Windstream 2011 Annual Report Download - page 169

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(c) During 2011, we amended certain of our postretirement medical plans to reduce the subsidies offered for medical and
prescription drug insurance premiums. The change will be made in two waves. Effective January 1, 2012, the available
subsidy will be reduced to one-half of the current subsidies. Effective January 1, 2013, the subsidy will be further
reduced to either $80 per month for participants who are not eligible for Medicare, or $17 per month for Medicare
eligible participants. These amendments were accounted for as plan amendments which reduced our benefit
obligation as of June 1, 2011 by $38.3 million, with a corresponding decrease in accumulated other comprehensive
loss, net of tax. As a result, the revised benefit obligation was $59.7 million as of June 1, 2011. The reduction in the
obligation is being amortized to postretirement benefits expense over the average remaining service life of active
employees beginning June 1, 2011. In remeasuring the postretirement obligations to reflect these amendments,
updated assumptions as of June 1, 2011 were used. Specifically, the discount rate was decreased from 5.25 percent to
5.20 percent.
(d) During 2011, we communicated the elimination of retiree basic life insurance benefits for certain participants of our
plans effective January 1, 2012. For accounting purposes, this change eliminated all retiree basic life insurance
benefits provided within one of the accounting plans and triggered a negative plan amendment and a curtailment
eliminating retiree basic life insurance benefit obligations for all participants of the accounting plan. As a result, our
postretirement benefit obligation was reduced by $13.8 million and the recognition of associated prior service credits
of $4.9 million and actuarial losses of $4.0 million was accelerated. In total, we recorded a $14.7 million gain during
the third quarter, of which $11.2 million was recorded in cost of services and $3.5 million in selling, general and
administrative expenses. Due to the changes discussed previously, the total accumulated benefit obligation decreased
by $13.8 million. In remeasuring the postretirement obligations to reflect these changes, updated assumptions as of
August 1, 2011 were used. Specifically, the discount rate was decreased from 5.20 percent to 4.86 percent. The
discount rate is selected based on a hypothetical yield curve that incorporates high-quality corporate bonds with
various maturities adjusted to reflect expected post retirement benefit payments.
Estimated amounts to be amortized from accumulated other comprehensive income (loss) into net periodic benefit expense
(income) in 2012, including executive retirement agreements, are as follows:
(Millions)
Net actuarial loss
Prior service credits
Pension
Benefits
$—
$(0.1)
Postretirement
Benefits
$ 1.2
$(12.3)
The accumulated benefit obligation of our pension plan and executive retirement agreements, was $1,243.6 million, $1,128.5
million and $1,022.0 million at December 31, 2011, 2010 and 2009, respectively.
Assumptions – Actuarial assumptions used to calculate pension and postretirement benefits expense were as follows for the
years ended December 31:
(Millions)
Discount rate
Expected return on plan assets
Rate of compensation increase
Pension Benefits
2011
5.31%
8.00%
3.44%
2010
5.89%
8.00%
3.44%
2009
6.18%
8.00%
3.44%
Postretirement Benefits
2011
5.11%
8.00%
—%
2010
5.79%
8.00%
—%
2009
6.11%
—%
—%
Actuarial assumptions used to calculate the projected benefit obligations were as follows at December 31:
Discount rate
Expected return on plan assets
Rate of compensation increase
Pension Benefits
2011
4.64%
8.00%
4.17%
2010
5.31%
8.00%
3.44%
Postretirement Benefits
2011
4.59%
8.00%
—
2010
5.25%
8.00%
—%
In developing the expected long-term rate of return assumption, we considered the historical rate of return on plan assets of
9.79 percent since 1975 including periods in which it was sponsored by Alltel, as well as input from our investment advisors.
Projected returns by such advisors were based on broad equity and bond indices. The expected long-term rate of return on