Retirement Plan

In 2012, our Compensation Committee, pursuant to authority delegated to it by the Board of Directors, approved the termination of the HollyFrontier Corporation Pension Plan (the "Plan"), a non-contributory defined benefit retirement plan that covered certain employees and was fully frozen prior to 2013.

In June 2013, we made contributions of $22.7 million to the Plan, which was sufficient for the Plan to settle its obligations to all participants including the premium paid to the non-participating annuity provider. In 2013, we recognized a pre-tax pension settlement charge of $39.5 million, of which $37.6 million was reclassified out of accumulated other comprehensive income, representing the irrevocable portion of our obligation.

The following table sets forth the changes in the benefit obligation and plan assets of our retirement plan for the years ended December 31, 2013 and 2012:



	Years Ended December 31,
	2013			2012
	(In thousands)
Change in plan's benefit obligation
Pension plan's benefit obligation - beginning of year	$	95,485		$	93,378
Service cost	—			679
Interest cost	1,797			3,962
Benefits paid	(3,957		)	(1,379		)
Actuarial loss	2,981			13,203
Settlements paid	(96,306		)	(7,256		)
Curtailment	—			(7,102		)
Pension plan's benefit obligation - end of year	$	—		$	95,485

Change in pension plan assets
Fair value of plan assets - beginning of year	$	77,757		$	61,398
Actual return on plan assets	(219		)	2,615
Benefits paid	(3,957		)	(1,379		)
Employer contributions	22,725			22,379
Settlements paid	(96,306		)	(7,256		)
Fair value of plan assets - end of year	$	—		$	77,757

Funded status
Under-funded balance	$	—		$	(17,728	)

Amounts recognized in consolidated balance sheets
Accrued pension liability	$	—		$	(17,728	)

Amounts recognized in accumulated other comprehensive income (loss)
Cumulative actuarial loss	$	—		$	(37,589	)

Net periodic pension expense consisted of the following components:



	Years Ended December 31,
	2013			2012			2011
	(In thousands)
Service cost – benefit earned during the year	$	—		$	679		$	5,070
Interest cost on projected benefit obligations	1,797			3,962			5,125
Expected return on plan assets	(92		)	(3,798		)	(5,230		)
Amortization of prior service cost	—			67			390
Amortization of net loss	1,386			1,933			2,126
Curtailment	—			899			1,065
Loss on settlement	36,203			2,855			3,951
Loss on plan termination	3,293			—			—
Net periodic pension expense	$	42,587		$	6,597		$	12,497

The weighted average assumptions used to determine net periodic benefit expense:



	December 31,
	2013		2012		2011

Discount rate	3.95	%	4.60	%	5.65	%
Rate of future compensation increases	—	%	4.00	%	4.00	%
Expected long-term rate of return on assets	0.25	%	6.50	%	8.00	%

In 2012, we established a program for plan participants whose benefits pursuant to the defined benefit plan were frozen. The program provides for payments after year-end for three years (beginning with 2012) provided the employee is employed by us on the last day of each year. The payments are based on each employee's years of service and eligible salary. Transition benefit costs associated with transition to the new defined contribution plan were $12.5 million and $15.6 million for the years ended December 31, 2013 and 2012, respectively.

Post-retirement Healthcare Plans

We provide post-retirement medical benefits to certain eligible employees. These plans are unfunded and provide differing levels of healthcare benefits dependent upon hire date and work location. Not all of our employees are covered by these plans at December 31, 2013.

Effective December 31, 2012, we amended the post-retirement healthcare plans for participants retiring after December 31, 2012 by eliminating post-retirement benefits after reaching age 65 and eliminating early retirement benefits for most participants who retire before reaching age 62. In addition, certain future retirees will receive a cash payment in lieu of post-retirement benefits after reaching age 65 and other changes were made generally to conform benefits. In the first quarter of 2013, we settled a portion of our post-retirement medical obligation, at which time we reclassified a $1.7 million pretax loss out of accumulated other comprehensive income that was recognized as a charge to net income.

The following table sets forth the changes in the benefit obligation and plan assets of our post-retirement healthcare plans for the years ended December 31, 2013 and 2012:



	Years Ended December 31,
	2013			2012
	(In thousands)
Change in plans' benefit obligation
Post-retirement plans' benefit obligation - beginning of year	$	26,797		$	77,303
Service cost	1,112			1,892
Interest cost	665			3,519
Participant contributions	564			760
Amendments	(820		)	(49,399		)
Settlements	(8,627		)	—
Benefits paid	(1,585		)	(1,275		)
Actuarial gain	(2,391		)	(6,003		)
Post-retirement plans' benefit obligation - end of year	$	15,715		$	26,797

Change in plan assets
Fair value of plan assets - beginning of year	$	—		$	—
Employer contributions	9,648			515
Participant contributions	564			760
Settlements	(8,627		)	—
Benefits paid	(1,585		)	(1,275		)
Fair value of plan assets - end of year	$	—		$	—

Funded status
Under-funded balance	$	(15,715	)	$	(26,797	)

Amounts recognized in consolidated balance sheets
Accrued post-retirement liability	$	(15,715	)	$	(26,797	)

Amounts recognized in accumulated other comprehensive income (loss)
Cumulative actuarial loss	$	(1,022	)	$	(5,359	)
Prior service credit	47,098			52,174
Total	$	46,076		$	46,815

Benefit payments, which reflect expected future service, are expected to be paid as follows: $1.4 million in 2014; $1.2 million in 2015; $1.2 million in 2016; $1.2 million in 2017; $1.3 million in 2018; and $6.6 million in 2019 through 2023.

The weighted average assumptions used to determine end of period benefit obligations:



	December 31,
	2013		2012

Discount rate	4.25	%	3.45	%
Current health care trend rate	8.00	%	8.10	%
Ultimate health care trend rate	5.00	%	5.00	%
Year rate reaches ultimate trend rate	2045		2023

Net periodic post-retirement expense consisted of the following components:



	Years Ended December 31,
	2013			2012			2011
	(In thousands)
Service cost – benefit earned during the year	$	1,112		$	1,892		$	1,569
Interest cost on projected benefit obligations	665			3,519			2,193
Amortization of transition obligation	—			—			44
Amortization of prior service credit	(5,896		)	(2,221		)	—
Amortization of net loss	130			269			114
Loss on settlement	1,726			—			—
Net periodic post-retirement expense (credit)	$	(2,263	)	$	3,459		$	3,920

Assumed health care cost trend rates have an effect on the amounts reported for the post-retirement health care benefit plans. The weighted average assumptions used to determine net periodic benefit expense follow:



	Years Ended December 31,
	2013		2012		2011

Discount rate	3.45	%	4.60	%	5.75	%
Current health care trend rate	8.10	%	8.40	%	8.70	%
Ultimate health care trend rate	5.00	%	5.00	%	5.00	%
Year rate reaches ultimate trend rate	2023		2023		2023

The effect of a 1% change in health care cost trend rates is as follows:



	1% Point Increase		1% Point Decrease
	(In thousands)
Service cost	$	241	$	(197	)
Interest cost	$	60	$	(50	)
Year-end accumulated post-retirement benefit obligation	$	1,373	$	(1,109	)

Retirement Restoration Plan

We adopted an unfunded retirement restoration plan that provides for additional payments from us so that total retirement plan benefits for certain executives will be maintained at the levels provided in the retirement plan before the application of Internal Revenue Code limitations. Effective January 1, 2012, we ceased to accrue benefits under this plan. We expensed $0.4 million, $0.3 million and $0.6 million for the years ended December 31, 2013, 2012 and 2011, respectively, in connection with this plan. The accrued liability reflected in the consolidated balance sheets was $6.8 million and $7.4 million at December 31, 2013 and 2012, respectively. As of December 31, 2013, the projected benefit obligation under this plan was $6.8 million. Benefit payments, which reflect expected future service, are expected to be paid as follows: $2.3 million in 2014; $0.5 million in 2015; $0.5 million in 2016; $1.6 million in 2017; $0.3 million in 2018; and $1.3 million in 2019 through 2023.

Defined Contribution Plans

We have a defined contribution “401(k)” plan that covers substantially all employees. Our contributions are based on an employee's eligible compensation and years of service. We also partially match the employee's contributions. We expensed $15.5 million, $16.0 million and $9.7 million for the years ended December 31, 2013, 2012 and 2011, respectively, in connection with these plans.