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Pension and Postretirement Plans
 12 Months Ended
Dec. 31, 2018
Retirement 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 $11.3 million, $8.2 million, and $8.4 million in 2018, 2017, and 2016, respectively.
Pension and Postretirement Plans
Cincinnati 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 (collectively the "Cincinnati Plans"). 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.
During 2017, the non-management pension plan made lump sum payments of $11.0 million resulting in a reduction of the plan benefit obligation of $11.3 million. The Company recorded a pension settlement cost of $4.0 million in 2017 as a result of the lump sum payments to the plan participants exceeding the sum of the service cost and the interest cost component of the net pension cost.
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. During 2017, the Company reviewed the employees with special death benefits only within the defined benefit pension plans and determined that the liabilities associated with the special death benefits would be better associated with the postretirement health plans. As a result, the Company eliminated the liability associated with the special death benefits in the defined benefit pension plans, and recorded a liability of $14.0 million in the postretirement health plans in 2017.
Hawaii Plans
The Company sponsors one noncontributory defined benefit plan for union employees, one cash balance pension plan for nonunion employees, and two postretirement health and life insurance plans for Hawaiian Telcom employees (collectively the "Hawaii Plans"). The noncontributory defined benefit plan was frozen as of March 1, 2012 and the cash balance pension plan was frozen as of April 1, 2007.
During 2018, Hawaiian Telcom's pension plans made lump sum payments of $3.6 million resulting in a reduction of plan benefit obligation of $3.6 million. The Company recorded a pension settlement cost of $0.1 million in 2018 as a result of the lump sum payments to the plan participants exceeding the sum of the service cost and the interest cost component of the net pension cost.
Components of Net Periodic Cost
The following information relates to noncontributory defined benefit pension plans, postretirement healthcare plans, and life insurance benefit plans at December 31, 2018, 2017 and 2016 for the Cincinnati Plans and at December 31, 2018 for the Hawaii Plans. In both 2017 and 2016, approximately 13% of these costs were capitalized to property, plant and equipment related to network construction in the Entertainment and Communications segment. In accordance with ASU 2017-07, adopted effective January 1, 2018, only the service cost component of net benefit cost is eligible for capitalization on a prospective basis, which was immaterial for 2018.
Pension and postretirement benefit costs for these plans were comprised of:
 
Pension Benefits
 
Postretirement and Other Benefits
(dollars in millions)
2018
 
2017
 
2016
 
2018
 
2017
 
2016
Service cost
$
—

 
$
—

 
$
—

 
$
0.6

 
$
0.2

 
$
0.3

Interest cost on projected benefit obligation
20.0

 
19.4

 
19.3

 
4.2

 
3.2

 
3.3

Expected return on plan assets
(29.8
)
 
(26.0
)
 
(27.3
)
 
—

 
—

 
—

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
Prior service cost (benefit)
—

 
—

 
0.1

 
(3.1
)
 
(4.5
)
 
(14.7
)
Actuarial loss
17.0

 
17.5

 
19.1

 
4.1

 
4.7

 
4.9

Pension settlement charges
0.1

 
4.0

 
—

 
—

 
—

 
—

Pension/postretirement cost (benefit)
$
7.3

 
$
14.9

 
$
11.2

 
$
5.8

 
$
3.6

 
$
(6.2
)

The following are the weighted-average assumptions used in measuring the net periodic cost of the pension and postretirement benefits:
Cincinnati Plans
Pension Benefits
 
 
Postretirement and Other Benefits
 
 
2018
 
2017
 
2016
 
 
2018
 
2017
 
2016
 
Discount rate
3.60
%
 
4.10
%
 
3.80
%

 
3.60
%
 
4.00
%
 
3.70
%
 
Expected long-term rate of return
7.00
%
 
7.25
%
 
7.50
%
 
 
—

 
—

 
—

 
Future compensation growth 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.
Hawaii Plans
Pension Benefits
 
Postretirement and Other Benefits
 
2018
 
2018
Discount rate
4.10
%
 
4.20
%
Expected long-term rate of return
7.00
%
 
—
 
Future compensation growth rate
—
 
 
—
 

The expected long-term rate of return on plan assets is determined using the target allocation of assets which is based on the goal of earning the highest rate of return while maintaining risk at an acceptable level. When developing the long-term rate of return on plan assets, historical experiences, long-term inflation assumptions, economic forecasts for the types of investments held by the plans, the plans' asset allocations and past performance of the plans' assets are all considered.


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)
2018
 
2017
 
2018
 
2017
Change in benefit obligation:
 
 
 
 
 
 
 
   Benefit obligation at January 1,
$
489.2

 
$
505.6

 
$
98.6

 
$
82.6

Hawaiian Telcom opening balance sheet adjustment
184.1

 
—

 
51.2

 
—

Service cost
—

 
—

 
0.6

 
0.2

Interest cost
20.0

 
19.4

 
4.2

 
3.2

Actuarial (gain) loss
(39.9
)
 
28.1

 
(20.3
)
 
7.6

Benefits paid
(43.0
)
 
(38.6
)
 
(13.1
)
 
(11.6
)
Retiree drug subsidy received
—

 
—

 
0.3

 
0.2

Transfer of special death benefit
—

 
(14.0
)
 
—

 
14.0

Settlements
(3.6
)
 
(11.3
)
 
—

 
—

Other
—

 
—

 
2.2

 
2.4

Benefit obligation at December 31,
$
606.8

 
$
489.2

 
$
123.7

 
$
98.6

 
 
 
 
 
 
 
 
Change in plan assets:
 
 
 
 
 
 
 
   Fair value of plan assets at January 1,
$
392.1

 
$
372.3

 
$
7.5

 
$
8.7

Hawaiian Telcom opening balance sheet adjustment
163.0

 
—

 
—

 
—

Actual (loss) return on plan assets
(37.7
)
 
64.8

 
0.3

 
0.2

Employer contributions
11.6

 
4.6

 
10.8

 
10.0

Retiree drug subsidy received
—

 
—

 
0.3

 
0.2

Benefits paid
(43.0
)
 
(38.6
)
 
(13.1
)
 
(11.6
)
Settlements
(3.6
)
 
(11.0
)
 
—

 
—

   Fair value of plan assets at December 31,
482.4

 
392.1

 
5.8

 
7.5

Unfunded status
$
(124.4
)
 
$
(97.1
)

$
(117.9
)

$
(91.1
)

The following are the weighted-average assumptions used in accounting for and measuring the projected benefit obligations:
Cincinnati Plans
Pension Benefits
 
Postretirement and Other Benefits
 
December 31,
 
December 31,
 
2018
 
2017
 
2018
 
2017
Discount rate
4.20
%
 
3.60
%
 
4.30
%
 
3.60
%
Future compensation growth rate
—

 
—

 
—

 
—


Hawaii Plans
Pension Benefits
 
Postretirement and Other Benefits
 
December 31,
 
December 31,
 
2018
 
2018
Discount rate
4.20
%
 
4.40
%
Future compensation growth rate
—
 

—
 

The assumed healthcare cost trend rate used to measure the postretirement health benefit obligation is shown below:
Cincinnati Plans
December 31,
 
2018
 
2017
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
2023

 
2022


Hawaii Plans
December 31,
 
2018
Healthcare cost trend
6.8
%
Rate to which the cost trend is assumed to decline (ultimate trend rate)
5.0
%
Year the rates reach the ultimate trend rate
2026


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 2018
$
0.1

 
$
(0.1
)
Postretirement benefit obligation at December 31, 2018
1.8

 
(1.7
)

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)
2018
 
2017
 
2018
 
2017
Accrued payroll and benefits (current liability)
$
2.1

 
$
2.1

 
$
11.0

 
$
10.5

Pension and postretirement benefit obligations (noncurrent liability)
122.3

 
95.0

 
106.9

 
80.6

Total
$
124.4

 
$
97.1

 
$
117.9

 
$
91.1


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:
 
Pension Benefits
 
Postretirement and Other Benefits
 
 
 
December 31,
 
December 31,
(dollars in millions)
2018
 
2017
 
2018
 
2017
Prior service (cost) benefit, net of tax of ($0.1), ($0.1), $4.6, $5.3
$
(0.1
)
 
$
(0.1
)
 
$
17.5

 
$
19.9

Actuarial loss, net of tax of ($45.0), ($42.5), ($7.1), ($12.7)
(156.3
)
 
(148.4
)
 
(25.6
)
 
(44.5
)
Total
$
(156.4
)
 
$
(148.5
)
 
$
(8.1
)
 
$
(24.6
)

Amounts recognized in "Accumulated other comprehensive loss" on the Consolidated Statements of Shareowners’ Deficit and the Consolidated Statements of Comprehensive Income are shown below:
 
Pension Benefits
 
Postretirement and Other Benefits
(dollars in millions)
2018
 
2017
 
2018
 
2017
Prior service cost recognized:
 
 
 
 
 
 
 
     Reclassification adjustments
$
—

 
$
—

 
$
(3.1
)
 
$
(4.5
)
Actuarial (loss) gain recognized:
 
 
 
 
 
 
 
     Reclassification adjustments
17.1

 
21.5

 
4.1

 
4.7

     Actuarial (loss) gain arising during the period
(27.7
)
 
11.0

 
20.4

 
(7.4
)

The following amounts currently included in "Accumulated other comprehensive loss" are expected to be recognized in 2019 as a component of net periodic pension and postretirement cost:
 
Pension Benefits
 
Postretirement and Other Benefits
(dollars in millions)
 
Prior service benefit
$
—

 
$
(2.5
)
Actuarial loss
13.9

 
1.9

Total
$
13.9

 
$
(0.6
)

Plan Assets, Investment Policies and Strategies
Cincinnati Plans
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 65% equity securities and 35% investment grade fixed income securities. 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 52% of the equity securities held by the pension plans at December 31, 2018, 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.
Hawaii Plans
From the acquisition date to December 31, 2018, Hawaiian Telcom's overall investment strategy is to primarily invest for long-term growth with sufficient investments available to fund near-term benefit payments. Hawaiian Telcom aims for diversification of asset types, fund strategies and fund managers. The target allocations for plan assets are 60% equity securities and 40% fixed income securities. Equity securities primarily include investments in equity funds. These investments are diversified in companies located in the United States and internationally. Equity securities that are located in the United States totaled approximately 69%. Fixed income securities are in funds that invest in bonds of companies from diversified industries, mortgage-backed securities and U.S. Treasuries. Beginning in 2019, Hawaiian Telcom's investment strategy will follow the strategies of the Cincinnati Plans.

The fair values of the pension plan assets at December 31, 2018 and 2017 by asset category are as follows:
(dollars in millions)
December 31, 2018
 
Quoted Prices
in active
markets
Level 1
 
Significant
observable
inputs
Level 2
 
Significant
unobservable
inputs
Level 3
Mutual funds
 
 
 
 
 
 
 
U.S. equity index funds
$
165.0

 
$
107.2

 
$
57.8

 
$
—

International equity index funds
127.2

 
100.7

 
26.5

 
—

Fixed income bond funds
183.0

 
119.3

 
63.7

 
—

Fixed income short-term money market funds
7.2

 
0.1

 
7.1

 
—

Group insurance contract
5.8

 
—

 
—

 
—

Total
$
488.2

 
$
327.3

 
$
155.1

 
$
—


(dollars in millions)
 
December 31, 2017
 
Quoted Prices
in active
markets
Level 1
 
Significant
observable
inputs
Level 2
 
Significant
unobservable
inputs
Level 3
Mutual funds
 
 
 
 
 
 
 
 
U.S. equity index funds
 
$
151.0

 
$
151.0

 
$
—

 
$
—

International equity index funds
 
101.3

 
101.3

 
—

 
—

Fixed income bond funds
 
136.1

 
136.1

 
—

 
—

Fixed income short-term money market funds
 
3.7

 
3.7

 
—

 
—

Group insurance contract
 
7.5

 
—

 
—

 
—

Total
 
$
399.6

 
$
392.1

 
$
—

 
$
—


The fair values of Level 1 investments are based on quoted prices in active markets.
Level 2 investments include certain fixed income funds, equity funds, and short term investment funds that are held by the Hawaii Plans. Investment funds include commingled funds that are not open to public investment and are valued at the net asset value per share. The majority of such funds allow for redemption each trading day at the daily reported net asset value per share which is reported as the fund fair value on that trading day.  There are no restrictions on fund redemptions.  As the published net asset value reflects the amount at which the fund trades, the Company has concluded it is reflective of the fund fair value as of the end of each reporting period.

The group insurance contract is valued at contract value plus accrued interest and has not been included in the fair value hierarchy, but is included in the totals above.
Contributions to our qualified pension plans were $9.3 million in 2018, $2.3 million in 2017, and $3.1 million in 2016. The 2018 contributions include a $5 million contribution to the Hawaii Plans that was required by the Public Utilities Commission of the State of Hawaii in order to complete the merger. Contributions to our non-qualified pension plan were $2.3 million in 2018, $2.3 million in 2017, and $2.3 million in 2016.
Based on current assumptions, contributions are expected to be approximately $3 million to both the qualified and non-qualified plans in 2019, respectively. Management expects to make cash payments of approximately $11 million related to its postretirement health plans in 2019.
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
2019
$
77.3

 
$
11.5

 
$
(0.4
)
2020
51.3

 
10.7

 
(0.4
)
2021
50.1

 
10.4

 
(0.3
)
2022
47.9

 
10.0

 
(0.3
)
2023
46.3

 
9.5

 
(0.3
)
Years 2024 - 2028
196.5

 
41.8

 
(1.0
)