Retirement Plans

9 Months Ended

Sep. 30, 2023

Retirement Plans [Abstract]

Retirement Plans

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(15) Retirement Plans:

Frontier recognizes actuarial gains (losses) for our pension and postretirement plans in the period they occur. The components of net periodic benefit cost other than the service cost component for our plans as well as any actuarial gains or losses are included in “Investment and other income (loss)” on the consolidated statements of income.

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

	Pension Benefits
	For the three months ended ‎ September 30,				For the nine months ended ‎ September 30,
($ in millions)	2023		2022		2023		2022
Components of total pension benefit cost
Service cost	$	12	$	14	$	39	$	55
Interest cost on projected benefit obligation		31		22		97		71
Expected return on plan assets		(36)		(46)		(111)		(145)
Net periodic pension (benefit)		7		(10)		25		(19)
Pension settlement costs		-		50		-		50
Pension remeasurement gain		-		(91)		-		(91)
Total pension benefit cost (income)	$	7	$	(51)	$	25	$	(60)

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

The value of our pension plan assets increased $50 million from $2,033 million at December 31, 2022 to $2,083 million at September 30, 2023. This increase primarily resulted from changes in the market value of investments of $85 million net of plan expenses, and contributions of $116 million, offset by benefit payments to participants of $151 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 nine months ended September 30, 2022, lump sum pension settlement payments to terminated or retired individuals amounted to $177 million, which exceeded the settlement threshold of $169 million, and as a result, Frontier recognized non-cash settlement charges totaling $50 million during the nine months ended September 30, 2022.

As a result of pension settlement charges incurred during the period, Frontier remeasured its pension plan obligations resulting in a remeasurement gain of $91 million for the nine months ended September 30, 2022. Upon emergence from bankruptcy, Frontier revised its accounting policy to recognize actuarial gains and losses in the period in which they occur. As such, this gain was recorded in “Investment and other income, net” on our consolidated statements of income.

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

	Postretirement
	For the three months ended ‎September 30,				For the nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Components of net periodic postretirement benefit cost
Service cost	$	2	$	3	$	6	$	10
Interest cost on projected benefit obligation		8		9		23		23
Amortization of prior service credit (gain) loss recognized		(6)		(4)		(16)		(10)
OPEB remeasurement (gain) loss		(46)		(84)		(38)		(234)
Total periodic postretirement (benefit) cost	$	(42)	$	(76)	$	(25)	$	(211)

In the first nine months of 2023, Frontier amended the medical coverage for certain postretirement benefit plans, which resulted in a $38 million net remeasurement gain. The net gain was comprised of a loss of $20 million in the first quarter, offset by remeasurement gains of $12 million in the second quarter and $46 million in the third quarter, primarily due to discount rate changes.

For the nine months ended September 30 2022, Frontier amended the medical coverage for certain postretirement benefit plans, which necessitated a remeasurement of its OPEB obligations. This remeasurement resulted in the recognition of a net actuarial gain of $234 million, which was driven primarily from a higher assumed discount rate relative to the previous measurement date. Frontier recognizes actuarial gains and losses in the period in which they occur. As such, this gain was recorded in “Investment and other income, net” on our consolidated statements of income.

During the nine months ended September 30, 2023, and 2022 we capitalized $14 million and $15 million of pension and OPEB expense, respectively, into the cost of our capital expenditures, as the costs relate to our engineering and plant construction activities.