PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

6 Months Ended

Mar. 31, 2013

Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract]

PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

2. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Pension Plans

Laclede Gas has non-contributory, defined benefit, trusteed forms of pension plans covering substantially all employees. Plan assets consist primarily of corporate and U.S. government obligations and a growth segment consisting of exposure to equity markets, commodities, real estate and inflation-indexed securities, achieved through derivative instruments.

Pension costs for the quarters ended March 31, 2013 and 2012 were $4.2 million and $7.6 million, respectively, including amounts charged to construction. Pension costs for the six months ended March 31, 2013 and 2012 were $8.4 million and $11.8 million, respectively, including amounts charged to construction.

The net periodic pension costs include the following components:

	Three Months Ended March 31,						Six Months Ended March 31,
(Thousands)	2013			2012			2013			2012
Service cost – benefits earned during the period	$	2,311		$	2,301		$	4,622		$	4,613
Interest cost on projected benefit obligation	4,066			4,840			8,132			9,711
Expected return on plan assets	(4,741		)	(4,899		)	(9,482		)	(9,798		)
Amortization of prior service cost	136			148			272			296
Amortization of actuarial loss	2,839			2,259			5,678			4,536
Loss on lump-sum settlement	—			3,407			—			3,407
Sub-total	4,611			8,056			9,222			12,765
Regulatory adjustment	(433		)	(484		)	(867		)	(967		)
Net pension cost	$	4,178		$	7,572		$	8,355		$	11,798

Pursuant to the provisions of the Laclede Gas pension plans, pension obligations may be satisfied by lump-sum cash payments. Pursuant to a Missouri Public Service Commission (MoPSC or Commission) Order, lump-sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds 100% of the sum of service and interest costs. There were no lump-sum payments recognized as settlements during the six months ended March 31, 2013. Lump-sum payments recognized as settlements were $6.4 million during the six months ended March 31, 2012.

Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains or losses not yet includible in pension cost are amortized only to the extent that such gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. The recovery in rates for the Utility’s qualified pension plans is based on an annual allowance of $15.5 million effective January 1, 2011. 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.

The funding policy of Laclede Gas 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 year 2013 contributions to the pension plans through March 31, 2013 were $8.9 million to the qualified trusts and approximately $0.3 million to the non-qualified plans. Contributions to the pension plans for the remaining six months of fiscal 2013 are anticipated to be at least $14.5 million to the qualified trusts and $0.8 million to the non-qualified plans.

Postretirement Benefits

Laclede Gas provides certain life insurance benefits at retirement. Medical insurance is available after early retirement until age 65. The transition obligation not yet includible in postretirement benefit cost is being amortized over 20 years. Postretirement benefit costs for both the quarters ended March 31, 2013 and 2012 were $2.4 million, including amounts charged to construction. Postretirement benefit costs for both the six months ended March 31, 2013 and 2012 were $4.8 million, including amounts charged to construction.

Net periodic postretirement benefit costs consisted of the following components:

	Three Months Ended March 31,						Six Months Ended March 31,
(Thousands)	2013			2012			2013			2012
Service cost-benefits earned during the period	$	2,534		$	2,015		$	5,067		$	4,030
Interest cost on accumulated       postretirement benefit obligation	1,279			1,380			2,558			2,760
Expected return on plan assets	(1,081		)	(991		)	(2,162		)	(1,982		)
Amortization of transition obligation	23			34			46			68
Amortization of prior service cost (credit)	1			(518		)	2			(1,036		)
Amortization of actuarial loss	1,325			1,065			2,650			2,130
Sub-total	4,081			2,985			8,161			5,970
Regulatory adjustment	(1,699		)	(604		)	(3,398		)	(1,208		)
Net postretirement benefit cost	$	2,382		$	2,381		$	4,763		$	4,762

Missouri state law provides for the recovery in rates of costs accrued pursuant to GAAP provided that such costs are funded through an independent, external funding mechanism. Laclede Gas established Voluntary Employees’ Beneficiary Association (VEBA) and Rabbi trusts as its external funding mechanisms. VEBA and Rabbi trusts’ assets consist primarily of money market securities and mutual funds invested in stocks and bonds.

Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets implemented prospectively over a four-year period. Gains and losses not yet includible in postretirement benefit cost are amortized only to the extent that such gain or loss exceeds 10% of the greater of the accumulated postretirement benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. The recovery in rates for the Utility’s postretirement benefit plans is based on an annual allowance of $9.5 million effective January 1, 2011. The difference between these amounts and postretirement benefit cost based on 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.

Laclede Gas’ funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. Fiscal year 2013 contributions to the postretirement plans through March 31, 2013 were $4.1 million to the qualified trusts and approximately $0.4 million paid directly to participants from Laclede Gas’ funds. Contributions to the postretirement plans for the remaining six months of fiscal year 2013 are anticipated to be $12.2 million to the qualified trusts and $0.4 million paid directly to participants from Laclede Gas’ funds.