Retirement Plans

12 Months Ended

Dec. 31, 2022

Retirement Plans [Abstract]

Retirement Plans

(20) 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 pension plan and postretirement benefit plans are closed to the majority of our newly hired employees. 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.

As of December 31, 2022, 2021 and 2020, we utilized an estimation technique that is based upon a settlement model (Bond:Link) that permits us to closely match cash flows to the expected payments to participants. This rate can change from year-to-year based on market conditions that affect corporate bond yields.

As a result of the technique described above, we are utilizing a discount rate of 5.50% as of December 31, 2022 for our qualified pension plan, compared to rates of 2.90% and 2.60% in 2021 and 2020, respectively. The discount rate for postretirement plans as of December 31, 2022 was 5.50% compared to 3.00% in 2021 and 2.60/2.80% in 2020.

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 25% in long-duration fixed income securities, and 75% in equity securities and other 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 Board of Directors. 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. Our expected long-term rate of return on plan assets was 7.50% in 2022 and 2021. For 2023, we expect to assume a rate of return of 7.50%. 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.

During 2022, we capitalized $21 million of pension and OPEB expense into the cost of our capital expenditures as the costs relate to our engineering and plant construction activities. During the four months of April 30, 2021, and the eight months ended December 31, 2021, we capitalized $7 million and $15 million, respectively, of pension and OPEB expense. We capitalized $25 million of pension and OPEB expense during the year ended December 31, 2020.

Pension Benefits

The following tables set forth the pension plan’s projected benefit obligations, fair values of plan assets and the pension benefit liability recognized on our consolidated balance sheets at the end of each period, and the components of total pension benefit cost for each period:

	Successor				Predecessor
	For the year ended		For the eight months		For the four months
	December 31,		ended December 31,		ended April 30,
($ in millions)	2022		2021		2021
Change in projected benefit obligation (PBO)
PBO at the beginning of the period	$	3,477	$	3,418	$	3,708
Service cost		69		53		32
Interest cost		106		69		31
Actuarial (gain) loss		(867)		30		(328)
Benefits paid		(75)		(93)		(25)
Settlements		(200)		-		-
PBO at the end of the period	$	2,510	$	3,477	$	3,418
Change in plan assets
Fair value of plan assets at the beginning of the period	$	2,655	$	2,586	$	2,507
Actual return on plan assets		(523)		152		72
Employer contributions		176		10		32
Settlements		(200)		-		-
Benefits paid		(75)		(93)		(25)
Fair value of plan assets at the end of the period	$	2,033	$	2,655	$	2,586
Funded status	$	(477)	$	(822)	$	(832)
Amounts recognized in the consolidated balance sheet
Pension and other postretirement benefits - current	$	-	$	-	$	-
Pension and other postretirement benefits - noncurrent	$	(477)	$	(822)	$	(832)
Accumulated other comprehensive loss	$	-	$	-	$	-

	Successor				Predecessor
	For the year ended		For the eight months		For the four months		For the year ended
	December 31,		ended December 31,		ended April 30,		December 31,
($ in millions)	2022		2021		2021		2020
Components of total pension benefit cost / (income)
Service cost	$	69	$	53	$	32	$	95
Interest cost on projected benefit obligation		106		69		31		108
Expected return on plan assets		(181)		(127)		(61)		(171)
(Gain) / Loss recognized		(218)		6		-		-
Amortization of unrecognized loss		-		-		24		99
Net periodic pension benefit cost / (income)		(224)		1		26		131
Pension settlement costs		55		-		-		159
Gain on disposal, net		-		-		-		(38)
Total pension benefit cost / (income)	$	(169)	$	1	$	26	$	252

The pension plan contains provisions that provide certain employees with the option of receiving a lump sum payment upon retirement. These payments are recorded as a settlement only if, in the aggregate, they exceed the sum of the annual service and interest costs for the Pension Plan’s net periodic pension benefit cost.

During 2022, lump sum pension settlement payments to terminated or retired individuals amounted to $200 million, which exceeded the settlement threshold of $175 million, and as a result, we recognized non-cash settlement charges totaling $55 million during the period. During 2022, we had actuarial gains of $867 million, driven by a change of 260 basis points in the discount rate, favorable lump sum annuity conversion interest rates and cash balance interest crediting rates, and updated census data to January 1, 2022, caused a gain the pension benefit obligation, as compared to the prior year. Upon emergence from bankruptcy, Frontier revised its accounting policy to recognize actuarial gains and losses in the period in which they occur. As such, this gain was recorded in “Investment and other income, net” on our consolidated statements of income.

As part of fresh start accounting, we remeasured our net pension obligation as of April 30, 2021. In revaluing the pension benefit obligation, the assumed discount rate was 3.10% and the assumed rate of return on Plan assets was 7.50%. The discount rate increased compared to the 2.60% used in the December 31, 2020 valuation. This change as well as other changes in assumptions lead to a pension obligation decrease as a result of actuarial gains of $328 million.

The largest contributors to the $30 million actuarial loss from April 30, 2021 to December 31, 2021, were the decrease in the assumed discount rate from 3.10% to 2.90%.

During 2020, lump sum pension settlement payments to terminated or retired individuals amounted to $465 million, which exceeded the settlement threshold of $211 million, and as a result, we recognized non-cash settlement charges totaling $159 million during the period. The non-cash charge accelerated the recognition of a portion of the previously unrecognized actuarial losses in the Pension Plan.

The plan’s weighted average asset allocations at December 31, 2022 and 2021 by asset category are as follows:

	2022		2021
Asset category:
Equity securities	58	%	49	%
Debt securities	30	%	44	%
Alternative and other investments	12	%	7	%
Total	100	%	100	%

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

($ in millions)	Amount
2023	$	233
2024		233
2025		236
2026		235
2027		233
2028-2032		1,129
Total	$	2,299

We made pension plan contributions of $176 million in 2022.

In 2021, we elected the provisions of American Rescue Plan Act, or ARPA retroactive to the 2019 plan year, which resulted in 1) a shortfall amortization period change from 7 to 15 years with a fresh start for the existing shortfall, commencing in the 2019 plan year and 2) interest rate stabilization, commencing in the 2020 plan year. These elections resulted in the creation of a funding balance that we used to satisfy certain required contributions in 2021. As a result of these changes, our pension plan contributions in the fiscal year 2021 were $42 million.

Assumptions used in the computation of annual pension costs and valuation of the beginning/end of period obligations were as follows:

	12/31/2022		12/31/2021		4/30/2021		12/31/2020
Discount rate - used at period end to value obligation	5.50	%	2.90	%	3.10	%	2.60	%
Discount rate - used at beginning of period to compute annual cost	2.90	%	3.10	%	2.60	%	3.40	%
Expected long-term rate of return on plan assets	7.50	%	7.50	%	7.50	%	7.50	%
Rate of increase in compensation levels	3.00	%	2.00	%	2.00	%	2.00	%

Postretirement Benefits Other Than Pensions - “OPEB”

The following tables set forth the OPEB plans’ benefit obligations, fair values of plan assets and the postretirement benefit liability recognized on our consolidated balance sheets as of December 31, 2022 and 2021 and the components of total postretirement benefit cost for the years ended December 31, 2022, 2021 and 2020.

	Successor				Predecessor
	For the year ended		For the eight months		For the four months
	December 31,		ended December 31,		ended April 30,
($ in millions)	2022		2021		2021
Change in benefit obligation
Benefit obligation at the beginning of the period	$	897	$	941	$	1,042
Service cost		13		11		7
Interest cost		31		18		9
Plan amendments		(41)		(79)		-
Plan participants' contributions		10		6		4
Actuarial (gain) loss		(248)		37		(99)
Benefits paid		(56)		(37)		(22)
Benefit obligation at the end of the period	$	606	$	897	$	941
Change in plan assets
Fair value of plan assets at the beginning of the period	$	-	$	-	$	-
Plan participants' contributions		10		6		4
Employer contribution		46		31		18
Benefits paid		(56)		(37)		(22)
Fair value of the plan assets at end of the period	$	-	$	-	$	-
Funded status	$	(606)	$	(897)	$	(941)
Amounts recognized in the consolidated balance sheet
Pension and other postretirement benefits - current	$	(39)	$	(46)	$	(48)
Pension and other postretirement benefits – noncurrent	$	(567)	$	(851)	$	(893)
Accumulated other comprehensive (gain) loss	$	(102)	$	(75)	$	-

	Successor				Predecessor
	For the year ended		For the eight months		For the four months		For the year ended
	December 31,		ended December 31,		ended April 30,		December 31,
($ in millions)	2022		2021		2021		2020
Components of total postretirement benefit cost / (income)
Service cost	$	13	$	11	$	7	$	20
Interest cost on projected benefit obligation		31		18		9		33
Amortization of prior service credit		(13)		(5)		(10)		(32)
(Gain) loss recognized		(248)		37		-		-
Amortization of unrecognized (gain) loss		-		-		5		6
Net periodic postretirement benefit cost / (income)		(217)		61		11		27
Gain on disposal, net		-		-		-		(24)
Total postretirement benefit cost / (income)	$	(217)	$	61	$	11	$	3

During 2022, we amended the medical coverage for certain postretirement benefit plans, which necessitated remeasurements of our OPEB obligations. These remeasurements along with the period end remeasurement resulted in the recognition of a net actuarial gain of $248 million, which was driven primarily from a higher assumed discount rate relative to the previous measurement dates. Upon emergence from bankruptcy, we revised our accounting policy to recognize actuarial gains and losses in the period in which they occur. As such, this gain was recorded in “Investment and other income, net” on our consolidated statements of income. The remeasurements of our OPEB obligations during 2022 due to the amendments to the medical coverage for certain postretirement benefit plans also resulted in remeasurement of prior service credits of $40 million which were deferred in Accumulated comprehensive income as December 31, 2022.

As part of the fresh start accounting, we remeasured our net OPEB obligation as of April 30, 2021 resulting in actuarial gains of $99 million primarily driven by an increase in the discount rates used to measure our OPEB plans reduction when compared to December 31, 2020. The decrease in the discount rate from April 30, 2021 to December 31, 2021 primarily resulted in the actuarial loss of $37 million at December 31, 2021. During the eight months ended December 31, 2021, we amended the medical coverage for certain postretirement benefit plans, which resulted in remeasurements of our other postretirement benefit obligation and prior service credits of $79 million which were deferred in Accumulated comprehensive income as December 31, 2021.

Assumptions used in the computation of annual OPEB costs and valuation of the beginning/end of period OPEB obligations were as follows:

	12/31/2022	12/31/2021	4/30/2021	12/31/2020
Discount rate - used at period end to value obligation	5.50%	3.00%	3.30%	2.60% - 2.80%
Discount rate - used to compute annual cost	3.00% - 5.60%	2.80% - 3.30%	2.60% - 2.80%	3.40% - 3.50%

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

($ in millions)	Gross Benefit		Medicare Part D Subsidy		Total
2023	$	40	$	-	$	40
2024		41		-		41
2025		42		-		42
2026		44		-		44
2027		45		-		45
2028-2032		246		-		246
Total	$	458	$	-	$	458

For purposes of measuring year-end benefit obligations, we used, depending on medical plan coverage for different retiree groups, a 7.25% annual rate of increase in the per-capita cost of covered medical benefits, gradually decreasing to 5.00% in the year 2029 and remaining at that level thereafter.

The amounts in accumulated other comprehensive (income) loss before tax that have not yet been recognized as components of net periodic benefit cost at December 31, 2022 and 2021 are as follows:

	Pension Plan				OPEB
($ in millions)	2022		2021		2022		2021
Prior service credit	$	-	$	-	$	(102)	$	(75)

The amounts recognized as a component of accumulated other comprehensive loss for the years ended December 31, 2022 and 2021 are as follows:

	Successor				Predecessor
	For the year ended		For the eight months		For the four months
Pension Plan	December 31,		ended December 31,		ended April 30,
($ in millions)	2022		2021		2021
Accumulated other comprehensive (gain) loss at
the beginning of the period	$	-	$	-	$	915
Net actuarial gain (loss) recognized during the period		-		-		(24)
Net actuarial (gain) loss occurring during the period		-		-		(338)
Impact of fresh start accounting		-		-		(553)
Effect of settlements		-		-		-
Net amount recognized in comprehensive income
(loss) for the period		-		-		(915)
Accumulated other comprehensive (gain) loss at
end of the period	$	-	$	-	$	-
	Successor				Predecessor
	For the year ended		For the eight months		For the four months
OPEB	December 31,		ended December 31,		ended April 30,
($ in millions)	2022		2021		2021
Accumulated other comprehensive (gain) loss at
the beginning of the period	$	(75)	$	-	$	74
Net actuarial gain (loss) recognized during the period		-		-		(5)
Prior service credit amortized during the period		13		5		10
Impact of fresh start accounting		-		-		20
Prior service credit occurring during the period		(40)		(80)		-
Net actuarial (gain) loss occurring during the period		-		-		(99)
Net amount recognized in comprehensive income
(loss) for the period		(27)		(75)		(74)
Accumulated other comprehensive (gain) loss at
end of the period	$	(102)	$	(75)	$	-

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 $38 million in 2022, $14 million for the four months ended April 30, 2021, $25 million for the eight months ended December 31, 2021 and $39 million in 2020, respectively.

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