CenturyLink 2015 Annual Report Download - page 139

• certain post-retirement benefits payable to certain eligible current and future retirees. Not all of our
post-retirement benefit obligation amount is a contractual obligation and only the portion that we
believe is a contractual obligation is reported in the table. See additional information on our benefits
plans in Note 7—Employee Benefits to our consolidated financial statements in Item 8 of our Annual
Report on Form 10-K for the year ended December 31, 2015;
• contract termination fees. These fees are non-recurring payments, the timing and payment of which, if
any, is uncertain. In the ordinary course of business and to optimize our cost structure, we enter into
contracts with terms greater than one year to use the network facilities of other carriers and to purchase
other goods and services. Our contracts to use other carriers’ network facilities generally have no
minimum volume requirements and are based on an interrelationship of volumes and discounted rates.
Assuming we terminate these contracts in 2016, the contract termination fees would be approximately
$399 million. Under the same assumption, we estimate that our termination fees for these contracts to
purchase goods and services would be approximately $154 million. In the normal course of business,
we do not believe payment of these fees is likely; and
• potential indemnification obligations to counterparties in certain agreements entered into in the normal
course of business. The nature and terms of these arrangements vary.
Pension and Post-retirement Benefit Obligations
We are subject to material obligations under our existing defined benefit pension plans and post-retirement
benefit plans. At December 31, 2015, the accounting unfunded status of our defined benefit pension plans and
post-retirement benefit plans were $2.277 billion and $3.374 billion, respectively. See Note 7—Employee
Benefits to our consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year
ended December 31, 2015 for additional information about our pension and post-retirement benefit
arrangements.
Benefits paid by our qualified pension plan are paid through a trust that holds all of the plan’s assets. Based
on current laws and circumstances, we do not expect any contributions to be required for our qualified pension
plan for 2016. The amount of required contributions to our qualified pension plan in 2017 and beyond will
depend on a variety of factors, most of which are beyond our control, including earnings on plan investments,
prevailing interest rates, demographic experience, changes in plan benefits and changes in funding laws and
regulations. We occasionally make voluntary contributions in addition to required contributions.
Certain of our post-retirement health care and life insurance benefits plans are unfunded. Several trusts hold
assets that are used to help cover the health care costs of certain retirees. As of December 31, 2015, the fair value
of these trust assets was approximately $193 million; however, a portion of these assets is comprised of
investments with restricted liquidity. We estimate that the more liquid assets in these trusts will be adequate to
provide continuing reimbursements for covered post-retirement health care costs for approximately one year.
Thereafter, covered benefits will be paid either directly by us or from these trusts as the remaining assets become
liquid. This projected one year period could be shorter or longer depending on returns on plan assets, the timing
of maturities of illiquid plan assets and future changes in benefits.
For 2016, our estimated annual long-term rate of return is 7.0% for both the pension plan trust assets and
post-retirement plans trust assets, based on the assets currently held. However, actual returns could be
substantially different.
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