Note 8 — Retirement and Other Employee Benefits

Net periodic benefit cost, some of which is capitalized as a component of labor cost and some of which is deferred as a regulatory asset, is comprised of the following components and is shown for our noncontributory defined benefit pension plan, our supplemental retirement program (SERP) and other postretirement benefits (OPEB) (in thousands):

	Three months ended June 30,
	Pension Benefits						SERP						OPEB
	2016			2015			2016			2015			2016			2015
Service cost	$	1,949		$	1,883		$	45		$	43		$	814		$	920
Interest cost	2,633			2,503			108			92			1,157			1,163
Expected return on plan assets	(3,465		)	(3,390		)	—			—			(1,374		)	(1,312		)
Amortization of prior service cost (1)	(157		)	(157		)	(3		)	(11		)	(253		)	(253		)
Amortization of net actuarial loss (1)	2,106			2,345			139			140			257			681

Net periodic benefit cost	$	3,066		$	3,184		$	289		$	264		$	601		$	1,199


	Six months ended June 30,

	Pension Benefits						SERP						OPEB

	2016			2015			2016			2015			2016			2015

Service cost	$	3,899		$	3,765		$	91		$	85		$	1,627		$	1,840
Interest cost	5,266			5,006			215			184			2,313			2,327
Expected return on plan assets	(6,931		)	(6,779		)	—			—			(2,748		)	(2,625		)
Amortization of prior service cost (1)	(315		)	(315		)	(7		)	(21		)	(506		)	(506		)
Amortization of net actuarial loss (1)	4,213			4,690			278			280			515			1,363


Net periodic benefit cost	$	6,132		$	6,367		$	577		$	528		$	1,201		$	2,399



	Twelve months ended June 30,


	Pension Benefits						SERP						OPEB


	2016			2015			2016			2015			2016			2015


Service cost	$	7,575		$	6,978		$	164		$	180		$	3,500		$	3,227
Interest cost	10,538			10,359			413			399			4,656			4,525
Expected return on plan assets	(13,719		)	(13,241		)	—			—			(5,320		)	(5,032		)
Amortization of prior service cost (1)	(630		)	(106		)	(28		)	(26		)	(1,011		)	(1,011		)
Amortization of net actuarial loss (1)	9,556			8,003			595			574			1,901			1,873



Net periodic benefit cost	$	13,320		$	11,993		$	1,144		$	1,127		$	3,726		$	3,582

(1)

Amounts are amortized from our regulatory asset originally recorded upon recognizing our net pension liability on the balance sheet.

We provide certain healthcare and life insurance benefits to eligible retired employees, their dependents and survivors through trusts we have established. Participants generally become eligible for retiree healthcare benefits after reaching age 55 with 5 years of service. Employees hired after June 1, 2014 will not receive a subsidy for healthcare benefits upon retirement.

In accordance with our regulatory agreements, our pension funding policy is to make contributions that are at least equal to the greater of either the minimum funding requirements of ERISA or the accrued cost of the plan. We expect to make pension contributions of approximately $12.4 million during 2016, of which we have made contributions of approximately $6.1 million as of June 30, 2016. Our OPEB funding policy is to contribute annually an amount at least equal to the actuarial cost of postretirement benefits. We expect to be required to fund approximately $2.6 million during 2016, of which we have made contributions of approximately $1.2 million as of June 30, 2016. The actual minimum funding requirements for both pension and OPEB will be determined based on the results of the actuarial valuations.

Employee Stock Purchase Plan

Our Employee Stock Purchase Plan (ESPP) permits the grant to eligible employees of options to purchase common stock at 90% of the lower of market value at date of grant or at date of exercise. The lookback feature of this plan is valued at 90% of the Black-Scholes methodology plus 10% of the maximum subscription price. As of June 30, 2016, there were 707,735 shares available for issuance in this plan.

	2016		2015
Subscriptions outstanding at June 30	25,407		59,529
Maximum subscription price(1)	$	30.29	$	21.43
Shares of stock issued	56,908		56,193
Stock issuance price	$	21.09	$	21.01

(1)

Stock will be issued on the closing date of the purchase period, which runs from June 1, 2016 to May 31, 2017.

Assumptions for valuation of these shares are shown in the table below.

	2016	2015
Fair value of grants at June 30	$ 6.11	$ 3.58
Risk-free interest rate	0.70%	0.26%
Expected dividend yield	3.10%	4.40%
Expected volatility	27.00%	21.00%
Expected life in months	12	12
Grant Date	6/1/16	6/1/15

Pursuant to the Merger Agreement, the right of any employee to continue participation in the ESPP and any purchase period under the ESPP then in effect shall terminate immediately prior to the effective time of the Merger. Payment of all remaining, unused amounts credited to each participant’s account, together with interest as provided in the ESPP, shall be made to the applicable participant as promptly as practicable following the effective time.