(17)	Retirement Plans:

We sponsor a noncontributory defined benefit pension plan covering a significant number of our former and current employees and other postretirement benefit plans that provide medical, dental, life insurance and other benefits for covered retired employees and their beneficiaries and covered dependents. The benefits are based on years of service and final average pay or career average pay. Contributions are made in amounts sufficient to meet ERISA funding requirements while considering tax deductibility. Plan assets are invested in a diversified portfolio of equity and fixed-income securities and alternative investments.

The accounting results for pension and other postretirement benefit costs and obligations are dependent upon various actuarial assumptions applied in the determination of such amounts. These actuarial assumptions include the following: discount rates, expected long-term rate of return on plan assets, future compensation increases, employee turnover, healthcare cost trend rates, expected retirement age, optional form of benefit and mortality. We review these assumptions for changes annually with our independent actuaries. We consider our discount rate and expected long-term rate of return on plan assets to be our most critical assumptions.

The discount rate is used to value, on a present value basis, our pension and other postretirement benefit obligations as of the balance sheet date. The same rate is also used in the interest cost component of the pension and postretirement benefit cost determination for the following year. The measurement date used in the selection of our discount rate is the balance sheet date. Our discount rate assumption is determined annually with assistance from our independent actuaries based on the pattern of expected future benefit payments and the prevailing rates available on long-term, high quality corporate bonds that approximate the benefit obligation.

Since the completion of the Transaction on July 1, 2010, we have focused on integrating the operations and converging the processes of the Acquired Business to effectively operate as one business. During the past two years, we have worked with Verizon and our third party actuaries to merge the plans, finalize the transfer of plan assets and ensure we have all the information necessary to make well informed decisions. Based on the underlying changes in demographics and cash flows, we amended the estimation techniques regarding its actuarial assumptions, where appropriate, across all of our pension and postretirement plans. The most significant of such changes was in the estimation technique utilized to develop the discount rate for its pension and postretirement benefit plans. The revised estimation technique is based upon a settlement model (Bond:Link) of such liabilities as of December 31, 2012 that permits us to more closely match cash flows to the expected payments to participants than would be possible with the previously used yield curve model. We believe such a change results in an estimate of the discount rate that more accurately reflects the settlement value for plan obligations than the different yield curve methodologies used in prior years, as it provides the ability to review the quality and diversification of the portfolio to select the bond issues that would settle the obligation in an optimal manner. This rate can change from year-to-year based on market conditions that affect corporate bond yields.

In determining the discount rate as of December 31, 2011 and 2010, we considered, among other things, the yields on the Citigroup Above Median Pension Curve, the Towers Watson Index, the general movement of interest rates and the changes in those rates from one period to the next.

As a result of the change described above, Frontier is utilizing a discount rate of 4.00% as of December 31, 2012 for its qualified pension plan, compared to rates of 4.50% and 5.25% in 2011 and 2010, respectively. Had the previous estimation technique been used, the discount rate would have been 3.75% in comparison to the 4.00% discount rate, and the impact to the projected benefit obligation at December 31, 2012 would have been immaterial. The discount rate for postretirement plans as of December 31, 2012 was a range of 4.00% to 4.20% compared to a range of 4.50% to 4.75% in 2011 and 5.25% in 2010.

The expected long-term rate of return on plan assets is applied in the determination of periodic pension and postretirement benefit cost as a reduction in the computation of the expense. In developing the expected long-term rate of return assumption, we considered published surveys of expected market returns, 10 and 20 year actual returns of various major indices, and our own historical 5-year, 10-year and 20-year investment returns. The expected long-term rate of return on plan assets is based on an asset allocation assumption of 35% to 55% in fixed income securities, 35% to 55% in equity securities and 5% to 15% in alternative investments. We review our asset allocation at least annually and make changes when considered appropriate. Our pension asset investment allocation decisions are made by the Retirement Investment & Administration Committee (RIAC), a committee comprised of members of management, pursuant to a delegation of authority by the Retirement Plan Committee of the Board of Directors. The RIAC is responsible for reporting its actions to the Retirement Plan Committee. Asset allocation decisions take into account expected market return assumptions of various asset classes as well as expected pension benefit payment streams. When analyzing anticipated benefit payments, management considers both the absolute amount of the payments as well as the timing of such payments. In 2012, 2011 and 2010, our expected long-term rate of return on plan assets was 7.75%, 8.00% and 8.00%, respectively. For 2013, we will assume a rate of return of 8.00%. Our pension plan assets are valued at fair value as of the measurement date. The measurement date used to determine pension and other postretirement benefit measures for the pension plan and the postretirement benefit plan is December 31.

Pension Benefits

The following tables set forth the pension plan's projected benefit obligations and fair values of plan assets as of December 31, 2012 and 2011 and the components of total periodic pension benefit cost for the years ended December 31, 2012, 2011 and 2010:

($ in thousands)	2012			2011

Change in projected benefit obligation (PBO)
PBO at beginning of year	$	1,799,313		$	1,644,657
Service cost		43,688			38,879
Interest cost		78,027			84,228
Actuarial loss		196,304			160,390
Benefits paid		(172,601	)		(128,841	)
PBO at end of year	$	1,944,731		$	1,799,313

Change in plan assets
Fair value of plan assets at beginning of year	$	1,257,990		$	1,290,274
Actual return on plan assets		139,679			19,883
Employer contributions, net of transfers		28,598			76,674
Benefits paid		(172,601	)		(128,841	)
Fair value of plan assets at end of year	$	1,253,666		$	1,257,990

Funded status	$	(691,065	)	$	(541,323	)

Amounts recognized in the consolidated balance sheet
Current liabilities	$	(60,386	)	$	-
Pension and other postretirement benefits	$	(630,679	)	$	(541,323	)
Accumulated other comprehensive loss	$	697,874		$	575,163

	Expected in
($ in thousands)	2013		2012			2011			2010

Components of total periodic pension benefit cost
Service cost			$	43,688		$	38,879		$	21,169
Interest cost on projected benefit obligation				78,027			84,228			67,735
Expected return on plan assets				(95,777	)		(100,558	)		(69,831	)
Amortization of prior service cost/(credit)	$	8		(199	)		(199	)		(199	)
Amortization of unrecognized loss		40,287		29,890			15,364			27,393
Net periodic pension benefit cost				55,629			37,714			46,267
Special termination charge				-			-			69
Total periodic pension benefit cost			$	55,629		$	37,714		$	46,336

We capitalized $15.8 million, $10.2 million and $8.3 million of pension and OPEB expense into the cost of our capital expenditures during the years ended December 31, 2012, 2011 and 2010, respectively, as the costs relate to our engineering and plant construction activities.

Based on current assumptions and plan asset values, we estimate that our 2013 pension and OPEB expenses will be approximately $100 million to $110 million before amounts capitalized into the cost of capital expenditures.

The plan's weighted average asset allocations at December 31, 2012 and 2011 by asset category are as follows:


	2012			2011
Asset category:
Equity securities		43	%		45	%
Debt securities		40	%		40	%
Alternative investments		14	%		14	%
Cash and other		3	%		1	%
Total		100	%		100	%

The plan's expected benefit payments over the next 10 years are as follows:

($ in thousands)

Year		Amount
2013		$	113,424
2014			120,836
2015			128,624
2016			134,922
2017			138,759
	2018 - 2022		729,847
Total		$	1,366,412

We made total net cash contributions to our pension plan for 2012 of $28.6 million, consisting of net cash payments of $18.3 million in the third quarter and $10.3 million in the fourth quarter. These pension contributions reflect the positive impact of funding rate changes contained in the Highway Investment Act of 2012 and guidance from the IRS on August 16, 2012 related to valuation rates, and on September 11, 2012 related to lump sum methodologies.

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.

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 $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.

We made cash contributions of $13.1 million to the Plan during 2010. We expect that we will make cash contributions to the Plan of approximately $60 million in 2013.

The accumulated benefit obligation for the Plan was $1,793.8 million and $1,673.4 million at December 31, 2012 and 2011, respectively.

Assumptions used in the computation of annual pension costs and valuation of the year-end obligations were as follows:

	2012	2011	2010
Discount rate - used at year end to value obligation	4.00%	4.50%	5.25%
Discount rate - used to compute annual cost	4.50%	5.25%	5.75%
Expected long-term rate of return on plan assets	7.75%	8.00%	8.00%
Rate of increase in compensation levels	2.50%	2.50%	3.00%

Postretirement Benefits Other Than Pensions—"OPEB"

The following tables set forth the OPEB plan's benefit obligations, fair values of plan assets and the postretirement benefit liability recognized on our consolidated balance sheets at December 31, 2012 and 2011 and the components of net periodic postretirement benefit costs for the years ended December 31, 2012, 2011 and 2010.


($ in thousands)	2012			2011

Change in benefit obligation

Benefit obligation at beginning of year	$	391,596		$	353,131
Service cost		10,812			8,958
Interest cost		17,842			17,722
Plan participants' contributions		4,059			4,389
Actuarial loss		30,958			22,564
Benefits paid		(15,974	)		(15,168	)
Plan change		(743	)		-
Benefit obligation at end of year	$	438,550		$	391,596

Change in plan assets
Fair value of plan assets at beginning of year	$	5,101		$	6,240
Actual return on plan assets		466			219
Plan participants' contributions		4,059			4,389
Employer contribution		11,403			9,421
Benefits paid		(15,974	)		(15,168	)
Fair value of plan assets at end of year	$	5,055		$	5,101

Funded status	$	(433,495	)	$	(386,495	)

Amounts recognized in the consolidated balance sheet
Current liabilities	$	(9,116	)	$	(9,117	)
Pension and other postretirement benefits	$	(424,379	)	$	(377,378	)
Accumulated other comprehensive loss	$	74,264		$	41,811

($ in thousands)	Expected in
	2013			2012			2011			2010
Components of net periodic postretirement benefit cost
Service cost				$	10,812		$	8,958		$	7,956
Interest cost on projected benefit obligation					17,842			17,722			17,883
Expected return on plan assets					(172	)		(324	)		(436	)
Amortization of prior service cost/(credit)	$	(6,101	)		(10,068	)		(10,198	)		(8,157	)
Amortization of unrecognized loss		8,911			7,537			4,424			4,917
Net periodic postretirement benefit cost				$	25,951		$	20,582		$	22,163

Assumptions used in the computation of annual OPEB costs and valuation of the year-end OPEB obligations were as follows:

	2012	2011	2010
Discount rate - used at year end to value obligation	4.00% - 4.20%	4.50% - 4.75%	5.25%
Discount rate - used to compute annual cost	4.50% - 4.75%	5.25%	5.75%
Expected long-term rate of return on plan assets	4.00% - 3.00%	6.00% - 3.00%	6.00%

The OPEB plan's expected benefit payments over the next 10 years are as follows:

($ in thousands)
		Gross		Medicare Part D
Year		Benefits		Subsidy		Total
2013		$	14,010	$	430	$	13,580
2014			15,591		533		15,058
2015			17,448		644		16,804
2016			19,457		760		18,697
2017			21,347		924		20,423
	2018 - 2022		131,410		7,838		123,572
Total		$	219,263	$	11,129	$	208,134

For purposes of measuring year-end benefit obligations, we used, depending on medical plan coverage for different retiree groups, an 8.0% annual rate of increase in the per-capita cost of covered medical benefits, gradually decreasing to 5% in the year 2019 and remaining at that level thereafter. The effect of a 1% increase in the assumed medical cost trend rates for each future year on the aggregate of the service and interest cost components of the total postretirement benefit cost would be $1.3 million and the effect on the accumulated postretirement benefit obligation for health benefits would be $19.8 million. The effect of a 1% decrease in the assumed medical cost trend rates for each future year on the aggregate of the service and interest cost components of the total postretirement benefit cost would be $(1.0) million and the effect on the accumulated postretirement benefit obligation for health benefits would be $(16.1) million.

In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Act) became law. The Act introduced a prescription drug benefit under Medicare. It includes a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the Medicare Part D benefit. The amount of the federal subsidy is based on 28% of an individual beneficiary's annual eligible prescription drug costs ranging between $250 and $5,000. We have determined that the Company-sponsored postretirement healthcare plans that provide prescription drug benefits are actuarially equivalent to the Medicare Prescription Drug benefit. The impact of the federal subsidy has been incorporated into the calculation.

The amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at December 31, 2012 and 2011 are as follows:

($ in thousands)	Pension Plan				OPEB
	2012		2011		2012			2011
Net actuarial loss	$	697,511	$	574,998	$	105,970		$	82,841
Prior service cost/(credit)		363		165		(31,706	)		(41,030	)
Total	$	697,874	$	575,163	$	74,264		$	41,811

The amounts recognized as a component of accumulated comprehensive loss for the years ended December 31, 2012 and 2011 are as follows:

	Pension Plan						OPEB
($ in thousands)	2012			2011			2012			2011

Accumulated other comprehensive loss at
beginning of year	$	575,163		$	349,264		$	41,811		$	13,369

Net actuarial gain (loss) recognized during year		(29,890	)		(15,364	)		(7,537	)		(4,424	)
Prior service (cost)/credit recognized during year		199			199			10,068			10,198
Net actuarial loss (gain) occurring during year		152,402			241,064			30,665			22,668
Prior service cost (credit) occurring during year		-			-			(743	)		-
Net amount recognized in comprehensive income
for the year		122,711			225,899			32,453			28,442
Accumulated other comprehensive loss at end of year	$	697,874		$	575,163		$	74,264		$	41,811

401(k) Savings Plans

We sponsor employee retirement savings plans under section 401(k) of the Internal Revenue Code. The plans cover substantially all full-time employees. Under certain plans, we provide matching contributions. Employer contributions were $23.0 million, $22.2 million and $14.9 million for 2012, 2011 and 2010, respectively. The amounts for 2011 and 2010 include employer contributions of $15.9 million and $10.6 million, respectively, for certain former employees of the Acquired Business under three separate plans.