Retirement Plans

3 Months Ended

Mar. 31, 2021

Retirement Plans [Abstract]

Retirement Plans

(17) Retirement Plans:

The following tables provide the components of total pension and postretirement benefit cost:

	Pension Benefits
	For the three months ended
	March 31,
($ in millions)	2021		2020
Components of total pension benefit cost
Service cost	$	24	$	25
Interest cost on projected benefit obligation		23		30
Expected return on plan assets		(45)		(50)
Amortization of unrecognized loss		18		17
Net periodic pension benefit cost		20		22
Pension settlement costs		-		103
Total pension benefit cost	$	20	$	125
	Postretirement Benefits
	For the three months ended
	March 31,
($ in millions)	2021		2020
Components of net periodic postretirement benefit cost
Service cost	$	5	$	5
Interest cost on projected benefit obligation		7		8
Amortization of prior service cost (credit)		(7)		(8)
Amortization of unrecognized (gain) loss		3		2
Net periodic postretirement benefit cost	$	8	$	7

The components of net periodic benefit cost other than the service cost component are included in “Investment and other income” in the consolidated statement of operations.

The value of our pension plan assets decreased $23 million from $2,507 million at December 31, 2020 to $2,484 million at March 31, 2021. This decrease primarily resulted from benefit payments to participants of $19 million and plan expenses of $5 million, partially offset by investment returns of $1 million.

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 three months ended March 31, 2020, lump sum pension settlement payments to terminated or retired individuals amounted to $310 million, which exceeded the settlement threshold of $211 million, and as a result, Frontier recognized non-cash settlement charges totaling $103 million during the three months ended March 31, 2020. 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 a corresponding offset to accumulated other comprehensive loss in stockholders’ equity.

During the first three months of 2021 and 2020, we capitalized $6 million and $7 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.

Prior to the CARES Act, required pension plan contributions for fiscal year 2020 were approximately $180 million. The CARES Act (passed in March 2020) allowed employers to postpone making pension contributions due in 2020 until January 4, 2021. As a result, Frontier decided to defer all of its remaining 2020 fiscal year required contributions (approximately $147 million including additional interest).

On December 31, 2020, a $27 million contribution was made for the 2019 plan year. The remaining required 2020 plan year contributions were further delayed past the January 4, 2021 deadline (approximately $120 million including additional interest to January 4, 2021). As Frontier has applied for a waiver of delayed contributions per minimum funding standard regulations under Section 412(c) of the Internal Revenue Code and Section 302(c) of the Employee Retirement Income Security Act of 1974. This waiver would delay payments of the 2020 plan year by spreading the 2020 plan year contributions, determined as of January 1, 2020, over the five subsequent plan years.

In March 2021, Congress passed the American Rescue Plan Act, or ARPA, which includes pension funding relief for plan sponsors.  ARPA provides for 1) a shortfall amortization period change from 7 to 15 years with a fresh start for the existing shortfall, with an option to commence in this in the 2019 plan year and 2) interest rate stabilization, with an option to commence in this in the 2020 plan year.

Assuming the pension waiver described above is finalized and incorporating the ARPA pension relief provisions, our pension plan contributions in the fiscal year 2021 are estimated to be $95 million. There were no contributions made during the first three months of 2021.