Employee Benefit Plans

The Company sponsors noncontributory qualified defined benefit pension plans ("qualified pension plans") and other 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 substantially replicated the prior Verizon plans available to the eligible employees in the acquired operations.

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 healthcare 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 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 290 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 September 30, 2015 was determined using the remeasured obligation as of July 31, 2015. Net periodic benefit cost for the period from February 23, 2015 to September 30, 2015 for the Represented OPEB Plan 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 healthcare 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 healthcare 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, are being amortized over 1.72 years for 2015 expense. The remaining unrecognized net actuarial loss related to the terminated Represented OPEB Plan of $192.2 million is being amortized over 1.50 years for 2015 expense.

The Company recognized a $40.0 million prior service credit for a negative plan amendment at remeasurement of the Represented Pension Plan related to pension bands that were frozen under the terms of the collective bargaining agreements. The prior service credit was recorded in accumulated other comprehensive income and is being amortized over 11.67 years for 2015 expense.

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 in accordance with the Compensation-Retirement Benefits Topic of the ASC.

Plan Assets, Obligations and Funded Status

A summary of plan assets, projected benefit obligation and funded status of the plans are as follows (in thousands):



	Qualified Pension Plans

	Nine Months ended September 30, 2015
Value of plan assets:
Beginning fair value of plan assets	$	195,410
Expected return on plan assets	14,445
Plan settlements	(6,416		)
Employer contributions	8,780
Benefits paid	(7,702		)
Ending value of plan assets	204,517
Projected benefit obligation:
Beginning projected benefit obligation	$	408,216
Service cost	6,822
Interest cost	11,146
Plan amendment	(40,049		)
Plan settlements	(21,847		)
Plan curtailment	(2,426		)
Benefits paid	(7,702		)
Actuarial gain	(4,768		)
Ending projected benefit obligation	349,392
Funded status	$	(144,875	)

Accumulated benefit obligation	$	349,392

Net amount recognized in long-term liabilities in the consolidated balance sheet	$	(144,875	)

Amounts recognized in accumulated other comprehensive income/(loss):
Prior service credit	$	33,772
Net actuarial loss	(98,106		)
Net amount recognized in accumulated other comprehensive income/(loss)	$	(64,334	)



	Other Post-employment Benefit Plans

	Nine Months ended September 30, 2015
Value of plan assets:
Beginning fair value of plan assets	$	—
Employer contributions	4,092
Benefits paid	(4,092		)
Ending value of plan assets	—
Projected benefit obligation:
Beginning projected benefit obligation	$	741,372
Service cost	4,479
Interest cost	6,683
Plan amendments	(609,619		)
Plan curtailment	(5,409		)
Benefits paid	(4,092		)
Actuarial gain	(27,075		)
Ending projected benefit obligation	106,339
Funded status	$	(106,339	)

Amounts recognized in the consolidated balance sheet:
Current liabilities	$	(5,166	)
Long-term liabilities	(101,173		)
Net amount recognized in the consolidated balance sheet	$	(106,339	)

Amounts recognized in accumulated other comprehensive income/(loss):
Net prior service credit	$	439,872
Net actuarial loss	(140,607		)
Net amount recognized in accumulated other comprehensive income/(loss)	$	299,265

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 three and nine months ended September 30, 2015 and the three and nine months ended September 30, 2014, the Company recognized settlement charges of $0.1 million, $0.7 million, $0.7 million and $0.7 million, respectively, 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 three and nine months ended September 30, 2015 and 2014 are as follows (in thousands):



	Three Months ended September 30, 2015						Three Months ended September 30, 2014
	Qualified Pension Plans			Other Post- employment Benefit Plans			Qualified Pension Plans			Other Post- employment Benefit Plans
Service cost	$	1,653		$	62		$	3,514		$	6,279
Interest cost	3,702			1,005			3,862			7,897
Expected return on plan assets	(3,688		)	—			(3,368		)	—
Amortization of actuarial loss	1,570			32,775			556			1,729
Amortization of prior service cost	(863		)	(89,550		)	—			—
Plan curtailment	(4,207		)	—			—			—
Plan settlement	110			—			650			—
Net periodic benefit cost	(1,723		)	(55,708		)	5,214			15,905
Less capitalized portion	(137		)	—			(322		)	(965		)
Other post-employment benefit and pension expense	$	(1,860	)	$	(55,708	)	$	4,892		$	14,940



	Nine Months ended September 30, 2015						Nine Months ended September 30, 2014
	Qualified Pension Plans			Other Post- employment Benefit Plans			Qualified Pension Plans			Other Post- employment Benefit Plans
Service cost	$	6,822		$	4,479		$	11,664		$	18,968
Interest cost	11,146			6,683			11,788			22,520
Expected return on plan assets	(10,911		)	—			(10,179		)	—
Amortization of actuarial loss	5,311			80,649			1,634			3,576
Amortization of prior service cost	(2,070		)	(215,076		)	—			—
Plan curtailment	(4,207		)	—			—			—
Plan settlement	717			—			650			—
Net periodic benefit cost	6,808			(123,265		)	15,557			45,064
Less capitalized portion	(469		)	—			(1,112		)	(3,192		)
Other post-employment benefit and pension expense	$	6,339		$	(123,265	)	$	14,445		$	41,872

Return on Plan Assets. For the three months ended September 30, 2015 and 2014 and for the nine months ended September 30, 2015 and 2014, the actual return on the pension plan assets were annualized gains/(losses) of approximately (5.6)%, (6.1)%, (3.7)% and 4.9%, respectively.

Other Comprehensive Income/(Loss). Other pre-tax changes in plan assets and benefit obligations recognized in other comprehensive income/(loss) are as follows (in thousands):



	Qualified Pension Plans

	Three Months ended September 30, 2015			Nine Months ended September 30, 2015
	Three Months ended September 30, 2015			Nine Months ended September 30, 2015
Amounts recognized in other comprehensive income/(loss):
Prior service credit	$	—		$	40,049
Net gain arising during the period	—			8,302
Amortization of prior service credit	(863		)	(2,070		)
Amortization of net actuarial loss	1,570			5,311
Plan curtailment	(1,781		)	(1,781		)
Plan settlement	16,151			16,149
Total amount recognized in other comprehensive income/(loss)	$	15,077		$	65,960

Estimated amounts that will be amortized from accumulated other comprehensive income/(loss) in the next three months:
Prior service credit	$	(863	)
Net actuarial loss	1,407
Total amount estimated to be amortized from accumulated other comprehensive income/(loss) in the next three months	$	544



	Other Post-employment Benefit Plans

	Three Months ended September 30, 2015			Nine Months ended September 30, 2015
Amounts recognized in other comprehensive income/(loss):
Prior service credit	$	—		$	619,454
Prior service cost	—			(9,835		)
Plan curtailment	—			5,409
Net gain arising during the period	—			27,075
Amortization of prior service credit	(89,550		)	(215,076		)
Amortization of net actuarial loss	32,775			80,649
Total amount recognized in other comprehensive income	$	(56,775	)	$	507,676

Estimated amounts that will be amortized from accumulated other comprehensive income/(loss) in the next three months:
Net prior service credit	$	(89,550	)
Net actuarial loss	32,775
Total amount estimated to be amortized from accumulated other comprehensive income/(loss) in the next three months	$	(56,775	)

Assumptions

The determination of the net liability and the net periodic benefit cost recognized for the qualified pension plans and other 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. Certain assumptions, which include, among others, assumptions regarding increases in the amount of other post-employment benefit expenditures to be paid by the Company, reflect the Company's past practice of providing such increases to participants and therefore are considered a substantive plan under the Compensation—Retirement Benefits Topic of the ASC.

Projected Benefit Obligation Assumptions. The weighted average assumptions used in determining projected benefit obligations for these plans at their respective measurement dates are as follows:



	September 30, 2015
Qualified Pension Plans:
Discount rate	4.34	%
Other Post-employment Benefit Plans:
Discount rate	3.77	%

Net Periodic Benefit Cost Assumptions. The weighted average assumptions used in determining net periodic benefit cost are as follows:



	Three Months ended September 30,
	2015		2014
Qualified Pension Plans:
Discount rate	4.34	%	4.92	%
Expected return on plan assets ^(a)	7.31	%	7.66	%
Other Post-employment Benefit Plans:
Discount rate	3.29	%	4.98	%

(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.

Contributions and Benefit Payments

During the nine months ended September 30, 2015, we contributed $8.8 million to our Company sponsored qualified defined benefit pension plans and funded benefit payments of $4.1 million under our other post-employment benefit plans.