(17)	Retirement Plans:

We sponsor a noncontributory defined benefit pension plan covering a significant number of our former and current employees and other postretirement benefit plans that provide medical, dental, life insurance and other benefits for covered retired employees and their beneficiaries and covered dependents. The benefits are based on years of service and final average pay or career average pay. Contributions are made in amounts sufficient to meet ERISA funding requirements while considering tax deductibility. Plan assets are invested in a diversified portfolio of equity and fixed-income securities and alternative investments.

The accounting results for pension and other postretirement benefit costs and obligations are dependent upon various actuarial assumptions applied in the determination of such amounts. These actuarial assumptions include the following: discount rates, expected long-term rate of return on plan assets, future compensation increases, employee turnover, healthcare cost trend rates, expected retirement age, optional form of benefit and mortality. We review these assumptions for changes annually with our independent actuaries. We consider our discount rate and expected long-term rate of return on plan assets to be our most critical assumptions.

The discount rate is used to value, on a present value basis, our pension and other postretirement benefit obligations as of the balance sheet date. The same rate is also used in the interest cost component of the pension and postretirement benefit cost determination for the following year. The measurement date used in the selection of our discount rate is the balance sheet date. Our discount rate assumption is determined annually with assistance from our independent actuaries based on the pattern of expected future benefit payments and the prevailing rates available on long-term, high quality corporate bonds that approximate the benefit obligation. In making this determination we consider, among other things, the yields on the Citigroup Above-Median Pension Curve, the Towers-Watson Index, the general movement of interest rates and the changes in those rates from one period to the next. This rate can change from year-to-year based on market conditions that affect corporate bond yields. Our discount rate was 4.50% at year-end 2011, 5.25% at year-end 2010 and 5.75% at year-end 2009.

The expected long-term rate of return on plan assets is applied in the determination of periodic pension and postretirement benefit cost as a reduction in the computation of the expense. In developing the expected long-term rate of return assumption, we considered published surveys of expected market returns, 10 and 20 year actual returns of various major indices, and our own historical 5-year, 10-year and 20-year investment returns. The expected long-term rate of return on plan assets is based on an asset allocation assumption of 35% to 55% in fixed income securities, 35% to 55% in equity securities and 5% to 15% in alternative investments. We review our asset allocation at least annually and make changes when considered appropriate. Our pension asset investment allocation decisions are made by the Retirement Investment & Administration Committee (RIAC), a committee comprised of members of management, pursuant to a delegation of authority by the Retirement Plan Committee of the Board of Directors. The RIAC is responsible for reporting its actions to the Retirement Plan Committee. Asset allocation decisions take into account expected market return assumptions of various asset classes as well as expected pension benefit payment streams. When analyzing anticipated benefit payments, management considers both the absolute amount of the payments as well as the timing of such payments. In 2011, 2010 and 2009, our expected long-term rate of return on plan assets was 8.00%. For 2012, we will assume a rate of return of 7.75%. Our pension plan assets are valued at fair value as of the measurement date. The measurement date used to determine pension and other postretirement benefit measures for the pension plan and the postretirement benefit plan is December 31.

Pension Benefits

The following tables set forth the pension plan's projected benefit obligations and fair values of plan assets as of December 31, 2011 and 2010 and the components of total periodic benefit cost for the years ended December 31, 2011, 2010 and 2009:

($ in thousands)	2011			2010

Change in projected benefit obligation (PBO)
PBO at beginning of year	$	1,644,657		$	890,576
PBO for plans of Acquired Business at contracted discount rate		-			581,256
Actuarial adjustment to PBO for plans of Acquired Business (1)		-			64,098
Service cost		38,879			21,169
Interest cost		84,228			67,735
Actuarial loss/(gain)		160,390			87,024
Benefits paid		(128,841	)		(67,270	)
Special termination benefits		-			69
PBO at end of year	$	1,799,313		$	1,644,657

Change in plan assets
Fair value of plan assets at beginning of year	$	1,290,274		$	608,625
Fair value of plan assets for Acquired Business as of
acquisition date		-			581,256
Actual return on plan assets		19,883			154,554
Employer contributions		76,674			13,109
Benefits paid		(128,841	)		(67,270	)
Fair value of plan assets at end of year	$	1,257,990		$	1,290,274

Funded status	$	(541,323	)	$	(354,383	)

Amounts recognized in the consolidated balance sheet
Pension and other postretirement benefits	$	(541,323	)	$	(354,383	)
Accumulated other comprehensive loss	$	575,163		$	349,264

(1) Represents the difference between the contracted discount rate agreed upon in the Transaction and the discount rate used by Frontier to value the liability on July 1, 2010 for financial reporting purposes.

In connection with the completion of the Transaction on July 1, 2010, certain employees were transferred from various Verizon pension plans into 12 pension plans that were then merged with the Frontier Communications Pension Plan (the Plan) effective August 31, 2010. Assets of $438.8 million were transferred into the Plan during the second half of 2010 and assets of $106.9 million (including $18.9 million in earnings on the assets) were transferred into the Plan in August 2011. The Plan has a receivable of $51.6 million as of December 31, 2011, that will be settled by the transfer of assets in 2012.

	Expected
($ in thousands)	2012			2011			2010			2009

Components of total periodic benefit cost
Service cost				$	38,879		$	21,169		$	6,098
Interest cost on projected benefit obligation					84,228			67,735			52,127
Expected return on plan assets					(100,558	)		(69,831	)		(44,712	)
Amortization of prior service cost/(credit)	$	(199	)		(199	)		(199	)		(255	)
Amortization of unrecognized loss		31,147			15,364			27,393			27,144
Net periodic benefit cost					37,714			46,267			40,402
Special termination charge					-			69			1,567
Total periodic benefit cost				$	37,714		$	46,336		$	41,969

We capitalized $10.2 million, $8.3 million and $7.5 million of pension and OPEB expense into the cost of our capital expenditures during the years ended December 31, 2011, 2010 and 2009, respectively, as the costs relate to our engineering and plant construction activities.

Based on current assumptions and plan asset values, we estimate that our 2012 pension and other postretirement benefit expenses will be approximately $75 million to $85 million before amounts capitalized into the cost of capital expenditures.

The plan's weighted average asset allocations at December 31, 2011 and 2010 by asset category are as follows:

	2011			2010
Asset category:
Equity securities		45	%		50	%
Debt securities		40	%		39	%
Alternative investments		14	%		10	%
Cash and other		1	%		1	%
Total		100	%		100	%

The plan's expected benefit payments over the next 10 years are as follows:

($ in thousands)

Year		Amount
2012		$	103,863
2013			110,058
2014			116,938
2015			125,617
2016			129,057
	2017 - 2021		687,871
Total		$	1,273,404

We made contributions to our pension plan of approximately $76.7 million in 2011, consisting of cash payments of $18.6 million and, as described below, the contribution of real property with a fair value of $58.1 million.

On September 8, 2011, the Company contributed four administrative properties to its qualified defined benefit pension plan. None of the buildings were under state regulation that required individual PUC approval. The pension plan obtained independent appraisals of the properties and, based on these appraisals, the pension plan recorded the contributions at their fair value of $58.1 million. The Company has entered into leases for the contributed properties for 15 years at a combined aggregate annual rent of approximately $5.8 million. The properties are managed on behalf of the pension plan by an independent fiduciary, and the terms of the leases were negotiated with the fiduciary on an arm's-length basis.

The contribution and leaseback of the properties was treated as a financing transaction and, accordingly, the Company will continue to depreciate the carrying value of the properties in its financial statements and no gain or loss was recognized. An obligation of $58.1 million was recorded in our consolidated balance sheet as “Other liabilities” for $57.5 million and as “Other current liabilities” for $0.6 million and will be reduced as lease payments are made to the pension plan.

We made cash contributions of $13.1 million to the Plan during 2010. No contributions were made to the Plan during 2009. We expect that we will make a cash contribution to the Plan of approximately $60 million in 2012.

The accumulated benefit obligation for the Plan was $1,673.4 million and $1,372.6 million at December 31, 2011 and 2010, respectively.

Assumptions used in the computation of annual pension costs and valuation of the year-end obligations were as follows:

	2011	2010	2009
Discount rate - used at year end to value obligation	4.50%	5.25%	5.75%
Discount rate - used to compute annual cost	5.25%	5.75%	6.50%
Expected long-term rate of return on plan assets	8.00%	8.00%	8.00%
Rate of increase in compensation levels	2.50%	3.00%	3.00%

Postretirement Benefits Other Than Pensions-“OPEB”

The following tables set forth the OPEB plan's benefit obligations, fair values of plan assets and the postretirement benefit liability recognized on our consolidated balance sheets at December 31, 2011 and 2010 and the components of net periodic postretirement benefit costs for the years ended December 31, 2011, 2010 and 2009.

($ in thousands)	2011			2010

Change in benefit obligation

Benefit obligation at beginning of year	$	478,576		$	189,290
Benefit obligation for Acquired Business		-			285,451
Revision to the benefit obligation for Acquired Business		(125,445	)		-
Service cost		8,958			7,956
Interest cost		17,722			17,883
Plan participants' contributions		4,389			3,976
Actuarial loss		22,564			16,670
Benefits paid		(15,168	)		(14,719	)
Plan change		-			(27,931	)
Benefit obligation at end of year	$	391,596		$	478,576

Change in plan assets
Fair value of plan assets at beginning of year	$	6,240		$	8,028
Actual return on plan assets		219			600
Plan participants' contributions		4,389			3,976
Employer contribution		9,421			8,355
Benefits paid		(15,168	)		(14,719	)
Fair value of plan assets at end of year	$	5,101		$	6,240

Funded status	$	(386,495	)	$	(472,336	)


Amounts recognized in the consolidated balance sheet
Current liabilities	$	(9,117	)	$	(10,131	)
Pension and other postretirement benefits	$	(377,378	)	$	(462,205	)
Accumulated other comprehensive loss	$	41,811		$	13,369

($ in thousands)	Expected
	2012			2011			2010			2009

Components of net periodic postretirement benefit cost
Service cost				$	8,958		$	7,956		$	361
Interest cost on projected benefit obligation					17,722			17,883			11,017
Expected return on plan assets					(324	)		(436	)		(439	)
Amortization of prior service cost/(credit)	$	(10,010	)		(10,198	)		(8,157	)		(7,751	)
Amortization of unrecognized loss		7,642			4,424			4,917			5,041
Net periodic postretirement benefit cost				$	20,582		$	22,163		$	8,229

Assumptions used in the computation of annual OPEB costs and valuation of the year-end OPEB obligations were as follows:

	2011	2010	2009
Discount rate - used at year end to value obligation	4.50% - 4.75%	5.25%	5.75%
Discount rate - used to compute annual cost	5.25%	5.75%	6.50%
Expected long-term rate of return on plan assets	6.00% - 3.00%	6.00%	6.00%

The OPEB plan's expected benefit payments over the next 10 years are as follows:

($ in thousands)
		Gross		Medicare Part D
Year		Benefits		Subsidy		Total
2012		$	13,211	$	372	$	12,839
2013			14,575		446		14,129
2014			15,955		537		15,418
2015			17,630		635		16,995
2016			19,412		737		18,675
	2017 - 2021		122,665		6,051		116,614
Total		$	203,448	$	8,778	$	194,670

For purposes of measuring year-end benefit obligations, we used, depending on medical plan coverage for different retiree groups, an 8.0% annual rate of increase in the per-capita cost of covered medical benefits, gradually decreasing to 5% in the year 2017 and remaining at that level thereafter. The effect of a 1% increase in the assumed medical cost trend rates for each future year on the aggregate of the service and interest cost components of the total postretirement benefit cost would be $1.0 million and the effect on the accumulated postretirement benefit obligation for health benefits would be $17.6 million. The effect of a 1% decrease in the assumed medical cost trend rates for each future year on the aggregate of the service and interest cost components of the total postretirement benefit cost would be $(0.9) million and the effect on the accumulated postretirement benefit obligation for health benefits would be $(15.8) million.

In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Act) became law. The Act introduced a prescription drug benefit under Medicare. It includes a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the Medicare Part D benefit. The amount of the federal subsidy is based on 28% of an individual beneficiary's annual eligible prescription drug costs ranging between $250 and $5,000. We have determined that the Company-sponsored postretirement healthcare plans that provide prescription drug benefits are actuarially equivalent to the Medicare Prescription Drug benefit. The impact of the federal subsidy has been incorporated into the calculation.

The amounts in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit cost at December 31, 2011 and 2010 are as follows:

($ in thousands)	Pension Plan					OPEB
	2011		2010			2011			2010
Net actuarial loss	$	574,998	$	349,298		$	82,841		$	64,598
Prior service cost/(credit)		165		(34	)		(41,030	)		(51,229	)
Total	$	575,163	$	349,264		$	41,811		$	13,369

The amounts recognized as a component of accumulated comprehensive income for the years ended December 31, 2011 and 2010 are as follows:

	Pension Plan						OPEB
($ in thousands)	2011			2010			2011			2010

Accumulated other comprehensive income at
beginning of year	$	349,264		$	374,157		$	13,369		$	21,554

Net actuarial gain (loss) recognized during year		(15,364	)		(27,393	)		(4,424	)		(4,919	)
Prior service (cost)/credit recognized during year		199			199			10,198			8,158
Net actuarial loss (gain) occurring during year		241,064			2,301			22,668			16,506
Prior service cost (credit) occurring during year		-			-			-			(27,930	)
Net amount recognized in comprehensive income
for the year		225,899			(24,893	)		28,442			(8,185	)
Accumulated other comprehensive income at end
of year	$	575,163		$	349,264		$	41,811		$	13,369

401(k) Savings Plans

We sponsor employee retirement savings plans under section 401(k) of the Internal Revenue Code. The plans cover substantially all full-time employees. Under certain plans, we provide matching contributions. Employer contributions were $22.2 million, $14.9 million and $4.4 million for 2011, 2010 and 2009, respectively. The amounts for 2011 and 2010 include employer contributions of $15.9 million and $10.6 million for certain former employees of the Acquired Business under three separate plans.