Windstream 2012 Annual Report Download - page 160

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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F-62
8. Employee Benefit Plans and Postretirement Benefits, Continued:
as of June 1, 2011 by $38.3 million, with a corresponding decrease in accumulated other comprehensive income (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 2011, 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 2013, including executive retirement agreements, are as follows:
(Millions)
Pension
Benefits
Postretirement
Benefits
Net actuarial loss $ — $ 2.7
Prior service credits $ (0.1)$ (11.3)
The accumulated benefit obligation of our pension plan and executive retirement agreements, was $1,375.8 million, $1,243.6
million and $1,128.5 million at December 31, 2012, 2011 and 2010, respectively.
Assumptions – Actuarial assumptions used to calculate pension and postretirement benefits expense (income) were as follows
for the years ended December 31:
Pension Benefits Postretirement Benefits
(Millions) 2012 2011 2010 2012 2011 2010
Discount rate 4.64% 5.31% 5.89% 4.58% 5.11% 5.79%
Expected return on plan assets 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Rate of compensation increase 4.17% 3.44% 3.44% —% —% —%
Actuarial assumptions used to calculate the projected benefit obligations were as follows at December 31:
Pension Benefits Postretirement Benefits
2012 2011 2012 2011
Discount rate 3.85% 4.64% 3.87% 4.59%
Expected return on plan assets 7.00% 8.00% 7.00% 8.00%
Rate of compensation increase 2.67% 4.17% — —%
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
qualified pension plan assets includes a targeted asset allocation of 25.0 percent to equities, 57.0 percent to fixed income
securities, and 18.0 percent to alternative investments, with an aggregate expected long-term rate of return of approximately 7.0
percent, which is 1.0 percent lower than our prior expected long-term rate of return given our higher allocation to fixed income
securities and lower allocation to equities.