension plan obtained independent appraisals of the properties and, based on these appraisals, the pension
plan recorded the contributions at their fair value of $58.1 million. The Company has entered into leases for the
contributed properties for 15 years at a combined aggregate annual rent of $5.8 million. The properties are
managed on behalf of the pension plan by an independent fiduciary, and the terms of the leases were negotiated
with the fiduciary on an arm’s-length basis.
We made cash contributions of $13.1 million to the Plan during 2010. We expect that we will make cash
contributions to the Plan of approximately $60 million in 2013.
The accumulated benefit obligation for the Plan was $1,793.8 million and $1,673.4 million at
December 31, 2012 and 2011, respectively.
Assumptions used in the computation of annual pension costs and valuation of the year-end obligations
were as follows:
2012 2011 2010
Discount rate—used at year end to value obligation....................... 4.00% 4.50% 5.25%
Discount rate—used to compute annual cost .............................. 4.50% 5.25% 5.75%
Expected long-term rate of return on plan assets . ......................... 7.75% 8.00% 8.00%
Rate of increase in compensation levels .................................. 2.50% 2.50% 3.00%
F-34
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements