Pension Plan and Employee Benefits

3 Months Ended

Mar. 31, 2020

Note 9 — Pension Plan and Employee Benefits

Pension Plan and Other Benefits Plan

Employees hired before August 1, 2007, are covered by a non-contributory, defined benefit pension plan. In September 2019, Cleco made a $12.3 million discretionary contribution to the pension plan. Based on updated funding assumptions at December 31, 2019, management estimates that $66.5 million in pension contributions will be required through 2024. Cleco expects to make a $15.5 million minimum required contribution to the pension plan in 2020.

Cleco Power is the plan sponsor and Support Group is the plan administrator. The plan was amended on February 4, 2019, to include certain former NRG Energy employees who are now Cleco Cajun employees. The Cleco Cajun employees are eligible to participate as a cash balance participant and are credited with all service that was credited to them under the NRG Pension Plan as of February 4, 2019. Benefits under the plan amendment reflect an employee’s years of service, age at retirement, and accrued benefit at retirement.

Cleco’s retirees may be eligible to receive Other Benefits. Dependents of Cleco’s retirees may also be eligible to receive Other Benefits with the exception of life insurance benefits.

The non-service components of net periodic pension and Other Benefits cost are included in Other income (expense), net within Cleco and Cleco Power’s Condensed Consolidated Statements of Income. The components of net periodic pension and Other Benefits cost for the three months ended March 31, 2020, and 2019 were as follows:



	PENSION BENEFITS						OTHER BENEFITS
	FOR THE THREE MONTHS ENDED MAR. 31,						FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2020			2019			2020		2019
Components of periodic benefit costs
Service cost	$	2,328		$	2,067		$	508	$	288
Interest cost	5,130			5,650			410		400
Expected return on plan assets	(6,245		)	(6,622		)	—		—
Amortizations
Prior period service credit	(15		)	(18		)	—		—
Net loss (gain)	3,672			1,875			339		(45		)
Net periodic benefit cost	$	4,870		$	2,952		$	1,257	$	643

Because 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’s other subsidiaries is transferred with a like amount of assets to Cleco Power monthly. The expense of the pension plan related to Cleco’s other subsidiaries for the three months ended March 31, 2020, was $0.4 million. The expense of the pension plan related to Cleco’s other subsidiaries for the three months ended March 31, 2019, was $0.5 million.

Cleco Holdings 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. The expense related to other benefits reflected in Cleco Power’s Condensed Consolidated Statements of Income for the three months ended March 31, 2020, was $1.2 million. The expense related to other benefits reflected in Cleco Power’s Condensed Consolidated Statements of Income for the three months ended March 31, 2019, was $0.7 million. The current and non-current portions of the Other Benefits liability for Cleco and Cleco Power at March 31, 2020, and December 31, 2019, were as follows:



Cleco
(THOUSANDS)	AT MAR. 31, 2020		AT DEC. 31, 2019
Current	$	4,401	$	4,401
Non-current	$	48,175	$	48,321



Cleco Power
(THOUSANDS)	AT MAR. 31, 2020		AT DEC. 31, 2019
Current	$	3,815	$	3,815
Non-current	$	41,994	$	42,080

SERP

Certain Cleco officers are covered by SERP. Cleco 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. The life insurance policies issued on SERP participants designate the rabbi trust as the beneficiary. Market conditions could have a significant impact on the cash surrender value of the life insurance policies. Proceeds from the life insurance policies are expected to be used to pay the SERP participants’ death benefits, as well as future SERP payments. However, because 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 that employed the officer. Cleco Power is the plan sponsor and Support Group is the plan administrator.

The non-service components of net periodic benefit cost related to SERP are included in Other income (expense), net within Cleco and Cleco Power’s Condensed Consolidated

Statements of Income. The components of the net periodic benefit cost related to SERP for the three months ended March 31, 2020, and 2019 were as follows:



	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2020			2019
Components of periodic benefit costs
Service cost	$	95		$	113
Interest cost	733			825
Amortizations
Prior period service credit	(40		)	(35		)
Net loss	757			392
Net periodic benefit cost	$	1,545		$	1,295

The expense related to SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three months ended March 31, 2020, was $0.2 million. The expense related to SERP reflected on Cleco Power’s Condensed Consolidated Statements of Income for the three months ended March 31, 2019, was $0.3 million.

Liabilities relating to SERP are reported on the individual subsidiaries’ financial statements. The current and non-current portions of the SERP liability for Cleco and Cleco Power at March 31, 2020, and December 31, 2019, were as follows:



Cleco
(THOUSANDS)	AT MAR. 31, 2020		AT DEC. 31, 2019
Current	$	4,599	$	4,599
Non-current	$	84,219	$	84,529



Cleco Power
(THOUSANDS)	AT MAR. 31, 2020		AT DEC. 31, 2019
Current	$	760	$	760
Non-current	$	13,863	$	13,964

401(k) Plan

Cleco’s 401(k) Plan is intended to provide active, eligible employees with voluntary, long-term savings and investment opportunities. The 401(k) Plan is a defined contribution plan and is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974. In accordance with the 401(k) Plan, employer contributions are made in the form of cash. Cash contributions are invested in proportion to the participant’s voluntary contribution investment choices. Participation in the Plan is voluntary, and active Cleco employees are eligible to participate. Cleco’s 401(k) Plan was amended upon the close of the Cleco Cajun Transaction to include Cleco Cajun employees. Cleco’s 401(k) Plan expense for the three months ended March 31, 2020, and 2019 was as follows:



	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2020		2019
401(k) Plan expense	$	3,256	$	2,267

Cleco Power is the plan sponsor for the 401(k) Plan. The expense of the 401(k) Plan related to Cleco’s other subsidiaries for the three months ended March 31, 2020, and 2019 was as follows:



	FOR THE THREE MONTHS ENDED MAR. 31,
(THOUSANDS)	2020		2019
401(k) Plan expense	$	1,662	$	930