Frontier Communications 2014 Annual Report Download - page 97

In connection with the completion of the Connecticut Acquisition, certain employees were
transferred to the Frontier Communications Pension Plan (the Plan) effective October 24, 2014. Assets
of $343 million, including a receivable of $35 million, were transferred into the Plan during the fourth
quarter of 2014.
($ in thousands) Expected in 2015 2014 2013 2012
Components of total periodic pension
benefit cost
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,649 $ 47,651 $ 43,688
Interest cost on projected benefit
obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,476 75,812 78,027
Expected return on plan assets . . . . . . . . . . (99,273) (94,695) (95,777)
Amortization of prior service cost /(credit) $ 45 45 8 (199)
Amortization of unrecognized loss. . . . . . . . 27,773 19,951 36,930 29,890
Net periodic pension benefit cost. . . . . . . . . 42,848 65,706 55,629
Pension settlement costs . . . . . . . . . . . . . . . . — 44,163 —
Total periodic pension benefit cost . . . . . . . $ 42,848 $109,869 $ 55,629
Our pension plan contains provisions that provide certain employees with the option of receiving
lump sum payment upon retirement. The Company’s accounting policy is to record these payments as
a settlement only if, in the aggregate, they exceed the sum of the annual service and interest costs for
the plan’s net periodic pension benefit cost. During 2013, lump sum pension settlement payments to
terminated or retired individuals amounted to $165 million, which exceeded the settlement threshold of
$125 million. As a result, the Company was required to recognize a non-cash settlement charge of
$44 million during 2013. The non-cash charge was required to accelerate the recognition of a portion of
the previously unrecognized actuarial losses in the pension plan. This non-cash charge reduced our
recorded net income and retained earnings, with an offset to accumulated other comprehensive loss in
shareholders’ equity of Frontier.
We capitalized $15 million, $19 million and $16 million of pension and OPEB expense into the cost
of our capital expenditures during the years ended December 31, 2014, 2013 and 2012, respectively,
as the costs relate to our engineering and plant construction activities.
Based on current assumptions and plan asset values, we estimate that our 2015 pension and
OPEB expenses will be approximately $85 million to $105 million before amounts capitalized into the
cost of capital expenditures and the impact of pension settlement costs, if any.
The plan’s weighted average asset allocations at December 31, 2014 and 2013 by asset category
are as follows:
2014 2013
Asset category:
Equity securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45% 42%
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47% 44%
Alternative investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6% 13%
Cash and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2% 1%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100%
F-36
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements