Retirement Plans

9 Months Ended

Sep. 30, 2011

Compensation and Retirement Disclosure [Abstract]

Retirement Plans

(15) Retirement Plans:

The following tables provide the components of net periodic benefit cost:

	Pension Benefits			Pension Benefits
	For the three months ended				For the nine months ended
	September 30,			September 30,
	2011		2010		2011	2010
($ in thousands)
Components of net periodic pension benefit cost
Service cost	$          9,615	$	8,994	$	28,844	$         12,212
Interest cost on projected benefit obligation	21,172		21,601		63,516	46,364
Expected return on plan assets	(25,589)		(23,262)		(76,766)	(46,561)
Amortization of prior service cost /(credit)	(50)		(49)		(150)	(149)
Amortization of unrecognized loss	4,435		7,048		13,306	20,545
Net periodic pension benefit cost	$          9,583	$	14,332	$	28,750	$         32,411
	Postretirement Benefits			Postretirement Benefits
	Other Than Pensions (OPEB)			Other Than Pensions (OPEB)
	For the three months ended				For the nine months ended
	September 30,				September 30,
	2011		2010		2011	2010
($ in thousands)
Components of net periodic postretirement benefit cost
Service cost	$          4,206	$	3,842	$	12,662	$           4,041
Interest cost on projected benefit obligation	5,986		6,241		18,642	11,499
Expected return on plan assets	(79)		(113)		(242)	(330)
Amortization of prior service cost/(credit)	(2,552)		(1,932)		(7,651)	(5,790)
Amortization of unrecognized loss	607		528		3,604	3,690
Net periodic postretirement benefit cost	$          8,168	$	8,566	$	27,015	$         13,110

During the first nine months of 2011 and 2010, we capitalized $9.8 million and $5.4 million, respectively, of pension and OPEB expense into the cost of our capital expenditures, as the costs relate to our engineering and plant construction activities.  Based on current assumptions and plan asset values, we estimate that our 2011 pension and OPEB expenses will be between $70 million and $80 million before amounts capitalized into the cost of capital expenditures (they were $68.4 million in 2010 before amounts capitalized into the cost of capital expenditures, including the plan expenses of the Acquired Business for the second half of 2010).   We made contributions to our pension plan of approximately $76.7 million in 2011, consisting of cash payments of $18.6 million and, as described below, the contribution of real property with a fair value of $58.1 million.  Frontier's required pension contribution under ERISA was approximately $50 million in 2011.  The excess will be used toward the Company's 2012 required contributions.

On September 8, 2011, the Company contributed four administrative properties to its qualified defined benefit pension plan.  None of the buildings were under state regulation that required individual PUC approval. The pension plan obtained independent appraisals of the properties and, based on these appraisals, the pension plan recorded the contributions at their fair value of $58.1 million.  The Company has entered into leases for the contributed properties for 15 years at a combined aggregate annual rent of approximately $5.8 million.  The properties are managed on behalf of the pension plan by an independent fiduciary, and the terms of the leases were negotiated with the fiduciary on an arm's-length basis.

The contribution and leaseback of the properties was treated as a financing transaction and, accordingly, the Company will continue to depreciate the carrying value of the properties in its financial statements and no gain or loss was recognized.  An obligation of $58.1 million was recorded in our consolidated balance sheet as “Other liabilities” for $57.5 million and as “Other current liabilities” for $0.6 million and will be reduced by a portion of the lease payments made to the pension plan.

In connection with the completion of the Transaction on July 1, 2010, certain employees were transferred from various Verizon pension plans into 12 pension plans that were then merged with the Frontier Communications Pension Plan (the Plan) effective August 31, 2010.  Assets of $438.8 million were transferred into the Plan during 2010 and $106.9 million was transferred into the Plan in August 2011.  The Plan has a receivable of $59.6 million as of September 30, 2011 that will be settled by the transfer of assets by the end of 2011 or early in 2012.

The Plan's assets have decreased from $1,290.3 million at December 31, 2010 to $1,228.1 million at September 30, 2011, a decrease of $62.2 million, or 5%.  This decrease is a result of $44.8 million of negative investment returns and ongoing benefit payments of $94.1 million, offset by cash and real property contributions of $76.7 million during the first nine months of 2011.