Pension and Postretirement Benefits

6 Months Ended

Jun. 30, 2011

Pension and Postretirement Benefits

7. Pension and Postretirement Benefits

DPL sponsors a defined benefit pension plan for the vast majority of its employees. For collective bargaining employees, the defined benefits are based on a specific dollar amount per year of service. For all other employees (management employees), the defined benefit pension plan is based primarily on compensation and years of service. As of December 31, 2010, this existing pension plan was closed to new management employees. A participant is 100% vested in all amounts credited to his or her account upon the completion of five vesting years, as defined in The Dayton Power and Light Company Retirement Income Plan, or upon a change of control or the participant's death or disability. If a participant's employment is terminated, other than by death or disability, prior to such participant becoming 100% vested in his or her account, the account shall be forfeited as of the date of termination.

Almost all management employees beginning employment on or after January 1, 2011 will be enrolled in a cash balance defined benefit plan. Similar to the predecessor pension plan for management employees, the cash balance benefits are based on compensation and years of service. A participant shall become 100% vested in all amounts credited to his or her account upon the completion of three vesting years, as defined in The Dayton Power and Light Company Retirement Income Plan or upon a change of control or the participant's death or disability. If a participant's employment is terminated, other than by death or disability, prior to such participant becoming 100% vested in his or her account, the account shall be forfeited as of the date of termination. Vested benefits in the cash balance plan are fully portable upon termination of employment.

We generally fund pension plan benefits as accrued in accordance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and, in addition, make discretionary contributions from time to time. DP&L made discretionary contributions of $40.0 million and $20.0 million to the defined benefit plan in February 2011 and 2010, respectively.

Qualified employees who retired prior to 1987 and their dependents are eligible for health care and life insurance benefits until their death, while qualified employees who retired after 1987 are eligible for life insurance benefits and partially subsidized health care. The partially subsidized health care is at the election of the employee, who pays the majority of the cost, and is available only from retirement until Medicare coverage begins at age 65. We have funded a portion of the union-eligible benefits using a Voluntary Employee Beneficiary Association Trust.

The amounts presented in the following tables for pension include both the defined benefit pension/cash balance plans and the SERP in the aggregate, and the amounts presented for postretirement include both health and life insurance.

The net periodic benefit cost (income) of the pension and postretirement benefit plans for the three months ended June 30, 2011 and 2010 was:

Net Periodic Benefit Cost / (Income)		Pension						Postretirement
$ in millions		2011			2010			2011			2010
Service cost	$	1.5		$	1.1		$	0.1		$	-
Interest cost		4.3			4.5			0.2			0.3
Expected return on assets (a)		(6.1	)		(5.6	)		-			(0.1	)
Amortization of unrecognized:
Actuarial (gain) / loss		2.2			1.8			(0.2	)		(0.1	)
Prior service cost		0.6			0.9			-			-
Net periodic benefit cost / (income) before adjustments	$	2.5		$	2.7		$	0.1		$	0.1

(a) For purposes of calculating the expected return on pension plan assets, under GAAP, the market-related value of assets (MRVA) is used. GAAP requires that the difference between actual plan asset returns and estimated plan asset returns be included in the MRVA equally over a period not to exceed five years. We use a methodology under which we include the difference between actual and estimated asset returns in the MRVA equally over a three year period. The MRVA used in the calculation of expected return on pension plan assets for the 2011 net periodic benefit cost was approximately $316 million.

The net periodic benefit cost (income) of the pension and postretirement benefit plans for the six months ended June 30, 2011 and 2010 was:

Net Periodic Benefit Cost / (Income)		Pension						Postretirement
$ in millions		2011			2010			2011			2010
Service cost	$	2.9		$	2.2		$	0.1		$	-
Interest cost		8.6			9.0			0.5			0.7
Expected return on assets (a)		(12.2	)		(11.2	)		(0.1	)		(0.2	)
Amortization of unrecognized:
Actuarial (gain) / loss		4.5			3.6			(0.4	)		(0.4	)
Prior service cost		1.1			1.9			-			0.1
Net periodic benefit cost / (income) before adjustments	$	4.9		$	5.5		$	0.1		$	0.2

(a) For purposes of calculating the expected return on pension plan assets, under GAAP, the market-related value of assets (MRVA) is used. GAAP requires that the difference between actual plan asset returns and estimated plan asset returns be included in the MRVA equally over a period not to exceed five years. We use a methodology under which we include the difference between actual and estimated asset returns in the MRVA equally over a three year period. The MRVA used in the calculation of expected return on pension plan assets for the 2011 net periodic benefit cost was approximately $316 million.

Benefit payments, which reflect future service, are expected to be paid as follows:

Estimated Future Benefit Payments and Medicare Part D Reimbursements
$ in millions		Pension	Postretirement
2011	$	10.7	$	1.3
2012	$	23.1	$	2.4
2013	$	23.1	$	2.4
2014	$	23.6	$	2.3
2015	$	24.0	$	2.1
2016 - 2020	$	122.9	$	8.8

DP&L [Member]

Pension and Postretirement Benefits

7. Pension and Postretirement Benefits

DPL sponsors a defined benefit pension plan for the vast majority of its employees. For collective bargaining employees, the defined benefits are based on a specific dollar amount per year of service. For all other employees (management employees), the defined benefit pension plan is based primarily on compensation and years of service. As of December 31, 2010, this existing pension plan was closed to new management employees. A participant is 100% vested in all amounts credited to his or her account upon the completion of five vesting years, as defined in The Dayton Power and Light Company Retirement Income Plan, or upon a change of control or the participant's death or disability. If a participant's employment is terminated, other than by death or disability, prior to such participant becoming 100% vested in his or her account, the account shall be forfeited as of the date of termination.

Almost all management employees beginning employment on or after January 1, 2011 will be enrolled in a cash balance defined benefit plan. Similar to the predecessor pension plan for management employees, the cash balance benefits are based on compensation and years of service. A participant shall become 100% vested in all amounts credited to his or her account upon the completion of three vesting years, as defined in The Dayton Power and Light Company Retirement Income Plan or upon a change of control or the participant's death or disability. If a participant's employment is terminated, other than by death or disability, prior to such participant becoming 100% vested in his or her account, the account shall be forfeited as of the date of termination. Vested benefits in the cash balance plan are fully portable upon termination of employment.

We generally fund pension plan benefits as accrued in accordance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and, in addition, make discretionary contributions from time to time. DP&L made discretionary contributions of $40.0 million and $20.0 million to the defined benefit plan in February 2011 and 2010, respectively.

Qualified employees who retired prior to 1987 and their dependents are eligible for health care and life insurance benefits until their death, while qualified employees who retired after 1987 are eligible for life insurance benefits and partially subsidized health care. The partially subsidized health care is at the election of the employee, who pays the majority of the cost, and is available only from retirement until Medicare coverage begins at age 65. We have funded a portion of the union-eligible benefits using a Voluntary Employee Beneficiary Association Trust.

The amounts presented in the following tables for pension include both the defined benefit pension/cash balance plans and the SERP in the aggregate, and the amounts presented for postretirement include both health and life insurance.

The net periodic benefit cost (income) of the pension and postretirement benefit plans for the three months ended June 30, 2011 and 2010 was:

Net Periodic Benefit Cost / (Income)		Pension						Postretirement
$ in millions		2011			2010			2011			2010
Service cost	$	1.5		$	1.1		$	0.1		$	-
Interest cost		4.3			4.5			0.2			0.3
Expected return on assets (a)		(6.1	)		(5.6	)		-			(0.1	)
Amortization of unrecognized:
Actuarial (gain) / loss		2.2			1.8			(0.2	)		(0.1	)
Prior service cost		0.6			0.9			-			-
Net periodic benefit cost / (income) before adjustments	$	2.5		$	2.7		$	0.1		$	0.1

(a) For purposes of calculating the expected return on pension plan assets, under GAAP, the market-related value of assets (MRVA) is used. GAAP requires that the difference between actual plan asset returns and estimated plan asset returns be included in the MRVA equally over a period not to exceed five years. We use a methodology under which we include the difference between actual and estimated asset returns in the MRVA equally over a three year period. The MRVA used in the calculation of expected return on pension plan assets for the 2011 net periodic benefit cost was approximately $316 million.

The net periodic benefit cost (income) of the pension and postretirement benefit plans for the six months ended June 30, 2011 and 2010 was:

Net Periodic Benefit Cost / (Income)		Pension						Postretirement
$ in millions		2011			2010			2011			2010
Service cost	$	2.9		$	2.2		$	0.1		$	-
Interest cost		8.6			9.0			0.5			0.7
Expected return on assets (a)		(12.2	)		(11.2	)		(0.1	)		(0.2	)
Amortization of unrecognized:
Actuarial (gain) / loss		4.5			3.6			(0.4	)		(0.4	)
Prior service cost		1.1			1.9			-			0.1
Net periodic benefit cost / (income) before adjustments	$	4.9		$	5.5		$	0.1		$	0.2

(a) For purposes of calculating the expected return on pension plan assets, under GAAP, the market-related value of assets (MRVA) is used. GAAP requires that the difference between actual plan asset returns and estimated plan asset returns be included in the MRVA equally over a period not to exceed five years. We use a methodology under which we include the difference between actual and estimated asset returns in the MRVA equally over a three year period. The MRVA used in the calculation of expected return on pension plan assets for the 2011 net periodic benefit cost was approximately $316 million.

Benefit payments, which reflect future service, are expected to be paid as follows:

Estimated Future Benefit Payments and Medicare Part D Reimbursements
$ in millions		Pension	Postretirement
2011	$	10.7	$	1.3
2012	$	23.1	$	2.4
2013	$	23.1	$	2.4
2014	$	23.6	$	2.3
2015	$	24.0	$	2.1
2016 - 2020	$	122.9	$	8.8