Pension Plan and Employee Benefits

6 Months Ended

Jun. 30, 2011

Compensation and Retirement Disclosure [Abstract]

Note 6 — Pension Plan and Employee Benefits

Pension Plan and Other Benefits Plan

Most employees hired before August 1, 2007 are covered by a non-contributory, defined benefit pension plan. Benefits under the plan reflect an employee’s years of service, age at retirement, and highest total average compensation for any consecutive five calendar years during the last 10 years of employment with Cleco Corporation. Cleco Corporation’s policy is to base its contributions to the employee pension plan upon actuarial computations utilizing the projected unit credit method, subject to the IRS’s full funding limitation. During January 2011, Cleco made $60.0 million in discretionary contributions to the pension plan, with $40.1 million designated for the 2010 plan year and the remaining $19.9 million designated for the 2011 plan year. Cleco Power expects to be required to make approximately $15.2 million in additional contributions to the pension plan over the next five years, none of which it expects will be required for the remainder of the 2011 or the 2012 plan year. The required contributions are driven by liability funding target percentages set by law which could cause the required contributions to be uneven among the years. The ultimate amount and timing of the contributions may be affected by changes in the discount rate, changes in the funding regulations, and actual returns on fund assets. Cleco Power is considered the plan sponsor, and Support Group is considered the plan administrator.

Cleco Corporation’s retirees and their dependents are eligible to receive medical, dental, vision, and life insurance benefits (other benefits). Cleco Corporation recognizes the expected cost of these other benefits during the periods in which the benefits are earned.

The components of net periodic pension and other benefit cost for the three and six months ended June 30, 2011, and 2010, are as follows:

	PENSION BENEFITS						OTHER BENEFITS
	FOR THE THREE MONTHS ENDED JUNE 30,
(THOUSANDS)	2011			2010			2011			2010
Components of periodic benefit costs:
Service cost	$	2,143		$	1,973		$	379		$	383
Interest cost		4,422			4,459			460			499
Expected return on plan assets		(6,811	)		(5,248	)		-			-
Amortizations:
Transition obligation		-			-			5			5
Prior period service cost		(18	)		(18	)		(51	)		(505	)
Net loss		1,376			1,095			256			250
Net periodic benefit cost	$	1,112		$	2,261		$	1,049		$	632

	PENSION BENEFITS						OTHER BENEFITS
	FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2011			2010			2011			2010
Components of periodic benefit costs:
Service cost	$	4,195		$	3,725		$	758		$	766
Interest cost		8,815			8,573			921			998
Expected return on plan assets		(12,323	)		(10,114	)		-			-
Amortizations:
Transition obligation		-			-			10			10
Prior period service cost		(36	)		(36	)		(103	)		(1,010	)
Net loss		2,778			1,578			513			500
Net periodic benefit cost	$	3,429		$	3,726		$	2,099		$	1,264

Since Cleco Power is the pension plan sponsor and the related trust holds the assets, the net unfunded status of the pension plan is reflected at Cleco Power. The liability of Cleco Corporation’s other subsidiaries is transferred, with a like amount of assets, to Cleco Power monthly. The expense of the pension plan related to Cleco Corporation’s other subsidiaries for the three and six months ended June 30, 2011, was $0.5 million and $1.1 million, respectively, compared to $0.5 million and $1.0 million for the same periods in 2010.

Cleco Corporation is the plan sponsor for the other benefit plans. There are no assets set aside in a trust, and the liabilities are reported on the individual subsidiaries’ financial statements. At both June 30, 2011, and December 31, 2010, the current portion of the other benefits liability for Cleco was $3.0 million. At both June 30, 2011, and December 31, 2010, the current portion of the other benefits liability for Cleco Power was $2.8 million. The expense related to other benefits reflected in Cleco Power’s Condensed Consolidated Statements of Income for the three and six months ended June 30, 2011, was $0.9 million and $1.8 million, respectively, compared to $0.5 million and $1.1 million for the same periods in 2010.

In March 2010, the President signed the PPACA, a comprehensive health care law. While the provisions of the PPACA are not effective immediately, the provisions could increase the Registrants’ retiree medical unfunded liability and related expenses before the effective date. Management will continue to monitor this law and its possible impact on the Registrants.

SERP

Certain Cleco executive officers are covered by the SERP. The SERP is a non-qualified, non-contributory, defined benefit pension plan. Benefits under the plan reflect an employee’s years of service, age at retirement, and the sum of the highest base salary paid out of the last five calendar years and the average of the three highest bonuses paid during the 60 months prior to retirement, reduced by benefits received from any other defined benefit pension plan, SERP Plan or Cleco contributions under the enhanced 401(k) Plan to the extent such contributions exceed the limits of the 401(k) Plan. Cleco Corporation does not fund the SERP liability, but instead pays for current benefits out of the general funds available. Cleco Power has formed a Rabbi Trust designated as the beneficiary for life insurance policies issued on the SERP participants. Proceeds from the life insurance policies are expected to be used to pay the SERP participants’ life insurance benefits, as well as future SERP payments. However, since SERP is a non-qualified plan, the assets of the trust could be used to satisfy general creditors of Cleco Power in the event of insolvency. All SERP benefits are paid out of the general cash available of the respective companies from which the officer retired. No contributions to the SERP were made during the six months ended June 30, 2011, or 2010. Cleco Power is considered the plan sponsor, and Support Group is considered the plan administrator.

The components of the net SERP cost are as follows:

	FOR THE THREE MONTHS ENDED JUNE 30,				FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2011		2010		2011		2010
Components of periodic benefit costs:
Service cost	$	333	$	347	$	783	$	695
Interest cost		527		525		1,052		1,050
Amortizations:
Prior period service cost		13		14		27		27
Net loss		208		221		470		442
Net periodic benefit cost	$	1,081	$	1,107	$	2,332	$	2,214

The SERP liabilities are reported on the individual subsidiaries’ financial statements. At June 30, 2011, and December 31, 2010, the current portion of the SERP liability for Cleco was $1.8 million and $2.0 million, respectively. At June 30, 2011, and December 31, 2010, the current portion of the SERP liability for Cleco Power was $0.7 million and $0.6 million, respectively. The expense related to the SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income was $0.3 million and $0.6 million for the three and six months ended June 30, 2011, respectively, compared to $0.3 million and $0.5 million for the same periods in 2010.

401(k) Plan

Most employees are eligible to participate in the 401(k) Plan. Since January 2008, Cleco Corporation has made matching contributions and funded dividend reinvestments with cash. Cleco’s 401(k) Plan expense for the three and six months ended June 30, 2011, and 2010 is as follows:

	FOR THE THREE MONTHS ENDED JUNE 30,		FOR THE SIX MONTHS ENDED JUNE 30,
(THOUSANDS)	2011	2010	2011	2010
401(k) Plan expense	$852	$829	$2,053	$1,859

Cleco Power is the plan sponsor for the 401(k) Plan. The expense of the 401(k) Plan related to Cleco Corporation’s other subsidiaries for the three and six months ended June 30, 2011, was $0.2 million and $0.5 million, respectively, compared to $0.2 million and $0.4 million for the same periods in 2010.