| Employee Benefit Plans | Employee Benefit Plans The Company sponsors noncontributory qualified defined benefit pension plans ("qualified pension plans") and post-employment benefit plans which provide certain cash payments and medical, dental and life insurance benefits to eligible retired employees and their beneficiaries and covered dependents. The qualified pension plans and certain post-employment benefit plans were created as part of the acquisition of the Northern New England operations from Verizon and mirrored the prior Verizon plans. On August 2, 2014, the Company’s collective bargaining agreements with two of its labor unions expired. On August 28, 2014, the Company informed the unions that the parties were at impasse and on that date implemented the terms of its final proposals to the labor unions. On February 22, 2015, membership of both labor unions ratified their respective collective bargaining agreements that expire in August 2018. As a result, the following changes were effective regarding the qualified pension plan available to represented employees (the "Represented Pension Plan") and the post-employment benefit plan for represented employees (the "Represented OPEB Plan"): • The Represented Pension Plan was closed to new participants and benefits under the prior formula were frozen as of October 14, 2014. For existing participants, future benefit accruals for service on and after February 22, 2015 are at 50% of prior rates and are capped at 30 years of total credited service. Pension plan participants on strike received no credited service from October 14, 2014 to February 21, 2015. • The Represented OPEB Plan for active represented employees was eliminated as of August 28, 2014. A transitional monthly reimbursement arrangement for eligible represented employees who retire no later than August 22, 2017 was established (the "Reimbursement Arrangement"). To be eligible for the Reimbursement Arrangement, the represented employee must, among other criteria, have commenced a service pension under the Represented Pension Plan immediately upon termination of employment. The monthly reimbursement amount cannot exceed $800 per retiree, plus up to an additional $400 for a retiree’s spouse, and may only be paid for reimbursement of medical insurance premiums for coverage of the retiree and spouse. The Reimbursement Arrangement is only available until the retiree reaches the earlier of age 65 , or dies, among other limitations, at which time the benefit will cease for the spouse as well. Approximately 260 active represented employees are expected to be eligible to receive benefits under the Reimbursement Arrangement. Upon ratification of the collective bargaining agreements on February 22, 2015, a remeasurement of the net obligations of the Represented Pension Plan and the Represented OPEB Plan was required as of that date. Net periodic benefit cost for the period from February 23, 2015 to July 31, 2015 for the Represented Pension Plan was determined using the remeasured obligation as of February 22, 2015 for that plan. As the result of a workforce reduction, a curtailment occurred related to the Represented Pension Plan and a subsequent remeasurement of the net obligation was performed as of July 31, 2015. Accordingly, net periodic benefit cost from August 1, 2015 to December 31, 2015 was determined using the remeasured obligation as of July 31, 2015. Net periodic benefit cost for the period from February 23, 2015 to December 31, 2015 for the Reimbursement Arrangement was determined using the remeasured obligation as of February 22, 2015 for that plan. Net periodic benefit cost for the period from January 1, 2015 to February 22, 2015 for these plans was determined using the respective net obligations as reflected in the financial statements as of December 31, 2014. Represented retirees who were eligible to participate in the Represented OPEB Plan continued to receive benefits under that plan for the duration of 2014. During the fourth quarter of 2014, the Company amended the other post-employment benefit plan for management employees (the "Continuing OPEB Plan") to allow the existing represented retirees to participate in that plan. Effective January 1, 2015, the represented retirees were transferred to the Continuing OPEB Plan and the Represented OPEB Plan was terminated. A proportionate amount of projected benefit obligation of $91.3 million and unrecognized net actuarial loss of $29.5 million , in addition to an unamortized prior service credit of $45.3 million , for these represented retirees were transferred from the Represented OPEB Plan to the Continuing OPEB Plan as of January 1, 2015. The remeasurement of the Represented OPEB Plan reflected the elimination of post-employment benefits for active represented employees effective August 28, 2014 and the termination of the plan effective January 1, 2015. The elimination of the post-employment benefits for active represented employees was accounted for as a negative plan amendment that reduced the projected benefit obligation with a corresponding prior service credit of $619.4 million being recognized in accumulated other comprehensive income. The elimination of future service accruals for active represented employees resulted in a curtailment gain of $5.4 million . The curtailment gain was applied against the unrecognized net actuarial loss in accumulated other comprehensive income. In addition, on February 22, 2015, an obligation of $9.8 million was established for the Reimbursement Arrangement with a corresponding amount of prior service cost in accumulated other comprehensive income. The prior service credit of $619.4 million and the $9.8 million prior service cost related to the Reimbursement Arrangement, which net to $609.6 million , were amortized over 1.72 years for 2015 expense and the remaining unrecognized net prior service credit as of December 31, 2015 of $306.8 million will be amortized in 2016. The remaining unrecognized net actuarial loss related to the terminated Represented OPEB Plan of $192.2 million was amortized over 1.5 years for 2015 expense and the remaining amount as of December 31, 2015 of $81.9 million will be amortized in 2016. The Company recognized a $40.0 million prior service credit for a negative plan amendment at remeasurement of the Represented Pension Plan related to the elimination of prospective future increase in pension bands that were reduced under the terms of the collective bargaining agreements. The prior service credit was recorded in accumulated other comprehensive income and the remaining amount is being amortized over 10.82 years . The qualified pension plan which covers non-represented employees was not impacted by these changes and remains frozen. Therefore, no new benefits are being earned by participants and the plan is closed to new participants. The Company makes contributions to the qualified pension plans to meet minimum funding requirements under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and has the ability to elect to make additional discretionary contributions. The other post-employment benefit plans are unfunded and the Company funds the benefits that are paid. Annually, and as necessary, the Company remeasures the net liabilities of its qualified pension and other post-employment benefit plans. Plan Assets, Obligations and Funded Status A summary of plan assets, projected benefit obligation and funded status of the plans are as follows for the years ended December 31, 2015 and 2014 (in thousands): Qualified Pension Plans Year Ended December 31, 2015 Year Ended December 31, 2014 Fair value of plan assets: Beginning fair value of plan assets $ 195,410 $ 175,242 Actual return on plan assets (3,677 ) 7,553 Plan settlements (4,472 ) (2,935 ) Employer contributions 14,980 30,000 Benefits paid (5,179 ) (14,450 ) Ending fair value of plan assets 197,062 195,410 Projected benefit obligation: Beginning projected benefit obligation $ 408,216 $ 328,776 Service cost 8,391 14,760 Interest cost 14,879 15,367 Plan amendment (40,049 ) — Plan settlements (4,472 ) (2,935 ) Plan curtailment (2,426 ) — Benefits paid (5,179 ) (14,450 ) Actuarial (gain)/loss (31,736 ) 66,698 Ending projected benefit obligation 347,624 408,216 Funded status $ (150,562 ) $ (212,806 ) Accumulated benefit obligation $ 347,619 $ 366,649 Net amount recognized in long-term liabilities in the consolidated balance sheets $ (150,562 ) $ (212,806 ) Amounts recognized in accumulated other comprehensive income/(loss): Prior service credit $ 32,909 $ — Net actuarial loss (106,704 ) (130,294 ) Net amount recognized in accumulated other comprehensive income/(loss) $ (73,795 ) $ (130,294 ) Post-employment Benefit Plans Year Ended December 31, 2015 Year Ended December 31, 2014 Fair value of plan assets: Beginning fair value of plan assets $ — $ — Employer contributions 5,597 6,097 Benefits paid (5,597 ) (6,097 ) Ending fair value of plan assets — — Projected benefit obligation: Beginning projected benefit obligation $ 741,372 $ 590,435 Service cost 4,541 24,969 Interest cost 7,688 29,908 Plan amendments (a) (609,619 ) (46,277 ) Plan curtailment (5,409 ) — Benefits paid (5,597 ) (6,097 ) Actuarial (gain)/loss (32,822 ) 148,434 Ending projected benefit obligation 100,154 741,372 Funded status $ (100,154 ) $ (741,372 ) Amounts recognized in the consolidated balance sheets: Current liabilities $ (6,112 ) $ (6,021 ) Long-term liabilities (94,042 ) (735,351 ) Net amount recognized in the consolidated balance sheets $ (100,154 ) $ (741,372 ) Amounts recognized in accumulated other comprehensive income/(loss): Net prior service credit $ 350,322 $ 45,329 Net actuarial loss $ (102,085 ) $ (253,740 ) Net amount recognized in accumulated other comprehensive income/(loss) $ 248,237 $ (208,411 ) (a) In the fourth quarter of 2014, the Company amended its OPEB Plan to permit the former represented employees currently receiving post-employment benefits to participate in that plan. Effective January 1, 2015, the former represented employees were transferred from their current Represented OPEB plan to the Continuing OPEB Plan. The healthcare plan options available in the OPEB Plan contained higher deductibles, co-pays and co-insurance requirements than the healthcare plan options in the post-employment benefit plan for former represented employees. Accordingly, the Company recognized a gain as a result of the plan amendment, which is accounted for as a prior service credit. Qualified Pension Plan Assets. The investment objective for the qualified pension plan assets is to achieve a rate of return sufficient to match or exceed the long-term growth rate of the plan liability, using investment vehicles that are consistent with the duration of each plan's liability. The investment objective also targets minimizing the risk of loss of principal. The Company's strategy emphasizes a long-term equity orientation, global diversification and financial and operating risk controls. Both active and passive management investment approaches are employed depending on perceived market efficiencies and various other factors. Diversification targets of 75% equity securities and 25% fixed income securities for the represented employees plan seeks to minimize the concentration of market risk. For the qualified pension plan for the non-represented employees, the diversification target is 45% equity securities and 55% fixed income securities and is invested using primarily a liability driven investment strategy. The asset allocation at December 31, 2015 for the Company's qualified pension plan assets was as follows: Non-Represented Employees Plan Represented Employees Plan Total Qualified Pension Plans Cash and cash equivalents (a) 0.6 % 0.6 % 0.6 % Equity securities 45.3 % 74.0 % 70.4 % Fixed income securities 54.1 % 25.4 % 29.0 % Plan asset portfolio allocation at December 31, 2015 100.0 % 100.0 % 100.0 % (a) Cash and cash equivalents at December 31, 2015 include amounts pending settlement from the purchase or sale of equity or fixed income securities. The fair values for the qualified pension plan assets by asset category at December 31, 2015 are as follows (in thousands): Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 1,223 $ 1,223 $ — $ — Equity securities 138,684 79,512 59,172 — Fixed income securities 57,155 30,856 26,299 — Fair value of plan assets at December 31, 2015 $ 197,062 $ 111,591 $ 85,471 $ — The fair values for the qualified pension plan assets by asset category at December 31, 2014 were as follows (in thousands): Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 848 $ 848 $ — $ — Equity securities (a) 133,446 79,896 53,199 351 Fixed income securities 61,116 26,803 34,313 — Fair value of plan assets at December 31, 2014 $ 195,410 $ 107,547 $ 87,512 $ 351 (a) All Level 3 equity securities are amounts held in hedged equity funds. Cash and cash equivalents include short-term investment funds, primarily in diversified portfolios of investment grade money market instruments and are valued using quoted market prices, and thus classified within Level 1 of the fair value hierarchy, as outlined in note (9) "Fair Value". Equity securities include direct holdings of equity securities and units held in mutual funds that invest in equity securities of domestic and international corporations in a variety of industry sectors. The direct holdings and units held in publicly traded mutual funds are valued using quoted market prices and are classified within Level 1 of the fair value hierarchy. Fair values for units held in mutual funds that invest in equity securities that are not publicly traded are based on observable prices and are classified within Level 2 of the fair value hierarchy. The fair values of hedged equity funds are estimated using net asset value per share of the investments. The Company has the ability to redeem these investments at net asset value on a limited basis and thus has classified hedged equity funds within Level 3 of the fair value hierarchy. The Company liquidated its positions in all its hedged equity funds per the terms of its investment agreements with such hedge equity funds in 2015. Fixed income securities are investments in mutual funds that invest in corporate bonds, treasury securities and other debt instruments. These securities are expected to provide significant diversification benefits, in terms of asset volatility and pension funding volatility, in the portfolio and a stable source of income. Units held in publicly traded mutual funds that invest in fixed income securities are valued using quoted market prices and are classified within Level 1 of the fair value hierarchy. Fair values of mutual funds that invest in fixed income securities that are not publicly traded are based on observable prices and are classified within Level 2 of the fair value hierarchy. A reconciliation of the beginning and ending balance of plan assets that are measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31, 2015 and 2014 is as follows (in thousands): Hedged Equity Funds Balance at December 31, 2013 $ 11,711 Actual gain on plan assets held 145 Purchases, sales and settlements, net (11,505 ) Balance at December 31, 2014 $ 351 Purchases, sales and settlements, net (351 ) Balance at December 31, 2015 $ — Net Periodic Benefit Cost. The Company capitalizes a portion of net periodic benefit cost in conjunction with its use of internal labor resources utilized on capital projects. During the years ended December 31, 2015 , 2014 and 2013 , the Company recognized settlement charges in the qualified pension plan that covers non-represented employees. The settlements were incurred when the cumulative amount of lump sums paid to participants in the respective years exceeded the expected service and interest cost for the respective years. In July 2015, as the result of a workforce reduction, the Company recognized a curtailment gain of $ 4.2 million in the Represented Pension Plan. Components of the net periodic benefit cost related to the Company's qualified pension plans and other post-employment benefit plans for the years ended December 31, 2015 , 2014 and 2013 are as follows (in thousands): Qualified Pension Plans Year Ended December 31, 2015 Year Ended December 31, 2014 Year Ended December 31, 2013 Service cost $ 8,391 $ 14,760 $ 18,543 Interest cost 14,879 15,367 14,934 Expected return on plan assets (14,635 ) (13,525 ) (12,462 ) Amortization of prior service credit (2,933 ) — — Amortization of actuarial loss 6,718 2,054 5,585 Plan curtailment (4,207 ) — — Plan settlement 1,022 671 1,683 Net periodic benefit cost 9,235 19,327 28,283 Less capitalized portion (600 ) (1,184 ) (2,063 ) Statement of operations expense $ 8,635 $ 18,143 $ 26,220 Post-employment Benefit Plans Year Ended December 31, 2015 Year Ended December 31, 2014 Year Ended December 31, 2013 Service cost $ 4,541 $ 24,969 $ 26,712 Interest cost 7,688 29,908 24,555 Amortization of prior service credit (304,626 ) (948 ) — Amortization of actuarial loss 113,424 6,654 7,398 Net periodic benefit cost (178,973 ) 60,583 58,665 Less capitalized portion — (3,444 ) (4,196 ) Statement of operations expense $ (178,973 ) $ 57,139 $ 54,469 Other Comprehensive Income/(Loss). Other pre-tax changes in plan assets and benefit obligations recognized in other comprehensive income/(loss) are as follows for the years ended December 31, 2015 , 2014 and 2013 , respectively, (in thousands): Qualified Pension Plans Year Ended December 31, 2015 Year Ended December 31, 2014 Year Ended December 31, 2013 Amounts recognized in other comprehensive income/(loss): Prior service credit $ (40,049 ) $ — $ — Net (gain)/loss arising during the period (13,424 ) 72,670 (49,218 ) Amortization of prior service credit 2,933 — — Amortization of net actuarial loss (6,718 ) (2,725 ) (7,268 ) Plan curtailment 1,781 — — Plan settlement (1,022 ) — — Total amount recognized in other comprehensive income/(loss) $ (56,499 ) $ 69,945 $ (56,486 ) Estimated amounts that will be amortized from accumulated other comprehensive income/(loss) in the next fiscal year: Prior service credit $ 3,042 Net actuarial loss (6,376 ) Total amount estimated to be amortized from accumulated other comprehensive income/(loss) in the next fiscal year $ (3,334 ) Post-employment Benefit Plans Year Ended December 31, 2015 Year Ended December 31, 2014 Year Ended December 31, 2013 Amounts recognized in other comprehensive income/(loss): Prior service credit $ (619,454 ) $ (46,277 ) $ — Prior service cost 9,835 — — Plan curtailment (5,409 ) — — Net (gain)/loss arising during the period (32,822 ) 148,434 (78,571 ) Amortization of prior service credit 304,626 948 — Amortization of net actuarial loss (113,424 ) (6,654 ) (7,398 ) Total amount recognized in other comprehensive income/(loss) $ (456,648 ) $ 96,451 $ (85,969 ) Estimated amounts that will be amortized from accumulated other comprehensive income/(loss) in the next fiscal year: Net prior service credit $ 308,632 Net actuarial loss (83,380 ) Total amount estimated to be amortized from accumulated other comprehensive income/(loss) in the next fiscal year $ 225,252 Assumptions The determination of the net liability and the net periodic benefit cost recognized for the qualified pension plans and post-employment benefit plans by the Company are, in part, based on assumptions made by management. These assumptions include, among others, the discount rate applied to estimated future cash flows of the plans, the expected return on assets held by the qualified pension plans, certain demographic characteristics of the participants, such as expected retirement and mortality rates, and future inflation in healthcare costs. The Company also has an assumption regarding increases in the amount of post-employment benefit plans expenditures to be paid by the Company, based upon the past practice of such increases being provided to participants. These assumptions are reviewed at least annually for changes with the Company's independent actuaries. Projected Benefit Obligation Assumptions. The weighted average assumptions used in determining projected benefit obligations are as follows: December 31, 2015 December 31, 2014 Qualified Pension Plans: Discount rate 4.44 % 4.04 % Rate of compensation increase (a) 3.00 % 3.00 % Post-employment Benefit Plans: Discount rate 4.15 % 4.14 % Rate of compensation increase (a) N/A 4.00 % (a) The rate of future increases in compensation assumption only applies to the plans for represented employees as plans for non-represented employees are frozen. Net Periodic Benefit Cost Assumptions. The weighted average assumptions used in determining net periodic cost are as follows: Years Ended December 31, 2015 2014 2013 Qualified Pension Plans: Discount rate 4.39 % 4.92 % 4.08 % Expected return on plan assets (a) 7.31 % 7.66 % 7.54 % Rate of compensation increase (b) 3.00 % 3.00 % 3.00 % Post-employment Benefit Plans: Discount rate 3.54 % 4.98 % 4.20 % Rate of compensation increase (b) N/A 4.00 % 4.00 % Healthcare cost trend rate (c) 7.70 % 7.90 % 8.10 % Rate that the cost trend rates ultimately declines to 4.50 % 4.50 % 4.50 % Year that the rates reach the terminal rate 2030 2030 2030 (a) The expected return on plan assets is the long-term rate-of-return the Company expects to earn on the plan assets. In developing the expected return on plan asset assumption, the Company evaluated historical investment performance, the plans' asset allocation strategies and return forecasts for each asset class and input from its advisors. Projected returns by such advisors were based on broad equity and fixed income indices. The expected return on plan assets is reviewed annually in conjunction with other plan assumptions and, if considered necessary, revised to reflect changes in the financial markets and the investment strategy. The investment strategy and target allocations of the qualified pension plans previously disclosed in "—Plan Assets, Obligations and Funded Status—Qualified Pension Plan Assets" herein were utilized. (b) The rate of future increases in compensation assumption only applies to the plans for represented employees as plans for non-represented employees are frozen. (c) The rate of healthcare cost trend assumption for 2015 applies to the Continuing OPEB Plan. Post-employment Benefit Plans Sensitivity. A 1% change in the medical trend rate assumed for post-employment benefits at December 31, 2015 would have the following effects (in thousands): Increase (Decrease) 1% increase in the medical trend rate: Effect on total service cost and interest cost components $ 450 Effect on benefit obligation $ 10,887 1% decrease in the medical trend rate: Effect on total service cost and interest cost components $ (372 ) Effect on benefit obligation $ (9,019 ) Estimated Future Contributions and Benefit Payments Legislation enacted in 2014 changed the method in determining the discount rate used for calculating a qualified pension plan’s unfunded liability. This act contained a pension funding stabilization provision which allows pension plan sponsors to use higher interest rate assumptions when determining funded status and funding obligations. As a result, the Company's 2015 minimum required pension plan contribution is significantly lower than it would have been in the absence of this stabilization provision. Estimated future employer contributions and benefit payments as of December 31, 2015 are as follows (in thousands): Qualified Pension Plans Post-employment Benefit Plans Expected employer contributions for fiscal year 2016 $ 12,446 $ 6,112 Expected benefit payments for fiscal years: 2016 $ 7,694 $ 6,112 2017 8,885 6,108 2018 10,219 6,466 2019 11,393 6,747 2020 12,037 6,807 2021-2025 78,514 31,327 401(k) Savings Plans As of December 31, 2015 , the Company and its subsidiaries sponsor four voluntary 401(k) savings plans that, in the aggregate, cover all eligible Telecom Group employees and northern New England management employees, and one voluntary 401(k) savings plan that covers all eligible northern New England represented employees (collectively, "the 401(k) Plans"). Each 401(k) Plan year, the Company contributes an amount of matching contributions to the 401(k) Plans determined by the Company at its discretion for management employees and based on collective bargaining agreements for all other employees. For the 401(k) Plan years ended December 31, 2015 , 2014 and 2013 , the Company generally matched 100% of each employee's contribution up to 5% of compensation. Total Company contributions to all 401(k) Plans were $8.8 million , $9.5 million and $9.9 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. |
