Employee Benefits

12 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

Employee Benefits

Pension and Other Postretirement Benefits

The Company provides pension and other postretirement benefits to certain employees through three benefit plans: the QEP Resources, Inc. Retirement Plan (Pension Plan), the Supplemental Executive Retirement Plan (SERP), and a postretirement medical plan (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, 2020, covers two active and suspended participants, or 1%, of QEP's active employees, and 212 participants that are retired or were terminated and vested. Pension Plan benefits are based on the employee's age at retirement, years of service as of the earlier of the participant's termination of employment or December 31, 2015, and highest earnings in a consecutive 72 semi-monthly pay period during the 10 years preceding termination of employment or, if earlier, December 31, 2015. The Pension Plan was amended and restated in June 2015, is closed to new participants and was frozen such that active participants do not earn any additional accrued benefits on or after January 1, 2016. During the year ended December 31, 2020, 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 2021. Contributions to the Pension Plan increase plan assets.

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 the participant's termination of employment. During the year ended December 31, 2020, the Company made contributions of $9.7 million to its SERP and expects to contribute approximately $3.1 million in 2021. Contributions to the SERP are used to fund current benefit payments. The SERP was amended and restated in June 2015 and is closed to new participants effective January 1, 2016.

The Medical Plan is a self-insured plan. It is unfunded and provides other postretirement benefits including certain health care and life insurance benefits for certain retired QEP employees. The Medical Plan was originally provided only to employees hired by Questar Corporation before January 1, 1997. Of the two active, pension eligible employees, neither is eligible for the Medical Plan when they retire. As of December 31, 2020, 27 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, 2020, the Company made contributions of $0.7 million and expects to contribute approximately $0.2 million of benefits in 2021. At December 31, 2020 and 2019, QEP's accumulated benefit obligation exceeded the fair value of its qualified retirement plan assets.

In February 2017, the Company changed the eligibility requirements for active employees eligible for the Medical Plan, as well as retirees currently enrolled. Effective July 1, 2017, the Company no longer offers the Medical Plan to a retiree and spouse that

are both Medicare eligible. In addition, the Company no longer offers life insurance to individuals retiring on or after July 1, 2017.

The Company recognizes service costs related to SERP and Medical Plan benefits within "General and administrative" expense on the statements of operations. All other expenses related to the Pension Plan, SERP and Medical Plan are recognized within "Interest and other income (expense)" on the statements of operations.

The Company's execution of its 2018 and 2019 strategic initiatives, including divestitures and corporate restructurings, triggered curtailments related to the Pension Plan, SERP and/or Medical Plan at the closing of the various transactions. Refer to Note 8 – Restructuring for more information. Curtailments were included in "Interest and other income (expense)" and "Net gain (loss) from asset sales, inclusive of restructuring costs" on the statements of operations depending on the associated participants triggering the curtailment and are summarized in the following table:

	Year ended December 31,
Statements of Operations Line	2020		2019		2018
Interest and other income (expense)	$	—	$	(1.4)	$	(0.3)
Net gain (loss) from asset sales, inclusive of restructuring costs	—		0.2		0.2
Total curtailment gain (loss)	$	—	$	(1.2)	$	(0.1)

The accumulated benefit obligation for the Pension and SERP defined-benefit pension plans was $135.3 million and $135.2 million as of December 31, 2020 and 2019, 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, 2020 and 2019, as well as the funded status of the plans and amounts recognized in the financial statements at December 31, 2020 and 2019:

	Pension Plan and SERP benefits				Medical Plan benefits
	2020		2019		2020		2019
Change in benefit obligation	(in millions)
Benefit obligation at January 1,	$	135.2	$	122.1	$	2.6	$	2.5
Service cost	—		0.3		—		—
Interest cost	4.1		4.8		0.1		0.1
Curtailments	—		1.2		—		—
Benefit payments	(10.3)		(6.2)		(0.7)		(0.9)
Plan amendments	—		—		—		—
Actuarial loss (gain)	11.7		13.0		0.7		0.9
Settlement loss	(5.4)		—		—		—
Benefit obligation at December 31,	$	135.3	$	135.2	$	2.7	$	2.6
Change in plan assets
Fair value of plan assets at January 1,	$	113.9	$	93.3	$	—	$	—
Actual return on plan assets	16.1		21.3		—		—
Company contributions to the plan	13.7		5.5		0.7		0.9
Benefit payments	(10.3)		(6.2)		(0.7)		(0.9)
Settlement loss	(5.4)		—		—		—
Fair value of plan assets at December 31,	128.0		113.9		—		—
Underfunded status (current and long-term)	$	(7.3)	$	(21.3)	$	(2.7)	$	(2.6)
Amounts recognized in balance sheets
Accounts payable and accrued expenses	$	(3.1)	$	(9.2)	$	(0.1)	$	(0.2)
Other long-term liabilities	(4.2)		(12.1)		(2.6)		(2.4)
Total amount recognized in balance sheet	$	(7.3)	$	(21.3)	$	(2.7)	$	(2.6)
Amounts recognized in AOCI
Net actuarial loss (gain)	$	15.4	$	15.7	$	1.0	$	0.4
Prior service cost	—		—		—		—
Total amount recognized in AOCI	$	15.4	$	15.7	$	1.0	$	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
	2020		2019		2018		2020		2019		2018
Components of net periodic benefit cost	(in millions)
Service cost	$	—	$	0.3	$	0.8	$	—	$	—	$	—
Interest cost	4.1		4.8		4.6		0.1		0.1		0.1
Expected return on plan assets	(6.1)		(5.9)		(5.8)		—		—		—
Curtailment (gain) loss	—		2.0		0.3		—		(0.8)		(0.2)
Settlement loss	1.0		—		—		—		—		—
Amortization of prior service costs	—		0.4		0.8		—		—		(0.3)
Amortization of actuarial loss	0.9		0.5		0.8		—		—		—
Periodic expense	$	(0.1)	$	2.1	$	1.5	$	0.1	$	(0.7)	$	(0.4)
Components recognized in accumulated other comprehensive income
Current period prior service cost	$	—	$	—	$	—	$	—	$	—	$	0.2
Current period actuarial (gain) loss	1.6		(2.4)		5.6		0.7		0.9		(0.1)
Amortization of prior service cost	—		(0.4)		(0.8)		—		0.8		0.3
Amortization of actuarial gain (loss)	(0.9)		(0.5)		(0.8)		—		—		—
Loss on curtailment in current period	—		(0.8)		(0.1)		—		—		—
Settlement loss	(1.0)		—		—		—		—		—
Total amount recognized in accumulated other comprehensive income	$	(0.3)	$	(4.1)	$	3.9	$	0.7	$	1.7	$	0.4

The estimated portion of net actuarial loss cost for the Pension Plan and SERP that will be amortized from AOCI into net periodic benefit cost in 2021 is $1.0 million, which represents amortization of actuarial losses. The estimated portion of net actuarial loss for the Medical Plan that will be amortized from AOCI into net periodic benefit cost in 2021 is less than $0.1 million, which represents amortization of actuarial losses. Amortization of actuarial gains or losses out of AOCI are recognized in the statements of operations in "Interest and other income (expense)".

Following are the weighted-average discount rates (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, 2020 and 2019:

	Pension Plan and SERP benefits				Medical Plan benefits
	2020		2019		2020		2019
Discount rate	2.45	%	3.13	%	2.70	%	3.40	%

The discount rate assumptions used by the Company represent 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
	2020		2019		2018		2020		2019		2018
Discount rate	3.21	%	4.19	%	3.50	%	3.40	%	4.30	%	3.60	%
Expected long-term return on plan assets	5.70	%	5.70	%	6.00	%	n/a		n/a		n/a
Rate of increase in compensation(1)	n/a		3.00	%	3.50	%	n/a		n/a		n/a

_______________________

(1)     As the Pension Plan was frozen, such that employees do not accrue additional defined benefits for future service or compensation on or after January 1, 2016, 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 of January 1, 2020, there were no longer any active employees eligible for the SERP. As such, the rate of increase in compensation is only used for the SERP for the years ended December 31, 2019 and 2018.

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 2021. 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.

The following table summarizes investments for which fair value is measured using the NAV per share practical expedient as of December 31, 2020 and 2019, respectively:

	December 31, 2020				December 31, 2019
	Total		Percentage of total		Total		Percentage of total
	(in millions, except percentages)
Cash and short-term investments	$	0.6	—	%	$	0.6	1	%
Equity securities:
Domestic	23.8		19	%	30.6		27	%
International	8.5		7	%	10.5		9	%
Fixed income	95.1		74	%	72.2		63	%
Total investments	$	128.0	100	%	$	113.9	100	%

Expected Benefit Payments

As of December 31, 2020, the following future benefit payments are expected to be paid:

	Pension Plan and SERP benefits		Medical Plan benefits
	(in millions)
2021	$	9.0	$	0.2
2022	$	9.1	$	0.2
2023	$	7.6	$	0.1
2024	$	7.5	$	0.1
2025	$	6.8	$	0.1
2026 through 2030	$	31.4	$	0.5

Employee Investment Plan

QEP employees may participate in the QEP Employee Investment Plan, a defined-contribution plan (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. Both employees and QEP make contributions to the 401(k) Plan. The Company may contribute a discretionary portion beyond the Company's matching contribution to employees not in the Pension Plan or SERP. During the years ended December 31, 2020, 2019 and 2018, the Company made contributions of $3.0 million, $3.6 million and $5.8 million to the 401(k) Plan, respectively. The Company recognizes expense equal to its yearly contributions. Participants receive 100% employer matching contributions on participant 401(k) plan contributions up to a percentage of qualifying earnings as described below.

	Year Ended December 31,
	2020		2019		2018
Employees who do not accrue a benefit in the SERP
Maximum employer matching of qualifying earnings	8	%	8	%	8	%
Employees who accrue a benefit in the SERP
Maximum employer matching of qualifying earnings	6	%	6	%	6	%

As a result of freezing benefits under the Pension Plan, the 401(k) Plan and the Wrap Plan were amended to allow the Company to make discretionary contributions in the form of Company Transition Credits to eligible participants. Eligible participants are certain highly and non-highly compensated employees who were active participants in the Pension Plan on December 31, 2015. During the years ended December 31, 2020 and 2019, the Company made a discretionary contribution of less than $0.1 million to active participants of the Pension Plan. During the year ended December 31, 2018, the Company made a discretionary contribution of $0.3 million to active participants of the Pension Plan.

Nonqualified, Unfunded Deferred Compensation Wrap Plan

QEP offers a nonqualified, unfunded deferred compensation wrap plan to certain individuals. The Wrap Plan provides participants with certain tax planning benefits as well as supplemental funds for retirement and allows participants to defer the receipt of various types of compensation. Participants are able to select from a variety of investment options, including mutual funds and phantom QEP shares. As of December 31, 2020 and 2019, the Wrap Plan obligations for participants' future benefits were $25.5 million and $26.8 million, respectively, and are included in "Other long-term liabilities" on the balance sheets. The Company established a Rabbi Trust to hold the investments associated with the Wrap Plan (other than phantom QEP shares) and to pay Wrap Plan obligations as they arise. As of December 31, 2020 and 2019, the marketable securities held in the Rabbi Trust were $23.4 million and $23.1 million, respectively, and are included in "Other noncurrent assets" on the balance sheets.

Changes in the fair value of Wrap Plan obligations and marketable securities are recorded as "Deferred compensation mark-to-market adjustments" and "Unrealized gain/loss on marketable securities" within "General and administrative" and "Interest and other income (expense)", respectively, on the statements of operations. "Deferred compensation mark-to-market adjustments" and "Unrealized gain/loss on marketable securities" for the years ended December 31, 2020, 2019 and 2018, respectively, are summarized in the table below:

	Year Ended December 31,
	(in millions)
	2020		2019		2018
Deferred compensation mark-to-market adjustments	$	1.0	$	2.3	$	(3.9)
Unrealized (gain)/loss on marketable securities	(3.2)		(3.9)		1.2

Refer to Note 5 – Fair Value Measurements for more information on the fair value measurement of the marketable securities held in the Rabbi Trust and the Wrap Plan obligations.