(16) Retirement Plans:

The following tables provide the components of total benefit cost:




	Pension Benefits
	For the three months ended				For the six months ended
	June 30,				June 30,

($ in millions)	2018		2017		2018		2017

Components of total pension benefit cost
Service cost	$	24	$	25	$	48	$	50
Interest cost on projected benefit obligation		30		33		60		67
Expected return on plan assets		(48)		(48)		(98)		(96)
Amortization of unrecognized loss		6		9		13		17
Net periodic pension benefit cost	$	12	$	19	$	23	$	38
Pension settlement costs		25		19		25		62
Total pension benefit cost	$	37	$	38	$	48	$	100


	Postretirement Benefits
	For the three months ended				For the six months ended
	June 30,				June 30,

($ in millions)	2018		2017		2018		2017

Components of net periodic postretirement benefit cost
Service cost	$	6	$	6	$	11	$	11
Interest cost on projected benefit obligation		10		9		19		19
Amortization of prior service cost/(credit)		(3)		(3)		(5)		(5)
Amortization of unrecognized (gain) loss		-		1		1		1
Net periodic postretirement benefit cost	$	13	$	13	$	26	$	26

During the first six months of 2018 and 2017, we capitalized $14 million and $14 million, respectively, of pension and OPEB expense into the cost of our capital expenditures, as the costs relate to our engineering and plant construction activities.

The Pension Plan contains provisions that provide certain employees with the option of receiving a lump sum payment upon retirement. Frontier’s accounting policy is to record these payments as a settlement only if, in the aggregate, they exceed the sum of the annual service and interest costs for the Pension Plan’s net periodic pension benefit cost. During the six months ended June 30, 2018, lump sum pension settlement payments to terminated or retired individuals amounted to $171 million. We expect lump sum pension settlement payments to exceed the settlement threshold of $216 million in 2018, and as a result, Frontier recognized a non-cash settlement charge of $25 million during the first six months of 2018. The non-cash charge accelerated the recognition of a portion of the previously unrecognized actuarial losses in the Pension Plan. These non-cash charges decreased our recorded net income (loss), with an offset to Accumulated other comprehensive loss in shareholders’ equity. As a result of the recognition of the settlement charges in the first six months of 2018, the net pension plan liability was remeasured as of June 30, 2018 to be $570 million, as compared to the $689 million measured and recorded at December 31, 2017.

During the six months ended June 30, 2017, lump sum pension settlement payments to terminated or retired individuals amounted to $362 million, which exceeded the settlement threshold of $234 million, and as a result, Frontier recognized a non-cash settlement charge of $62 million during the first six months of 2017. The non-cash charge accelerated the recognition of a portion of the previously unrecognized actuarial losses in the Pension Plan. These non-cash charges increased our recorded net loss and accumulated deficit, with an offset to accumulated other comprehensive loss in shareholders’ equity. As a result of the recognition of the settlement charges in the first six months of 2017, the net pension plan liability was remeasured as of June 30, 2017 to be $711 million, as compared to the $665 million measured and recorded at March 31, 2017. Frontier did not record any adjustment to the pension plan liability, beyond the settlement charge, as a result of this remeasurement.

Required pension plan contributions for the full year 2018 are approximately $150 million, of which $64 million was contributed to the Plan during the first six months of 2018.

Our Pension Plan assets decreased from $2,674 million at December 31, 2017 to $2,499 million at June 30, 2018, a decrease of $175 million, or 7%. This decrease was a result of benefit payments of $202 million and negative investment returns of $37 million, net of investment management and administrative fees, partially offset by contributions of $64 million.