Windstream 2010 Annual Report Download - page 160

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Employee Benefit Plans and Postretirement Benefits, Continued:
(c) During 2009, Windstream amended certain of its postretirement medical and life insurance plans to replace
post-65 Medicare supplement plans with a portfolio of individual post-65 products including various
Medigap, Part D Prescription Drug Plan and a Medicare Advantage plan effective July 1, 2010. In addition,
these amendments capped the maximum amount of medical subsidy provided by Windstream to retirees and
eliminated dental subsidies and Medicare Part B reimbursement effective January 1, 2010. These
amendments were accounted for as plan amendments and reduced Windstream’s benefit obligation at
December 31, 2009 by $54.8 million, with a corresponding decrease in accumulated other comprehensive
loss, net of tax. The reduction in the obligation will be amortized to postretirement benefits expense in
accordance with Company policy.
Estimated amounts to be amortized from accumulated other comprehensive income (loss) into net periodic benefit
expense (income) in 2011, including executive retirement agreements, are as follows:
(Millions)
Pension
Benefits
Postretirement
Benefits
Net actuarial loss $ 42.3 $ 2.1
Prior service credits $ (0.1) $ (10.1)
The accumulated benefit obligation of the Company’s pension plan was $1,128.5 million, $1,011.3 million and
$911.0 million at December 31, 2010, 2009 and 2008, respectively.
Actuarial assumptions used to calculate the projected benefit obligations were as follows for the years ended
December 31:
Pension Benefits Postretirement Benefits
2010 2009 2010 2009
Discount rate 5.31% 5.89% 5.25% 5.79%
Expected return on plan assets 8.00% 8.00% - -
Rate of compensation increase 3.44% 3.44% - -
In developing the expected long-term rate of return assumption, the Company considered the historical rate of
return on plan assets of 9.98 percent since 1975 including periods in which it was sponsored by Alltel, as well as
input from its investment advisors. Projected returns by such advisors were based on broad equity and bond
indices. The expected long-term rate of return on qualified pension plan assets includes a targeted asset allocation
of 55.0 percent to equities, 35.0 percent to fixed income securities, and 10.0 percent to alternative investments,
with an aggregate expected long-term rate of return of approximately 8.0 percent.
The Company’s pension plan assets are allocated to asset categories based on the specific strategy employed by
the asset’s investment manager. The asset allocation at December 31, 2010 and 2009 for the Company’s pension
plan by asset category were as follows:
Target Allocation Percentage of Plan Assets
Asset Category 2011 2010 2009
Equity securities 45.0% - 60.0% 61.1% 53.0%
Fixed income securities 31.0% - 44.0% 34.9% 38.2%
Alternative investments 0.0% - 17.0% 0.2% -
Money market and other short-term interest bearing
securities 0.0% - 3.0% 3.8% 8.8%
100.0% 100.0%
The Company’s investment strategy is to maintain a diversified asset portfolio expected to provide long-term asset
growth. Asset allocation decisions reflect the return objectives of the pension plan as well as tolerance for risk,
liquidity needs and future funding obligations. The long-term return objective is to satisfy any current funding
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