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Pension and Postretirement Plans
 12 Months Ended
Dec. 31, 2013
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 $6.6 million, $6.9 million, and $6.4 million in 2013, 2012, and 2011, respectively.
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 former 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. Pension plan amendments were approved in May 2013, and the Company remeasured the associated pension obligations. As a result of the pension plan amendment, the Company recorded a curtailment gain of $0.6 million and a $10.3 million reduction to the associated pension obligations in the three months ended June 30, 2013. 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, a curtailment loss of $4.2 million was recognized upon remeasurement.
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. Retiree healthcare benefits are being phased out for both management and certain retirees. In August 2013, several amendments to the postretirement plan required a remeasurement of the associated benefit obligations. As a result, the Company recorded a $26.1 million reduction to the postretirement liability in the third quarter of 2013.
Components of Net Periodic Cost
The following information relates to noncontributory defined benefit pension plans, postretirement healthcare plans, and life insurance benefit plans. Approximately 10% in 2013, 11% in 2012, and 7% in 2011 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)
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Service cost
$
2.1

 
$
2.6

 
$
5.1

 
$
0.4

 
$
0.5

 
$
0.3

Interest cost on projected benefit obligation
18.8

 
21.3

 
24.8

 
4.0

 
5.6

 
7.1

Expected return on plan assets
(25.7
)
 
(26.1
)
 
(29.3
)
 
—

 
—

 
—

Amortization of:


 

 

 

 

 

Prior service cost (benefit)
0.2

 
0.1

 
0.3

 
(14.1
)
 
(13.2
)
 
(13.2
)
Actuarial loss
22.0

 
19.4

 
14.3

 
5.6

 
6.8

 
6.5

Curtailment (gain) loss
(0.6
)
 
—

 
4.2

 
—

 
—

 
—

Pension/postretirement costs
$
16.8

 
$
17.3

 
$
19.4

 
$
(4.1
)
 
$
(0.3
)
 
$
0.7


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
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Discount rate
3.30
%
*
3.90
%
 
4.90
%
 
3.40
%
**
3.60
%
 
4.50
%
Expected long-term rate of return
7.75
%
 
7.75
%
 
8.25
%
 
0
%
 
0
%
 
0
%
Future compensation growth rate
3.00
%
 
3.00
%
 
3.00
%
 
—

 
—

 
—


* Discount rate used for the remeasurement of the management pension plan was consistent with the discount rate previously established.
** For the period January 1, 2013 through July 31, 2013, the date of the remeasurement, we used a 3.10% discount rate. From that date through the end of the year, we used a 3.90% discount rate.
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)
2013
 
2012
 
2013
 
2012
Change in benefit obligation:
 
 
 
 
 
 
 
   Benefit obligation at January 1,
$
584.9

 
$
569.2

 
$
152.4

 
$
164.9

Service cost
2.1

 
2.6

 
0.4

 
0.5

Interest cost
18.8

 
21.3

 
4.0

 
5.6

Prior service credit
—

 
—

 
(17.4
)
 
—

Actuarial (gain) loss
(38.2
)
 
30.6

 
(19.6
)
 
2.2

Benefits paid
(44.6
)
 
(38.8
)
 
(23.9
)
 
(26.0
)
Retiree drug subsidy received
—

 
—

 
0.5

 
0.6

Early retiree subsidy refunded
—

 
—

 
—

 
(0.1
)
Other
—

 
—

 
5.1

 
4.7

Benefit obligation at December 31,
$
523.0

 
$
584.9

 
$
101.5

 
$
152.4

 
 
 
 
 
 
 
 
Change in plan assets:
 
 
 
 
 
 
 
   Fair value of plan assets at January 1,
$
343.8

 
$
312.5

 
$
11.7

 
$
12.1

Actual return on plan assets
55.1

 
44.2

 
0.4

 
0.4

Employer contributions
45.0

 
25.9

 
22.6

 
24.7

Retiree drug subsidy received
—

 
—

 
0.5

 
0.6

Early retiree subsidy refunded
—

 
—

 
—

 
(0.1
)
Benefits paid
(44.6
)
 
(38.8
)
 
(23.9
)
 
(26.0
)
   Fair value of plan assets at December 31,
399.3

 
343.8

 
11.3

 
11.7

Unfunded status
$
(123.7
)
 
$
(241.1
)

$
(90.2
)

$
(140.7
)

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,
 
2013
 
2012
 
2013
 
2012
Discount rate
4.20
%
 
3.30
%
 
4.10
%
 
3.10
%
Expected long-term rate of return
7.75
%
 
7.75
%
 
0
%
 
0
%
Future compensation growth rate
—

 
3.00
%
 
—

 
—


The assumed healthcare cost trend rate used to measure the postretirement health benefit obligation is shown below:
 
December 31,
 
2013
 
2012
Healthcare cost trend
6.5
%
 
6.5
%
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
2017

 
2016


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 2013
$
0.2

 
$
(0.2
)
Postretirement benefit obligation at December 31, 2013
4.7

 
(4.2
)

The projected benefit obligation is recognized in the Consolidated Balance Sheets as follows:
 
Pension Benefits
 
Postretirement and Other Benefits
 
December 31,
 
December 31,
(dollars in millions)
2013
 
2012
 
2013
 
2012
Accrued payroll and benefits (current liability)
$
2.1

 
$
1.7

 
$
12.7

 
$
21.4

Pension and postretirement benefit obligations (noncurrent liability)
121.6

 
239.4

 
77.5

 
119.3

Total
$
123.7

 
$
241.1

 
$
90.2

 
$
140.7


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)
2013
 
2012
 
2013
 
2012
Prior service (cost) benefit, net of tax of $0.3, $0.2, $(26.8), $(26.0)
$
(0.6
)
 
$
(0.3
)
 
$
48.4

 
$
45.9

Actuarial loss, net of tax of $77.2, $109.0, $26.6, $35.6
(134.8
)
 
(192.5
)
 
(46.1
)
 
(62.7
)
Total
$
(135.4
)
 
$
(192.8
)
 
$
2.3

 
$
(16.8
)

Amounts recognized in "Accumulated other comprehensive loss" on the Consolidated Statements of Shareowners’ Deficit and the Consolidated Statements of Comprehensive Income (Loss) are shown below:
 
Pension Benefits
 
Postretirement and Other Benefits
(dollars in millions)
2013

2012
 
2013
 
2012
Prior service cost recognized:
 
 
 
 
 
 
 
     Reclassification adjustments
$
(0.4
)
 
$
0.1

 
$
(14.1
)
 
$
(13.2
)
     Prior service credit
—

 
—

 
17.4

 
—

Actuarial loss recognized:
 
 
 
 
 
 
 
     Reclassification adjustments
22.0

 
19.4

 
5.6

 
6.8

     Actuarial loss arising during the period
67.5

 
(12.5
)
 
20.0

 
(1.8
)

The following amounts currently included in "Accumulated other comprehensive loss" are expected to be recognized in 2014 as a component of net periodic pension and postretirement cost:
 
Pension Benefits
 
Postretirement and Other Benefits
(dollars in millions)
 
Prior service cost (benefit)
$
0.2

 
$
(15.4
)
Actuarial loss
16.7

 
5.2

Total
$
16.9

 
$
(10.2
)

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 78% of the equity securities held by the pension plans at December 31, 2013 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, 2013 and 2012 by asset category are as follows:
(dollars in millions)
December 31, 2013
 
Quoted Prices
in active
markets
Level 1
 
Significant
observable
inputs
Level 2
 
Significant
unobservable
inputs
Level 3
Mutual funds
 
 
 
 
 
 
 
U.S. equity index funds
$
201.4

 
$
201.4

 
$
—

 
$
—

International equity index funds
57.0

 
57.0

 
—

 
—

Fixed income bond funds
109.8

 
109.8

 
—

 
—

Fixed income short-term money market funds
0.3

 
0.3

 
—

 
—

Real estate pooled funds
30.8

 
—

 
—

 
30.8

Group insurance contract
11.3

 
—

 
—

 
11.3

Total
$
410.6

 
$
368.5

 
$
—

 
$
42.1


(dollars in millions)
 
December 31, 2012
 
Quoted Prices
in active
markets
Level 1
 
Significant
observable
inputs
Level 2
 
Significant
unobservable
inputs
Level 3
Mutual funds
 
 
 
 
 
 
 
 
U.S. equity index funds
 
$
163.3

 
$
163.3

 
$
—

 
$
—

International equity index funds
 
49.8

 
49.8

 
—

 
—

Fixed income bond funds
 
102.9

 
102.9

 
—

 
—

Real estate pooled funds
 
27.8

 
—

 
—

 
27.8

Group insurance contract
 
11.7

 
—

 
—

 
11.7

Total
 
$
355.5

 
$
316.0

 
$
—

 
$
39.5


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 real estate pooled funds invest primarily in commercial real estate and include mortgage loans which are backed by the associated properties. These investments are sensitive to changes in commercial real estate market values. They focus on properties that return both lease income and appreciation of the buildings’ marketable value. In estimating fair value of the investments in level 3, the fund managers use independent appraisers. The generally accepted method used in the valuation of real estate are the income, cost and sales comparison approaches of estimating property value. Key inputs and assumptions used to determine fair value include among others, rental revenue and expense amounts and related revenue and expense growth rates, terminal capitalization rates and discount rates. In the event that total withdrawal requests exceed the total cash available to honor such requests, available cash will be pro-rated among those contract-holders eligible for withdrawals.

The Level 3 investments had the following changes in 2013 and 2012:
 
Pension
 
Postretirement and Other Benefits
(dollars in millions)
2013
 
2012
 
2013
 
2012
Balance, beginning of year
$
27.8

 
$
25.5

 
$
11.7

 
$
12.1

Realized gains, net
1.0

 
1.0

 
0.4

 
0.4

Unrealized gains, net
2.7

 
1.8

 
—

 
—

Purchases, sales, issuances and settlements, net
(0.7
)
 
(0.5
)
 
(0.8
)
 
(0.8
)
Balance, end of year
$
30.8

 
$
27.8

 
$
11.3

 
$
11.7


Contributions to our qualified pension plans were $42.1 million in 2013, $23.9 million in 2012, and $18.1 million in 2011. Contributions to our non-qualified pension plan were $2.9 million in 2013 and $2.0 million in 2012 and 2011, respectively.
Based on current assumptions, management believes it will make contributions of approximately $33 million to the qualified pension plan in 2014. Contributions to non-qualified pension plans in 2014 are expected to be approximately $2 million. Management expects to make cash payments of approximately $13 million related to its postretirement health plans in 2014.
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
2014
$
42.0

 
$
13.4

 
$
(0.7
)
2015
41.0

 
12.3

 
(0.6
)
2016
41.7

 
11.1

 
(0.6
)
2017
41.6

 
10.0

 
(0.5
)
2018
40.7

 
9.0

 
(0.5
)
Years 2019 - 2023
184.6

 
32.3

 
(1.9
)