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Employee Benefits Plans | 12 Months Ended
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Dec. 31, 2015
Disclosure Text Block |
Employee Benefit Plans | Note 12 Employee Benefit Plans Defined Contribution Plans TDS sponsors a qualified noncontributory defined contribution pension plan. The plan provides benefits for certain employees of TDS C orporate, TDS Telecom and U.S. Cellular. Under this plan, pension costs are calculated separately for each participant and are funded annually. Total pension costs were $16.4 million, $16.4 millio n and $16.2 million in 2015, 2014 and 2013, respectively. In addition, TDS sponsors a defined contri bution retirement savings plan (“401(k)”) plan. Total costs incurred from TDS’ contributions to the 401(k) plan were $25.7 million, $25.3 million and $24.8 million in 2015, 2014 and 2013, respectively. TDS also sponsors an unfunded nonqualified deferred supplemental executive retirement plan for c ertain employees to offset the reduction of benefits caused by the limitation on annual employee compensation under the tax laws. Other Post-Retirement Benefits TDS sponsors a defined benefit post-retirement plan that provides medical benefits to ret irees and that covers certain employees of TDS Corporate and TDS Telecom. The plan is contributory, with retiree contributions adjusted annually. In August 2015, TDS approved an amendment to its defined benefit post-retirement plan. Under this plan, TDS provides a subsidy to retirees to pay for various medical plan options. The amendment increased subsidy caps and became effective January 1, 2016. The plan amendment, along with certain valuation assumption updates, increased the plan’s benefit obligatio n by $8.6 million. This amount is included in TDS’ December 31, 2015 Accumulated other comprehensive income (loss) as a component of Net actuarial gains (losses) and Prior service cost. The following amounts are included in Accumulated other comprehensive income (loss) in the Consolidated Balance Sheet before affecting such amounts for income taxes:
December 31, | 2015 |  | 2014
(Dollars in thousands) |  |  |  |  |
Net prior service costs | $ | 6,846 |  | $ | 17,246
Net actuarial loss |  | (7,280) |  |  | (8,436)
| $ | (434) |  | $ | 8,810
The estimated net actuarial loss and prior service cost gain for the postretirement benefit plans that will be amortized from Accumulated other comprehensive loss into net periodic benefit cost during 2016 are $0.2 million and $2.0 million, respectively. The following table reconciles the beginning and ending balances of the benefit obligation and the fair value of plan assets for the other post-retirement benefit plan.
December 31, | 2015 |  | 2014
(Dollars in thousands) |  |  |  |  |
Change in benefit obligation |  |  |  |  |
| Benefit obligation at beginning of year | $ | 34,645 |  | $ | 46,142
| Service cost |  | 549 |  |  | 1,018
| Interest cost |  | 1,540 |  |  | 2,255
| Plan amendments |  | 7,412 |  |  | (2,057)
| Actuarial (gain) loss |  | (3,723) |  |  | (10,897)
| Prescription drug subsidy |  | 227 |  |  | 264
| Employee contribution |  | 2,222 |  |  | 2,216
| Benefits paid |  | (4,101) |  |  | (4,296)
| Benefit obligation at end of year |  | 38,771 |  |  | 34,645
Change in plan assets |  |  |  |  |
| Fair value of plan assets at beginning of year |  | 51,324 |  |  | 49,743
| Actual return (loss) on plan assets |  | 395 |  |  | 3,495
| Employee contribution |  | 2,222 |  |  | 2,216
| Employer contribution |  | 168 |  |  | 166
| Benefits paid |  | (4,101) |  |  | (4,296)
| Fair value of plan assets at end of year |  | 50,008 |  |  | 51,324
Funded status | $ | 11,237 |  | $ | 16,679
The funded status identified above is recorded as a component of Other assets and deferred charges in TDS’ Consolidated Balance Sheet as of December 31, 2015 and 2014. The following table sets forth by level within the fair value hierarchy the plans’ assets at fair value, as of December 31, 2015 and 2014. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. A financial instrument’s level within the fair value hierarchy is not representative of its expected performance or its over all risk profile, and therefore Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets. There were no Level 3 assets for any years presented. Mutual funds are valued based on the closing price reported on the active market on which the individual securities are traded. The bank common trust is entirely comprised of the BlackRock Intermediate Government/Credit Bond Index Fund F (“BlackRock Bond Fund”) and is valued using the market approach which values the underlying investments in the fund using observable inputs for similar assets.
December 31, 2015 | Level 1 |  | Level 2 |  | Total
(Dollars in thousands) |  |  |  |  |  |  |  |
Mutual funds |  |  |  |  |  |  |  |
| International equity 1 | $ | 11,912 |  | $ | – |  | $ | 11,912
| Money market 2 |  | 3,139 |  |  | – |  |  | 3,139
| US large cap 3 |  | 22,327 |  |  | – |  |  | 22,327
Bank common trust |  |  |  |  |  |  |  |
| Bond 4 |  | – |  |  | 12,630 |  |  | 12,630
Total plan assets at fair value | $ | 37,378 |  | $ | 12,630 |  | $ | 50,008
December 31, 2014 | Level 1 |  | Level 2 |  | Total
(Dollars in thousands) |  |  |  |  |  |  |  |
Mutual funds |  |  |  |  |  |  |  |
| Bond 5 | $ | 12,842 |  | $ | – |  | $ | 12,842
| International equity 1 |  | 12,003 |  |  | – |  |  | 12,003
| Money market 2 |  | 2,053 |  |  | – |  |  | 2,053
| US large cap 3 |  | 20,191 |  |  | – |  |  | 20,191
| US small cap 6 |  | 4,234 |  |  | – |  |  | 4,234
Other |  | – |  |  | 1 |  |  | 1
Total plan assets at fair value | $ | 51,323 |  | $ | 1 |  | $ | 51,324
1 | International equity - This type of fund seeks to provide long-term capital appreciation by investing in the stocks of companies located outside the United States that are considered to have the potential for above-average capital appreciation.
2 | Money market - This type of fund seeks as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity by investing in a diversified portfolio of high-quality, dollar-denominated short-term debt securities.
3 | US large cap - This type of fund seeks to track the performance of several benchmark indices that measure the investment return of large-capitalization stocks. The funds attempt to replicate the indices by investing substantially all of their assets in the stocks that make up the various indices in approximately the same proportion as the weighting in the indices.
4 | Bond (bank common trust) – This type of fund seeks to achieve maximum total return by investing in Bond Index Funds and other short-term investments.
5 | Bond (mutual funds) - This type of fund seeks to achieve a maximum total return, consistent with preservation of capital and prudent investment management by investing in a wide spectrum of fixed income instruments including bonds, debt securities and other similar instruments issued by government and private-sector entities.
6 | US small cap - This type of fund seeks to track the performance of a benchmark index that measures the investment return of small-capitalization stocks. The fund attempts to replicate the index by investing substantially all of its assets in the stocks that make up the index in approximately the same proportion as the weighting in the index.
The following table summarizes how plan assets are invested.
|  |  |  | Allocation of Plan Assets
|  |  |  | at December 31,
Investment |  | Target Asset |  |  |  |
Category |  | Allocation |  | 2015 |  | 2014
U.S. equities |  | 45% |  | 44.7% |  | 47.6%
International equities |  | 25% |  | 23.8% |  | 23.4%
Debt securities |  | 30% |  | 31.5% |  | 29.0%
The post-retirement benefit fund engages multiple asset managers to ensure proper diversification of the investment portfolio within each asset category. The investment objective is to meet or exceed the rate of return of a performance index comprised of 45% Dow Jones U.S. Total Stock Market Index, 25% FTSE All World (excluding U.S.) Stock Index, and 30% Barclays Capital Aggregate Bond Index. The three-year and five-year aver age rates of return for TDS’ post-retirement benefit fund are 8.02% and 7.40%, respectively. The post-retirement benefit fund does not hold any debt or equity securities issued by TDS, U.S. Cellul ar or any related parties. TDS is not required to set aside current funds for its future retiree health insurance benefits. The decision to contribute to the plan assets is based upon several factors, including the funded status of the plan, market condit ions, alternative investment opportunities, tax benefits and other circumstances. In accordance with applicable income tax regulations, annual contributions to fund the costs of future retiree medical benefits may not exceed certain thresholds. TDS has n ot determined whether it will make a contribution to the plan in 2016. Net periodic benefit cost recorded in the Consolidated Statement of Operations includes the following components:
Year Ended December 31, | 2015 |  | 2014 |  | 2013
(Dollars in thousands) |  |  |  |  |  |  |  |
Service cost | $ | 549 |  | $ | 1,018 |  | $ | 1,348
Interest cost |  | 1,540 |  |  | 2,255 |  |  | 2,137
Expected return on plan assets |  | (3,252) |  |  | (3,402) |  |  | (3,065)
Amortization of prior service costs 1 |  | (2,988) |  |  | (3,644) |  |  | (3,605)
Amortization of actuarial losses 2 |  | 290 |  |  | 1,287 |  |  | 2,452
Net post-retirement cost (benefit) | $ | (3,861) |  | $ | (2,486) |  | $ | (733)
1 | Based on straight-line amortization over the average time remaining before active employees become fully eligible for plan benefits.
2 | Based on straight-line amortization over the average time remaining before active employees retire.
The following assumptions were used to determine benefit obligations and net periodic benefit cost:
December 31, | 2015 |  | 2014
Benefit obligations |  |  |
Discount rate | 4.40% |  | 4.20%
Net periodic benefit cost |  |  |
Discount rate | 4.20% |  | 5.00%
Expected return on plan assets | 6.50% |  | 7.00%
The discount rate for 2015 and 2014 was determined using a hypothetical Aa spot yield curve represented by a series of annualized individual spot discount rates from six months to 99 years. The spot rate curve was derived from a direct calculation of the implied forward rate curve based on the included bond cash flows. This yi eld curve, when populated with projected cash flows that represent the expected timing and amount of TDS plan benefit payments, produces a single effective interest discount rate that is used to measure the plan’s liabilities. The expected rate of return was determined using the target asset allocation for the TDS plan and rate of return expectations for each asset class. The measurement date for actuarial determination was December 31, 2015. For measurement purposes, the annual rate of increase in the per capita cost of covered health care benefits was assumed for 2015 to be 9.5% for plan participants aged 65 and above, and 7.3% for participants under age 65. For all participants the 2015 annual rate of increase is expected to decrease to 5.0% by 2024. The 2014 expected rate of increase was 7.8% for plan participants aged 65 and above, and 7.5% for participants under age 65, decreasing to 5.0% for all participants by 2022. A 1% increase or decrease in assumed health care cost trend rates would have the following effects as of and for the year ended December 31, 2015:
| One Percent
| Increase |  | Decrease
(Dollars in thousands) |  |  |  |  |
Effect on total service and interest cost components | $ | 14 |  | $ | (13)
Effect on post-retirement benefit obligation | $ | 230 |  | $ | (202)
The following estimated future benefit payments, which reflect expected future service, are expected to be paid:
Year | Estimated Future Post-Retirement Benefit Payments
(Dollars in thousands) |  |
2016 | $ | 1,823
2017 |  | 1,969
2018 |  | 2,061
2019 |  | 2,163
2020 |  | 2,257
2021-2025 |  | 12,229

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- Definition The entire disclosure for postemployment benefits, which may include supplemental unemployment benefits, obligations recognized for all types of benefits provided to former or inactive employees, their beneficiaries, and covered dependents after employment but before retirement. Disclosure may also include discussion that an obligation for postemployment benefits is not accrued in accordance with regulation only because the amount cannot be reasonably estimated. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 712 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6410195&loc=d3e80090-111668 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 712 -SubTopic 10 -Section 25 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6410138&loc=d3e79691-111665 + Details
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