Note 9 - Pension Plans and Other Postretirement Benefits

9 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Retirement Benefits [Text Block]

9. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Pension Plans

Spire and the Utilities maintain pension plans for their employees.

Spire Missouri and Spire Alabama have non-contributory, defined benefit, trusteed forms of pension plans covering the majority of their employees. Qualified plan assets are comprised of mutual and commingled funds consisting of U.S. equities with varying strategies, global equities, alternative investments, and fixed income investments.

The net periodic pension cost includes components shown in the following tables. The components other than the service costs and regulatory adjustment are presented in “Other Income, Net” in the income statement, except for Spire Alabama’s losses on lump-sum settlements. Such losses are capitalized in regulatory balances and amortized over the remaining actuarial life of individuals in the plan, and that amortization is presented in “Other Income, Net.”

	Three Months Ended June 30,						Nine Months Ended June 30,
	2023			2022			2023			2022
Spire
Service cost – benefits earned during the period	$	4.2		$	4.8		$	12.2		$	15.6
Interest cost on projected benefit obligation		6.6			5.4			18.9			15.8
Expected return on plan assets		(6.4	)		(7.7	)		(18.5	)		(24.1	)
Amortization of prior service credit		(1.1	)		(1.1	)		(3.4	)		(3.4	)
Amortization of actuarial loss		1.5			2.5			4.7			9.8
Loss on lump-sum settlements		—			17.8			8.6			29.5
Subtotal		4.8			21.7			22.5			43.2
Regulatory adjustment		6.1			(6.9	)		18.3			2.5
Net pension cost	$	10.9		$	14.8		$	40.8		$	45.7
Spire Missouri
Service cost – benefits earned during the period	$	2.8		$	3.5		$	8.5		$	11.2
Interest cost on projected benefit obligation		4.5			3.8			13.4			10.9
Expected return on plan assets		(4.5	)		(5.7	)		(13.5	)		(17.6	)
Amortization of prior service credit		(0.5	)		(0.5	)		(1.5	)		(1.5	)
Amortization of actuarial loss		1.5			2.0			4.6			7.6
Loss on lump-sum settlements		—			17.3			—			24.1
Subtotal		3.8			20.4			11.5			34.7
Regulatory adjustment		3.4			(8.3	)		19.6			1.3
Net pension cost	$	7.2		$	12.1		$	31.1		$	36.0
Spire Alabama
Service cost – benefits earned during the period	$	1.3		$	1.1		$	3.2		$	3.8
Interest cost on projected benefit obligation		1.5			1.1			3.6			3.4
Expected return on plan assets		(1.1	)		(1.2	)		(2.7	)		(4.0	)
Amortization of prior service credit		(0.6	)		(0.6	)		(1.8	)		(1.8	)
Amortization of actuarial loss		0.1			0.5			0.4			2.2
Loss on lump-sum settlements		—			0.5			8.6			5.4
Subtotal		1.2			1.4			11.3			9.0
Regulatory adjustment		2.4			1.1			(2.0	)		0.5
Net pension cost	$	3.6		$	2.5		$	9.3		$	9.5

Pursuant to the provisions of Spire Missouri’s and Spire Alabama’s pension plans, pension obligations may be satisfied by monthly annuities, lump-sum cash payments, or special termination benefits. Lump-sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds the sum of service and interest costs in a specific year. Special termination benefits, when offered, are also recognized as settlements which can result in gains or losses. For the three and nine months ended June 30, 2023, two Spire Alabama plans met the criteria for settlement recognition. The lump-sum payments recognized as settlements for the remeasurement were $27.5 for the Spire Alabama plans. The lump-sum settlement resulted in a loss of $8.6 for Spire Alabama. For the remeasurement, the discount rate for both of the Spire Alabama plans was updated to 5.6%, from 5.7% for one plan and 5.65% for the other plan, at September 30, 2022. The Spire Alabama regulatory tariff requires that settlement losses be amortized over the remaining actuarial life of the individuals in the plan — in this case, 13.4 years for one plan and 12.4 years for the other plan. Therefore, no lump sum settlement expense was recorded in the nine months ended June 30, 2023.

For the three months ended June 30, 2022, one Spire Missouri plan and two Spire Alabama plans met the criteria for settlement recognition. The lump-sum payments recognized as settlements for the remeasurement were $47.4 for the Spire Missouri plan and $3.6 for the Spire Alabama plans. The lump-sum settlement resulted in losses of $17.3 and $0.5 for Spire Missouri and Spire Alabama, respectively. For the remeasurement, the discount rate for the Spire Missouri plan was updated to 4.55% from 3.6% at February 28, 2022, and the discount rates for the Spire Alabama plans were also updated to 4.55% from 3.6% at February 28, 2022. The Spire Alabama regulatory tariff requires that settlement losses be amortized over the remaining actuarial life of the individuals in the plan — in this case, 13.0 years for the one plan and 11.1 years for the second plan. Therefore, no lump sum settlement expense was recorded in the period ended June 30, 2022.

For the three months ended March 31, 2022, one Spire Missouri plan and two Spire Alabama plans met the criteria for settlement recognition. The lump-sum payments recognized as settlements for the remeasurement were $21.6 for the Spire Missouri plan and $17.4 for the Spire Alabama plans. The lump-sum settlement resulted in losses of $6.8 and $4.9 for Spire Missouri and Spire Alabama, respectively. For the remeasurement, the discount rate for the Spire Missouri plan was updated to 3.6% from 3.0% at September 30, 2021, and the discount rates for the Spire Alabama plans were updated to 3.6% from 3.0% for the first plan and 3.1% for the second plan at September 30, 2021. The Spire Alabama regulatory tariff requires that settlement losses be amortized over the remaining actuarial life of the individuals in the plan — in this case, 12.3 years for the one plan and 12.6 years for the second plan. Therefore, no lump sum settlement expenses were recorded in the period ended  March 31, 2022.

Effective December 23, 2021, the pension cost for Spire Missouri’s western territory (Missouri West) included in customer rates was reduced from $5.5 to $4.4 per year, the pension cost included in Spire Missouri’s eastern territory (Missouri East) customer rates was increased from $29.0 to $32.4 per year. Subsequently, on December 26, 2022, the amount in Missouri East was lowered to $29.9. The difference between these amounts and pension expense as calculated pursuant to the above and that otherwise would be included in the statements of income and statements of comprehensive income is deferred as a regulatory asset or regulatory liability.

Also effective December 23, 2021, Missouri East prepaid pension assets and other postretirement benefits that were previously being included in rates at $21.6 per year for eight years were reduced to $11.0 per year, with the amortization period being reset for another eight years. Missouri West net liability for pension and other postretirement benefits that were previously reducing rates by $3.3 per year for eight years were reduced to a $1.1 reduction in rates per year, with the amortization period being reset for another eight years. Subsequently, on December 26, 2022, Missouri East amortization was lowered to $6.9 and Missouri West to a reduction of $0.8.

The funding policy of the Utilities is to contribute an amount not less than the minimum required by government funding standards, nor more than the maximum deductible amount for federal income tax purposes. Fiscal 2023 contributions to Spire Missouri’s pension plans through June 30, 2023 were $29.7 to the qualified trusts and none to non-qualified plans. Fiscal 2023 contributions to the Spire Alabama pension plans through June 30, 2023 were $2.8. No additional contributions to the qualified trusts of Spire Missouri’s pension plans are anticipated for the remainder of fiscal 2023. Contributions to Spire Alabama’s pension plans for the remainder of fiscal 2023 are anticipated to be $25.0.

Other Postretirement Benefits

Spire and the Utilities provide certain life insurance benefits at retirement. Spire Missouri plans provide for medical insurance after early retirement until age 65. For retirements prior to January 1, 2015, certain Spire Missouri plans provided medical insurance after retirement until death. The Spire Alabama plans provide medical insurance upon retirement until death for certain retirees depending on the type of employee and the date the employee was originally hired.

The net periodic postretirement benefit cost includes components shown in the following tables. The components other than the service costs and regulatory adjustment are presented in “Other Income, Net” in the income statement, except in the event Spire Alabama incurs losses on lump-sum settlements. Any such losses are capitalized in regulatory balances and amortized over the remaining actuarial life of individuals in the plan, and that amortization is presented in “Other Income, Net.”

	Three Months Ended June 30,						Nine Months Ended June 30,
	2023			2022			2023			2022
Spire
Service cost – benefits earned during the period	$	1.2		$	1.9		$	3.6		$	5.8
Interest cost on accumulated postretirement benefit obligation		2.0			1.6			6.3			4.6
Expected return on plan assets		(4.0	)		(4.3	)		(11.8	)		(12.8	)
Amortization of prior service cost		0.1			0.3			0.2			0.8
Amortization of actuarial gain		(0.9	)		(0.5	)		(3.0	)		(1.7	)
Subtotal		(1.6	)		(1.0	)		(4.7	)		(3.3	)
Regulatory adjustment		(0.5	)		(0.1	)		(0.2	)		3.2
Net postretirement benefit income	$	(2.1	)	$	(1.1	)	$	(4.9	)	$	(0.1	)
Spire Missouri
Service cost – benefits earned during the period	$	1.0		$	1.6		$	3.0		$	4.8
Interest cost on accumulated postretirement benefit obligation		1.6			1.2			4.9			3.4
Expected return on plan assets		(2.6	)		(2.9	)		(7.9	)		(8.6	)
Amortization of prior service cost		0.1			0.2			0.4			0.6
Amortization of actuarial gain		(0.8	)		(0.5	)		(2.4	)		(1.5	)
Subtotal		(0.7	)		(0.4	)		(2.0	)		(1.3	)
Regulatory adjustment		(0.2	)		0.4			1.1			4.5
Net postretirement benefit cost	$	(0.9	)	$	—		$	(0.9	)	$	3.2
Spire Alabama
Service cost – benefits earned during the period	$	0.2		$	0.3		$	0.5		$	0.9
Interest cost on accumulated postretirement benefit obligation		0.4			0.4			1.3			1.1
Expected return on plan assets		(1.3	)		(1.3	)		(3.8	)		(3.9	)
Amortization of prior service (credit) cost		—			0.1			(0.2	)		0.2
Amortization of actuarial gain		(0.1	)		—			(0.4	)		—
Subtotal		(0.8	)		(0.5	)		(2.6	)		(1.7	)
Regulatory adjustment		(0.5	)		(0.5	)		(1.4	)		(1.4	)
Net postretirement benefit income	$	(1.3	)	$	(1.0	)	$	(4.0	)	$	(3.1	)

Missouri and Alabama state laws provide for the recovery in rates of costs accrued pursuant to GAAP provided that such costs are funded through an independent, external funding mechanism. The Utilities have established Voluntary Employees’ Beneficiary Association (VEBA) and Rabbi Trusts as external funding mechanisms. The assets of the VEBA and Rabbi Trusts consist primarily of money market securities and mutual funds invested in stocks and bonds.

Effective December 23, 2021, the $8.6 allowance for recovery in rates for Spire Missouri’s postretirement benefit plans was discontinued. The difference between no recovery in rates and pension expense as calculated pursuant to the above and that otherwise would be included in the statements of income and statements of comprehensive income is deferred as a regulatory asset or regulatory liability. Effective with the resolution of the 2022 Missouri rate case in December 2022, net liabilities for postretirement benefits will reduce rates $0.9 and $0.1 per year for Missouri East and Missouri West, respectively.

The Utilities’ funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. There have been no contributions to the postretirement plans through June 30, 2023 for Spire Missouri or Spire Alabama, and none are expected to be required for the remainder of the fiscal year.