PENSION PLAN AND OTHER POST-RETIREMENT BENEFITS

6 Months Ended

Jun. 30, 2013

PENSION PLAN AND OTHER POST-RETIREMENT BENEFITS

PENSION PLAN AND OTHER POST-RETIREMENT BENEFITS

9. PENSION PLAN AND OTHER POST-RETIREMENT BENEFITS

Defined Benefit Plans

We sponsor a qualified defined benefit pension plan (“Retirement Plan”) that is non-contributory covering certain of our hourly employees who fulfill minimum age and service requirements.  Certain salaried employees are also covered by the Retirement Plan, although these benefits have previously been frozen.  In April 2013, the Retirement Plan was amended to among other things: (i) change the benefit formula to a cash balance account as of May 1, 2013 and (ii) freeze entrance into the Retirement Plan so that no person is eligible to become a participant on or following May 1, 2013.

In connection with the acquisition of SureWest, we assumed sponsorship in 2012 of a frozen non-contributory defined benefit pension plan (the “SureWest Plan”).  The SureWest Plan covers certain eligible employees and benefits are based on years of service and the employee’s average compensation during the five highest consecutive years of the last ten years of credited service.  This plan has previously been frozen so that no person is eligible to become a new participant and all future benefit accruals for existing participants have ceased.

We also have two non-qualified supplemental retirement plans (“Supplemental Plans”): the Restoration Plan, which we acquired as part of our North Pittsburgh Systems, Inc. (“North Pittsburgh”) and TXU Communications Venture Company (“TXUCV”) acquisitions, and a Supplemental Executive Retirement Plan (“SERP”), which we acquired as part of our acquisition of SureWest.  The Supplemental Plans provide supplemental retirement benefits to certain former employees by providing for incremental pension payments to partially offset the reduction that would have been payable under the qualified defined benefit pension plans if it were not for limitations imposed by federal income tax regulations. Both plans have previously been frozen so that no person is eligible to become a new participant in the Supplemental Plans.  These plans are unfunded and have no assets.  The benefits paid under the Supplemental Plans are paid from the general operating funds of the Company.

The following table summarizes the components of net periodic pension cost for our defined benefit plans for the quarters and six-month periods ended June 30, 2013 and 2012:

	Quarter Ended				Six Months
	June 30,				Ended June 30,
(In thousands)	2013		2012		2013		2012
Service cost	$	304	$	357	$	608	$	713
Interest cost	3,860		2,641		7,722		5,283
Expected return on plan assets	(5,151)		(2,611)		(10,302)		(5,222)
Net amortization loss	891		809		1,782		1,618
Prior service credit amortization	(70)		(41)		(141)		(83)
Net periodic pension (benefit) cost	$	(166)	$	1,155	$	(331)	$	2,309

Other Non-qualified Deferred Compensation Agreements

We also are liable for deferred compensation agreements with former members of the board of directors and certain other former employees of a subsidiary of TXUCV, which was acquired in 2004.  The benefits are payable for up to the life of the participant and may begin as early as age 65 or upon the death of the participant.  Participants accrue no new benefits as these plans had previously been frozen by TXUCV’s predecessor company prior to our acquisition of TXUCV.  Payments related to the deferred compensation agreements totaled approximately $0.1 million for the three month period ended June 30, 2013 and 2012, respectively and $0.3 million for the six-month periods ended June 30, 2013 and 2012, respectively.  The net present value of the remaining obligations was approximately $1.9 million and $2.2 million at June 30, 2013 and December 31, 2012, respectively, and is included in pension and post-retirement benefit obligations in the accompanying balance sheets.

We also maintain 37 life insurance policies on certain of the participating former directors and employees.  The excess of the cash surrender value of the remaining life insurance policies over the notes payable balances related to these policies is determined by an independent consultant, and totaled $2.1 million at June 30, 2013 and $2.0 million at December 31, 2012. These amounts are included in investments in the accompanying condensed consolidated balance sheets.  Cash principal payments for the policies and any proceeds from the policies are classified as operating activities in the condensed consolidated statements of cash flows.

Post-retirement Benefit Obligations

We sponsor a healthcare and life insurance plan (“Post-retirement Plan”) that provides post-retirement medical benefits and life insurance to certain groups of retired employees.  Retirees share in the cost of healthcare benefits, making contributions that are adjusted periodically—either based upon collective bargaining agreements or because total costs of the program have changed.  Covered expenses for retiree health benefits are paid as they are incurred.  Post-retirement life insurance benefits are fully insured.  The Post-retirement Plan is unfunded and has no assets, and benefits are paid from the general operating funds of the Company.

In connection with the acquisition of SureWest, we acquired its post-retirement benefit plan which provides life insurance benefits and a stated reimbursement for Medicare supplemental insurance to certain eligible retired participants.  This plan has previously been frozen so that no person is eligible to become a new participant.  Employer contributions for retiree medical benefits are separately designated within the SureWest Plan pension trust for the sole purpose of providing payments of retiree medical benefits.  The nature of the assets used to provide payment of retiree medical benefits is the same as that of the SureWest Plan.

	Quarter Ended				Six Months
	June 30,				Ended June 30,
(In thousands)	2013		2012		2013		2012
Service cost	$	231	$	213	$	463	$	427
Interest cost	392		414		783		828
Expected return on plan assets	(58)		-		(116)		-
Net prior service credit amortization	(45)		(47)		(90)		(95)
Net periodic postretirement benefit cost	$	520	$	580	$	1,040	$	1,160

Contributions

We expect to contribute approximately $11.5 million to our pension plans and $2.5 million to our other post-retirement plans in 2013.  As of June 30, 2013, we have contributed $4.6 million and $1.4 million of the annual contribution to the pension plans and other post-retirement plans, respectively.