PENSION AND OTHER POSTRETIREMENT BENEFITS:

SJI has several defined benefit pension plans and other postretirement benefit plans. SJG participates in the defined benefit pension plans and other postretirement benefit plans of SJI. Approximately 39% and 56% of SJI's and SJG's current, full-time, regular employees, respectively, will be entitled to annuity payments upon retirement. Participation in the Company's qualified defined benefit pension plans was closed to new employees beginning in 2003; however, employees who are not eligible for these pension plans are eligible to receive an enhanced version of SJI's defined contribution plan. Certain SJI and SJG officers also participate in a non-funded supplemental executive retirement plan (SERP), a non-qualified defined benefit pension plan. The other postretirement benefit plans provide health care and life insurance benefits to some retirees.

Net periodic benefit cost related to the SJI employee and officer pension and other postretirement benefit plans consisted of the following components (in thousands):



SJI (includes SJG and all other consolidated subsidiaries):	Pension Benefits
	2017			2016			2015
Service Cost	$	4,989		$	4,843		$	5,337
Interest Cost	11,772			12,125			11,168
Expected Return on Plan Assets	(14,105		)	(13,508		)	(14,789		)
Amortizations:
Prior Service Cost	131			212			212
Actuarial Loss	10,282			9,394			10,608
Net Periodic Benefit Cost	13,069			13,066			12,536
Capitalized Benefit Costs	(4,723		)	(4,645		)	(4,805		)
Deferred Benefit Costs	(527		)	(645		)	(1,007		)
Total Net Periodic Benefit Expense	$	7,819		$	7,776		$	6,724



SJI (includes SJG and all other consolidated subsidiaries):	Other Postretirement Benefits
	2017			2016			2015
Service Cost	$	910		$	851		$	1,116
Interest Cost	2,418			2,615			2,973
Expected Return on Plan Assets	(3,411		)	(3,104		)	(2,993		)
Amortizations:
Prior Service (Credits) Cost	(344		)	(344		)	608
Actuarial Loss	1,238			1,109			1,342
Net Periodic Benefit Cost	811			1,127			3,046
Capitalized Benefit Costs	(46		)	(277		)	(1,043		)
Curtailment Costs (Credit)	(106		)	—			—
Deferred Benefit Costs	—			—			(256		)
Total Net Periodic Benefit Expense	$	659		$	850		$	1,747

Net periodic benefit cost related to the SJG employee and officer pension and other postretirement benefit plans consisted of the following components (in thousands):



SJG:	Pension Benefits
	2017			2016			2015
Service Cost	$	4,303		$	4,144		$	4,430
Interest Cost	9,925			10,292			9,357
Expected Return on Plan Assets	(11,366		)	(11,029		)	(11,914		)
Amortization:
Prior Service Cost (Credits)	127			203			203
Actuarial Loss	8,692			7,975			8,969
Net Periodic Benefit Cost	11,681			11,585			11,045
Capitalized Benefit Costs	(4,723		)	(4,645		)	(4,805		)
Affiliate SERP Allocations	(2,235		)	(1,960		)	(1,688		)
Deferred Benefit Costs	(527		)	(644		)	(1,007		)
Total Net Periodic Benefit Expense	$	4,196		$	4,336		$	3,545



SJG:	Other Postretirement Benefits
	2017			2016			2015
Service Cost	$	582		$	576		$	726
Interest Cost	1,897			2,120			2,406
Expected Return on Plan Assets	(3,101		)	(2,823		)	(2,708		)
Amortization:
Prior Service Cost (Credits)	(257		)	(257		)	499
Actuarial Loss	972			945			1,107
Net Periodic Benefit Cost	93			561			2,030
Capitalized Benefit Costs	(46		)	(277		)	(1,043		)
Deferred Benefit Costs	—			—			(256		)
Total Net Periodic Benefit Expense	$	47		$	284		$	731

Capitalized benefit costs reflected in the tables above relate to SJG’s construction program. Deferred benefit costs relate to the deferral of incremental expenses associated with the adoption of new mortality tables in 2015. Deferred benefit costs will be recovered through rates as part of SJG's recent base rate case settlement (See Note10)

Companies with publicly traded equity securities that sponsor a postretirement benefit plan are required to fully recognize, as an asset or liability, the overfunded or underfunded status of its benefit plans and recognize changes in the funded status in the year in which the changes occur. Changes in funded status are generally reported in Other Comprehensive Loss; however, since SJG recovers all prudently incurred pension and postretirement benefit costs from its ratepayers, a significant portion of the charges resulting from the recording of additional liabilities under this requirement are reported as regulatory assets (see Note 11).

Details of the activity within the Regulatory Asset and Accumulated Other Comprehensive Loss associated with Pension and Other Postretirement Benefits are as follows (in thousands):



SJI (includes SJG and all other consolidated subsidiaries):	Regulatory Assets						Accumulated Other Comprehensive Loss (pre-tax)
	Pension Benefits			Other Postretirement Benefits			Pension Benefits			Other Postretirement Benefits
Balance at January 1, 2016	$	64,432		$	15,347		$	35,066		$	2,062

Amounts Arising during the Period:
Net Actuarial Gain	9,706			2,584			8,370			829
Prior Service Credit	—			257			—			84
Amounts Amortized to Net Periodic Costs:
Net Actuarial Loss	(5,485		)	(945		)	(3,838		)	(154		)
Prior Service Cost	(203		)	—			(8		)	—

Balance at December 31, 2016	68,450			17,243			39,590			2,821

Amounts Arising during the Period:
Net Actuarial Gain (Loss)	2,711			(3,286		)	18,506			1,614
Prior Service Credit	—			257			—			84
Amounts Amortized to Net Periodic Costs:
Net Actuarial Loss	(6,066		)	(972		)	(4,160		)	(1,013		)
Prior Service Cost	(126		)	—			(4		)	—

Balance at December 31, 2017	$	64,969		$	13,242		$	53,932		$	3,506



SJG:	Regulatory Assets						Accumulated Other Comprehensive Loss (pre-tax)
	Pension Benefits			Other Postretirement Benefits			Pension Benefits			Other Postretirement Benefits
Balance at January 1, 2016	$	64,432		$	15,347		$	20,463		$	—

Amounts Arising during the Period:
Net Actuarial Gain	9,706			2,584			6,129			—
Prior Service Credit	—			257			—			—
Amounts Amortized to Net Periodic Costs:
Net Actuarial Loss	(5,485		)	(945		)	(2,490		)	—
Prior Service Cost	(203		)	—			—			—

Balance at December 31, 2016	68,450			17,243			24,102			—

Amounts Arising during the Period:
Net Actuarial Gain	2,711			(3,286		)	17,881			—
Prior Service Credit	—			257			—			—
Amounts Amortized to Net Periodic Costs:
Net Actuarial Loss	(6,066		)	(972		)	(2,627		)	—
Prior Service Cost	(126		)	—			—			—

Balance at December 31, 2017	$	64,969		$	13,242		$	39,356		$	—

The estimated costs that will be amortized from Regulatory Assets for SJI and SJG into net periodic benefit costs in 2018 are as follows (in thousands):



SJI and SJG (costs are the same for both entities):	Pension Benefits		Other Postretirement Benefits
Prior Service Cost/(Credit)	$	124	$	(257	)
Net Actuarial Loss	$	5,847	$	743

The estimated costs that will be amortized from for SJI and SJG Accumulated Other Comprehensive Loss into net periodic benefit costs in 2018 are as follows (in thousands):



	Pension Benefits		Other Postretirement Benefits
SJI (includes SJG and all other consolidated subsidiaries):
Prior Service Cost/(Credit)	$	6	$	(87	)
Net Actuarial Loss	$	5,665	$	213

SJG:
Prior Service Cost/(Credit)	$	—	$	—
Net Actuarial Loss	$	4,143	$	—

A reconciliation of the plans' benefit obligations, fair value of plan assets, funded status and amounts recognized in SJI's consolidated balance sheets follows (in thousands):



SJI (includes SJG and all other consolidated subsidiaries):	Pension Benefits						Other Postretirement Benefits
	Pension Benefits						Other Postretirement Benefits
	2017			2016			2017			2016
Change in Benefit Obligations:
Benefit Obligation at Beginning of Year	$	278,288		$	254,195		$	60,350		$	57,430
Service Cost	4,989			4,843			910			851
Interest Cost	11,772			12,125			2,418			2,615
Actuarial Loss (Gain)	32,893			18,254			1,411			3,121
Retiree Contributions	—			—			19			81
Plan Amendments	—			—			—			—
Benefits Paid	(11,653		)	(11,129		)	(2,825		)	(3,748		)
Benefit Obligation at End of Year	$	316,289		$	278,288		$	62,283		$	60,350

Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year	$	189,542		$	184,824		$	50,532		$	47,759
Actual Return on Plan Assets	25,807			13,569			7,390			2,784
Employer Contributions	12,369			2,278			2,806			3,656
Retiree Contributions				—			19			81
Benefits Paid	(11,653		)	(11,129		)	(2,825		)	(3,748		)
Fair Value of Plan Assets at End of Year	$	216,065		$	189,542		$	57,922		$	50,532


Funded Status at End of Year:	$	(100,224	)	$	(88,746	)	$	(4,361	)	$	(9,818	)
Amounts Related to Unconsolidated Affiliate	135			326			518			540
Accrued Net Benefit Cost at End of Year	$	(100,089	)	$	(88,420	)	$	(3,843	)	$	(9,278	)

Amounts Recognized in the Statement of Financial Position Consist of:
Current Liabilities	$	(2,388	)	$	(2,463	)	$	—		$	—
Noncurrent Liabilities	(97,701		)	(85,957		)	(3,843		)	(9,278		)
Net Amount Recognized at End of Year	$	(100,089	)	$	(88,420	)	$	(3,843	)	$	(9,278	)

Amounts Recognized in Regulatory Assets Consist of:
Prior Service Costs	$	428		$	538		$	(2,775	)	$	(3,032	)
Net Actuarial Loss	64,541			67,912			16,017			20,275
	$	64,969		$	68,450		$	13,242		$	17,243

Amounts Recognized in Accumulated Other Comprehensive Loss Consist of (pre-tax):
Prior Service Costs	$	47		$	69		$	(906	)	$	(989	)
Net Actuarial Loss	53,885			39,521			4,412			3,810
	$	53,932		$	39,590		$	3,506		$	2,821



SJG:							Other
	Pension Benefits						Postretirement Benefits
	2017			2016			2017			2016
Change in Benefit Obligations:
Benefit Obligation at Beginning of Year	$	236,356		$	213,660		$	48,549		$	46,518
Service Cost	4,303			4,144			582			576
Interest Cost	9,925			10,292			1,897			2,120
Actuarial Loss (Gain)	27,892			17,463			328			2,292
Retiree Contributions	—			—			15			70
Plan Amendments	—			—			—			—
Benefits Paid	(9,410		)	(9,203		)	(2,273		)	(3,027		)
Benefit Obligation at End of Year	$	269,066		$	236,356		$	49,098		$	48,549
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year	$	154,729		$	149,032		$	45,948		$	43,428
Actual Return on Plan Assets	18,666			12,656			6,715			2,531
Employer Contributions	10,292			2,244			2,259			2,946
Retiree Contributions	—			—			14			70
Benefits Paid	(9,410		)	(9,203		)	(2,273		)	(3,027		)
Fair Value of Plan Assets at End of Year	$	174,277		$	154,729		$	52,663		$	45,948

Funded Status at End of Year:
Accrued Net Benefit Cost at End of Year	$	(94,789	)	$	(81,627	)	$	3,565		$	(2,601	)
Amounts Recognized in the Statement of Financial Position Consist of:
Current Liabilities	$	(2,353	)	$	(2,428	)	$	—		$	—
Noncurrent Liabilities	(92,436		)	(79,199		)	3,565			(2,601		)
Net Amount Recognized at End of Year	$	(94,789	)	$	(81,627	)	$	3,565		$	(2,601	)
Amounts Recognized in Regulatory Assets Consist of:
Prior Service Costs	$	428		$	538		$	(2,775	)	$	(3,032	)
Net Actuarial Loss	64,541			67,912			16,017			20,275
Net Amount Recognized at End of Year	$	64,969		$	68,450		$	13,242		$	17,243
Amounts Recognized in Accumulated Other Comprehensive Loss Consist of:
Net Actuarial Loss	$	39,356		$	24,102		$	—		$	—

The projected benefit obligation (PBO) and accumulated benefit obligation (ABO) of SJI's qualified employee pension plans were $243.9 million and $227.3 million, respectively, as of December 31, 2017; and $224.3 million and $208.3 million, respectively, as of December 31, 2016. The ABO of these plans exceeded the value of the plan assets as of December 31, 2017 and 2016. The value of these assets were $216.1 million and $189.5 million as of December 31, 2017 and 2016, respectively, and can be seen in the table above. The PBO and ABO for SJI's non-funded SERP were $72.4 million and $63.9 million, respectively, as of December 31, 2017; and $53.9 million and $51.9 million, respectively, as of December 31, 2016. SJI's SERP obligation is reflected in the tables above and has no assets.

The PBO and ABO of SJG's qualified employee pension plans were $197.0 million and $183.5 million, respectively, as of December 31, 2017; and $183.2 million and $170.0 million, respectively, as of December 31, 2016. The ABO of these plans exceeded the value of the plan assets as of December 31, 2017 and 2016. The value of these assets were $174.3 million and $154.7 million as of December 31, 2017 and 2016, respectively, and can be seen in the tables above. The PBO and ABO for SJG's non-funded SERP were $72.0 million and $63.6 million, respectively, as of December 31, 2017; and $53.2 million and $51.2 million, respectively, as of December 31, 2016. SJG's SERP obligation is reflected in the tables above and has no assets.

The weighted-average assumptions used to determine benefit obligations for SJI and SJG at December 31 were:



	Pension Benefits				Other Postretirement Benefits
	2017		2016		2017		2016
Discount Rate	3.73	%	4.30	%	3.63	%	4.13	%
Rate of Compensation Increase	3.50	%	3.50	%	3.50	%	3.50	%

The weighted-average assumptions used to determine net periodic benefit cost for SJI and SJG for the years ended December 31 were:



	Pension Benefits						Other Postretirement Benefits
	2017		2016		2015		2017		2016		2015
Discount Rate	4.30	%	4.83	%	4.25	%	4.13	%	4.73	%	4.20	%
Expected Long-Term Return on Plan Assets	7.25	%	7.50	%	7.75	%	6.50	%	6.50	%	6.25	%
Rate of Compensation Increase	3.50	%	3.50	%	3.50	%	3.50	%	3.50	%	3.50	%

In 2014, the Society of Actuaries (SOA) released new mortality tables (RP-2014), which the Company adopted as of December 31, 2014. Since then, the SOA has updated the mortality projection on an annual basis. The Company utilizes the most current projection tables available. The obligations as of December 31, 2017, 2016, and 2015, disclosed herein, reflect the use of the updated projection tables applicable to those years.

The discount rates used to determine the benefit obligations at December 31, 2017 and 2016, which are used to determine the net periodic benefit cost for the subsequent year, were based on a portfolio model of high-quality investments with maturities that match the expected benefit payments under our pension and other postretirement benefit plans.

The expected long-term return on plan assets (“return”) has been determined by applying long-term capital market projections provided by our pension plan Trustee to the asset allocation guidelines, as defined in SJI's and SJG's investment policy, to arrive at a weighted average return. For certain other equity securities held by an investment manager outside of the control of the Trustee, the return has been determined based on historic performance in combination with long-term expectations. The return for the other postretirement benefits plan is determined in the same manner as discussed above; however, the expected return is reduced based on the taxable nature of the underlying trusts.

The retiree medical plan changed effective January 1, 2016. Retirees are provided a fixed contribution to a health reimbursement account, allowing them to obtain coverage from health-care exchanges, rather than utilizing the Company provided health-care plan. Since the health-care benefits are now a fixed dollar amount under the new plan and will not increase in the future, the plan no longer has health care trend assumptions as of December 31, 2015. As a result, assumed health care cost trend rates no longer have a significant effect on the amounts reported for SJI's and SJG's postretirement health care plans.

PLAN ASSETS - SJI's and SJG's overall investment strategy for pension plan assets is to achieve a diversification by asset class, style of manager, and sector and industry limits to achieve investment results that match the actuarially assumed rate of return, while preserving the inflation adjusted value of the plans. SJI and SJG have implemented this diversification strategy primarily with commingled common/collective trust funds. The target allocations for pension plan assets are 28-48 percent U.S. equity securities, 13-25 percent international equity securities, 32-42 percent fixed income investments, and 0-7 percent to all other types of investments. Equity securities include investments in commingled common/collective trust funds as well as large-cap and mid-cap companies. Fixed income securities include commingled common/collective trust funds, group annuity contracts for pension payments, and hedge funds. Other types of investments include investments in private equity funds and real estate funds that follow several different strategies.

The strategy recognizes that risk and volatility are present to some degree with all types of investments. SJI and SJG seek to avoid high levels of risk at the total fund level through diversification by asset class, style of manager, and sector and industry limits. Specifically prohibited investments include, but are not limited to, venture capital, margin trading, commodities and securities of companies with less than $250.0 million capitalization (except in the small-cap portion of the fund where capitalization levels as low as $50.0 million are permissible). These restrictions are only applicable to individual investment managers with separately managed portfolios and do not apply to mutual funds or commingled trusts.

SJI evaluated its pension and other postretirement benefit plans' asset portfolios for the existence of significant concentrations of credit risk as of December 31, 2017. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country, and individual fund. As of December 31, 2017, there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in SJI's pension and other postretirement benefit plan assets.

GAAP establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques. This hierarchy groups assets into three distinct levels, as fully described in Note 17, which will serve as the basis for presentation throughout the remainder of this Note.

The fair values of SJI's and SJG's pension plan assets at December 31, 2017 and 2016 by asset category are as follows (in thousands):



SJI (includes SJG and all other consolidated subsidiaries):
Asset Category	Total		Level 1		Level 2		Level 3
As of December 31, 2017
Cash / Cash Equivalents:
Cash	$	72	$	72	$	—	$	—
Common/Collective Trust Funds (a)	477		—		477		—
STIF-Type Instrument (b)	1,522		—		1,522		—
Equity securities:
Common/Collective Trust Funds - U.S. (a)	75,699		—		75,699		—
Common/Collective Trust Funds - International (a)	39,077		—		39,077		—
U.S. Large-Cap (c)	13,526		13,526		—		—
U.S. Mid-Cap (c)	1,701		1,701		—		—
U.S. Small-Cap (c)	490		490		—		—
International (c)	3,260		3,260		—		—
Fixed Income:
Common/Collective Trust Funds (a)	54,106		—		54,106		—
Guaranteed Insurance Contract (d)	9,211		—		—		9,211
Other types of investments:
Private Equity Fund (e)	7,111		—		—		7,111
Common/Collective Trust Fund - Real Estate (f)	9,813		—		—		9,813
Total	$	216,065	$	19,049	$	170,881	$	26,135



Asset Category	Total		Level 1		Level 2		Level 3
As of December 31, 2016
Cash / Cash Equivalents:
Cash	$	63	$	63	$	—	$	—
Common/Collective Trust Funds (a)	460		—		460		—
STIF-Type Instrument (b)	1,431		—		1,431		—
Equity securities:
Common/Collective Trust Funds - U.S. (a)	51,902		—		51,902		—
Common/Collective Trust Funds - International (a)	33,096		—		33,096		—
U.S. Large-Cap (c)	17,792		17,792		—		—
U.S. Mid-Cap (c)	2,479		2,479		—		—
International (c)	3,340		3,340		—		—
Fixed Income:
Common/Collective Trust Funds (a)	54,970		—		54,970		—
Guaranteed Insurance Contract (d)	9,714		—		—		9,714
Other types of investments:
Private Equity Fund (e)	5,100		—		—		5,100
Common/Collective Trust Fund - Real Estate (f)	9,195		—		—		9,195
Total	$	189,542	$	23,674	$	141,859	$	24,009



SJG:
Asset Category	Total		Level 1		Level 2		Level 3
As of December 31, 2017:
Cash / Cash Equivalents:
Cash	$	58	$	58	$	—	$	—
Common/Collective Trust Funds (a)	385		—		385		—
STIF-Type Instrument (b)	1,228		—		1,228		—
Equity securities:
Common/Collective Trust Funds – U.S. (a)	61,057		—		61,057		—
Common/Collective Trust Funds – International (a)	31,519		—		31,519		—
U.S. Large-Cap (c)	10,910		10,910		—		—
U.S. Mid-Cap (c)	1,372		1,372		—		—
U.S. Small-Cap (c)	395		395		—		—
International (c)	2,629		2,629		—		—
Fixed Income:
Common/Collective Trust Funds (a)	43,640		—		43,640		—
Guaranteed Insurance Contract (d)	7,429		—		—		7,429
Other types of investments:
Private Equity Fund (e)	5,735		—		—		5,735
Common/Collective Trust Fund – Real Estate (f)	7,920		—		—		7,920
Total	$	174,277	$	15,364	$	137,829	$	21,084



Asset Category	Total		Level 1		Level 2		Level 3
As of December 31, 2016:
Cash / Cash Equivalents:
Cash	$	52	$	52	—		$	—
Common/Collective Trust Funds (a)	376		—		376		—
STIF-Type Instrument (b)	1,168		—		1,168		—
Equity securities:
Common/Collective Trust Funds – U.S. (a)	42,369		—		42,369		—
Common/Collective Trust Funds – International (a)	27,017		—		27,017		—
U.S. Large-Cap (c)	14,523		14,523		—		—
U.S. Mid-Cap (c)	2,024		2,024		—		—
International (c)	2,727		2,727		—		—
Fixed Income:
Common/Collective Trust Funds (a)	44,873		—		44,873		—
Guaranteed Insurance Contract (d)	7,930		—		—		7,930
Other types of investments:
Private Equity Fund (e)	4,164		—		—		4,164
Common/Collective Trust Fund – Real Estate (f)	7,506		—		—		7,506
Total	$	154,729	$	19,326	$	115,803	$	19,600

(a)

This category represents common/collective trust fund investments through a commingled employee benefit trust (excluding real estate). These commingled funds are not traded publicly; however, the majority of the underlying assets held in these funds are stocks and bonds that are traded on active markets; prices for these assets are readily observable. Also included in these funds are interest rate swaps, asset backed securities, mortgage backed securities and other investments with observable market values. Holdings in the commingled funds are classified as Level 2 investments.

(b)

This category represents short-term investment funds held for the purpose of funding disbursement payment arrangements. Underlying assets are valued based on quoted prices in active markets, or where quoted prices are not available, based on models using observable market information. Since not all values can be obtained from quoted prices in active markets, these funds are classified as Level 2 investments.


(c)	This category of equity investments represents a managed portfolio of common stock investments in five sectors: telecommunications, electric utilities, gas utilities, water and energy. These common stocks are actively traded on exchanges and price quotes for these shares are readily available. These common stocks are classified as Level 1 investments.

(d)

This category represents SJI’s Group Annuity contracts with a nationally recognized life insurance company. The contracts are the assets of the plan, while the underlying assets of the contracts are owned by the contract holder. Valuation is based on a formula and calculation specified within the contract. Since the valuation is based on the reporting entity’s own assumptions, these contracts are classified as Level 3 investments.

(e)

This category represents a limited partnership which includes several investments in U.S. leveraged buyout, venture capital, and special situation funds. Fund valuations are reported on a 90 to 120 day lag and, therefore, the value reported herein represents the market value as of June or September 30, 2017 and 2016, respectively, with cash flow changes through December applied. The fund’s investments are stated at fair value, which is generally based on the valuations provided by the general partners or managers of such investments. Fund investments are illiquid and resale is restricted. These funds are classified as Level 3 investments.

(f)

This category represents real estate common/collective trust fund investments through a commingled employee benefit trust. These commingled funds are part of a direct investment in a pool of real estate properties. These funds are valued by investment managers on a periodic basis using pricing models that use independent appraisals from sources with professional qualifications. Since these valuation inputs are not highly observable, the real estate funds are classified as Level 3 investments.

Fair Value Measurement Using Significant

Unobservable Inputs (Level 3)

(In thousands)



SJI (includes SJG and all other consolidated subsidiaries):	Guaranteed						Private
	Insurance			Hedge			Equity			Real
	Contract			Funds			Funds			Estate		Total

Balance at January 1, 2016	$	9,960		$	4,159		$	4,312		$	8,515	$	26,946
Actual return on plan assets:
Relating to assets still held at the reporting date	541			(67		)	(140		)	680		1,014
Relating to assets sold during the period	14			—			245			—		259
Purchases, Sales and Settlements	(801		)	(4,092		)	683			—		(4,210		)
Balance at December 31, 2016	9,714			—			5,100			9,195		24,009
Actual return on plan assets:
Relating to assets still held at the reporting date	245						(214		)	618		649
Relating to assets sold during the period	12			—			491			—		503
Purchases, Sales and Settlements	(760		)				1,734			—		974
Balance at December 31, 2017	$	9,211		$	—		$	7,111		$	9,813	$	26,135



SJG:	Guaranteed Insurance Contract			Hedge Funds			Private Equity Funds			Real Estate		Total
Balance at January 1, 2016	$	8,031		$	3,353		$	3,477		$	6,866	$	21,727
Actual return on plan assets:
Relating to assets still held at the reporting date	541			(13		)	(71		)	640		1,097
Relating to assets sold during the period	12			—			200			—		212
Purchases, Sales and Settlements	(654		)	(3,340		)	558			—		(3,436		)
Balance at December 31, 2016	$	7,930		$	—		$	4,164		$	7,506	$	19,600
Actual return on plan assets:
Relating to assets still held at the reporting date	103			—			(224		)	414		293
Relating to assets sold during the period	9			—			396			—		405
Purchases, Sales and Settlements	(613		)	—			1,399			—		786
Balance at December 31, 2017	$	7,429		$	—		$	5,735		$	7,920	$	21,084

As with the pension plan assets, SJI's and SJG's overall investment strategy for post-retirement benefit plan assets is to achieve a diversification by asset class, style of manager, and sector and industry limits to achieve investment results that match the actuarially assumed rate of return, while preserving the inflation adjusted value of the plans. SJI and SJG have implemented this diversification strategy with a mix of common/collective trust funds, mutual funds and Company-owned life insurance policies. The target allocations for post-retirement benefit plan assets are 30-43 percent U.S. equity securities, 20-30 percent international equity securities, and 32-42 percent fixed income investments and 0-7 percent to all other types of investments. Equity securities include investments in large-cap, mid-cap and small-cap companies within mutual funds or common/collective trust funds. Fixed income securities within the common/collective trust fund include primarily investment grade, U.S. Government and mortgage-backed financial instruments. The insurance policies are backed by a series of commingled trust investments held by the insurance carrier.

The fair values of SJI's and SJG's other postretirement benefit plan assets at December 31, 2017 and 2016 by asset category are as follows (in thousands):



SJI (includes SJG and all other consolidated subsidiaries):
Asset Category	Total		Level 1		Level 2		Level 3
As of December 31, 2017:
Cash	$	—	$	—	$	—	$	—
Equity Securities:
Common/Collective Trust Funds - U.S. (a)	15,101		—		15,101		—
Common/Collective Trust Funds - International (a)	11,378		—		11,378		—
Mutual Fund - U.S. (b)	—		—		—		—
Mutual Funds - International (b)	—		—		—		—
Fixed Income:
Common/Collective Trust Funds - Bonds (a)	15,272		—		15,272		—
Mutual Funds - Bonds (b)	—		—		—		—
Other Types of Investments:
Mutual Funds - REITS (b)	864		864		—		—
Company Owned Life Insurance (c)	15,307		—		15,307		—
Total	$	57,922	$	864	$	57,058	$	—

Asset Category	Total		Level 1		Level 2		Level 3
As of December 31, 2016:
Cash	$	—	$	—	$	—	$	—
Equity Securities:
Common/Collective Trust Funds - U.S. (a)	14,878		—		14,878		—
Common/Collective Trust Funds - International (a)	8,674		—		8,674		—
Mutual Fund - U.S. (b)	—		—		—		—
Mutual Funds - International (b)	—		—		—		—
Fixed Income:
Common/Collective Trust Funds - Bonds (a)	13,537		—		13,537		—
Mutual Funds - Bonds (b)	—		—		—		—
Other Types of Investments:
Mutual Funds - REITS (b)	—		—		—		—
Company Owned Life Insurance (c)	13,443		—		13,443		—
Total	$	50,532	$	—	$	50,532	$	—



SJG:
Asset Category	Total		Level 1		Level 2		Level 3
As of December 31, 2017
Cash	$	—	$	—	$	—	$	—
Equity Securities:
Common/Collective Trust Funds - U.S. (a)	13,572		—		13,572		—
Common/Collective Trust Funds - International (a)	10,226		—		10,226		—
Mutual Fund - U.S. (b)	—		—		—		—
Mutual Funds - International (b)	—		—		—		—
Fixed Income:
Common/Collective Trust Funds - Bonds (a)	13,726		—		13,726		—
Mutual Funds - Bonds (b)	—		—		—		—
Other Types of Investments:
Mutual Funds - REITS (b)	777		777		—		—
Company Owned Life Insurance (c)	14,362		—		14,362		—
Total	$	52,663	$	777	$	51,886	$	—

Asset Category	Total		Level 1		Level 2		Level 3
As of December 31, 2016
Cash	$	—	$	—	$	—	$	—
Equity Securities:
Common/Collective Trust Funds - U.S. (a)	13,372		—		13,372		—
Common/Collective Trust Funds - International (a)	7,796		—		7,796		—
Mutual Fund - U.S. (b)	—		—		—		—
Mutual Funds - International (b)	—		—		—		—
Fixed Income:
Common/Collective Trust Funds - Bonds (a)	12,167		—		12,167		—
Mutual Funds - Bonds (b)	—		—		—		—
Other Types of Investments:
Mutual Funds - REITS (b)	—		—		—		—
Company Owned Life Insurance (c)	12,613		—		12,613		—
Total	$	45,948	$	—	$	45,948	$	—

(a)

This category represents common/collective trust fund investments through a commingled employee benefit trust (excluding real estate). These commingled funds are not traded publicly; however, the majority of the underlying assets held in these funds are stocks and bonds that are traded on active markets and prices for these assets are readily observable. Also included in these funds are interest rate swaps, asset backed securities, mortgage backed securities and other investments with observable market values. Holdings in these commingled funds are classified as Level 2 investments.


(b)	This category represents mutual fund investments. The mutual funds are actively traded on exchanges and price quotes for the shares are readily available. These mutual funds are classified as Level 1 investments.


(c)	This category represents Company-owned life insurance policies with a nationally known life insurance company. The value of these policies is backed by a series of common/collective trust funds held by the insurance carrier similar to category (a) above. Holdings in these insurance policies are classified as Level 2 investments.

FUTURE BENEFIT PAYMENTS - The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid during the following years (in thousands):



SJI (includes SJG and all other consolidated subsidiaries):	Pension Benefits		Other Postretirement Benefits
2018	$	12,596	$	4,291
2019	$	13,535	$	4,380
2020	$	14,180	$	4,499
2021	$	14,851	$	4,503
2022	$	15,937	$	4,513
2023 - 2027	$	90,714	$	20,683



SJG:	Pension Benefits		Other Postretirement Benefits
2018	$	10,451	$	3,434
2019	$	11,349	$	3,587
2020	$	11,917	$	3,710
2021	$	12,495	$	3,726
2022	$	13,489	$	3,752
2023 - 2027	$	77,033	$	17,172

CONTRIBUTIONS - SJI contributed $10.0 million to the pension plans in January 2017, of which SJG contributed $8.0 million. SJI and SJG did not make contributions to its employee pension plans in 2016. SJI contributed $15.0 million to the pension plans in 2015, of which SJG contributed $12.0 million. Payments related to the unfunded SERP plan for SJI and SJG in 2017, 2016 and 2015 were $2.4 million, $2.3 million and $2.0 million, respectively. SERP payments for SJI and SJG are expected to approximate $2.4 million in 2018. Prior to the base rate case settlement in October 2017, SJG also had a regulatory obligation to contribute approximately $3.6 million annually to its other postretirement benefit plans’ trusts, less direct costs incurred. The recent rate case settlement (see Note 11) allows SJG to modify the future requirement level up to a limit that represents full funding of its obligation and to the maximum tax deduction allowed.

DEFINED CONTRIBUTION PLAN - SJI and SJG offer an Employees' Retirement Savings Plan (Savings Plan) to eligible employees. For employees eligible for participation in the defined benefit pension plan, SJI and SJG match 50% of participants' contributions up to 6%of base compensation. For employees who are not eligible for participation in the defined benefit pension plans, SJI and SJG match 50% of participants' contributions up to 8% of base compensation. Employees not eligible for the pension plans also receive a year-end contribution of $1,500, if 10 or fewer years of service, or $2,000, if more than 10 years of service. The amount expensed and contributed for the matching provision of the Savings Plan for SJI approximated $2.6 million , $2.3 million and $2.1 million for the years ended December 31, 2017, 2016 and 2015, respectively, and $1.6 million, $1.3 million and $1.2 million for SJG for the years ended December 31, 2017, 2016 and 2015, respectively.