XML 39 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
EMPLOYEE BENEFIT PLANS (Notes)
12 Months Ended
Dec. 31, 2017
Defined Benefit Plans and Other Postemployment Benefit Plans Table Text Block [Line Items]  
Pension and Other Postemployment Benefits Disclosure [Text Block]
11.
EMPLOYEE BENEFIT PLANS

Retirement and Other Postemployment Benefit Plans

Retirement Plans - We have a defined benefit pension plan covering nonbargaining-unit employees hired before January 1, 2005, and certain bargaining-unit employees hired before December 15, 2011. Nonbargaining-unit employees hired after December 31, 2004; employees represented by Local No. 304 of the International Brotherhood of Electrical Workers (“IBEW”) hired on or after July 1, 2010; employees represented by the United Steelworkers hired on or after December 15, 2011; and employees who accepted a one-time opportunity to opt out of the defined benefit pension plan are covered by a profit-sharing plan. Certain employees of the Texas Gas Service division are entitled to benefits under a frozen cash-balance pension plan. In addition, we have a supplemental executive retirement plan for the benefit of certain officers. No new participants in the supplemental executive retirement plan have been approved since 2005, and it was formally closed to new participants as of January 1, 2014. We fund our defined benefit pension 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. Pension expense was $30.2 million, $32.0 million and $38.0 million in 2017, 2016 and 2015, respectively.

Other Postemployment Benefit Plans - We sponsor health and welfare plans that provide postemployment medical and life insurance benefits to certain employees who retire with at least five years of service. The postemployment medical plan is contributory based on hire date, age and years of service, with retiree contributions adjusted periodically, and contains other cost-sharing features such as deductibles and coinsurance. Other postemployment benefit expense was $1.7 million, $2.6 million and $5.0 million in 2017, 2016 and 2015, respectively, prior to regulatory deferrals.

Plan Amendments - In September 2016, due to uncertain market conditions with health insurance exchange providers, we elected not to move the eligible pre-65 participants in our postemployment medical plans to a healthcare exchange. As a result, we remeasured the respective plan assets and benefit obligations, effective September 30, 2016. In the fourth quarter of 2016, we further amended our other postemployment medical plan to allow certain participants access to reimbursable retirement accounts. The net impact of these plan amendments in 2016 was a $483 thousand increase in our other postemployment benefit plan obligation.
 
Actuarial Assumptions - The following table sets forth the weighted-average assumptions used to determine benefit obligations for pension and postemployment benefits for the periods indicated:
 
 
December 31,
 
 
2017
 
2016
Discount rate - pension plans
 
3.80%
 
4.30%
Discount rate - other postemployment plans
 
3.70%
 
4.20%
Compensation increase rate
 
3.25% - 3.35%
 
3.25% - 3.40%

The following table sets forth the weighted-average assumptions used by us to determine the periodic benefit costs for the periods indicated:
 
 
Years Ended December 31,
 
 
 
2017
 
2016
 
 
2015
 
Discount rate - pension plans
 
4.30%
 
4.75%
 
 
4.25%/4.75%
(c)
Discount rate - other postemployment plans
 
4.20%
 
4.75%/3.75%
(a)
 
4.25%/4.75%
(c)
Expected long-term return on plan assets - pension plans
 
7.75%
 
7.75%
 
 
7.75%
 
Expected long-term return on plan assets - other postemployment plans
 
7.60%
 
8.00%/7.75%
(b)
 
7.75%
 
Compensation increase rate
 
3.25% - 3.40%
 
3.35% - 3.40%
 
 
3.30% - 3.50%
 

(a) Discount rate for the nine months ended September 30, 2016, and three months ended December 31, 2016, respectively.
(b) Expected long-term return on plan assets for the nine months ended September 30, 2016, and three months ended December 31, 2016, respectively.
(c) Discount rate for the nine months ended September 30, 2015, and three months ended December 31, 2015, respectively.

We determine our overall expected long-term rate of return on plan assets, based on our review of historical returns and economic growth models. At December 31, 2017, we updated our assumed mortality rates to incorporate the new set of mortality tables issued by the Society of Actuaries in October 2017.

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 defined benefit pension and other postemployment 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.

Regulatory Treatment - The OCC, KCC and regulatory authorities in Texas have approved the recovery of pension costs and other postemployment benefits costs through rates for Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service, respectively. The costs recovered through rates are based on current funding requirements and the net periodic benefit cost for defined benefit pension and other postemployment costs. Differences, if any, between the expense and the amount recovered through rates would be reflected in earnings, net of authorized deferrals.

We historically have recovered defined benefit pension and other postemployment benefit costs through rates. We believe it is probable that regulators will continue to include the net periodic pension and other postemployment benefit costs in our cost of service.

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

 
Pension Benefits
 
Other Postemployment Benefits
 
December 31,
 
December 31,
 
2017
 
2016
 
2017
 
2016
Changes in Benefit Obligation
(Thousands of dollars)
 
 
Benefit obligation, beginning of period
$
966,531

 
$
985,624

 
$
243,548

 
$
228,253

Service cost
12,176

 
12,055

 
2,509

 
2,675

Interest cost
40,453

 
45,550

 
9,890

 
10,235

Plan participants’ contributions

 

 
3,483

 
3,043

Actuarial loss (gain)
76,325

 
25,886

 
12,129

 
14,309

Benefits paid
(55,107
)
 
(71,066
)
 
(16,690
)
 
(15,450
)
Plan amendment

 

 
171

 
483

Settlements
(46,487
)
 
(31,518
)
 

 

   Benefit obligation, end of period
993,891

 
966,531

 
255,040

 
243,548

 
 
 
 
 
 
 
 
Change in Plan Assets
 
 
 
 
 
 
 
Fair value of plan assets, beginning of period
739,586

 
785,161

 
166,046

 
155,495

Actual return on plan assets
135,056

 
48,768

 
31,228

 
9,733

Employer contributions
111,936

 
12,441

 
6,159

 
13,225

Plan participants’ contributions

 

 
3,483

 
3,043

Benefits paid
(55,107
)
 
(71,066
)
 
(16,690
)
 
(15,450
)
Settlements
(46,667
)
 
(35,718
)
 

 

   Fair value of assets, end of period
884,804

 
739,586

 
190,226

 
166,046

   Balance at December 31
$
(109,087
)
 
$
(226,945
)
 
$
(64,814
)
 
$
(77,502
)
 
 
 
 
 
 
 
 
Current liabilities
$
(963
)
 
$
(941
)
 
$

 
$

Noncurrent liabilities
(108,124
)
 
(226,004
)
 
(64,814
)
 
(77,502
)
   Balance at December 31
$
(109,087
)
 
$
(226,945
)
 
$
(64,814
)
 
$
(77,502
)


We made contributions to our pension plan of $111.9 million and $12.4 million during 2017 and 2016, respectively. During 2017 and 2016, we purchased group annuity contracts for approximately $46.7 million and $35.7 million, respectively, and transferred to a third-party insurance company liabilities of approximately $46.5 million and $31.5 million, respectively, related to certain participants in our defined benefit pension plan. Benefits paid includes $18.1 million of lump sum payments to certain terminated vested participants during 2016.

The accumulated benefit obligation for our defined benefit pension plans was $936.7 million and $912.4 million at December 31, 2017 and 2016, respectively.

There are no plan assets expected to be withdrawn and returned to us in 2018.

Components of Net Periodic Benefit Cost - The following tables set forth the components of net periodic benefit cost for our defined benefit pension and other postemployment benefit plans for the period indicated:

 
Pension Benefits
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(Thousands of dollars)
Components of net periodic benefit cost
 
 
 
 
 
Service cost
$
12,176

 
$
12,055

 
$
13,660

Interest cost
40,453

 
45,550

 
43,542

Expected return on assets
(58,496
)
 
(61,183
)
 
(61,769
)
Amortization of unrecognized prior service cost

 

 
266

Amortization of net loss
36,107

 
35,543

 
42,226

Settlements

 

 
27

   Net periodic benefit cost
$
30,240

 
$
31,965

 
$
37,952


 
Other Postemployment Benefits
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(Thousands of dollars)
Components of net periodic benefit cost
 
 
 
 
 
Service cost
$
2,509

 
$
2,675

 
$
3,257

Interest cost
9,890

 
10,235

 
10,628

Expected return on assets
(12,590
)
 
(12,370
)
 
(11,892
)
Amortization of unrecognized prior service cost
(4,597
)
 
(3,316
)
 
(2,228
)
Amortization of net loss
6,484

 
5,369

 
5,268

   Net periodic benefit cost
$
1,696

 
$
2,593

 
$
5,033



Other Comprehensive Income (Loss) - The following table sets forth the amounts recognized in other comprehensive income (loss) related to our defined benefit pension benefits for the period indicated:

 
Pension Benefits
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(Thousands of dollars)
Net gain (loss) arising during the period
$
(2,101
)
 
$
(1,262
)
 
$
339

Amortization of loss
837

 
751

 
917

Deferred income taxes
486

 
197

 
(483
)
   Total recognized in other comprehensive income (loss)
$
(778
)
 
$
(314
)
 
$
773



There were no amounts recognized in other comprehensive income (loss) related to our other postemployment benefits for the periods presented.

The tables below set forth the amounts in accumulated other comprehensive income (loss) that had not yet been recognized as components of net periodic benefit expense for the periods indicated:

 
Pension Benefits
 
December 31,
 
2017
 
2016
 
(Thousands of dollars)
Prior service credit (cost)
$

 
$

Accumulated loss
(378,595
)
 
(414,757
)
Accumulated other comprehensive loss
  before regulatory assets
(378,595
)
 
(414,757
)
Regulatory asset for regulated entities
369,647

 
407,073

Accumulated other comprehensive loss
  after regulatory assets
(8,948
)
 
(7,684
)
Deferred income taxes
3,455

 
2,969

Accumulated other comprehensive loss,
  net of tax
$
(5,493
)
 
$
(4,715
)

 
Other Postemployment Benefits
 
December 31,
 
2017
 
2016
 
(Thousands of dollars)
Prior service credit (cost)
$
5,442

 
$
10,211

Accumulated loss
(49,030
)
 
(62,084
)
Accumulated other comprehensive loss
  before regulatory assets
(43,588
)
 
(51,873
)
Regulatory asset for regulated entities
43,588

 
51,873

Accumulated other comprehensive loss
  after regulatory assets

 

Deferred income taxes

 

Accumulated other comprehensive loss,
  net of tax
$

 
$



The following table sets forth the amounts recognized in either accumulated comprehensive income (loss) or regulatory assets expected to be recognized as components of net periodic benefit expense in the next fiscal year:

 
Pension Benefits
 
Other Postemployment Benefits
Amounts to be recognized in 2018
(Thousands of dollars)
Prior service credit (cost)
$

 
$
(4,567
)
Actuarial net loss
$
39,913

 
$
3,887



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


2017
 
2016
Health care cost-trend rate assumed for next year
7.00%
 
7.25%
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
2023
 
2022


Assumed health care cost-trend rates have a significant effect on the amounts reported for our health care plans. A one percentage point change in assumed health care cost-trend rates would have the following effects:


One Percentage

One Percentage

Point Increase

Point Decrease

(Thousands of dollars)
Effect on total of service and interest cost
$
239


$
(238
)
Effect on other postemployment benefit obligation
$
2,906


$
(3,006
)


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. To achieve this strategy, we have established a liability-driven investment strategy to change the allocations as the plan reaches certain funded status. The plan’s investments include a diverse blend of various domestic and international equities, investment-grade debt securities which mirror the cash flows of our liability, insurance contracts and alternative investments. The current target allocation for the assets of our defined benefit pension plan is as follows:
 
 
Investment-grade bonds
40.0
%
U.S. large-cap equities
18.0
%
Alternative investments
14.0
%
Developed foreign large-cap equities
10.0
%
Mid-cap equities
7.0
%
Emerging markets equities
6.0
%
Small-cap equities
5.0
%
  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 current target allocation for the assets of our other postemployment benefits plan is 30 percent fixed income securities and 70 percent equity securities.

The following tables set forth our pension benefits and other postemployment benefits plan assets by fair value category as of the measurement date:


Pension Benefits

December 31, 2017
Asset Category
Level 1
Level 2
Level 3
Total

(Thousands of dollars)
Investments:




Equity securities (a)
$
301,911

$
91,014

$

$
392,925

Government obligations

74,596


74,596

Corporate obligations (b)

260,907


260,907

Cash and money market funds (c)
21,139

20,787


41,926

Insurance contracts and group annuity contracts


35,158

35,158

Other investments (d)

585

78,707

79,292

  Total assets
$
323,050

$
447,889

$
113,865

$
884,804

(a) - This category represents securities of the various market sectors from diverse industries.
(b) - This category represents bonds from diverse industries.
(c) - This category is primarily money market funds.
(d) - This category represents alternative investments such as hedge funds and other financial instruments.

 
Pension Benefits
 
December 31, 2016
Asset Category
Level 1
Level 2
Level 3
Total
 
(Thousands of dollars)
Investments:
 
 
 
 
Equity securities (a)
$
371,655

$
58,987

$

$
430,642

Government obligations

47,445


47,445

Corporate obligations (b)

129,036


129,036

Cash and money market funds (c)
13,786

16,114


29,900

Insurance contracts and group annuity contracts


45,140

45,140

Other investments (d)

71

57,352

57,423

  Total assets
$
385,441

$
251,653

$
102,492

$
739,586

(a) - This category represents securities of the various market sectors from diverse industries.
(b) - This category represents bonds from diverse industries.
(c) - This category is primarily money market funds.
(d) - This category represents alternative investments such as hedge funds and other financial instruments.

 
Other Postemployment Benefits
 
December 31, 2017
Asset Category
Level 1
Level 2
Level 3
Total
 
(Thousands of dollars)
Investments:
 
 
 
 
Equity securities (a)
$
63,180

$
123

$

$
63,303

Government obligations

101


101

Corporate obligations (b)

25,905


25,905

Cash and money market funds (c)
4,512

28


4,540

Insurance contracts and group annuity contracts

96,377


96,377

  Total assets
$
67,692

$
122,534

$

$
190,226

(a) - This category represents securities of the various market sectors from diverse industries.
(b) - This category represents bonds from diverse industries.
(c) - This category is primarily money market funds.

 
Other Postemployment Benefits
 
December 31, 2016
Asset Category
Level 1
Level 2
Level 3
Total
 
(Thousands of dollars)
Investments:
 
 
 
 
Equity securities (a)
$
39,817

$
7,323

$

$
47,140

Government obligations

75


75

Corporate obligations (b)

19,948


19,948

Cash and money market funds (c)
74

16,989


17,063

Insurance contracts and group annuity contracts

81,820


81,820

  Total assets
$
39,891

$
126,155

$

$
166,046

(a) - This category represents securities of the various market sectors from diverse industries.
(b) - This category represents bonds from diverse industries.
(c) - This category is primarily money market funds.
The following table sets forth the reconciliation of Level 3 fair value measurements of our pension plans for the periods indicated:

 
Pension Benefits
 
Insurance
Contracts
 
Other
Investments
 
Total
 
(Thousands of dollars)
January 1, 2016
$
56,465

 
$
57,972

 
$
114,437

Net realized and unrealized gains (losses)
4,518

 
(620
)
 
3,898

Settlements
(15,843
)
 

 
(15,843
)
December 31, 2016
$
45,140

 
$
57,352

 
$
102,492

Net realized and unrealized gains (losses)
2,569

 
5,055

 
7,624

Purchases

 
16,300

 
16,300

Sales and settlements
(12,551
)
 

 
(12,551
)
December 31, 2017
$
35,158

 
$
78,707

 
$
113,865



Contributions - During 2017, we contributed $111.9 million to our defined benefit pension plans and we contributed $6.2 million to our other postemployment benefit plans. In 2018, we expect to contribute $1.0 million to our defined benefit pension plans and expect to contribute $3.0 million to our other postemployment benefit plans.

Pension and Other Postemployment Benefit Payments - Benefit payments for our defined benefit pension and other postemployment benefit plans for the period ended December 31, 2017 were $55.1 million and $16.7 million, respectively. The following table sets forth the pension benefits and other postemployment benefits payments expected to be paid in 2018-2027:

 
Pension
Benefits
 
Other Postemployment
Benefits
Benefits to be paid in:
(Thousands of dollars)
2018
$
50,875

 
$
17,293

2019
$
51,635

 
$
17,383

2020
$
52,518

 
$
17,538

2021
$
53,516

 
$
17,485

2022
$
54,289

 
$
17,558

2023 through 2027
$
286,188

 
$
85,543



The expected benefits to be paid are based on the same assumptions used to measure our benefit obligation at December 31, 2017, and include estimated future employee service.

Other Employee Benefit Plans

401(k) Plan - We have a 401(k) Plan which covers all full-time employees, and employee contributions are discretionary. We match 100 percent of each participant’s eligible contribution up to 6 percent of eligible compensation, subject to certain limits. Our contributions made to the plan were $11.7 million, $10.8 million and $10.2 million in 2017, 2016 and 2015, respectively.

Profit Sharing Plan - We have a profit sharing plan for all employees who do not participate in our defined benefit pension plan. We plan to make a contribution to the profit sharing plan each quarter equal to 1 percent of each participant’s eligible compensation during the quarter. Additional discretionary employer contributions may be made at the end of each year. Employee contributions are not allowed under the plan. Our contributions made to the plan were $8.1 million, $6.0 million and $6.5 million in 2017, 2016 and 2015, respectively.

Employee Deferred Compensation Plan - Our Nonqualified Deferred Compensation Plan provides certain employees 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. Contributions made to the plan were not material in 2017, 2016 and 2015.