Pension and Other Postretirement Benefits

NiSource provides defined contribution plans and noncontributory defined benefit retirement plans that cover its employees. Benefits under the defined benefit retirement plans reflect the employees’ compensation, years of service and age at retirement. Additionally, NiSource provides health care and life insurance benefits for certain retired employees. The majority of employees may become eligible for these benefits if they reach retirement age while working for NiSource. The expected cost of such benefits is accrued during the employees’ years of service. Current rates of rate-regulated companies include postretirement benefit costs, including amortization of the regulatory assets that arose prior to inclusion of these costs in rates. For most plans, cash contributions are remitted to grantor trusts.

For the six months ended June 30, 2013, NiSource has contributed $7.2 million to its pension plans and $20.2 million to its other postretirement benefit plans.

The following tables provide the components of the plans’ net periodic benefits cost for the three and six months ended June 30, 2013 and 2012:



	Pension Benefits						Other Postretirement Benefits
Three Months Ended June 30, (in millions)	2013			2012			2013			2012
Components of Net Periodic Benefit Cost
Service cost	$	9.3		$	9.4		$	3.0		$	2.8
Interest cost	24.3			28.2			8.1			9.3
Expected return on assets	(42.1		)	(41.1		)	(7.6		)	(6.7		)
Amortization of transition obligation	—			—			0.1			0.3
Amortization of prior service cost	0.1			0.1			(0.2		)	(0.1		)
Recognized actuarial loss	19.7			20.3			2.8			2.4
Settlement loss	3.6			—			—			—
Total Net Periodic Benefit Costs	$	14.9		$	16.9		$	6.2		$	8.0



	Pension Benefits						Other Postretirement Benefits
Six Months Ended June 30, (in millions)	2013			2012			2013			2012
Components of Net Periodic Benefit Cost
Service cost	$	18.7		$	18.8		$	6.0		$	5.6
Interest cost	48.6			56.4			16.2			18.6
Expected return on assets	(84.5		)	(82.2		)	(15.2		)	(13.4		)
Amortization of transition obligation	—			—			0.2			0.6
Amortization of prior service cost	0.2			0.2			(0.4		)	(0.2		)
Recognized actuarial loss	40.4			40.6			5.6			4.8
Settlement loss	24.3			—			—			—
Total Net Periodic Benefit Costs	$	47.7		$	33.8		$	12.4		$	16.0

For the quarters ended June 30, 2013 and 2012, pension and other postretirement benefit cost of approximately $2.3 million and $5.3 million, respectively, was capitalized as a component of plant or recognized as a regulatory asset or liability consistent with regulatory orders for certain of NiSource’s regulated businesses. For the six months ended June 30, 2013 and 2012, pension and other postretirement benefit cost of approximately $25.8 million and $10.9 million, respectively, was capitalized as a component of plant or recognized as a regulatory asset or liability consistent with regulatory orders for certain of NiSource's regulated businesses.

As of February 28, 2013, it became probable that a NiSource pension plan's lump sum payouts for 2013 would exceed the plan's 2013 service cost plus interest cost and, therefore, settlement accounting was required. A one-time settlement charge of $20.7 million was recorded during the first quarter of 2013. As a result of the settlement, the pension plan was remeasured as of February 28, 2013 resulting in a decrease to the pension benefit obligation, net of plan assets, of $18.6 million, and net decreases to regulatory assets and accumulated other comprehensive loss of $36.1 million and $3.2 million, respectively. During the second quarter of 2013, NiSource continued to apply settlement accounting for the pension plan and recognized an additional settlement charge of $3.6 million. As a result of the additional settlement, the pension plan was remeasured as of May 31, 2013 resulting in a decrease to the pension benefit obligation, net of plan assets, of $30.7 million, and net decreases to regulatory assets and accumulated other comprehensive loss of $30.8 million and $3.5 million, respectively. Net periodic pension benefit cost for 2013 was decreased by $4.6 million as a result of the first and second quarter remeasurements.

The following table provides the key assumptions that were used to calculate the pension benefit obligation and the net periodic benefit cost at the measurement dates of May 31, 2013, February 28, 2013 and December 31, 2012:



	May 31, 2013		February 28, 2013		December 31, 2012
Actuarial Assumptions
Discount Rate	3.75	%	3.50	%	3.63	%
Expected return on assets	8.30	%	8.30	%	8.30	%