XML 42 R20.htm IDEA: XBRL DOCUMENT v3.6.0.2
Employee Benefits
 12 Months Ended
Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract]  
Employee Benefits
 
Pension and other postretirement benefits
The Company provides pension and other postretirement benefits to certain employees through three retirement benefit plans: the QEP Resources, Inc. Retirement Plan (the Pension Plan), the Supplemental Executive Retirement Plan (the SERP), and a postretirement medical plan (the Medical Plan).

The Pension Plan is a closed, qualified, defined-benefit pension plan that is funded and provides pension benefits to certain QEP employees, which, as of December 31, 2016, covers 41 active and suspended participants, or 6%, of QEP's active employees, and 173 participants that are retired or were terminated and vested. Pension Plan benefits are based on the employee's age at retirement, years of service and highest earnings in a consecutive 72 semi-monthly pay period during the 10 years preceding retirement. During the year ended December 31, 2016, the Company made contributions of $4.0 million to the Pension Plan and expects to contribute approximately $4.0 million to the Pension Plan in 2017. Contributions to the Pension Plan increase plan assets.

As a result of the Company's 2014 divestitures and retirements in 2015, the number of active participants in the Pension Plan fell to 50 participants during the year ended December 31, 2015, which is the minimum number of active participants for a plan to be qualified under the Internal Revenue Services' participant rules. In order to prevent disqualification, the Pension Plan was amended in June 2015 and was frozen effective January 1, 2016, such that employees do not earn additional defined benefits for future services. This change resulted in a non-cash curtailment loss of $11.2 million recognized on the Consolidated Statement of Operations within "General and administrative" expense during the year ended December 31, 2015. A curtailment is recognized immediately when there is a significant reduction in, or an elimination of, defined benefit accruals for present employees' future services.

The SERP is a nonqualified retirement plan that is unfunded and provides pension benefits to certain QEP employees. SERP benefits are based on the employee's age at retirement, years of service and highest earnings in a consecutive 72 semi-monthly pay period during the 10 years preceding retirement. During the year ended December 31, 2016, the Company made contributions of $3.2 million to its SERP and expects to contribute approximately $2.5 million in 2017. Contributions to the SERP are used to fund current benefit payments. The SERP was amended and restated in June 2015 and was closed to new participants effective January 1, 2016.

The Medical Plan is unfunded and provides other postretirement benefits including certain health care and life insurance benefits for certain retired QEP employees. The Medical Plan is provided only to employees hired before January 1, 1997. Of the 41 active, pension eligible employees, 25 are also eligible for the Medical Plan when they retire. As of December 31, 2016, 50 retirees are enrolled in the Medical Plan. The Company has capped its exposure to increasing medical costs by paying a fixed dollar monthly contribution toward these retiree benefits. The Company's contribution is prorated based on an employee's years of service at retirement; only those employees with 25 or more years of service receive the maximum company contribution. During the year ended December 31, 2016, the Company made contributions of $0.4 million and expects to contribute approximately $0.3 million of benefits in 2017. At December 31, 2016 and 2015, QEP's accumulated benefit obligation exceeded the fair value of its qualified retirement plan assets.

During the year ended December 31, 2014, the Company recognized a $10.7 million loss on curtailment and $1.9 million in expenses for special termination benefits in connection with the Midstream Sale (see Note 3 – Discontinued Operations) and the 2014 property sales in the Other Southern area (see Note 2 – Acquisitions and Divestitures). The Pension Plan was amended to provide certain termination benefits for participants impacted by the Midstream Sale and the 2014 property sales in the Other Southern area who were aged 50-54 as of the date of their separation from the Company. These expenses are included within "Net income from discontinued operations, net of income tax" and "Net gain (loss) from asset sales" for the year ended December 31, 2014, on the Consolidated Statements of Operations.

The accumulated benefit obligation for all defined-benefit pension plans was $124.5 million and $117.4 million at December 31, 2016 and 2015, respectively.

The following table sets forth changes in the benefit obligations and fair value of plan assets for the Company's Pension Plan, SERP and Medical Plan for the years ended December 31, 2016 and 2015, as well as the funded status of the plans and amounts recognized in the financial statements at December 31, 2016 and 2015:
 
Pension Plan and SERP benefits
 
Medical Plan benefits
 
2016
 
2015
 
2016
 
2015
Change in benefit obligation
(in millions)
Benefit obligation at January 1,
$
120.3

 
$
132.6

 
$
5.2

 
$
6.6

Service cost
1.2

 
2.1

 
—

 
—

Interest cost
5.2

 
4.9

 
0.2

 
0.2

Curtailments
—

 
(7.1
)
 
—

 
—

Benefit payments
(7.8
)
 
(7.7
)
 
(0.4
)
 
(0.2
)
Plan amendments
—

 
0.9

 
—

 
—

Actuarial loss (gain)
10.3

 
(5.4
)
 
0.4

 
(1.4
)
Benefit obligation at December 31,
$
129.2

 
$
120.3

 
$
5.4

 
$
5.2

Change in plan assets
 
 
 
 
 
 
 
Fair value of plan assets at January 1,
$
79.3

 
$
81.4

 
$
—

 
$
—

Actual return on plan assets
7.4

 
(1.9
)
 
—

 
—

Company contributions to the plan
7.2

 
7.5

 
0.4

 
0.2

Benefit payments
(7.8
)
 
(7.7
)
 
(0.4
)
 
(0.2
)
Fair value of plan assets at December 31,
86.1

 
79.3

 
—

 
—

Underfunded status (current and long-term)
$
(43.1
)
 
$
(41.0
)
 
$
(5.4
)
 
$
(5.2
)
Amounts recognized in balance sheets
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
(2.5
)
 
$
(2.9
)
 
$
(0.3
)
 
$
(0.3
)
Other long-term liabilities
(40.6
)
 
(38.1
)
 
(5.1
)
 
(4.9
)
Total amount recognized in balance sheet
$
(43.1
)
 
$
(41.0
)
 
$
(5.4
)
 
$
(5.2
)
Amounts recognized in AOCI
 
 
 
 
 
 
 
Net actuarial loss (gain)
$
23.5

 
$
15.8

 
$
(0.4
)
 
$
(0.8
)
Prior service cost
2.9

 
4.1

 
1.0

 
1.2

Total amount recognized in AOCI
$
26.4

 
$
19.9

 
$
0.6

 
$
0.4



The following table sets forth the Company's Pension Plan, SERP and Medical Plan cost and amounts recognized in other comprehensive income (before tax) for the respective years ended December 31:
 
Pension Plan and SERP benefits
 
Medical Plan benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Components of net periodic benefit cost
(in millions)
Service cost
$
1.2

 
$
2.1

 
$
2.6

 
$
—

 
$
—

 
$
—

Interest cost
5.2

 
4.9

 
5.3

 
0.2

 
0.2

 
0.3

Expected return on plan assets
(5.6
)
 
(5.7
)
 
(5.1
)
 
—

 
—

 
—

Curtailment loss
—

 
11.2

 
9.3

 
—

 
—

 
1.4

Special termination benefits
—

 
—

 
1.9

 
—

 
—

 
—

Settlements
—

 
—

 
0.7

 
—

 
—

 
—

Amortization of prior service costs
1.1

 
1.7

 
4.7

 
0.2

 
0.2

 
0.3

Amortization of actuarial loss
0.8

 
0.5

 
0.8

 
—

 
—

 
—

Periodic expense
$
2.7

 
$
14.7

 
$
20.2


$
0.4

 
$
0.4

 
$
2.0

Components recognized in accumulated other comprehensive income
 
 
 
 
 
 
 
 
 
 
 
Current period prior service cost
$
—

 
$
0.9

 
$
—

 
$
—

 
$
—

 
$
—

Current period actuarial (gain) loss
8.5

 
2.2

 
21.5

 
0.4

 
(1.4
)
 
0.6

Amortization of prior service cost
(1.1
)
 
(12.9
)
 
(14.0
)
 
(0.2
)
 
(0.2
)
 
(1.7
)
Amortization of actuarial gain (loss)
(0.8
)
 
(0.5
)
 
(0.8
)
 
—

 
—

 
—

Loss on curtailment in current period
—

 
(7.1
)
 
(8.2
)
 
—

 
—

 
(0.2
)
Settlements
—

 
—

 
(0.7
)
 
—

 
—

 
—

Total amount recognized in accumulated other comprehensive income
$
6.6

 
$
(17.4
)
 
$
(2.2
)
 
$
0.2

 
$
(1.6
)
 
$
(1.3
)

 
The estimated portion of net actuarial loss and net prior service cost for the Pension Plan and SERP that will be amortized from AOCI into net periodic benefit cost in 2017 is $2.2 million, which represents amortization of prior service cost recognition and actuarial losses. The estimated portion to be recognized in net periodic cost for the Medical Plan from AOCI in 2017 is $0.2 million, which represents amortization of prior service cost recognition. Amortization of prior service costs and actuarial gains or losses out of AOCI are recognized in the Consolidated Statements of Operations in "General and administrative" expense.

Following are the weighted-average assumptions (weighted by the plan level benefit obligation for pension benefits) used by the Company to calculate the Pension Plan, SERP and Medical Plan obligations at December 31, 2016 and 2015:
 
Pension Plan and SERP benefits
 
Medical Plan benefits
 
2016
 
2015
 
2016
 
2015
Discount rate
3.96
%
 
4.24
%
 
4.10
%
 
4.40
%
Rate of increase in compensation(1)
3.50
%
 
4.00
%
 
3.50
%
 
4.00
%
_______________________
(1)  
The Pension Plan was frozen effective January 1, 2016, and as a result, the rate of increase in compensation for participants is no longer considered an assumption used by the Company to calculate the value of the Pension Plan. As such, for the year ended December 31, 2016, the rate of increase in compensation only includes the SERP and Medical Plan.

The discount rate assumptions used by the Company represents an estimate of the interest rate at which the Pension Plan, SERP and Medical Plan obligations could effectively be settled on the measurement date.

Following are the weighted-average assumptions (weighted by the net period benefit cost for pension benefits) used by the Company in determining the net periodic Pension Plan, SERP and Medical Plan cost for the years ended December 31:
 
Pension Plan and SERP benefits
 
Medical Plan benefits
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Discount rate
4.23
%
 
3.94
%
 
4.40
%
 
4.40
%
 
4.00
%
 
5.00
%
Expected long-term return on plan assets
6.50
%
 
6.75
%
 
7.00
%
 
n/a

 
n/a

 
n/a

Rate of increase in compensation(1)
4.00
%
 
4.00
%
 
4.00
%
 
4.00
%
 
4.00
%
 
4.00
%
_______________________
(1)  
The Pension Plan was frozen effective January 1, 2016, and as a result, the rate of increase in compensation for participants is no longer considered an assumption used by the Company to calculate the value of the Pension Plan. As such, for the year ended December 31, 2016, the rate of increase in compensation only includes the SERP and Medical Plan.

In selecting the assumption for expected long-term rate of return on assets, the Company considers the average rate of return expected on the funds to be invested to provide benefits. This includes considering the plan's asset allocation, historical returns on these types of assets, the current economic environment and the expected returns likely to be earned over the life of the plan. No plan assets are expected to be returned to the Company in 2017. Historical health care cost trend rates are not applicable to the Company, because the Company's medical costs are capped at a fixed amount. As the Company's medical costs are capped at a fixed amount, the sensitivity to increases and decreases in the health-care inflation rate is not applicable.

Plan Assets
The Company's Employee Benefits Committee (EBC) oversees investment of qualified pension plan assets. The EBC uses a third-party asset manager to assist in setting targeted-policy ranges for the allocation of assets among various investment categories. The EBC allocates pension plan assets among broad asset categories and reviews the asset allocation at least annually. Asset allocation decisions consider risk and return, future-benefit requirements, participant growth and other expected cash flows. These characteristics affect the level, risk and expected growth of postretirement-benefit assets. The EBC uses asset-mix guidelines that include targets for each asset category, return objectives for each asset group and the desired level of diversification and liquidity. These guidelines may change from time to time based on the EBC's ongoing evaluation of each plan's risk tolerance. The EBC estimates an expected overall long-term rate of return on assets by weighting expected returns of each asset class by its targeted asset allocation percentage. Expected return estimates are developed from analysis of past performance and forecasts of long-term return expectations by third-parties. Responsibility for individual security selection rests with each investment manager, who is subject to guidelines specified by the EBC. The EBC sets performance objectives for each investment manager that are expected to be met over a three-year period or a complete market cycle, whichever is shorter. Performance and risk levels are regularly monitored to confirm policy compliance and that results are within expectations. Performance for each investment is measured relative to the appropriate index benchmark for its category. QEP securities may be considered for purchase at an investment manager's discretion, but within limitations prescribed by the Employee Retirement Income Security Act of 1974 (ERISA) and other laws. There was no direct investment in QEP shares for the periods disclosed. The majority of retirement-benefit assets were invested as follows:

Equity securities: Domestic equity assets were invested in a combination of index funds and actively managed products, with a diversification goal representative of the whole U.S. stock market. International equity securities consisted of developed and emerging market foreign equity assets that were invested in funds that hold a diversified portfolio of common stocks of corporations in developed and emerging foreign countries.

Debt securities: Investment grade intermediate-term debt assets are invested in funds holding a diversified portfolio of debt of governments, corporations and mortgage borrowers with average maturities of five to ten years and investment grade credit ratings. Investment grade long-term debt assets are invested in a diversified portfolio of debt of corporate and non-corporate issuers, with an average maturity of more than ten years and investment grade credit ratings. High yield and bank loan assets are held in funds holding a diversified portfolio of these instruments with an average maturity of five to seven years.

Although the actual allocation to cash and short-term investments is minimal (less than 5%), larger cash allocations may be held from time to time if deemed necessary for operational aspects of the retirement plan. Cash is invested in a high-quality, short-term temporary investment fund that purchases investment-grade quality short-term debt issued by governments and corporations.

The EBC made the decision to invest all of the retirement plan assets in commingled funds as these funds typically have lower expense ratios and are more tax efficient than mutual funds. These investments are public investment vehicles valued using the net asset value (NAV) as a practical expedient. The NAV is based on the underlying assets owned by the fund excluding transaction costs and minus liabilities, which can be traced back to observable asset values. No assets held by the Pension Plan that were valued using the NAV methodology were subject to redemption restrictions on their valuation date. These commingled funds are audited annually by an independent accounting firm.

QEP measures and discloses fair values in accordance with the provisions of ASC 820, Fair Value Measurements and Disclosures. This guidance defines fair value in applying GAAP, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 also establishes a fair value hierarchy. Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable and significant to the fair value measurement. In conjunction with the issuance of ASU 2015-07, Fair Value Measurements (Topic 820): Disclosures for Investment in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), QEP no longer presents its Pension Plan assets in the fair value hierarchy, as all investments are measured at NAV as a practical expedient, which are now required to be excluded from the fair value hierarchy.
The following table summarizes investments for which fair value is measured using the NAV per share practical expedient as of December 31, 2016 and 2015, respectively:
 
December 31, 2016
 
December 31, 2015
 
Total
 
Percentage of total
 
Total
 
Percentage of total
 
(in millions, except percentages)
Cash and short-term investments
$
3.5

 
4
%
 
$
0.4

 
—
%
Equity securities:
 
 
 
 
 
 
 
Domestic
39.3

 
46
%
 
38.5

 
49
%
International
21.6

 
25
%
 
16.8

 
21
%
Fixed income
21.7

 
25
%
 
23.6

 
30
%
Total investments
$
86.1

 
100
%
 
$
79.3

 
100
%


Expected Benefit Payments
As of December 31, 2016, the following future benefit payments are expected to be paid:
 
Pension Plan and SERP benefits
 
Medical Plan benefits
 
(in millions)
2017
$
7.2

 
$
0.3

2018
$
6.6

 
$
0.3

2019
$
8.6

 
$
0.3

2020
$
8.0

 
$
0.3

2021
$
8.9

 
$
0.3

2022 through 2026
$
42.3

 
$
1.4



Employee Investment Plan
QEP employees may participate in the QEP Employee Investment Plan, a defined-contribution plan (the 401(k) Plan). The 401(k) Plan allows eligible employees to make investments, including purchasing shares of QEP common stock, through payroll deduction at the current fair market value on the transaction date. For the year ended December 31, 2016, all employees not covered by the SERP were eligible for matching contributions equal to 100% of the employees’ contributions up to a maximum of 8% of their qualifying earnings. For the year ended December 31, 2016, employees covered by the SERP were eligible for matching contributions equal to 100% of the employee's contributions up to a maximum of 6% of their qualifying earnings. For the years ended December 31, 2015 and 2014, the Company made matching contributions for employees not covered by the Pension Plan or the SERP equal to 100% of employees' contributions up to a maximum of 8% of their qualifying earnings. For the years ended December 31, 2015 and 2014, employees covered by the Pension Plan or the SERP were eligible for matching contributions equal to 100% of the employees' contributions up to a maximum of 6% match of their qualifying earnings. The Company may contribute a discretionary portion beyond the Company's matching contribution to employees not in the Pension Plan or SERP. The Company recognizes expense equal to its yearly contributions, which amounted to $5.6 million, $6.3 million and $7.6 million during the years ended December 31, 2016, 2015 and 2014, respectively.