EMPLOYEE BENEFIT PLANS

Retirement and Other Postretirement Benefit Plans

Retirement Plans - We have a defined benefit pension plan covering certain employees and former employees hired before January 1, 2005. Employees hired after December 31, 2004, and employees who accepted a one-time opportunity to opt out of our defined benefit pension plan historically were covered by our Profit Sharing Plan, which was merged into our 401(k) Plan effective January 1, 2019. In addition, we have a supplemental executive retirement plan for the benefit of certain officers. No new participants in our supplemental executive retirement plan have been approved since 2005, and effective January 2014, the plan was formally closed to new participants. We fund our retirement costs at a level needed to maintain or exceed the minimum funding levels required by the Employee Retirement Income Security Act of 1974, as amended, and the Pension Protection Act of 2006.

Other Postretirement Benefit Plans - We sponsor health and welfare plans that provide postretirement medical and life insurance benefits to employees hired prior to 2017 who retire with at least five years of service. The postretirement medical plan is contributory with retiree contributions adjusted periodically and contains other cost-sharing features such as deductibles and coinsurance.

Obligations and Funded Status - The following table sets forth our retirement and other postretirement benefit plans benefit obligations and fair value of plan assets for the periods indicated:



	Retirement Benefits						Other Postretirement Benefits
	December 31,						December 31,
	2018			2017			2018			2017
Change in benefit obligation	(Thousands of dollars)
Benefit obligation, beginning of period	$	481,615		$	428,386		$	57,938		$	54,823
Service cost	7,339			6,896			845			662
Interest cost	17,659			18,645			2,108			2,261
Plan participants’ contributions	—			—			1,050			901
Actuarial loss (gain)	(24,345		)	41,678			(10,233		)	3,456
Benefits paid	(15,274		)	(13,990		)	(4,868		)	(4,165		)
Benefit obligation, end of period	466,994			481,615			46,840			57,938

Change in plan assets
Fair value of plan assets, beginning of period	306,008			261,671			34,133			29,550
Actual return on plan assets	(12,350		)	50,827			(998		)	5,385
Employer contributions	12,300			7,500			1,100			2,000
Plan participants’ contributions	—			—			1,050			901
Benefits paid	(15,274		)	(13,990		)	(4,485		)	(3,703		)
Fair value of plan assets, end of period	290,684			306,008			30,800			34,133
Balance at December 31	$	(176,310	)	$	(175,607	)	$	(16,040	)	$	(23,805	)

Current liabilities	$	(4,514	)	$	(4,544	)	$	—		$	—
Noncurrent liabilities	(171,796		)	(171,063		)	(16,040		)	(23,805		)
Balance at December 31	$	(176,310	)	$	(175,607	)	$	(16,040	)	$	(23,805	)

The table above includes the supplemental executive retirement plan obligation. ONEOK has investments included in other assets on the Consolidated Balance Sheets, which totaled $87.7 million and $93.2 million at December 31, 2018 and 2017, respectively, for the purpose of funding the obligation. These assets are not assets of the supplemental executive retirement plan and are excluded from the table above.

The accumulated benefit obligation for our retirement plans was $434.4 million and $456.6 million at December 31, 2018 and 2017, respectively.

The actuarial gains and losses impacting our benefit obligations for our retirement and other postretirement benefit plans are due primarily to changes in the discount rate assumptions discussed in the “Actuarial Assumptions” section below.

Components of Net Periodic Benefit Cost - The following table sets forth the components of net periodic benefit cost for our retirement and other postretirement benefit plans for the periods indicated:



	Retirement Benefits									Other Postretirement Benefits
	Years Ended December 31,									Years Ended December 31,
	2018			2017			2016			2018			2017			2016
	(Thousands of dollars)
Components of net periodic benefit cost
Service cost	$	7,339		$	6,896		$	6,501		$	845		$	662		$	596
Interest cost	17,659			18,645			19,820			2,108			2,261			2,404
Expected return on plan assets	(23,917		)	(21,376		)	(20,348		)	(2,690		)	(2,257		)	(2,124		)
Amortization of prior service credit	—			—			—			(1,662		)	(1,662		)	(1,662		)
Amortization of net loss	17,060			13,586			10,966			1,338			1,679			1,046
Net periodic benefit cost	$	18,141		$	17,751		$	16,939		$	(61	)	$	683		$	260

Other Comprehensive Income (Loss) - The following table sets forth the amounts recognized in other comprehensive income (loss) related to our retirement benefits and other postretirement benefits for the periods indicated:



	Retirement Benefits									Other Postretirement Benefits
	Years Ended December 31,									Years Ended December 31,
	2018			2017			2016			2018			2017			2016
	(Thousands of dollars)
Net gain (loss) arising during the period	$	(16,351	)	$	(16,572	)	$	(33,043	)	$	6,545		$	(328	)	$	(5,128	)
Amortization of prior service credit	—			—			—			(1,662		)	(1,662		)	(1,662		)
Amortization of net loss	17,060			13,586			10,966			1,338			1,679			1,046
Deferred income taxes (a)	(18,928		)	(960		)	8,831			(2,831		)	82			2,297
Total recognized in other comprehensive income (loss)	$	(18,219	)	$	(3,946	)	$	(13,246	)	$	3,390		$	(229	)	$	(3,447	)

(a) - Year ended December 31, 2018, includes the impact of adopting ASU 2018-02.

The table below sets forth the amounts in accumulated other comprehensive loss that had not yet been recognized as components of net periodic benefit expense for the periods indicated:



	Retirement Benefits						Other Postretirement Benefits
	December 31,						December 31,
	2018			2017			2018			2017
	(Thousands of dollars)
Prior service credit	$	—		$	—		$	227		$	1,889
Accumulated loss	(160,212		)	(160,921		)	(5,108		)	(12,991		)
Accumulated other comprehensive loss	(160,212		)	(160,921		)	(4,881		)	(11,102		)
Deferred income taxes	43,286			62,214			1,567			4,398
Accumulated other comprehensive loss, net of tax	$	(116,926	)	$	(98,707	)	$	(3,314	)	$	(6,704	)

Actuarial Assumptions - The following table sets forth the weighted-average assumptions used to determine benefit obligations for retirement and other postretirement benefits for the periods indicated:



	Retirement Benefits		Other Postretirement Benefits
	December 31,		December 31,
	2018	2017	2018	2017
Discount rate	4.50%	3.75%	4.50%	3.75%
Compensation increase rate	3.65%	3.00%	N/A	N/A

The following table sets forth the weighted-average assumptions used to determine net periodic benefit costs for the periods indicated:



	Years Ended December 31,
	2018	2017	2016
Discount rate - retirement plans	3.75%	4.50%	5.25%
Discount rate - other postretirement plans	3.75%	4.25%	5.00%
Expected long-term return on plan assets	8.00%	7.75%	7.75%
Compensation increase rate	3.00%	3.10%	3.10%

We determine our overall expected long-term rate of return on plan assets based on our review of historical returns and economic growth models.

We determine our discount rates annually. We estimate our discount rate based upon a comparison of the expected cash flows associated with our future payments under our retirement and other postretirement obligations to a hypothetical bond portfolio created using high-quality bonds that closely match expected cash flows. Bond portfolios are developed by selecting a bond for each of the next 60 years based on the maturity dates of the bonds. Bonds selected to be included in the portfolios are only those rated by Moody’s as AA- or better and exclude callable bonds, bonds with less than a minimum issue size, yield outliers and other filtering criteria to remove unsuitable bonds.

Health Care Cost Trend Rates - The following table sets forth the assumed health care cost-trend rates for the periods indicated:



	2018	2017
Health care cost-trend rate assumed for next year	6.50%	7.00%
Rate to which the cost-trend rate is assumed to decline (the ultimate trend rate)	5.00%	5.00%
Year that the rate reaches the ultimate trend rate	2022	2022

Plan Assets - Our investment strategy is to invest plan assets in accordance with sound investment practices that emphasize long-term fundamentals. The goal of this strategy is to maximize investment returns while managing risk in order to meet the plan’s current and projected financial obligations. The investment policy follows a glide path approach toward liability-driven investing that shifts a higher portfolio weighting to fixed income as the plan's funded status increases. The purpose of liability-driven investing is to structure the asset portfolio to more closely resemble the pension liability and thereby more effectively hedge against changes in the liability. The plan’s current investments include a diverse blend of various domestic and international equities, investments in various classes of debt securities, real estate and hedge funds. The target allocation for the assets of our retirement plan as of December 31, 2018, is as follows:



Domestic and international equities	42	%
Long duration fixed income	30	%
Return-seeking credit	11	%
Hedge funds	10	%
Real estate funds	7	%
Total	100	%

As part of our risk management for the plans, minimums and maximums have been set for each of the asset classes listed above. All investment managers for the plan are subject to certain restrictions on the securities they purchase and, with the exception of indexing purposes, are prohibited from owning our stock.

The following tables set forth the plan assets by fair value category as of the measurement date for our defined benefit pension and other postretirement benefit plans:



	Pension Benefits
	December 31, 2018
Asset Category	Level 1		Level 2		Level 3		Subtotal		Measured at NAV (d)		Total
	(Thousands of dollars)
Investments:
Equity securities (a)	$	58	$	—	$	—	$	58	$	116,790	$	116,848
Real estate funds	—		—		—		—		20,569		20,569
Government obligations	—		—		—		—		48,913		48,913
Corporate obligations (b)	—		—		—		—		69,377		69,377
Common/collective trusts	—		3,961		—		3,961		—		3,961
Cash	95		—		—		95		—		95
Other investments (c)	—		—		—		—		30,921		30,921
Fair value of plan assets	$	153	$	3,961	$	—	$	4,114	$	286,570	$	290,684

(a) - This category represents securities of the respective market sector from diverse industries.

(b) - This category represents bonds from diverse industries.

(c) - This category represents alternative investments in limited partnerships, which can be redeemed with a 30-day notice with no further restrictions. There are no unfunded capital commitments.

(d) - Plan asset investments measured at fair value using the net asset value per share.



	Pension Benefits
	December 31, 2017
Asset Category	Level 1		Level 2		Level 3		Subtotal		Measured at NAV (d)		Total
	(Thousands of dollars)
Investments:
Equity securities (a)	$	176,347	$	19,199	$	—	$	195,546	$	—	$	195,546
Government obligations	—		19,481		—		19,481		—		19,481
Corporate obligations (b)	—		62,981		—		62,981		—		62,981
Common/collective trusts	—		6,621		—		6,621		—		6,621
Cash	298		—		—		298		—		298
Other investments (c)	—		—		—		—		21,081		21,081
Fair value of plan assets	$	176,645	$	108,282	$	—	$	284,927	$	21,081	$	306,008

(a) - This category represents securities of the respective market sector from diverse industries.

(b) - This category represents bonds from diverse industries.

(c) - This category represents alternative investments in limited partnerships, which can be redeemed with a 30-day notice with no further restrictions. There are no unfunded capital commitments.

(d) - Plan asset investments measured at fair value using the net asset value per share.



	Other Postretirement Benefits
	December 31, 2018
Asset Category	Level 1		Level 2		Level 3		Total
	(Thousands of dollars)
Investments:
Equity securities (a)	$	1,792	$	—	$	—	$	1,792
Money market funds	1		413		—		414
Insurance and group annuity contracts	—		28,594		—		28,594
Fair value of plan assets	$	1,793	$	29,007	$	—	$	30,800

(a) - This category represents securities of the respective market sector from diverse industries.



	Other Postretirement Benefits
	December 31, 2017
Asset Category	Level 1		Level 2		Level 3		Total
	(Thousands of dollars)
Investments:
Equity securities (a)	$	1,951	$	—	$	—	$	1,951
Money market funds	—		1,515		—		1,515
Insurance and group annuity contracts	—		30,667		—		30,667
Fair value of plan assets	$	1,951	$	32,182	$	—	$	34,133

(a) - This category represents securities of the respective market sector from diverse industries.

Contributions - During 2018, we made $12.3 million in contributions to our defined benefit pension plan and $1.1 million in contributions to our other postretirement benefit plans. We contributed $14.5 million to our defined benefit pension plan in January 2019 and expect to make $2.0 million in contributions to our other postretirement plans in 2019.

Pension and Other Postretirement Benefit Payments - Benefit payments for our defined benefit pension and other postretirement benefit plans for the period ending December 31, 2018, were $15.3 million and $4.9 million, respectively. The following table sets forth the defined benefit pension and other postretirement benefits payments expected to be paid in 2019 through 2028:



	Pension Benefits		Other Postretirement Benefits
Benefits to be paid in:	(Thousands of dollars)
2019	$	17,014	$	3,114
2020	$	18,164	$	3,237
2021	$	19,215	$	3,230
2022	$	20,279	$	3,346
2023	$	21,362	$	3,315
2024 through 2028	$	122,012	$	16,178

The expected benefits to be paid are based on the same assumptions used to measure our benefit obligation at December 31, 2018, and include estimated future employee service.

Other Employee Benefit Plans

401(k) Plan - We have a 401(k) Plan covering all employees, and employee contributions are discretionary. We match 100 percent of employee contributions up to 6 percent of each participant’s eligible compensation, subject to certain limits. Our contributions made to the plan were $15.1 million, $13.7 million and $11.9 million in 2018, 2017 and 2016, respectively.

Profit Sharing Plan - We historically maintained a profit-sharing plan (Profit Sharing Plan) for all employees hired after December 31, 2004. Employees who were employed prior to January 1, 2005, were given a one-time opportunity to make an irrevocable election to participate in the Profit Sharing Plan and not accrue any additional benefits under our defined benefit pension plan after December 31, 2004. The Profit Sharing Plan was merged into our 401(k) Plan as of January 1, 2019, and ceased to exist as a separate plan. We plan to make a contribution to the 401(k) Plan each quarter equal to 1 percent of each profit-sharing participant’s eligible compensation during the quarter. Additional discretionary employer profit-sharing contributions may be made at the end of each year. Our contributions made to our former Profit Sharing Plan were $12.9 million, $7.4 million and $8.2 million in 2018, 2017 and 2016, respectively.

Nonqualified Deferred Compensation Plan - The Nonqualified Deferred Compensation Plan provides select employees, as approved by our Chief Executive Officer, with the option to defer portions of their compensation and provides nonqualified deferred compensation benefits that are not available due to limitations on employer and employee contributions to qualified defined contribution plans under the federal tax laws. The plan also provides benefits in excess of applicable tax limits for certain participants in the defined benefit pension plan who are not participants in the supplemental executive retirement plan. Our contributions to the plan were not material in 2018, 2017 and 2016.