Retirement Plans

6 Months Ended

Jun. 30, 2013

Retirement Plans [Abstract]

Retirement Plans

(16) Retirement Plans:

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

	Pension Benefits					Pension Benefits
	For the three months ended				For the six months ended
	June 30,					June 30,
		2013		2012			2013	2012
($ in thousands)
Components of net periodic pension benefit cost
Service cost	$	12,834	$	10,492		$	25,668	$          20,984
Interest cost on projected benefit obligation		18,880		19,658			37,760	39,316
Expected return on plan assets		(24,590)		(24,089)			(49,180)	(48,177)
Amortization of prior service cost /(credit)		2		(50)			4	(100)
Amortization of unrecognized loss		10,072		7,787			20,144	15,573
Net periodic pension benefit cost	$	17,198	$	13,798		$	34,396	$          27,596
	Postretirement Benefits					Postretirement Benefits
	Other Than Pensions (OPEB)					Other Than Pensions (OPEB)
		For the three months ended				For the six months ended
	June 30,						June 30,
		2013		2012			2013	2012
($ in thousands)
Components of net periodic postretirement benefit cost
Service cost	$	3,179	$	2,555		$	6,358	$            5,110
Interest cost on projected benefit obligation		4,440		4,460			8,880	8,920
Expected return on plan assets		(43)		(55)			(86)	(110)
Amortization of prior service cost/(credit)		(1,525)		(2,503)			(3,050)	(5,006)
Amortization of unrecognized loss		2,228		1,911			4,456	3,822
Net periodic postretirement benefit cost	$	8,279	$	6,368		$	16,558	$          12,736

During the first six months of 2013 and 2012, we capitalized $10.0 million and $8.0 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 2013 pension and OPEB expenses will be approximately $100 million to $110 million, excluding the impact of lump sum settlement accounting, as discussed below, and before amounts capitalized into the cost of capital expenditures (they were $81.6 million in 2012 before amounts capitalized into the cost of capital expenditures).   We made total cash contributions to our pension plan during the six months ended June 30, 2013 of $25.5 million.  We expect that we will make contributions to our pension plan of approximately $60 million in 2013.   

Our pension plan contains provisions that provide certain employees with the option of receiving lump sum payment upon retirement. The Company’s policy is to record these payments as a settlement only if, in the aggregate, they exceed the sum of the annual service and interest costs for the plan’s net periodic pension benefit cost. Based upon lump sum payments through the end of the second quarter of 2013 and our projection of payments for the remainder of 2013, we expect to exceed this threshold and record settlement charges in the second half of 2013. This would reduce our recorded net income and retained earnings, with an offset to accumulated other comprehensive loss in shareholders’ equity of Frontier.

The Plan’s assets have decreased from $1,253.6 million at December 31, 2012 to $1,165.7 million at June 30, 2013, a decrease of $87.9 million, or 7%.  This decrease is a result of benefit payments of $142.9 million, primarily lump sum settlements, offset by positive investment returns or $29.5 million and cash contributions of $25.5 million during the first six months of 2013.