Pension and Other Post-retirement Benefit Plans

12 Months Ended

Sep. 30, 2012

Pension And Other Post-Retirement Benefit Plans

Pension and Other Post-retirement Benefit Plans

(7) Pension and Other Post-retirement Benefit Plans

In 1997, the Company established a trust (the Rabbi Trust) to fund a deferred compensation plan for certain officers. The fair market value of assets in the trust was $2,220,536 (plus $51,185 in additional stock), $2,216,083 (plus $51,185 in additional stock) and $2,315,685 (plus $51,185 in additional stock) at September 30, 2012, 2011 and 2010, respectively, and the plan liability, which is labeled as deferred compensation on the balance sheet, was $1,499,264, $1,849,019 and $1,938,106 at September 30, 2012, 2011 and 2010, respectively. The assets of the trust are available to general creditors in the event of insolvency.

The Company has defined benefit pension plans covering substantially all of its employees. The benefits are based on years of service and the employee’s highest average compensation during a specified period. The Company makes annual contributions to the plans equal to amounts determined in accordance with the funding requirements of the Employee Retirement Security Act of 1974. Contributions are intended to provide for benefits attributed for service to date, and those expected to be earned in the future.

In addition to the Company’s defined benefit pension plans, the Company offers post-retirement benefits comprised of medical and life coverages to its employees who meet certain age and service criteria. Currently, the retirees under age 65 pay 60% of their health care premium until Medicare benefits commence at age 65. After age 65, Medicare supplemental coverage is offered with Company payment of the premium. For union participants who retire on or after September 2, 1992, the Company cost for post-retirement benefits is contractually limited and will not exceed $150 per month. This contract is in effect until April 2, 2015. The monthly benefit for all non-union employees, regardless of retirement date, shall not exceed $150. In addition, the Company offers limited life insurance coverage to active employees and retirees. The post-retirement benefit plan is not funded. The Company accrues the cost of providing post-retirement benefits during the active service period of the employee.

The following table shows reconciliations of the Company’s pension and post-retirement plan benefits as of September 30:

	Pension Benefits									Post-retirement Benefits
	2012			2011			2010			2012			2011			2010
Change in benefit obligations:
Benefit obligation at beginning of year	$	15,857,827		$	15,199,060		$	14,900,272		$	857,645		$	825,942		$	1,513,523
Service cost		328,661			333,060			333,425			14,388			13,819			26,229
Interest cost		771,341			776,058			797,680			41,569			41,920			48,987
Participant contributions		—			—			—			88,000			122,000			113,000
Actuarial (gain) loss		2,202,387			338,403			(75,605	)		82,701			30,964			(431,212	)
Benefits paid		(827,657	)		(788,754	)		(756,712	)		(141,000	)		(177,000	)		(162,000	)
Curtailments		—			—			—			243,815			—			(282,585	)
Benefit obligation at end of year		18,332,559			15,857,827			15,199,060			1,187,118			857,645			825,942
Change in plan assets:
Fair value of plan assets at beginning of year		9,458,419			9,179,959			8,813,215			—			—			—
Actual return on plan assets		1,532,489			19,398			699,286			—			—			—
Company contributions		1,339,796			1,047,816			424,170			53,000			55,000			49,000
Participant contributions		—			—			—			88,000			122,000			113,000
Benefits paid		(832,685	)		(788,754	)		(756,712	)		(141,000	)		(177,000	)		(162,000	)
Fair value of plan assets at end of year		11,498,019			9,458,419			9,179,959			—			—			—
Funded status		(6,834,540	)		(6,399,408	)		(6,019,101	)		(1,187,118	)		(857,645	)		(825,942	)
Unrecognized net actuarial loss / (gain)		4,881,181			4,133,593			3,900,917			(186,506	)		(293,680	)		(360,716	)
Unrecognized PSC adjustment		—			—			—			—			—			—
Unrecognized prior service cost		(44,180	)		(60,598	)		(77,403	)		—			—			—
Unrecognized net transition asset (obligation)		—			—			—			160,724			(94,782	)		(106,473	)
Additional minimum liability		—			—			—			—			—			—
(Accrued) prepaid benefit cost		(1,909,179	)		(2,205,217	)		(2,040,781	)		(1,212,900	)		(1,246,107	)		(1,293,131	)
Accrued contribution		—			—			—			—			—			—
Amounts recognized in the Balance Sheets consist of:
(Accrued)/prepaid pension cost as of beginning of fiscal year		(2,205,217	)		(2,040,781	)		(1,091,741	)		(1,246,107	)		(1,293,131	)		(1,306,006	)
Pension (cost) income		(862,576	)		(1,043,758	)		(1,212,252	)		(29,793	)		(5,976	)		(36,125	)
Contributions		1,339,796			1,047,816			424,170			—			—			—
Change in receivable contribution		(181,182	)		(168,494	)		(160,958	)		—			—			—
Net benefits paid		—			—			—			63,000			53,000			49,000
Change in additional minimum liability		—			—			—			—			—			—
(Accrued)/prepaid pension cost as of end of fiscal year		(1,909,179	)		(2,205,217	)		(2,040,781	)		(1,212,900	)		(1,246,107	)		(1,293,131	)

Weighted average assumptions used to determine benefit obligation at September 30,

Discount rate	4.00%	5.00%	5.25%
Expected return on assets	7.75%	8.00%	8.00%
Rate of compensation increase	2.00%	2.00%	3.00%
Measurement Date	10/1/2012	10/1/2011	10/1/2010

For measurement purposes, a 9.5% annual rate of increase in the per capita cost of covered benefits (health care cost trend rate) was assumed for 2012. The rate is assumed to increase by 6.5% each year thereafter. A 1% increase in the actual health care cost trend would result in approximately a 4.1% increase in the service and interest cost components of the annual net periodic post-retirement benefit cost and a 4.1% increase in the accumulated post-retirement benefit obligation. A 1% decrease in the actual health care cost trend would result in approximately a 3.6% decrease in the service and interest cost components of the annual net periodic post-retirement benefit cost and a 3.6% decrease in the accumulated post-retirement benefit obligation.

	Pension Benefits									Post-retirement Benefits
	2012			2011			2010			2012			2011			2010
Components of net period benefit cost (benefit):
Service cost		328,661			333,060			333,425			14,388			13,819			26,229
Interest cost		771,341			776,058			797,680			41,569			41,920			48,987
Expected return on plan assets		(778,194	)		(743,037	)		(692,297	)		—			—			—
Amortization of prior service		16,418			16,805			16,805			(11,691	)		(11,691	)		(10,432	)
Amortization of transition obligation		—			—			—			—			—			—
Amortization of PSC adjustment		—			—			—			—			—			—
FAS88 recognition - loss on curtailment		—			—			—			—			—			—
Amortization of unrecognized actuarial loss (gain)		705,532			829,366			917,597			(24,473	)		(36,072	)		(28,659	)
Net periodic benefit cost (benefit)		1,043,758			1,212,252			1,373,210			19,793			7,976			36,125
Amounts recognized in the balance sheet consists of:
Prepaid (accrued) benefit liability		(6,834,540	)		(6,399,408	)		(6,019,101	)		(1,187,118	)		(857,645	)		(825,942	)
Prior period adjustment		—			—			—			—			—			—
Regulatory adjustments		—			—			—			—			—			—
Change in receivable contribution		—			—			—			—			—			—
Net amount recognized at end of period		(6,834,540	)		(6,399,408	)		(6,019,101	)		(1,187,118	)		(857,645	)		(825,942	)
Weighted average assumptions used to determine net
period cost at September 30:
Discount rate		4.00	%		5.00	%		5.25	%		4.00	%		5.00	%		5.25	%
Expected return on assets		7.75	%		8.00	%		8.00	%		8.00	%		8.00	%		8.00	%

The estimated pension plan payments are as follows:

2013	$	912,000
2014	$	942,000
2015	$	980,000
2016	$	1,054,000
2017	$	1,073,000

The expected returns on plan assets of the Retirement Plan and Post-Retirement Plan are applied to the market-related value of plan assets of the respective plans. For the Retirement Plan, the market-related value of assets recognizes the performance of its portfolio over five years and reduces the effects of short-term market fluctuations. The market-related value of Post-Retirement Plan assets is set equal to market value.

For ratemaking and financial statement purposes, pension expense represents the amount approved by the PSC in the Company’s most recently approved rate case. Pension expense (benefit) for ratemaking and financial statement purposes was approximately $1,173,710, $1,285,000 and $1,190,949 for the years ended September 30, 2012, 2011 and 2010 respectively. The difference between the pension expense (benefit) for ratemaking and financial statement purposes, and the amount computed above has been deferred and is not included in the prepaid pension cost noted above. Such balances equal $375,415, $661,786 and $1,040,618 as of September 30, 2012, 2011 and 2010 respectively.

The NYPSC has allowed the Company to recover incremental cost associated with post-retirement benefits through rates on a current basis. Due to the timing differences between the Company’s rate case filings and financial reporting period, a regulatory receivable (liability) of $197,477, $172,354 and $142,214 has been recognized at September 30, 2012, 2011 and 2010 respectively.

The Company also maintains the Corning Natural Gas Corporation Employee Savings Plan (the "Savings Plan"). All employees of the Company who work for more than 1,000 hours per year and who have completed one year of service may enroll in the Savings Plan at the beginning of each calendar quarter. Under the Savings Plan, participants may contribute up to 50% of their wages. For all employees, the Company will match one-half of the participant’s contribution up to a total of 50% of the participant’s contribution up to a total of 6% of the participant’s wages. The plan is subject to the federal limitation. The Company contribution to the plan was $75,005 in 2012, $75,963 in 2011 and $66,969 in 2010.