Pension and Postretirement Plans

9 Months Ended

Sep. 30, 2021

Compensation And Retirement Disclosure [Abstract]

Pension and Postretirement Plans

9.    Pension and Postretirement Plans

As of September 30, 2021, the Company sponsors three noncontributory defined benefit plans and a postretirement health and life insurance plan in Cincinnati (collectively the "Cincinnati Plans"), and 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").

In connection with the Merger, the Company remeasured the pension and postretirement projected benefit obligations as of the Merger Date. As a result, the Company's pension and postretirement benefit obligations decreased $22.3 million and $4.3 million, respectively. The decrease in the benefit obligations is primarily driven by changes in the discount rate as well as gains to record pension assets to fair value. Additionally, actuarial gains (losses) and prior service costs (benefits) recorded in "Accumulated other comprehensive loss" of $101.6 million were remeasured as of the Merger Date.

In the periods July 1, 2021 to September 7, 2021 and January 1, 2021 to September 7, 2021, the Hawaii defined benefit plan for union employees made lump sum payments of $0.8 million and $7.4 million, respectively, resulting in a reduction of the benefit obligation of $7.4 million. The lump sum payments to the plan participants exceeded the sum of the service cost and the interest cost component of the net pension cost resulting in a nominal pension settlement cost for the period January 1, 2021 to September 7, 2021. In the three and nine months ended September 30, 2020, the Hawaii defined benefit plans made lump sum payments of $3.4 million and $10.8 million, respectively, resulting in a reduction of the benefit obligation of $10.8 million. The Company recorded a pension settlement cost of $1.1 million in the nine months ended September 30, 2020 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.

In accordance with ASC 715, only the service cost component of net benefit cost is eligible for capitalization, which was immaterial for all periods presented.

Unrecognized actuarial net gains and losses for the Cincinnati Plans and the Hawaii Plans are primarily generated by differences between assumed and actual rates of return on invested assets, changes in discount rates and healthcare costs. Because gains and losses reflect refinements in estimates, as well as real changes in economic values, and because some gains in one period may be offset by losses in another or vice versa, we are not required to recognize these gains and losses in the periods that they occur. Instead, if the gains and losses exceed a 10% corridor defined in the accounting literature, the excess is amortized over a defined term. In conjunction with remeasuring the pension and postretirement benefit obligations, the amortization period for the Cincinnati pension plans in the Successor period was updated to amortize the excess over the average remaining life expectancy of plan participants from the average future working lifetime which was utilized in the Predecessor period. This change is not expected to have an impact in the 2021 Successor period as gains or losses will not be generated until December 31, the next measurement date. Additionally in the Successor period, the market-related value of assets is equal to the fair market value.  Previously, the market-related value of assets was determined using a five-year moving market average method. Except for these changes described related to the Cincinnati pension plans, no other changes to methodology were made in the Successor period as a result of the Merger.

Pension and postretirement costs (benefits) are as follows:

	Pension Benefits									Postretirement and Other Benefits
	Successor			Predecessor			Predecessor			Successor		Predecessor			Predecessor
(dollars in millions)	September 8, 2021 to September 30, 2021			July 1, 2021 to September 7, 2021			Three Months Ended September 30, 2020			September 8, 2021 to September 30, 2021		July 1, 2021 to September 7, 2021			Three Months Ended September 30, 2020
Service cost	$	—		$	—		$	—		$	—	$	0.1		$	0.1
Other components of pension and postretirement benefit plans expense:
Interest cost on projected benefit obligation		0.9			2.7			4.6			0.1		0.5			0.9
Expected return on plan assets		(2.1	)		(5.2	)		(7.1	)		—		—			—
Amortization of:
Prior service benefit		—			—			—			—		(0.4	)		(0.6	)
Actuarial loss		—			4.5			4.5			—		—			0.3
Pension / postretirement costs	$	(1.2	)	$	2.0		$	2.0		$	0.1	$	0.2		$	0.7

	Pension Benefits									Postretirement and Other Benefits
	Successor			Predecessor			Predecessor			Successor		Predecessor			Predecessor
(dollars in millions)	September 8, 2021 to September 30, 2021			January 1, 2021 to September 7, 2021			Nine Months Ended September 30, 2020			September 8, 2021 to September 30, 2021		January 1, 2021 to September 7, 2021			Nine Months Ended September 30, 2020
Service cost	$	—		$	—		$	—		$	—	$	0.3		$	0.3
Other components of pension and postretirement benefit plans expense:
Interest cost on projected benefit obligation		0.9			10.2			14.2			0.1		1.8			2.8
Expected return on plan assets		(2.1	)		(19.9	)		(21.6	)		—		—			—
Amortization of:
Prior service benefit		—			—			—			—		(1.7	)		(1.9	)
Actuarial loss		—			16.0			13.5			—		—			0.9
Pension settlement charges		—			—			1.1			—		—			—
Pension / postretirement costs	$	(1.2	)	$	6.3		$	7.2		$	0.1	$	0.4		$	2.1

Amortizations of prior service benefit and actuarial loss in the Predecessor periods represent reclassifications from accumulated other comprehensive income.

In conjunction with remeasuring the pension and postretirement benefit obligations, the weighted-average assumptions used in accounting for and measuring the projected benefit obligations as of the date of the Merger were reviewed and determined to still be appropriate with the exception of the discount rates. The following are the weighted-average discount rate assumptions used in accounting for and measuring the projected benefit obligations:

	Pension Benefits		Postretirement and Other Benefits
	Successor	Predecessor	Successor	Predecessor
	September 8, 2021	December 31, 2020	September 8, 2021	December 31, 2020
Cincinnati plans	2.60%	2.40%	2.60%	2.40%
Hawaii plans	2.50%	2.30%	2.80%	2.60%

Contributions to the qualified and non-qualified pension plans in the Predecessor period were $0.9 million and $1.8 million, respectively. In the Successor period, there were no contributions to the qualified pension plans and contributions to the non-qualified pension plans were $0.2 million. For the nine months ended September 30, 2020, contributions to the qualified and non-qualified pension plans were $2.8 million and $2.0 million, respectively. Based on current assumptions, no additional contributions are expected to be made to the qualified pension plans in 2021. Contributions to the non-qualified pension plans in 2021 are expected to be approximately $3 million.

For the Predecessor and Successor periods in 2021, contributions to our postretirement plans were $4.3 million and $0.5 million, respectively. For the nine months ended September 30, 2020, contributions to our postretirement plans were $4.3 million. Management expects to make cash payments of approximately $8 million related to its postretirement health plans in 2021.