Pension and Postretirement Plans

12 Months Ended

Dec. 31, 2011

General Discussion of Pension and Other Postretirement Benefits [Abstract]

Pension and Postretirement Plans [Text Block]

Pension and Postretirement Plans

Savings Plans

The Company sponsors several defined contribution plans covering substantially all employees. The Company's contributions to the plans are based on matching a portion of the employee contributions. Both employer and employee contributions are invested in various investment funds at the direction of the employee. Employer contributions to the defined contribution plans were $6.4 million, $4.8 million, and $3.6 million in 2011, 2010, and 2009, respectively. In 2009, employer contributions were suspended for management employees for an eight month period; these contributions were reinstated in 2010.

Pension and Postretirement Plans

The Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees, and one supplemental, nonqualified, unfunded plan for certain senior executives. The management pension plan is a cash balance plan in which the pension benefit is determined by a combination of compensation-based credits and annual guaranteed interest credits. The non-management pension plan is also a cash balance plan in which the combination of service and job-classification-based credits and annual interest credits determine the pension benefit. Benefits for the supplemental plan are based on eligible pay, adjusted for age and service upon retirement. We fund both the management and non-management plans in an irrevocable trust through contributions, which are determined using the traditional unit credit cost method. We also use the traditional unit credit cost method for determining pension cost for financial reporting purposes.

The Company also provides healthcare and group life insurance benefits for eligible retirees. We fund healthcare benefits and other group life insurance benefits using Voluntary Employee Benefit Association ("VEBA") trusts. It is our practice to fund amounts as deemed appropriate from time to time. Contributions are subject to Internal Revenue Service ("IRS") limitations developed using the traditional unit credit cost method. The actuarial expense calculation for our postretirement health plan is based on numerous assumptions, estimates, and judgments including healthcare cost trend rates and cost sharing with retirees.

In 2009, pension benefits were frozen for certain management employees below 50 years of age and provided a 10 year transition period for employees over age 50. Additionally, retiree healthcare benefits are being phased out for both management and certain retirees. Effective January 1, 2012, future pension service credits were eliminated for certain non-management employees which resulted in a remeasurement of the projected benefit obligations for this plan. In 2011 and 2009, curtailment losses/(gains) of $4.2 million and $(7.6) million, respectively, were recognized upon remeasurement. In 2010, no curtailments occurred. In 2009, special termination benefits of $2.1 million were also recognized related to early retirement benefits accepted by certain management and union employees.

Components of Net Periodic Cost

The following information relates to noncontributory defined benefit pension plans, postretirement healthcare plans, and life insurance benefit plans. Approximately 7% in 2011, 8% in 2010, and 10% in 2009 of these costs were capitalized to property, plant and equipment related to network construction in the Wireline segment. Pension and postretirement benefit costs for these plans were comprised of:

	Pension Benefits									Postretirement and Other Benefits
(dollars in millions)	2011			2010			2009			2011			2010			2009
Service cost	$	5.1		$	5.2		$	5.7		$	0.3		$	0.2		$	0.4
Interest cost on projected benefit obligation	24.8			26.8			29.0			7.1			8.0			10.3
Expected return on plan assets	(29.3		)	(30.3		)	(26.0		)	—			—			(0.9		)
Amortization of:
Transition obligation	—			—			—			—			—			0.1
Prior service cost (benefit)	0.3			0.5			0.7			(13.2		)	(13.1		)	(12.1		)
Actuarial loss	14.3			9.3			8.7			6.5			5.2			4.5
Special termination benefit	—			—			1.8			—			—			0.3
Curtailment loss (gain)	4.2			—			(7.6		)	—			—			—
Benefit costs	$	19.4		$	11.5		$	12.3		$	0.7		$	0.3		$	2.6

The following are the weighted-average assumptions used in measuring the net periodic cost of the pension and postretirement benefits:

	Pension Benefits						Postretirement and Other Benefits
	2011		2010		2009		2011		2010		2009
Discount rate	4.90	%	5.50	%	6.35	%	4.50	%	5.10	%	6.30	%
Expected long-term rate of return	8.25	%	8.25	%	8.25	%	0	%	0	%	8.25	%
Future compensation growth rate	3.00	%	3.00	%	4.00	%	—		—		—

The expected long-term rate of return on plan assets, developed using the building block approach, is based on the mix of investments held directly by the plans and the current view of expected future returns, which is influenced by historical averages. Changes in actual asset return experience and discount rate assumptions can impact the Company’s operating results, financial position and cash flows.

Benefit Obligation and Funded Status

Changes in the plans' benefit obligations and funded status are as follows:

							Postretirement and Other Benefits
	Pension Benefits
(dollars in millions)	2011			2010			2011			2010
Change in benefit obligation:
Benefit obligation at January 1,	$	526.1		$	506.3		$	163.5		$	166.1
Service cost	5.1			5.2			0.3			0.2
Interest cost	24.8			26.8			7.1			8.0
Actuarial loss	60.2			36.6			13.8			11.5
Benefits paid	(47.0		)	(48.8		)	(27.2		)	(27.3		)
Retiree drug subsidy received	—			—			0.7			1.0
Early retiree subsidy received	—			—			1.9			—
Other	—			—			4.8			4.0
Benefit obligation at December 31,	$	569.2		$	526.1		$	164.9		$	163.5
Change in plan assets:
Fair value of plan assets at January 1,	$	324.0		$	325.4		$	12.3		$	20.9
Actual return on plan assets	15.4			39.7			0.3			—
Employer contribution	20.1			7.7			24.1			17.7
Retiree drug subsidy received	—			—			0.7			1.0
Early retiree subsidy received	—			—			1.9			—
Benefits paid	(47.0		)	(48.8		)	(27.2		)	(27.3		)
Fair value of plan assets at December 31,	312.5			324.0			12.1			12.3
Unfunded status	$	(256.7	)	$	(202.1	)	$	(152.8	)	$	(151.2	)

The following are the weighted-average assumptions used in accounting for and measuring the projected benefit obligations:

	Pension Benefits				Postretirement and Other Benefits
	December 31,				December 31,
	2011		2010		2011		2010
Discount rate	3.90	%	4.90	%	3.60	%	4.50	%
Future compensation growth rate	3.00	%	3.50	%	—		—

The assumed healthcare cost trend rate used to measure the postretirement health benefit obligation is shown below:

	December 31,
	2011		2010
Healthcare cost trend	8.0	%	8.0	%
Rate to which the cost trend is assumed to decline (ultimate trend rate)	4.5	%	4.5	%
Year the rates reach the ultimate trend rate	2019		2018

A one-percentage point change in assumed healthcare cost trend rates would have the following effect on the postretirement benefit costs and obligation:

(dollars in millions)	1% Increase		1% Decrease
Service and interest costs for 2011	$	0.2	$	(0.2	)
Postretirement benefit obligation at December 31, 2011	5.9		(5.4		)

The projected benefit obligation is recognized in the Consolidated Balance Sheets as follows:

					Postretirement and Other Benefits
	Pension Benefits
	December 31,				December 31,
(dollars in millions)	2011		2010		2011		2010
Accrued payroll and benefits (current liability)	$	1.7	$	1.9	$	21.5	$	22.1
Pension and postretirement benefit obligations (noncurrent liability)	255.0		200.2		131.3		129.1
Total	$	256.7	$	202.1	$	152.8	$	151.2

Amounts recognized in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets which have not yet been recognized in net pension costs consisted of the following:

							Postretirement and Other Benefits
	Pension Benefits
	December 31,						December 31,
(dollars in millions)	2011			2010			2011			2010
Prior service (cost) benefit, net of tax of $0.2, $1.9, $(30.8), $(36.2)	$	(0.4	)	$	(3.3	)	$	54.3		$	62.0
Actuarial loss, net of tax of $111.6, $90.5, $37.3, $35.5	(196.8		)	(157.9		)	(65.9		)	(60.8		)
	$	(197.2	)	$	(161.2	)	$	(11.6	)	$	1.2

Amounts recognized in "Accumulated other comprehensive loss" on the Consolidated Statements of Shareowners’ Deficit and Comprehensive (Loss)/Income are shown below:

	Pension Benefits						Postretirement and Other Benefits
(dollars in millions)	2011			2010			2011			2010
Prior service cost recognized:
Reclassification adjustments	$	4.5		$	0.5		$	(13.2	)	$	(13.1	)
Actuarial loss recognized:
Reclassification adjustments	14.3			9.3			6.5			5.2
Actuarial loss arising during the period	(74.2		)	(27.1		)	(13.2		)	(11.9		)

The following amounts currently included in "Accumulated other comprehensive loss" are expected to be recognized in 2012 as a component of net periodic pension and postretirement cost:

	Pension Benefits		Postretirement and Other Benefits
(dollars in millions)
Prior service cost (benefit)	$	0.1	$	(13.2	)
Actuarial loss	19.9		6.6
Total	$	20.0	$	(6.6	)

Plan Assets, Investment Policies and Strategies

The primary investment objective for the trusts holding the assets of the pension and postretirement plans is preservation of capital with a reasonable amount of long-term growth and income without undue exposure to risk. This is provided by a balanced strategy using fixed income and equity securities. The target allocations for the pension plan assets are 61% equity securities, 33% investment grade fixed income securities and 6% in pooled real estate funds. Equity securities are primarily held in the form of passively managed funds that seek to track the performance of a benchmark index. Equity securities include investments in growth and value common stocks of companies located in the United States, which represents approximately 75% of the equity securities held by the pension plans at December 31, 2011 as well as stock of international companies located in both developed and emerging markets around the world. Fixed income securities primarily include holdings of funds, which generally invest in a variety of intermediate and long-term investment grade corporate bonds from diversified industries. The postretirement plan assets are currently invested in a group insurance contract.

The fair values of the pension and postretirement plan assets at December 31, 2011 and 2010 by asset category are as follows:

(dollars in millions)	December 31, 2011		Quoted Prices in active markets Level 1		Significant observable inputs Level 2		Significant unobservable inputs Level 3
Mutual funds
U.S. equity index funds	$	150.6	$	150.6	$	—	$	—
International equity index funds	44.2		44.2		—		—
Fixed income long-term bond funds	91.9		91.9		—		—
Fixed income short-term money market funds	0.3		—		0.3		—
Real estate pooled funds	25.5		—		—		25.5
Group insurance contract	12.1		—		—		12.1
Total	$	324.6	$	286.7	$	0.3	$	37.6

(dollars in millions)	December 31, 2010		Quoted Prices in active markets Level 1		Significant observable inputs Level 2		Significant unobservable inputs Level 3
Mutual funds
U.S. equity index funds	$	159.2	$	159.2	$	—	$	—
International equity index funds	46.1		46.1		—		—
Fixed income long-term bond funds	96.5		96.5		—		—
Fixed income short-term money market funds	1.1		—		1.1		—
Real estate pooled funds	21.1		—		—		21.1
Group insurance contract	12.3		—		—		12.3
Total	$	336.3	$	301.8	$	1.1	$	33.4

The fair values of Level 1 investments are based on quoted prices in active markets. The fair values of Level 2 investments, which consist of funds that hold securities in active markets, are determined based on the net asset value as reported by the fund manager.

The Level 3 investments consist of real estate pooled funds and a group insurance contract. The real estate pooled funds are valued at the net asset values disclosed by the fund managers, which are based on estimated fair values of the real estate investments using independent appraisal. The group insurance contract is valued at contract value plus accrued interest, which approximates fair value.

The Level 3 investments had the following changes in 2011 and 2010:

	Pension						Postretirement and Other Benefits
(dollars in millions)	2011			2010			2011			2010
Balance, beginning of year	$	21.1		$	19.6		$	12.3		$	—
Realized gains, net	1.7			1.3			0.3			—
Unrealized gains, net	3.1			1.3			—			—
Purchases, sales, issuances and settlements, net	(0.4		)	(1.1		)	(0.5		)	12.3
Balance, end of year	$	25.5		$	21.1		$	12.1		$	12.3

Contributions to our qualified pension plans were $18.1 million in 2011, $5.6 million in 2010, and $50.0 million in 2009. Contributions to our non-qualified pension plan were $2.0 million, $2.1 million, and $2.2 million for 2011, 2010, and 2009, respectively.

Based on current assumptions, management believes it will make contributions of $30.0 million to the qualified pension plan in 2012. Contributions to non-qualified pension plans in 2012 are expected to be approximately $2.1 million. Management expects to make cash payments of approximately $21.6 million related to its postretirement health plans in 2012.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years:

(dollars in millions)	Pension Benefits		Postretirement and Other Benefits		Medicare Subsidy Receipts
2012	$	43.2	$	22.3	$	0.7
2013	39.9		21.3		0.7
2014	41.6		16.7		0.7
2015	40.9		17.1		0.7
2016	42.1		16.3		0.6
Years 2017 - 2021	201.4		54.8		2.6