FairPoint Communications 2010 Annual Report Download - page 105

Table of Contents
A reconciliation of the beginning and ending balance of pension plan assets that are measured at fair value using significant unobservable (Level 3) inputs
as of December 31, 2010 is as follows:

    
Balance at December 31, 2008 $ — $ 32,094 $ — $ 32,094
Actual gain (loss) on plan assets (798) 1,459 — 661
Purchases and sales — — — —
Transfers in and/or out of Level 3 15,000 — 2,263 17,263
Balance at December 31, 2009 $ 14,202 $ 33,553 $ 2,263 $ 50,018
Actual gain (loss) on plan assets (171) — 68 (103)
Purchases and sales — — — —
Transfers in and/or out of Level 3 7,900 (33,553) (2,331) (27,984)
Balance at December 31, 2010 $ 21,931 $ — $ — $ 21,931
Cash and cash equivalents include short-term investment funds, primarily in diversified portfolios of investment grade money market instruments and are
valued using quoted market prices, and thus classified within Level 1 of the fair value hierarchy.
Equity securities are investments in common stock of domestic and international corporations in a variety of industry sectors and are valued using quoted
market prices, and are classified within Level 1 of the fair value hierarchy.
Fixed income securities are investments in corporate bonds and in publicly traded mutual funds that invest in corporate bonds. The fair values of corporate
bonds are based on observable prices and are classified within Level 2 of the fair value hierarchy. Pricing of publicly traded mutual funds is readily available
and, therefore, these funds are classified within Level 1 of the fair value hierarchy.
Hedge funds seek to maximize absolute returns using a broad range of strategies to enhance returns and provide diversification. The fair values of hedge
funds are estimated using net asset value per share (NAV) of the investments. The Company has the ability to redeem these investments at NAV on a limited
basis, and thus has classified hedge funds within Level 3 of the fair value hierarchy.
Other assets represent cash and cash equivalents held in a short-term investment fund. Due to limitations on the liquidity of assets within this fund, the
Company has classified these assets within Level 3 of the fair value hierarchy.
Funds receivable from Verizon represent the estimated pending transfer of funds from Verizon following final actuarial settlement. Concurrent with the
closing of the Merger, Verizon transferred 80% of the value of the pension plans to the Company. During the three months ended March 31, 2010,
$33.3 million was transferred from Verizon’s defined benefit pension plans’ trusts to the Company’s pension plan trust. As of December 31, 2009, a disputed
amount was pending final validation by a third-party actuary of the census information and related actuarial calculations in accordance with relevant statutory
and regulatory guidelines and the Employee Matters Agreement. The disputed amount was not included in the Company’s pension plan assets at December 31,
2009. By letter dated July 29, 2010, the third-party actuary appointed to perform the review and validation determined that an additional $2.5 million,
adjusted for gains or losses since the date of the original transfer, should be transferred from Verizon’s defined benefit plans’ trusts to the Company’s
represented employees pension plan trust. This transfer was received in the amount of $2.4 million on September 1, 2010, at which time the Company’s net
pension obligation was decreased by this amount.
104