Pension Plans and Other Postretirement Benefits | 12 Months Ended |
Dec. 31, 2013 |
Compensation and Retirement Disclosure [Abstract] | ' |
Pension Plans and Other Postretirement Benefits | ' |
Pension Plans and Other Postretirement Benefits |
The Company sponsors several qualified and nonqualified pension plans and other postretirement benefit plans for its employees. The following tables provide a reconciliation of the changes in the qualified plans’ benefit obligations and fair value of assets and a statement of the funded status as of and for the years ended December 31, 2013 and 2012, and the classification of amounts recognized in the consolidated balance sheets: |
|
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Defined Benefit | | Other Postretirement | | | | | | | | |
Pension Plan | Benefit Plans | | | | | | | | |
(In thousands) | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | |
Change in benefit obligations: | | | | | | | | | | | | | | | |
| | | | | | | |
Benefit obligations, beginning of period | $ | 32,176 | | | $ | 33,705 | | | $ | 2,045 | | | $ | 1,647 | | | | | | | | | |
| | | | | | | |
Service cost | — | | | 1,838 | | | 54 | | | 41 | | | | | | | | | |
| | | | | | | |
Interest cost | 1,325 | | | 1,489 | | | 84 | | | 73 | | | | | | | | | |
| | | | | | | |
Curtailment | — | | | (7,459 | ) | | — | | | — | | | | | | | | | |
| | | | | | | |
Actuarial (gain) loss | (5,116 | ) | | 3,739 | | | (187 | ) | | 295 | | | | | | | | | |
| | | | | | | |
Benefits paid, net | (389 | ) | | (375 | ) | | (16 | ) | | (11 | ) | | | | | | | | |
| | | | | | | |
Benefit obligations transferred | (222 | ) | | (761 | ) | | — | | | — | | | | | | | | | |
| | | | | | | |
Benefit obligations, end of period | $ | 27,774 | | | $ | 32,176 | | | $ | 1,980 | | | $ | 2,045 | | | | | | | | | |
| | | | | | | |
Change in plan assets: | | | | | | | | | | | | | | | |
| | | | | | | |
Fair value of plan assets, beginning of period | $ | 20,837 | | | $ | 15,343 | | | $ | — | | | $ | — | | | | | | | | | |
| | | | | | | |
Actual return on plan assets | 4,255 | | | 2,329 | | | — | | | — | | | | | | | | | |
| | | | | | | |
Employer contributions | 32 | | | 3,999 | | | 16 | | | 11 | | | | | | | | | |
| | | | | | | |
Benefits paid | (425 | ) | | (386 | ) | | (16 | ) | | (11 | ) | | | | | | | | |
| | | | | | | |
Plan assets transferred | (89 | ) | | (448 | ) | | — | | | — | | | | | | | | | |
| | | | | | | |
Fair value of plan assets, end of period | $ | 24,610 | | | $ | 20,837 | | | $ | — | | | $ | — | | | | | | | | | |
| | | | | | | |
Funded status: | | | | | | | | | | | | | | | |
| | | | | | | |
Total liability at December 31, | $ | (3,164 | ) | | $ | (11,339 | ) | | $ | (1,980 | ) | | $ | (2,045 | ) | | | | | | | | |
| | | | | | | |
In accordance with the terms of Employee Matters Agreement, in connection with the Business Separation, the Company transferred total assets of $0.5 million and total benefit obligations of $1.0 million between 2012 and 2013 related to Lumos Networks employees into a new defined benefit pension plan adopted by Lumos Networks. In addition, the transfer of the benefit obligation triggered the transfer of $0.2 million of unrealized actuarial loss classified in other comprehensive income between 2012 and 2013. No additional transfers will be required in future periods for either plan. |
The accumulated benefit obligation for the defined benefit pension plan at December 31, 2013 and 2012 was $27.8 million and $32.2 million, respectively. The accumulated benefit obligation represents the present value of pension benefits based on service and salary earned to date. As of December 31, 2012, the Company froze future benefit accruals, resulting in a $7.5 million reduction in the Company’s projected benefit obligations due to the curtailment. Accordingly, the accumulated benefit obligation is equal to the projected benefit obligation. |
The following table provides the components of net periodic benefit cost for the plans for the years ended December 31, 2013, 2012 and 2011: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Defined Benefit Pension Plan | | Other Postretirement Benefit Plans |
(In thousands) | 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | 2011 |
Components of net periodic benefit cost: | | | | | | | | | | | |
|
Service cost | $ | — | | | $ | 1,838 | | | $ | 2,790 | | | $ | 54 | | | $ | 41 | | | $ | 89 | |
|
Interest cost | 1,325 | | | 1,489 | | | 3,637 | | | 78 | | | 88 | | | 600 | |
|
Recognized net actuarial loss | 131 | | | 734 | | | 563 | | | 16 | | | 28 | | | — | |
|
Expected return on plan assets | (1,595 | ) | | (1,293 | ) | | (4,131 | ) | | — | | | — | | | — | |
|
Net periodic benefit cost | $ | (139 | ) | | $ | 2,768 | | | $ | 2,859 | | | $ | 148 | | | $ | 157 | | | $ | 689 | |
|
Defined benefit pension plan net periodic benefit cost outlined above contained $1.3 million of cost related to discontinued operations for the year ended December 31, 2011. Additionally, other postretirement benefit plan net periodic benefit cost outlined above contained $0.6 million of cost related to discontinued operations for the year ended December 31, 2011. |
Prior service costs are amortized on a straight-line basis over the average remaining service period of active participants. Gains and losses in excess of 10% of the greater of the benefit obligation and the market-related value of assets are amortized over the average remaining service period of active participants. |
Unrecognized actuarial gains in 2013 were $(7.7) million and $(0.2) million for the defined benefit pension plan and the other postretirement benefit plans, respectively. The total amount of unrecognized actuarial (gain)/loss recorded in accumulated other comprehensive income at December 31, 2013 related to these respective plans was $(0.7) million, net of a $0.4 million deferred tax liability, and $0.4 million, net of a $0.3 million deferred tax asset. |
The total amount reclassified out of accumulated other comprehensive income related to actuarial losses from the defined benefit plans was $0.3 million, $0.5 million, and $0.4 million for the three years ended December 31, 2013, 2012, and 2011, respectively, all of which has been reclassified to cost of sales and services, customer operations, and corporate operations on the unaudited condensed consolidated statement of income for the respective periods. |
The assumptions used in the measurements of the Company’s benefit obligations at December 31, 2013 and 2012 are shown in the following table: |
|
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Defined | | Other | | | | | | | | | | | | |
Benefit | Postretirement | | | | | | | | | | | | |
Pension Plan | Benefit Plans | | | | | | | | | | | | |
| 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | | | |
Discount rate | 5 | % | | 4.15 | % | | 5 | % | | 4.15 | % | | | | | | | | | | | | |
| | | | | | | | | | | |
The assumptions used in the measurements of the Company’s net cost for the consolidated statement of operations for the years ended December 31, 2013, 2012 and 2011 are: |
|
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Defined Benefit | | Other | | | | | | |
Pension Plan | Postretirement | | | | | | |
| Benefit Plans | | | | | | |
| 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | 2011 | | | | | | |
Discount rate | 4.15 | % | | 4.45 | % | | 5.5 | % | | 4.15 | % | | 4.45 | % | | 5.5 | % | | | | | | |
| | | | | |
Expected return on plan assets | 7.75 | % | | 7.75 | % | | 7.75 | % | | — | | | — | | | — | | | | | | | |
| | | | | |
Rate of compensation increase | — | | | 3 | % | | 3 | % | | — | | | — | | | — | | | | | | | |
| | | | | |
The Company reviews the assumptions noted in the above table annually or more frequently to reflect anticipated future changes in the underlying economic factors used to determine these assumptions. The discount rates assumed reflect the rate at which the Company could invest in high quality corporate bonds in order to settle future obligations. In doing so, the Company utilizes a Citigroup Pension Discount Curve applied against the Company’s estimated defined benefit payments to derive a blended rate. The Citigroup Pension Discount Curve is derived from over 350 Aa rated corporate bonds. The Company also compares this to a Moody’s ten-year Aa rated bond index for reasonableness. |
For measurement purposes, a 6.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2014 for the obligation as of December 31, 2013. The rate was assumed to decrease one-half percent per year to a rate of 5.0% for 2017 and remain at that level thereafter. |
Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plans. The effect of a 1% change on the medical trend rate per future year, while holding all other assumptions constant, to the service and interest cost components of net periodic postretirement health care benefit costs and accumulated postretirement benefit obligation would be less than a $0.1 million increase and a $0.4 million increase, respectively, for a 1% increase in medical trend rate and less than a $0.1 million decrease and a $0.3 million decrease, respectively, for a 1% decrease in medical trend rate. |
In developing the expected long-term rate of return assumption for the assets of the Defined Benefit Pension Plan, the Company evaluated input from its third-party pension plan administrator, including its review of asset class return expectations and long-term inflation assumptions. The Company also considered the related historical ten-year average asset return at December 31, 2013 as well as considered input from its third-party pension plan asset managers. |
The weighted average actual asset allocations by asset category as of December 31, 2013 and the fair value by asset category as of December 31, 2013 and 2012 were as follows: |
|
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Actual Allocation as of | | Fair Value as of | | | | | | | | | | | | | |
December 31, | | | | | | | | | | | | | |
Asset Category (dollars in thousands) | 31-Dec-13 | | 2013 | | 2012 | | | | | | | | | | | | | |
Large Cap Value | 33 | % | | $ | 8,097 | | | $ | 6,627 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Large Cap Blend | 16 | % | | 4,022 | | | 3,301 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Mid Cap Blend | 6 | % | | 1,500 | | | 1,271 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Small Cap Blend | 4 | % | | 1,005 | | | 862 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Foreign Stock – Large Cap | 7 | % | | 1,706 | | | 1,493 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Bond | 31 | % | | 7,548 | | | 6,638 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Cash and cash equivalents | 3 | % | | 732 | | | 645 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Total | 100 | % | | $ | 24,610 | | | $ | 20,837 | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
The actual and target allocation for plan assets is broadly defined and measured as follows: |
|
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Asset Category | Actual | | Target | | | | | | | | | | | | | | | | | | |
Allocation | Allocation | | | | | | | | | | | | | | | | | | |
Equity securities | 66 | % | | 70 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Bond securities and cash equivalents | 34 | % | | 30 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total | 100 | % | | 100 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
It is the Company’s policy to invest pension plan assets in a diversified portfolio consisting of an array of asset classes. The investment risk of the assets is limited by appropriate diversification both within and between asset classes. The assets are primarily invested in investment funds that invest in a broad mix of publicly traded equities, bonds and cash equivalents (and fair value is based on quoted market prices (“Level 1” input)). The allocation between equity and bonds is reset quarterly to the target allocations. Updates to the allocation are considered in the normal course and changes may be made when appropriate. The bond holdings consist of three bond funds split relatively evenly between these funds at December 31, 2013 and 2012. The maximum holdings of any one asset within these funds is under 3% of this fund and thus is well under 1% of the total portfolio. At December 31, 2013, the Company believes that there are no material concentrations of risk within the portfolio of plan assets. |
The assumed long-term return noted above is the target long-term return. Overall return, risk adjusted return, and management fees are assessed against a peer group and benchmark indices. There are minimum performance standards that must be attained within the investment portfolio. Reporting on asset performance is provided quarterly and review meetings are held semi-annually. In addition to normal rebalancing to maintain an adequate cash reserve, projected cash flow needs of the plan are reviewed at least annually to ensure liquidity is properly managed. |
The Company does not expect to contribute to the pension plan in 2014. The Company expects the net periodic benefit gain for the defined benefit pension plan in 2014 to be $(0.5) million and expects the periodic benefit cost for the other postretirement benefit plans in 2014 to be $0.1 million. |
The following estimated future pension benefit payments and other postretirement benefit plan payments which reflect expected future service, as appropriate, are expected to be paid in the years indicated: |
|
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Defined | | Other | | | | | | | | | | | | | | | | |
Benefit | Postretirement | | | | | | | | | | | | | | | | |
Pension | Benefit Plans | | | | | | | | | | | | | | | | |
Plan | | | | | | | | | | | | | | | | | |
2014 | $ | 550 | | | $ | 58 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
2015 | 608 | | | 59 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
2016 | 645 | | | 58 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
2017 | 694 | | | 65 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
2018 | 753 | | | 56 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Aggregate of next five years | 5,152 | | | 433 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other Benefit Plans |
The Company also sponsors a supplemental executive retirement plan. This nonqualified plan, which has no plan assets, was closed to new participants in 2003. The projected benefit obligation of this nonqualified plan was $7.3 million and $8.1 million at December 31, 2013 and 2012, respectively. The total expense recognized related to this plan was $0.4 million for the year ended December 31, 2013, and 2012 and $0.7 million for the year ended December 31, 2011. |
The Company recognized $0.1 million of expense from previously unrecognized loss related to the supplemental executive retirement plan for each of the years ended December 31, 2013, 2012 and 2011. Unrecognized actuarial (gain)loss was $(0.6) million and $0.3 million in 2013 and 2012, respectively. The total balance of unrecognized actuarial losses recorded in accumulated other comprehensive income at December 31, 2013 and 2012 related to this plan was $1.7 million, net of a $1.0 million deferred tax asset, and $2.1 million, net of a $1.3 million deferred tax asset, respectively. The total expense to be recognized in 2014 for the nonqualified pension plan is approximately $0.4 million and the estimated payments are expected to be approximately $0.5 million. |
Estimated future benefit payments are expected to be paid in the years indicated: $0.5 million annually for each of the years 2014 through 2018 and $2.5 million in aggregate for the years 2019 through 2023. |
The Company also sponsors a contributory defined contribution plan under IRC Section 401(k) for substantially all employees. The Company’s matching contributions to this plan were $1.1 million for the years ended December 31, 2013, 2012 and 2011. The Company’s policy is to make matching contributions in shares of the Company’s common stock. All of the matching contributions for 2013, 2012 and 2011 represented equity contributions. |