15.Employee Benefit Plans

Pension Plans and Postretirement Benefits

As a result of the Combination between Sabine and Forest, Sabine assumed qualified defined benefit pension plans (the “Forest Pension Plan” and the “Wiser Pension Plan”). Sabine also assumed non-qualified unfunded supplementary retirement plans (the “Forest SERP” and the “THX SERP,” and together, the “SERP”) that provide certain retired executives with defined retirement benefits in excess of qualified plan limits imposed by federal tax law. The Forest Pension Plan and the Forest SERP were curtailed and all benefit accruals under both plans were suspended effective May 31, 1991. The Wiser Pension Plan was curtailed and all benefit accruals were suspended effective December 11, 1998. The THX SERP was curtailed and all benefit accruals were suspended effective January 1, 2008. The Forest Pension Plan, the Wiser Pension Plan, the Forest SERP, and the THX SERP are hereinafter collectively referred to as the “Pension Plans.” Effective December 23, 2015, Sabine’s board of directors approved a resolution to terminate the SERP plan.

In addition to the Pension Plans described above, as a result of the Combination between Sabine and Forest, Sabine also assumed a plan that provides postretirement benefits to certain former Forest employees hired on or prior to January 1, 2009, their beneficiaries, and covered dependents. These medical and dental benefits are hereinafter referred to as the “Postretirement Benefits Plan.”

Expected Benefit Payments

As of December 31, 2015, it is anticipated Sabine will be required to provide benefit payments from the Forest Pension Plan trust and the Wiser Pension Plan trust and the Postretirement Benefits Plan in the following amounts:


	2016		2017		2018		2019		2020		2021 - 2025
	(in thousands)
Forest Pension Plan (1)	$	2,220	$	2,206	$	2,178	$	2,118	$	2,079	$	9,317
Wiser Pension Plan (1)		874		865		846		830		812		3,843
Postretirement Benefits Plan		551		563		544		529		510		2,356

(1)

Benefit payments expected to be made to participants in the Forest Pension Plan and Wiser Pension Plan are expected to be paid out of funds held in trusts established for each plan.

Sabine anticipates that it will make contributions in 2016 totaling $0.5 million to the Pension Plans and $0.5 million to the Postretirement Benefits Plan, net of retiree contributions, as applicable.

Benefit Obligations

The following table sets forth the estimated benefit obligations associated with the Pension Plans and Postretirement Benefits Plan.


	Year Ended				Year Ended
	December 31, 2015				December 31, 2014
			Postretirement				Postretirement
	Pension Plans		Benefits Plan		Pension Plans		Benefits Plan
	(in thousands)				(in thousands)
Benefit obligation at the beginning of the year	$	44,400	$	18,052	$	—	$	—
Service cost		—		74		—		—
Interest cost		1,479		273		—		—
Amendments		—		90		—		—
Actuarial (gain)/loss		(3,061)		(413)		—		—
Benefits paid		(3,172)		(584)		—		—
Business combination		(440)		(10,383)		44,400		18,052
Benefit obligation at the end of the year	$	39,206	$	7,109	$	44,400	$	18,052

Fair Value of Plan Assets

The assets of the Forest Pension Plan and the Wiser Pension Plan measured at fair value on a recurring basis are set forth by level within the fair value hierarchy in the table below. There are no assets set aside under the Postretirement Benefits Plan.


	December 31, 2015
	Using Quoted		Using Significant
	Prices in Active		Other		Using Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total (1)
	(in thousands)
Cash and cash equivalents	$	183	$	64	$	—	$	247
Investment funds—equities:
Research equity portfolio(1)		—		9,778		—		9,778
International stock funds(2)		11,086		—		—		11,086
Investment funds—fixed income:
Short-term fund(3)		1,985		—		—		1,985
Bond fund(4)		6,078		—		—		6,078
Oil and gas royalty interests(5)		—		—		172		172
	$	19,332	$	9,842	$	172	$	29,346

(1)

This investment fund’s assets are primarily large capitalization U.S. equities. The investment approach of this fund, which held approximately 224 different securities at December 31, 2015, focuses on diversifying the investment portfolio by delegating the equity selection process to research analysts with expertise in their respective industries. Industry weights are kept similar to those of the S&P 500 Index. As of December 31, 2015, the approximate sector weighting of this fund was comprised of the following: financials (18%), information technology (18%), health care (16%), consumer discretionary (13%), consumer staples (12%), industrials (11%), and other (12%). The fair value of this investment fund was determined based on the net asset value per unit provided by the fund. Sabine performs procedures to validate the net asset value per unit provided by the fund. Such procedures include verifying the pricing of a sample of the underlying securities, with such pricing being directly observable in the marketplace.

(2)

These three investment funds seek long-term growth of principal and income by investing primarily in diversified portfolios of equity securities issued by foreign, medium-to-large companies in international markets including emerging markets. The first fund, which comprises $6.4 million of the international stock funds, seeks to invest in solid, well-established global leaders with emphasis on strong corporate governance, positive future growth opportunities, and growing return on capital. As of December 31, 2015, the approximate sector weighting of this fund, which seeks diversification across regions, countries, and market sectors, was comprised of the following: financials (23%), information technology (23%), health care (14%), consumer discretionary (10%), and other (30%). The second fund, which comprises $3.4 million of the international stock funds, seeks to obtain growth through long-term appreciation of its holdings, selecting investments based upon their current fundamentals. As of December 31, 2015, the approximate sector weighting of this fund, which invests in Asian (excluding Japanese) growth equities with a focus on domestic demand growth rather than an export orientation, was comprised of the following: consumer staples (20%), financials (18%), information technology (16%), consumer discretionary (11%), healthcare (11%) and other (24%). The third fund, which comprises $1.3 million of the international stock funds, seeks to deliver equity-like returns with significantly less volatility by investing in emerging markets equity securities, with country allocations not exceeding 25%. As of December 31, 2015, the approximate sector weighting of this fund was comprised of the following: Short-term securities (26%), information technology (11%), financials (10%), industrials (10%), and other (43%). The fair value of these investment funds was determined based on the funds’ net asset values per unit, which are directly observable in the marketplace.

(3)

This investment fund’s assets are high-quality short-term fixed income securities. This fund generally limits its foreign currency exposure to 20% of its total assets and is actively managed as an enhanced cash strategy, seeking to derive excess returns versus money market fund indices by capturing term, transactional liquidity, credit, and volatility premiums. As of December 31, 2015, the approximate sector weighting of this fund was comprised of the following: cash and cash equivalents (31%), corporate (29%), government related (18%), derivative (13%) and other (9%). The fair value of this investment fund was determined based on the fund’s net asset value per unit, which is directly observable in the marketplace.

(4)

These two investment funds consist of diversified portfolios of bonds. The main investments of the first fund, which comprises $4.9 million of the bond fund, are intermediate maturity fixed income securities with a duration between three and six years, with a maximum of 10% of the portfolio being invested in securities below Baa grade, and up to 30% of the portfolio being invested in non-U.S. dollar denominated securities. As of December 31, 2015, the approximate sector weighting of this fund was comprised of the following: government-related (38%), cash and cash equivalents (27%), securitized (18%), derivative (10%) and other (7%). The second fund, which comprises $1.2 million of the bond fund, seeks to deliver equity-like returns with significantly less volatility by investing in emerging markets debt securities, with country allocations not exceeding 25%. As of December 31, 2015, the approximate sector weighting of this fund was comprised of the following: government related (74%), energy (10%) and other (16%). The fair value of these investment funds was determined based on the funds’ net asset values per unit, which are directly observable in the marketplace.

(5)

The oil and gas royalty interests are valued at their estimated discounted future cash flows, which approximate fair value.

The following table sets forth a rollforward of the fair value of the plan assets.


	Year Ended				Year Ended
	December 31, 2015				December 31, 2014
			Postretirement				Postretirement
	Pension Plans		Benefits Plan		Pension Plans		Benefits Plan
	(in thousands)				(in thousands)
Fair value of plan assets at beginning of the year	$	31,395	$	—	$	—	$	—
Actual return on plan assets		(556)		—		—		—
Employer contributions		1,679		494		—		—
Participant contributions		—		90		—		—
Benefits paid		(3,172)		(584)		—		—
Business combination		—		—		31,395		—
Fair value of plan assets at the end of the year	$	29,346	$	—	$	31,395	$	—

The following table presents a reconciliation of the beginning and ending balances of the plan assets that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3).


	Year Ended		Year Ended
	December 31, 2015		December 31, 2014
	Oil and Gas		Oil and Gas
	Royalty Interests		Royalty Interests
	(in thousands)		(in thousands)
Balance at beginning of period	$	199	$	—
Actual return on plan assets		(27)		—
Purchases, sales, and settlements (net)		—		199
Transfers in and/or out of Level 3		—		—
Balance at end of period	$	172	$	199

Investments of the Plans

The Forest Pension Plan and the Wiser Pension Plan assets are invested with a view toward the long-term in order to fulfill the obligations promised to participants as well as to control future funding levels. Sabine plans to regularly review the levels of funding and investment strategy for the pension plans. Generally, the strategy includes allocating the assets between equity securities and fixed income securities, depending on economic conditions and funding needs, although the strategy does not define any specified minimum exposure for any point in time. The equity and fixed income asset allocation levels in place from time to time are intended to achieve an appropriate balance between capital appreciation, preservation of capital, and current income.

The overall investment goal for the pension plans’ assets is to achieve an investment return that allows the assets to achieve the assumed actuarial interest rate and to exceed the rate of inflation. In order to manage risk, in terms of volatility, the portfolios are designed with the intent of avoiding a loss of 20% during any single year and expressing no more volatility than experienced by the S&P 500 Index. The pension plans’ investment allocation target is up to 75% equity, with discretion to vary the mix temporarily, in response to market conditions.

The weighted average asset allocations of the Forest Pension Plan and Wiser Pension Plan are set forth in the following table:


	December 31, 2015				December 31, 2014
	Forest		Wiser		Forest		Wiser
	Pension Plan		Pension Plan		Pension Plan		Pension Plan
Fixed income securities	28	%	28	%	26	%	26	%
Equity securities	71	%	72	%	73	%	74	%
Other	1	%	—	%	1	%	—	%
	100	%	100	%	100	%	100	%

Funded Status

The following table sets forth the funded status of the Pension Plans and Postretirement Benefits Plan.


	December 31, 2015				December 31, 2014
			Postretirement				Postretirement
	Pension Plans		Benefits Plan		Pension Plans		Benefits Plan
	(in thousands)				(in thousands)
Excess of benefit obligation over plan assets	$	9,860	$	7,109	$	13,004	$	18,052
Unrecognized actuarial gain (loss)		(1,517)		413		—		—
Net amount recognized	$	8,343	$	7,522	$	13,004	$	18,052
Amounts recognized in the balance sheet consist of:
Accrued benefit liability—current	$	—	$	466	$	128	$	628
Accrued benefit liability—noncurrent		9,860		6,643		12,876		17,424
Accumulated other comprehensive		(1,517)		413		—		—
Net amount recognized	$	8,343	$	7,522	$	13,004	$	18,052

The following table sets forth the projected and accumulated benefit obligations for the Pension Plans and the fair value of the plan assets.


	December 31, 2015		December 31, 2014
	(in thousands)		(in thousands)
Projected benefit obligation	$	39,206	$	44,400
Accumulated benefit obligation		39,206		44,400
Fair value of plan assets		29,346		31,395

Annual Periodic Expense and Actuarial Assumptions

The following tables set forth the components of the net periodic cost and the underlying weighted average actuarial assumptions.


	December 31, 2015
				Postretirement
	Pension Plans			Benefits Plan
	(in thousands)
Service cost	$	—		$	74
Interest cost		1,479			273
Expected return on plan assets		(2,157)			—
Settlement (gain)/loss		(1,854)			—
Recognized actuarial loss		—			—
Total net periodic expense	$	(2,532)		$	347

Assumptions used to determine net periodic expense:
Discount rate		3.49	%		3.66	%
Expected return on plan assets		7.00	%		n/a

Assumptions used to determine benefit obligations:
Discount rate		3.78	%		3.98	%

Employee benefit plans were acquired in December of 2014, thus no expenses were recognized as net periodic costs in 2014 and 2013.

The discount rates used to determine the Pension Plans and Postretirement Benefits Plan benefit obligations at December 31, 2015 were 3.78% and 3.98%, respectively. These discount rates were determined by adjusting composite AA bond yields to reflect the difference between the duration of the future estimated cash flows of the Pension Plans and the Postretirement Benefits Plan benefit obligations and the duration of the composite AA bond yields.

The company estimates it will have no net periodic expense for the year ended December 31, 2016 for the Pension Plan and the Postretirement Benefit Plan resulting from the amortization of the related accumulated actuarial loss included in accumulated other comprehensive income at December 31, 2015, as those balances are less than 10% of the project benefit obligation for those plans.

The assumed health care cost trend rate for the next year and thereafter that was used to measure the expected cost of benefits covered by the Postretirement Benefits Plan was 5.5%. Assumed health care cost trend rates can have a significant effect on the amounts reported for the Postretirement Benefits Plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:


	December 31, 2015
	Postretirement Benefits Plan
	1% Increase		1% Decrease
	(in thousands)
Effect on postretirement benefit obligation	$	1,288	$	(934)

Other Employee Benefit Plans

The Company co-sponsors a 401 (k) tax deferred savings plan (the Plan) and makes it available to employees. The Plan is a defined contribution plan, and the Company may make discretionary matching contributions of up to 6% of each participating employee’s compensation to the Plan. The contributions made by the Company totaled approximately $1.5 million, $1.1 million and $1.0 million during the years ended December 31, 2015, 2014 and 2013, respectively.

As a result of the Combination between Sabine and Forest, Sabine assumed the obligation to provide life insurance benefits for certain Forest retirees and former executives under split dollar life insurance plans. Under the life insurance plans, Sabine is assigned a portion of the benefits. No current employees are covered by these plans. Sabine has recognized a liability for the estimated cost of maintaining the insurance policies during the postretirement periods of the retirees and former executives, with such liability accreted each period to its present value. Sabine’s estimate of costs expected to be paid in 2016 to maintain these life insurance policies is $0.7 million. The split dollar life insurance obligation recognized in the Consolidated Balance Sheet was $4.8 million and $6.7 million as of December 31, 2015 and 2014, respectively. The discount rate used to determine the obligation was 3.42% and 2.98% as of December 31, 2015 and 2014, respectively. The cash surrender value of the split dollar life insurance policies recognized in the Consolidated Balance Sheets was $6.2 million as of December 31, 2015 and $6.4 million as of December 31, 2014.