The Company currently provides health care and life insurance benefits to qualifying salaried and hourly retirees of its current and certain former subsidiaries and their dependents from benefit plans established by the Company. Plan coverage for health benefits is provided to future hourly and salaried retirees in accordance with the applicable plan document. Life insurance benefits are provided to future hourly retirees in accordance with the applicable labor agreement.


	Year Ended December 31,
	2020		2019		2018
	(Dollars in millions)
Service cost for benefits earned	$	3.8	$	4.8	$	8.2
Interest cost on accumulated postretirement benefit obligation	20.2		25.1		28.3
Expected return on plan assets	(1.5)		(0.5)		—
Amortization of prior service credit	(17.3)		(8.7)		—

Net actuarial loss (gain)	16.5		78.3		(128.4)
Net periodic postretirement benefit cost (benefit)	$	21.7	$	99.0	$	(91.9)

The actuarial loss for all benefit plans in 2020 was primarily due to the decrease in the discount rate used to measure the benefit obligation offset by the favorable impact of claims experience for the year and updating the mortality base tables and improvement scales to those published by the Society of Actuaries for all participants except those receiving medical benefits under the UMWA Coal Action design. The actuarial loss for all benefit plans in 2019 was primarily due to the decrease in the discount rate used to measure the benefit obligation and unfavorable medical claims experience for the year. The actuarial gain for all benefit plans in 2018 was primarily due to the increase in the discount rate used to measure the benefit obligation, favorable medical claims experience for the year and the impact of Medicare Part D amendment from the 2018 Bipartisan Budget Act.

The Company amortizes prior service credit over an amortization period of the average remaining service period to full eligibility for participating employees at the time of the plan change or the expected lifetime of participants in the plan (3.9 years and 4.9 years were the remaining amortization periods at January 1, 2021 and 2020, respectively for the plan changes effective December 31, 2018). New prior service credits established during 2020 are described below. The estimated prior service credit that will be amortized from accumulated other comprehensive income into net periodic postretirement benefit cost during the year ending December 31, 2021 is $43.9 million.


	December 31,
	2020		2019
	(Dollars in millions)
Change in benefit obligation:
Accumulated postretirement benefit obligation at beginning of period	$	659.9	$	595.4
Service cost	3.8		4.8
Interest cost	20.2		25.1
Participant contributions	2.4		2.3
Plan amendments	(185.4)		—
Benefits paid	(42.9)		(47.7)
Actuarial loss	18.6		80.0
Accumulated postretirement benefit obligation at end of period	476.6		659.9
Change in plan assets:
Fair value of plan assets at beginning of period	34.2		15.0
Actual return on plan assets	3.6		2.2
Employer contributions	36.4		62.4
Participant contributions	2.4		2.3
Benefits paid and administrative fees (net of Medicare Part D reimbursements)	(42.9)		(47.7)
Fair value of plan assets at end of period	33.7		34.2
Funded status at end of period	(442.9)		(625.7)
Less: Current portion (included in “Accounts payable and accrued expenses”)	29.7		32.3
Noncurrent obligation (included in “Accrued postretirement benefit costs”)	$	(413.2)	$	(593.4)

In September 2020, the Company announced changes to its postretirement health care benefit plans for non-represented employees and retirees. Effective January 1, 2021, the Company will no longer subsidize medical costs for Medicare eligible individuals or provide life insurance to salaried and hourly non-union retirees. The Company will provide non-Medicare eligible salaried and hourly non-union retirees and eligible dependents a health reimbursement arrangement. There were no changes to benefits for represented participants.

The impact of the changes on future benefits reduced the Company’s accumulated postretirement benefit obligation by $185.4 million. The reduction was attributable to the elimination of health care benefits upon covered individuals’ attainment of Medicare eligibility and the elimination of life insurance benefits for certain non-represented participants. The reduction in liability was recorded with an offsetting balance in “Accumulated other comprehensive income.” The $174.5 million reduction for elimination of health care benefits upon attainment of Medicare eligibility for salaried and non-union hourly retirees and eligible dependents is being amortized to earnings over an average remaining service period to full eligibility for participating employees of 5.1 years when it was established on September 30, 2020. The remaining $10.9 million for the elimination of life insurance benefits and elimination of health care benefits upon attainment of Medicare eligibility for select non-union retirees was amortized to earnings over the average remaining life expectancy of the affected plan, which was 10.5 years as of December 31, 2020.

The expected rate of return on plan assets is determined by taking into consideration expected long-term returns associated with each major asset class based on long-term historical ranges, inflation assumptions and the expected net value from active management of the assets based on actual results. Effective January 1, 2021 the Company lowered its expected pre-tax rate of return on plan assets from 7.00% to 5.75% reflecting the impact of the Company’s asset allocation and capital market expectations.


	Year Ended December 31,
	2020		2019
Pre-Medicare:
Health care cost trend rate assumed for next year	6.00	%	6.75	%
Rate to which the cost trend is assumed to decline (the ultimate trend rate)	4.75	%	4.75	%
Year that the rate reaches the ultimate trend rate	2026		2023

Post-Medicare:
Health care cost trend rate assumed for next year	5.75	%	6.35	%
Rate to which the cost trend is assumed to decline (the ultimate trend rate)	4.75	%	4.75	%
Year that the rate reaches the ultimate trend rate	2026		2023

The Company has established two Voluntary Employees Beneficiary Association (VEBA) trusts to pre-fund a portion of benefits for non-represented and represented retirees. Assets of the Peabody Investments Corp. Non-Represented Retiree VEBA Trust (the Non-Represented Trust) are invested in accordance with the investment policy established by the Peabody VEBA Retirement Committee after consultation with outside investment advisors and actuaries. As of December 31, 2020, the asset allocation strategy for the Non-Represented trust is 30% in equity and 70% in fixed income assets. As of December 31, 2019, the asset allocation strategy for the Non-Represented trust was 50% in equity and 50% in fixed income assets. The asset strategy may vary over time based on changes in the status of the Non-Represented Plan, the Company’s risk posture and other factors. Assets of the Peabody Holding Company LLC Represented Retiree VEBA Trust (the Represented Trust) are invested in cash funds at December 31, 2020 and 2019.

A financial instrument’s level within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation techniques and inputs used for investments measured at fair value, including the general classification of such investments pursuant to the valuation hierarchy.

U.S. equity securities: The Non-Represented Trust invests in U.S. equity securities for growth and diversification. Investment vehicles include various domestic large-cap publicly traded common stocks and mutual funds. All common stocks are traded on a national securities exchange and are valued at quoted market prices in active markets and accordingly classified within Level 1 of the valuation hierarchy. The mutual funds are traded on a national securities exchange in an active market, are valued using daily publicly quoted net asset value (NAV) prices and accordingly classified within Level 1 of the valuation hierarchy.

International equity securities. The Non-Represented Trust invests in international equity securities for growth and diversification. Investment vehicles include various international publicly traded common stocks, exchange traded funds and mutual funds. All common stocks are traded on a national securities exchange and are valued at quoted market prices in active markets and accordingly classified within Level 1 of the valuation hierarchy. The exchange traded funds and mutual funds are traded on a national securities exchange in an active market, are valued using daily publicly quoted NAV prices and accordingly classified within Level 1 of the valuation hierarchy.

Corporate bonds. The Non-Represented Trust invests in corporate bonds for diversification, volatility reduction of equity securities and to provide a hedge to interest rate movements affecting liabilities. Investment types are predominantly investment-grade corporate bonds. Fair value for these securities is provided by a third-party pricing service that utilizes various inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as well as other relevant economic measures. Corporate bonds are classified within the Level 2 valuation hierarchy since fair value inputs are derived prices in active markets and the bonds are not traded on a national securities exchange.

U.S. government securities. The Non-Represented Trust invests in U.S. government securities for diversification, volatility reduction of equity securities and to provide a hedge to interest rate movements affecting liabilities. Investment types are predominantly U.S. government bonds, notes, agency securities and municipal bonds. Fair value for these securities is provided by a third-party pricing service that utilizes various inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as well as other relevant economic measures. If fair value is based on quoted prices in active markets and traded on a national securities exchange, U.S. government securities are classified within the Level 1 valuation hierarchy; otherwise, U.S. government securities are classified within the Level 2 valuation hierarchy.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments.


	December 31, 2020
	Level 1		Level 2		Level 3		Total
	(Dollars in millions)
U.S. equity securities	$	10.5	$	—	$	—	$	10.5
International equity securities	2.0		—		—		2.0
Corporate bonds	—		9.6		—		9.6
U.S. government securities	1.0		4.2		—		5.2
Cash funds	6.4		—		—		6.4
Total assets at fair value	$	19.9	$	13.8	$	—	$	33.7


	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(Dollars in millions)
U.S. equity securities	$	13.0	$	—	$	—	$	13.0
International equity securities	4.0		—		—		4.0
Corporate bonds	—		9.2		—		9.2
U.S. government securities	2.6		4.5		—		7.1
Cash funds	0.9		—		—		0.9
Total assets at fair value	$	20.5	$	13.7	$	—	$	34.2

One of the Company’s subsidiaries, Peabody Investments Corp. (PIC), sponsors a defined benefit pension plan covering certain U.S. salaried employees and eligible hourly employees at certain PIC subsidiaries (the Peabody Plan). A subsidiary of PIC also has a defined benefit pension plan covering eligible employees who are represented by the UMWA under the Western Surface Agreement (the Western Plan and together with the Peabody Plan, the Pension Plans).

Effective May 31, 2008, the Peabody Plan was frozen in its entirety for both participation and benefit accrual purposes. In 2020, the Company announced a program to offer a voluntary lump-sum pension payout to eligible active salaried employees and former salaried employees in the Peabody Plan which would settle the Company’s obligation to them. The program provided participants with a limited time opportunity to elect to receive a lump-sum settlement of their pension benefit or begin to receive their benefit in the form of a monthly annuity in December 2020. As part of this voluntary lump-sum program, the Company settled $51.6 million of its pension obligations for active salaried employees and former salaried employees in the Peabody Plan with an equal amount paid from plan assets. As a result, the Company recorded a settlement gain of $2.7 million during the year ended December 31, 2020. The settlement gain was reflected in “Net periodic benefit (credit) costs, excluding service cost” on the consolidated statement of operations.


	Year Ended December 31,
	2020		2019		2018
	(Dollars in millions)
Service cost for benefits earned	$	0.3	$	2.0	$	2.3
Interest cost on projected benefit obligation	28.0		33.5		31.4
Expected return on plan assets	(29.7)		(31.4)		(42.8)


Settlement	(2.7)		—		—
Net actuarial (gain) loss	(25.6)		(16.6)		4.2
Net periodic pension benefit	$	(29.7)	$	(12.5)	$	(4.9)

The actuarial gain for all pension plans in 2020 was primarily due to actual returns on plan assets exceeding the expected returns for the year and the favorable impact of updating the mortality base tables and improvement scales to those published by the Society of Actuaries offset by the decline in the discount rate used to measure the benefit obligation. The actuarial gain for all pension plans in 2019 was primarily due to actual returns on plan assets exceeding the expected returns for the year offset by the decline in the discount rate used to measure the benefit obligation. The actuarial loss for all pension plans in 2018 was primarily due to actual returns on plan assets lower than expected returns for the year offset by the increase in the discount rate used to measure the benefit obligation.


	December 31,
	2020		2019
	(Dollars in millions)
Change in benefit obligation:
Projected benefit obligation at beginning of period	$	853.8	$	795.9
Service cost	0.3		2.0
Interest cost	28.0		33.5
Benefits paid	(57.5)		(55.6)
Actuarial loss	43.4		78.0
Settlement	(51.6)		—
Projected benefit obligation at end of period	816.4		853.8
Change in plan assets:
Fair value of plan assets at beginning of period	855.2		764.8
Actual return on plan assets	101.4		126.0
Employer contributions	—		20.0
Benefits paid	(57.5)		(55.6)
Settlement	(51.6)		—
Fair value of plan assets at end of period	847.5		855.2
Funded status at end of period	$	31.1	$	1.4
Amounts recognized in the consolidated balance sheets:
Noncurrent asset (included in “Investments and other assets”)	$	39.6	$	13.4
Noncurrent obligation (included in “Other noncurrent liabilities”)	(8.5)		(12.0)
Net amount recognized	$	31.1	$	1.4

The expected rate of return on plan assets is determined by taking into consideration expected long-term returns associated with each major asset class based on long-term historical ranges, inflation assumptions and the expected net value from active management of the assets based on actual results. Effective January 1, 2021, the Company lowered its expected rate of return on plan assets from 3.60% to 2.80% reflecting the impact of the Company’s asset allocation and capital market expectations.

As of December 31, 2020 and 2019, the accumulated benefit obligation for all plans was $816.4 million and $853.8 million, respectively, which was equal to the projected benefit obligation for those periods. As of December 31, 2020 and 2019, the plan assets for the Peabody Plan of $672.5 million and $689.4 million, respectively, exceeded the projected benefit obligation and accumulated benefit obligation for those periods of $632.9 million and $675.9 million, respectively. The projected benefit obligation and accumulated benefit obligation for the Western Plan as of December 31, 2020 and 2019, was $183.5 million and $177.9 million, respectively, which exceeded the plan assets of $175.0 million and $165.8 million, respectively, for those periods.

Assets of the PIC Master Trust (the Master Trust) are invested in accordance with investment guidelines established by the Peabody Plan Retirement Committee and the Peabody Western Plan Retirement Committee (collectively, the Retirement Committees) after consultation with outside investment advisors and actuaries.

The asset allocation targets have been set with the expectation that the assets of the Master Trust will be managed with an appropriate level of risk to fund each Pension Plan’s expected liabilities. To determine the appropriate target asset allocations, the Retirement Committees consider the demographics of each Pension Plan’s participants, the funded status of each Pension Plan, the business and financial profile of the Company and other associated risk preferences. These allocation targets are reviewed by the Retirement Committees on a regular basis and revised as necessary. As a result of discretionary contributions made in recent years, the Pension Plans have become nearly fully funded and therefore, as of December 31, 2020 and 2019, the Master Trust investment portfolio reflected the Company’s target asset mix of 100% fixed income investments. Master Trust assets also include investments in various real estate holdings through limited partnerships representing approximately less than 1% of total Master Trust assets as of both December 31, 2020 and 2019. The Retirement Committees’ intention is to liquidate these real estate holdings when allowable per the terms of the limited partnership agreements. Generally, dissolution and liquidation of the limited partnerships is required before the Master Trust’s real estate holdings can be liquidated and is estimated to occur at various times through 2022.

Assets of the Master Trust are under management by third-party investment managers, which are selected and monitored by the Retirement Committees. Specific investment guidelines have been established by the Retirement Committees for each major asset class including performance benchmarks, allowable and prohibited investment types and concentration limits. In general, investment guidelines do not permit leveraging the assets held in the Master Trust. However, investment managers may employ various strategies and derivative instruments in establishing overall portfolio characteristics consistent with the guidelines and investment objectives established by the Retirement Committees for their portfolios. Fixed income investment guidelines only allow for exchange-traded derivatives if the investment manager deems the derivative vehicle to be more attractive than a similar direct investment in an underlying cash market or to manage the duration of the fixed income portfolio.

Corporate bonds. The Master Trust invests in corporate bonds for diversification and to provide a hedge to interest rate movements affecting liabilities. Investment types are predominantly investment-grade corporate bonds. Fair value for these securities is provided by a third-party pricing service that utilizes various inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as well as other relevant economic measures. Corporate bonds are classified within the Level 2 valuation hierarchy since fair value inputs are derived prices in active markets and the bonds are not traded on a national securities exchange.

U.S. government securities. The Master Trust invests in U.S. government securities for diversification and to provide a hedge to interest rate movements affecting liabilities. Investment types are predominantly U.S. government bonds, agency securities and municipal bonds. Fair value for these securities is provided by a third-party pricing service that utilizes various inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as well as other relevant economic measures. If fair value is based on quoted prices in active markets and traded on a national securities exchange, U.S. government securities are classified within the Level 1 valuation hierarchy; otherwise, U.S. government securities are classified within the Level 2 valuation hierarchy.

International government securities. The Master Trust invests in international government securities for diversification and to provide a hedge to interest rate movements affecting liabilities. Investment types are predominantly non-U.S. government bonds. Fair value for these securities is provided by a third-party pricing service that utilizes various inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as well as other relevant economic measures. International government securities are classified within the Level 2 valuation hierarchy since fair value inputs are derived prices in active markets and the bonds are not traded on a national securities exchange.

Asset-backed securities. The Master Trust invests in asset-backed securities for diversification and to provide a hedge to interest rate movements affecting liabilities. Investment types are predominately mortgage-backed securities. Asset-backed securities are classified within the Level 2 valuation hierarchy since fair value inputs are derived prices in active markets and the investments are not traded on a national securities exchange.

Cash funds. The Master Trust invests in cash funds to manage liquidity resulting from payment of participant benefits and certain administrative fees. Investment vehicles primarily include a non-interest bearing cash fund with an earnings credit allowance feature, various exchange-traded derivative instruments consisting of futures and interest rate swap agreements used to manage the duration of certain liability-hedging investments. The non-interest bearing cash fund is classified within the Level 1 valuation hierarchy. Exchange traded derivatives, such as options and futures, for which market quotations are readily available, are valued at the last reported sale price or official closing price on the primary market or exchange on which they are traded and are classified within the Level 1 valuation hierarchy.

Real estate interests. The Master Trust invests in real estate interests for diversification. Investments in real estate represent interests in several limited partnerships, which invest in various real estate properties. Interests in real estate are valued using various methodologies, including independent third party appraisals; fair value measurements are not developed by the Company. For some investments, little market activity may exist and determination of fair value is then based on the best information available in the circumstances. This involves a significant degree of judgment by taking into consideration a combination of internal and external factors. Accordingly, interests in real estate are classified within the Level 3 valuation hierarchy. Some limited partnerships issue dividends to their investors in the form of cash distributions that the Pension Plans invest elsewhere within the Master Trust.

Private mutual funds. The Master Trust invests in mutual funds for growth and diversification. Investment vehicles include an institutional fund that holds a diversified portfolio of long-duration corporate fixed income investments (Corporate Bond Fund). The Corporate Bond Fund is not traded on a national securities exchange and is valued at NAV, the practical expedient to estimate fair value.


	December 31, 2020
	Level 1		Level 2		Level 3		Total
	(Dollars in millions)

Corporate bonds	$	—	$	623.3	$	—	$	623.3
U.S. government securities	121.4		21.2		—		142.6
International government securities	—		18.7		—		18.7
Asset-backed securities	—		4.7		—		4.7
Cash funds	14.9		—		—		14.9
Real estate interests	—		—		1.2		1.2
Total assets at fair value	$	136.3	$	667.9	$	1.2	805.4

Assets measured at net asset value practical expedient (1)
Private mutual funds							42.1

Total plan assets							$	847.5


	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(Dollars in millions)

Corporate bonds	$	—	$	598.3	$	—	$	598.3
U.S. government securities	135.9		19.0		—		154.9
International government securities	—		18.2		—		18.2
Asset-backed securities	—		3.4		—		3.4
Cash funds	33.2		—		—		33.2
Real estate interests	—		—		4.1		4.1
Total assets at fair value	$	169.1	$	638.9	$	4.1	812.1

Assets measured at net asset value practical expedient (1)
Private mutual funds							43.1


Total plan assets							$	855.2

(1) In accordance with Accounting Standards Update 2015-07, investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the total value of assets of the plans.


	Year Ended December 31,
	2020		2019		2018
	(Dollars in millions)
Balance, beginning of period	$	4.1	$	6.2	$	11.8
Realized gains (losses)	1.6		(1.0)		2.6
Unrealized (losses) gains relating to investments still held at the reporting date	(2.1)		1.4		(2.6)
Purchases, sales and settlements, net	(2.4)		(2.5)		(5.6)
Balance, end of period	$	1.2	$	4.1	$	6.2

Annual contributions to qualified plans are made in accordance with minimum funding standards and the Company’s agreement with the Pension Benefit Guaranty Corporation. Funding decisions also consider certain funded status thresholds defined by the Pension Protection Act of 2006 (generally 80%). As of December 31, 2020, the Company’s qualified plans are expected to be at or above the Pension Protection Act thresholds. Minimum funding standards are legislated by ERISA and are modified by pension funding stabilization provisions included in the Moving Ahead for Progress in the 21st Century Act of 2012, the Highway and Transportation Funding Act of 2014 and the Bipartisan Budget Act of 2015. The Company was not required to make any payments to its qualified pension plans in 2020 based on minimum funding requirements and did not make any discretionary contributions in 2020.

The Company sponsors employee retirement accounts under three 401(k) plans for eligible U.S. employees. The Company matches voluntary contributions to each plan up to specified levels. In May 2020 the Company amended one of its plans to eliminate the formula for calculating matching contributions and provide the Company sole discretion in making any matching contributions. In addition, in May 2020 the Company also temporarily suspended matching contributions due to challenging business conditions of COVID-19. The expense for these plans was $9.6 million, $27.8 million and $30.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. A performance contribution feature in one of the plans allows for additional discretionary contributions from the Company. There was no performance contribution granted for the years ended December 31, 2020 and 2019. There were no discretionary performance contributions paid during the year ended December 31, 2020. Prior performance contributions of $8.9 million and $8.5 million were paid during the years ended December 31, 2019 and 2018, respectively.