Pension and Postretirement Plans

12 Months Ended

Dec. 31, 2021

Compensation And Retirement Disclosure [Abstract]

Pension and Postretirement Plans

11.    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 $4.0 million and $9.7 million in the Successor and Predecessor periods of 2021, respectively, and $13.1 million and $12.9 million in 2020 and 2019, respectively.

Pension and Postretirement 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 was 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.

Unrecognized actuarial net gains and losses for the Cincinnati Plans (defined below) and the Hawaii Plans (defined below) 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 as of the Merger Date, 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 did not have an impact in the 2021 Successor period as gains or losses were not 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.

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 2020, the management pension plan made lump sum payments of $6.0 million resulting in a reduction of the plan benefit obligation of $6.0  million. The Company recorded a pension settlement cost of $2.3  million in 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.

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 were phased out as of December 31, 2018 for all employees, with the exception of a small group of grandfathered employees. The postretirement health plan also includes liabilities associated with employees who have special death benefits only.  

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 2021, Hawaiian Telcom’s pension plans made lump sum payments of $1.9 million in the Successor period and $7.4 million in the Predecessor period resulting in a reduction of the plan benefit obligation of $1.9 million and $7.4 million, respectively. The Company recorded a nominal pension settlement gain in the Successor period as a result of the sum of the service cost and the interest cost component of the net pension cost exceeding lump sum payments to the plan participants. The Company recorded a pension settlement cost of $0.4 million in the Predecessor period as a result of lump sum payments to the plan participants exceeding the sum of the service cost and the interest cost component of the net pension cost. During 2020, Hawaiian Telcom’s pension plans made lump sum payments of $15.1 million resulting in a reduction of the plan benefit obligation of $15.1 million and a pension settlement cost of $1.5 million. During 2019, Hawaiian Telcom's pension plans made lump sum payments of $1.0 million resulting in a reduction of the plan benefit obligation of $1.0 million and a nominal pension settlement cost.

Components of Net Periodic Cost

The following information relates to noncontributory defined benefit pension plans, postretirement healthcare plans, and life insurance benefit plans for the Successor and Predecessor periods in 2021 and for the years ended December 31, 2020 and 2019 for the Cincinnati Plans and the Hawaii Plans. In accordance with ASU 2017-07, only the service cost component of net benefit cost is eligible for capitalization, which was immaterial for the Successor and Predecessor periods in 2021 and for the years ended December 31, 2020 and 2019.

Pension and postretirement (benefits) costs for these plans were comprised of:

	Pension Benefits												Postretirement and Other Benefits
	Successor			Predecessor			Predecessor			Predecessor			Successor		Predecessor			Predecessor			Predecessor
(dollars in millions)	September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021			Year Ended December 31, 2020			Year Ended December 31, 2019			September 8, 2021 to December 31, 2021		January 1, 2021 to September 7, 2021			Year Ended December 31, 2020			Year Ended December 31, 2019
Service cost	$	—		$	—		$	—		$	—		$	0.1	$	0.3		$	0.4		$	0.6
Interest cost on projected benefit obligation		4.7			10.2			18.8			23.9			0.8		1.8			3.7			5.0
Expected return on plan assets		(10.2	)		(19.9	)		(29.0	)		(30.7	)		—		—			—			—
Amortization of:
Prior service benefit		—			—			—			—			—		(1.7	)		(2.5	)		(2.5	)
Actuarial loss		—			16.0			18.1			13.7			—		—			1.2			1.8
Pension settlement charges		—			—			3.8			—			—		—			—			—
Pension/postretirement (benefit) cost	$	(5.5	)	$	6.3		$	11.7		$	6.9		$	0.9	$	0.4		$	2.8		$	4.9

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

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
	Successor			Predecessor			Predecessor			Predecessor			Successor			Predecessor		Predecessor			Predecessor
	September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021			Year Ended December 31, 2020			Year Ended December 31, 2019			September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021		Year Ended December 31, 2020			Year Ended December 31, 2019
Discount rate		2.60	%		2.40	%		3.10	%		4.20	%		2.60	%	2.40%			3.20	%		4.30	%
Expected long-term rate of return		6.00	%		6.00	%		6.00	%		6.50	%		—			—		—			—
Cash balance interest credit rate		4.00	%		4.00	%		4.00	%		4.00	%		—			—		—			—
Future compensation growth rate		—			—			—			—			—			—		—			—

Hawaii Plans	Pension Benefits												Postretirement and Other Benefits
	Successor			Predecessor			Predecessor			Predecessor			Successor			Predecessor			Predecessor			Predecessor
	September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021			Year Ended December 31, 2020			Year Ended December 31, 2019			September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021			Year Ended December 31, 2020			Year Ended December 31, 2019
Discount rate		2.50	%		2.30	%		2.80	%		4.20	%		2.80	%		2.60	%		3.30	%		4.40	%
Expected long-term rate of return		6.00	%		6.00	%		6.00	%		6.50	%		—			—			—			—
Cash balance interest credit rate		1.10	%		1.20	%		2.00	%		2.20	%		—			—			—			—
Future compensation growth rate		—			—			—			—			—			—			—			—

The expected long-term rate of return on plan assets, developed using the building block approach, for each of the plans 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.

The Company utilized the Pri-2012/MP-2021 and Pri-2012/MP-2020 mortality tables published by the Society of Actuaries to measure the benefit obligations as of December 31, 2021 and 2020, respectively.

Benefit Obligation and Funded Status

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

	Pension Benefits									Postretirement and Other Benefits
	Successor			Predecessor			Predecessor			Successor			Predecessor			Predecessor
(dollars in millions)	September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021			Year Ended December 31, 2020			September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021			Year Ended December 31, 2020
Change in benefit obligation:
Benefit obligation at beginning of period	$	633.3		$	674.1		$	652.9		$	102.8		$	109.6		$	116.3
Service cost		—			—			—			0.1			0.3			0.4
Interest cost		4.7			10.2			18.8			0.8			1.8			3.7
Actuarial (gain) loss (a) (b)		(11.4	)		(17.0	)		62.8			(0.6	)		(4.0	)		(3.5	)
Benefits paid		(12.8	)		(26.6	)		(39.3	)		(2.4	)		(5.4	)		(7.9	)
Retiree drug subsidy received		—			—			—			—			0.2			0.1
Settlements (c)		(1.9	)		(7.4	)		(21.1	)		—			—			—
Other		—			—			—			0.2			0.3			0.5
Benefit obligation at end of period	$	611.9		$	633.3		$	674.1		$	100.9		$	102.8		$	109.6
Change in plan assets:
Fair value of plan assets at beginning of period	$	571.8		$	570.6		$	538.8		$	3.3		$	3.1		$	4.3
Actual return on plan assets		1.3			32.5			84.5			—			0.1			0.1
Employer contributions		0.8			2.7			7.7			2.4			5.1			6.5
Retiree drug subsidy received		—			—			—			—			0.3			0.1
Benefits paid		(12.8	)		(26.6	)		(39.3	)		(2.4	)		(5.3	)		(7.9	)
Settlements (c)		(1.9	)		(7.4	)		(21.1	)		—			—			—
Fair value of plan assets at end of period		559.2			571.8			570.6			3.3			3.3			3.1
Unfunded status	$	(52.7	)	$	(61.5	)	$	(103.5	)	$	(97.6	)	$	(99.5	)	$	(106.5	)

(a) The actuarial (gain) recorded in the Successor and Predecessor periods in 2021 for the pension plans was primarily driven by an increase in the discount rate. The actuarial loss recorded during the period ended December 31, 2020 for the pension plans was primarily driven by changes in the discount rate as well as gains or losses to record pension assets to fair value.

(b) The actuarial (gain) recorded in the Successor and Predecessor periods in 2021 for the postretirement plans is primarily due to an increase in the discount rate and the result of actual versus expected benefit payments. The actuarial (gain) recorded for the period ending December 31, 2020 is primarily due to updated participant assumptions for the Hawaii plans partially offset by changes to the discount rate for both plans.

(c) The decrease in pension plan settlements in the Successor and Predecessor periods in 2021 compared to 2020 is due to participant elections in 2020 to take lump sum payments upon termination as result of the voluntary severance program offered to employees in both Cincinnati and Hawaii. The extent of the funding exceeded the settlement accounting threshold, and as such in all periods presented, these activities have been categorized as settlements.

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
	Successor			Predecessor			Predecessor			Successor			Predecessor			Predecessor
	September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021			Year Ended December 31, 2020			September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021			Year Ended December 31, 2020
Discount rate		2.70	%		2.60	%		2.40	%		2.80	%		2.60	%		2.40	%
Cash balance interest credit rate		4.00	%		4.00	%		4.00	%		—			—			—
Future compensation growth rate		—			—			—			—			—			—

Hawaii Plans	Pension Benefits									Postretirement and Other Benefits
	Successor			Predecessor			Predecessor			Successor			Predecessor			Predecessor
	September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021			Year Ended December 31, 2020			September 8, 2021 to December 31, 2021			January 1, 2021 to September 7, 2021			Year Ended December 31, 2020
Discount rate		2.70	%		2.50	%		2.30	%		2.90	%		2.80	%		2.60	%
Cash balance interest credit rate		1.30	%		1.10	%		1.20	%		—			—			—
Future compensation growth rate		—			—			—			—			—			—

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

	Successor			Predecessor			Predecessor
Cincinnati Plans	September 8, 2021 to			January 1, 2021 to			Year Ended
	December 31, 2021			September 7, 2021			December 31, 2020
Healthcare cost trend		6.5	%		6.5	%		6.5	%
Rate to which the cost trend is assumed to decline (ultimate trend rate)		4.5	%		4.5	%		4.5	%
Year the rates reach the ultimate trend rate	2026			2025			2025

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

	Pension Benefits				Postretirement and Other Benefits
	Successor		Predecessor		Successor		Predecessor
	December 31,		December 31,		December 31,		December 31,
(dollars in millions)	2021		2020		2021		2020
Accrued payroll and benefits (current liability)	$	2.0	$	2.1	$	7.8	$	8.5
Pension and postretirement benefit obligations (noncurrent liability)		50.7		101.4		89.8		98.0
Total	$	52.7	$	103.5	$	97.6	$	106.5

Amounts recognized in "Accumulated other comprehensive income (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
	Successor		Predecessor			Successor		Predecessor
	December 31,		December 31,			December 31,		December 31,
(dollars in millions)	2021		2020			2021		2020
Prior service (cost) benefit, net of tax of ($0.1), $3.4	$	—	$	(0.1	)	$	—	$	13.7
Actuarial gain (loss), net of tax of $0.7, ($39.0), $0.1, ($4.3)		2.0		(136.1	)		0.6		(16.3	)
Total	$	2.0	$	(136.2	)	$	0.6	$	(2.6	)

Amounts recognized in "Accumulated other comprehensive income (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
	Successor		Predecessor		Predecessor			Successor		Predecessor			Predecessor
(dollars in millions)	September 8, 2021 to December 31, 2021		January 1, 2021 to September 7, 2021		Year Ended December 31, 2020			September 8, 2021 to December 31, 2021		January 1, 2021 to September 7, 2021			Year Ended December 31, 2020
Prior service cost recognized:
Reclassification adjustments	$	—	$	—	$	—		$	—	$	(1.7	)	$	(2.5	)
Actuarial gain (loss) recognized:
Reclassification adjustments		—		15.6		21.9			—		—			1.2
Actuarial gain (loss) arising during the period		2.7		29.5		(7.1	)		0.7		4.0			3.6

Plan Assets, Investment Policies and Strategies

Cincinnati and Hawaii 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. The investment follows a glide path approach toward liability-driven investing that shifts a higher portfolio weighting to fixed income as the plan’s funded status increases. The current target allocations for the pension plan assets are 40% equity securities and 60% investment grade fixed income securities with the exception of the Hawaii pension plan for union employees that is 30% equity securities and 70% investment grade fixed income securities as a result of its funded status. 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 50% of the equity securities held by the pension plans at December 31, 2021, 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 and U.S. Treasuries. The postretirement plan assets held by the Cincinnati plan are currently invested in a group insurance contract.

The fair values of the pension plan assets at December 31, 2021 and 2020 by asset category are as follows:

	Successor
(dollars in millions)	December 31, 2021		Quoted prices in active markets Level 1		Significant observable inputs Level 2		Significant unobservable inputs Level 3
Mutual funds
U.S. equity index funds	$	104.8	$	104.8	$	—	$	—
International equity index funds		101.8		101.8		—		—
Fixed income bond funds		350.7		350.7		—		—
Fixed income short-term money market funds		1.9		1.9		—		—
Group insurance contract		3.3		—		—		—
Total	$	562.5	$	559.2	$	—	$	—

	Predecessor
(dollars in millions)	December 31, 2020		Quoted prices in active markets Level 1		Significant observable inputs Level 2		Significant unobservable inputs Level 3
Mutual funds
U.S. equity index funds	$	151.2	$	151.2	$	—	$	—
International equity index funds		152.4		152.4		—		—
Fixed income bond funds		265.0		265.0		—		—
Fixed income short-term money market funds		2.0		2.0		—		—
Group insurance contract		3.1		—		—		—
Total	$	573.7	$	570.6	$	—	$	—

The fair values of Level 1 investments are based on quoted prices in active markets.

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 $0.9 million in the Predecessor period in 2021, $5.5 million in 2020, and $3.6 million in 2019. No contributions were made to our qualified pension plans in the Successor period. Contributions to our non-qualified pension plan were $0.8 million in the Successor period, $1.8 million in the Predecessor period in 2021, $2.2 million in 2020, and $2.3 million in 2019.

Based on current assumptions, contributions are expected to be nominal to the qualified plans and approximately $2 million to the non-qualified plans in 2022. Management expects to make cash payments of approximately $7 million related to its postretirement health plans in 2022.

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
2022	$	54.2	$	8.0	$	(0.2	)
2023		51.0		7.6		(0.1	)
2024		49.7		7.3		(0.1	)
2025		48.9		6.9		(0.1	)
2026		44.6		6.6		(0.1	)
Years 2027 - 2031		186.6		29.2		(0.3	)