XML 80 R24.htm IDEA: XBRL DOCUMENT v3.3.0.814
PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
 12 Months Ended
Sep. 30, 2015
Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract]  
PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
This footnote includes all pension plans of the Company whether historical plans or those acquired as part of the purchase of certain assets and liabilities of MGE on September 1, 2013 or those acquired in the Alagasco Transaction effective August 31, 2014. The net pension and postretirement obligations were re-measured at the applicable acquisition dates as well as at the fiscal year end.
Pension Plans
The pension plans of Laclede Group consist of plans for employees at the Missouri Utilities and plans covering the employees of Alagasco.
The Missouri Utilities have non-contributory, defined benefit, trusteed forms of pension plans covering the majority of their employees. Plan assets consist primarily of corporate and US government obligations and a growth segment consisting of exposure to equity markets, commodities, real estate and inflation-indexed securities, achieved through derivative instruments and investments in diversified mutual funds.
Alagasco has non-contributory, defined benefit, trusteed forms of pension plans covering the majority of its employees. Qualified plan assets are comprised of United States equities consisting of mutual and commingled funds with varying strategies, global equities consisting of mutual funds, alternative investments of limited partnerships and commingled and mutual funds, and fixed income investments.
The net periodic pension costs include the following components:
 
2015
 
2014*
 
2013
Laclede Group
 
 
 
 
 
Service cost – benefits earned during the period
$
17.3

 
$
10.2

 
$
9.2

Interest cost on projected benefit obligation
29.5

 
24.5

 
17.0

Expected return on plan assets
(37.4
)
 
(27.2
)
 
(19.4
)
Amortization of prior other comprehensive income
—

 
0.4

 
—

Amortization of prior service cost
0.5

 
0.5

 
0.5

Amortization of actuarial loss
7.5

 
7.1

 
10.7

Loss on lump-sum settlements
19.6

 
1.5

 
27.0

Subtotal
37.0

 
17.0

 
45.0

Regulatory adjustment
(2.1
)
 
10.4

 
(27.5
)
Net pension cost
$
34.9

 
$
27.4

 
$
17.5

 
* Includes Alagasco.
 
 
 
2015
 
2014
 
2013
Laclede Gas
 
 
 
 
 
Service cost – benefits earned during the period
$
11.5

 
$
9.7

 
$
9.2

Interest cost on projected benefit obligation
23.3

 
24.0

 
17.0

Expected return on plan assets
(29.2
)
 
(26.5
)
 
(19.4
)
Amortization of prior service cost
0.5

 
0.5

 
0.5

Amortization of actuarial loss
7.5

 
7.1

 
10.7

Loss on lump-sum settlements
18.0

 
1.5

 
27.0

Subtotal
31.6

 
16.3

 
45.0

Regulatory adjustment
(5.2
)
 
10.4

 
(27.5
)
Net pension cost
$
26.4

 
$
26.7

 
$
17.5


 
2015
 
2014*
 
2013**
Alagasco
 
 
 
 
 
Service cost – benefits earned during the period
$
5.8

 
$
5.1

 
$
14.2

Interest cost on projected benefit obligation
6.2

 
4.1

 
11.2

Expected return on plan assets
(8.2
)
 
(5.2
)
 
(14.7
)
Amortization of prior service cost
—

 
0.1

 
0.5

Amortization of actuarial loss
—

 
2.2

 
14.0

Loss on lump-sum settlements
1.6

 
10.1

 
1.4

Subtotal
5.4

 
16.4

 
26.6

Regulatory adjustment
3.1

 
0.4

 
—

Net pension cost
$
8.5

 
$
16.8

 
$
26.6

 
* Nine months ended September 30,
 
** Year ended December 31, 2013

Other changes in plan assets and pension benefit obligations recognized in other comprehensive income include the following:
 
2015
 
2014
 
2013
Laclede Group
 
 
 
 
 
Current year actuarial loss
$
48.3

 
$
15.7

 
$
17.0

Amortization of actuarial loss
(7.5
)
 
(7.1
)
 
(10.7
)
Acceleration of loss recognized due to settlement
(19.6
)
 
(1.5
)
 
(27.0
)
Amortization of prior service cost
(0.5
)
 
(0.5
)
 
(0.5
)
Subtotal
20.7

 
6.6

 
(21.2
)
Regulatory adjustment
(21.2
)
 
(6.1
)
 
21.1

Total recognized in other comprehensive income
$
(0.5
)
 
$
0.5

 
$
(0.1
)
 
* Includes Alagasco.
 
 
 
 
 
 
 
 
Laclede Gas
2015
 
2014
 
2013
Current year actuarial loss
$
26.0

 
$
14.2

 
$
17.0

Amortization of actuarial loss
(7.5
)
 
(7.1
)
 
(10.7
)
Acceleration of loss recognized due to settlement
(18.0
)
 
(1.5
)
 
(27.0
)
Amortization of prior service cost
(0.5
)
 
(0.5
)
 
(0.5
)
Subtotal
—

 
5.1

 
(21.2
)
Regulatory adjustment
(0.5
)
 
(4.7
)
 
21.1

Total recognized in other comprehensive income
$
(0.5
)
 
$
0.4

 
$
(0.1
)
 
 
 
 
 
 
 
 
 
 
 
 
Alagasco
2015
 
2014*
 
2013**
Current year actuarial loss
$
22.3

 
$
1.5

 
$
(14.1
)
Amortization of actuarial loss
—

 
—

 
(8.9
)
Acceleration of loss recognized due to settlement
(1.6
)
 
—

 
—

Amortization of prior service cost
—

 
—

 
(0.3
)
Subtotal
20.7

 
1.5

 
(23.3
)
Regulatory adjustment
(20.7
)
 
(1.5
)
 
—

Total recognized in other comprehensive income
$
—

 
$
—

 
$
(23.3
)
 
* Nine months ended September 30
 
** Year ended December 31
Laclede Group pension obligations are driven by separate plan and regulatory provisions governing Laclede Gas and Alagasco pension plans.
Pursuant to the provisions of the Missouri Utilities' and Alagasco's pension plans, pension obligations may be satisfied by lump-sum cash payments. 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 in a specific year. Two Laclede Gas plans and one Alagasco plan met the criteria for settlement recognition in the fiscal year ended September 30, 2015, requiring re-measurement of the obligation under those plans using updated census data and assumptions for discount rate and mortality. Lump-sum payments recognized as settlements during fiscal year 2015, 2014, and 2013 were $71.1 ($58.2 attributable to Laclede Gas and $12.9 attributable to Alagasco), $22.1, and $79.5, respectively.
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 Laclede Gas' eastern Missouri qualified pension plan is based on an annual allowance of $15.5 effective January 1, 2011. The recovery in rates for MGE's qualified pension plan is based on an annual allowance of $10.0 effective February 20, 2010. 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 following table shows the reconciliation of the beginning and ending balances of the pension benefit obligation at September 30:
 
Laclede Group
 
Laclede Gas
 
Alagasco
 
2015
 
2014**
 
2015
 
2014
 
2015
 
2014***
Benefit obligation, beginning of year
$
692.4

 
$
503.8

 
$
543.6

 
$
503.8

 
$
148.8

 
$
293.4

Service cost
17.3

 
10.2

 
11.5

 
9.7

 
5.8

 
5.1

Interest cost
29.5

 
24.5

 
23.3

 
24.0

 
6.2

 
4.1

Actuarial (gain) loss
(12.8
)
 
39.4

 
(20.7
)
 
41.5

 
7.9

 
7.8

Energen divestiture
—

 
—

 
—

 
—

 
—

 
(127.8
)
Alagasco acquisition
—

 
150.2

 
—

 
—

 
—

 
—

Settlement loss
16.5

 
1.2

 
14.5

 
1.2

 
2.0

 
—

Gross benefits paid *
(90.6
)
 
(36.9
)
 
(74.6
)
 
(36.6
)
 
(16.0
)
 
(33.8
)
Benefit obligation, end of year
$
652.3

 
$
692.4

 
$
497.6

 
$
543.6

 
$
154.7

 
$
148.8

Accumulated benefit obligation, end of year
591.4

 
$
613.7

 
456.9

 
$
484.1

 
134.5

 
$
129.6

*
Includes $71.1 ($58.2 attributable to Laclede Gas and $12.9 to Alagasco) and $22.1 lump-sum payments recognized as settlements in fiscal years 2015 and 2014, respectively.
** Includes Alagasco.
*** Nine-month transition period ended September 30.
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets at September 30:
 
Laclede Group
 
Laclede Gas
 
Alagasco
 
2015
 
2014*
 
2015
 
2014
 
2015
 
2014**
Fair value of plan assets, beginning of year
$
506.6

 
$
345.4

 
$
387.4

 
$
345.4

 
$
119.2

 
$
219.5

Actual return on plan assets
(7.2
)
 
52.1

 
(3.0
)
 
55.0

 
(4.2
)
 
7.8

Employer contributions
40.1

 
23.6

 
30.1

 
23.6

 
10.0

 
1.6

Settlements
(71.1
)
 
—

 
(58.2
)
 
—

 
(12.9
)
 
—

Energen divestiture
—

 
—

 
—

 
—

 
—

 
(75.9
)
Alagasco acquisition
—

 
122.4

 
—

 
—

 
—

 
—

Gross benefits paid
(19.5
)
 
(36.9
)
 
(16.4
)
 
(36.6
)
 
(3.1
)
 
(33.8
)
Fair value of plan assets, end of year
$
448.9

 
$
506.6

 
$
339.9

 
$
387.4

 
$
109.0

 
$
119.2

Funded status of plans, end of year
$
(203.4
)
 
$
(185.8
)
 
$
(157.7
)
 
$
(156.2
)
 
$
(45.7
)
 
$
(29.6
)
*    Includes Alagasco.
**    Nine-month transition period ended September 30.
The following table sets forth the amounts recognized in the balance sheets at September 30:
 
Laclede Group
 
Laclede Gas
 
Alagasco
 
2015
 
2014*
 
2015
 
2014
 
2015
 
2014**
Current liabilities
$
(0.5
)
 
$
(0.5
)
 
$
(0.5
)
 
$
(0.5
)
 
$
—

 
$
—

Noncurrent liabilities
(202.9
)
 
(185.4
)
 
(157.2
)
 
(155.7
)
 
(45.7
)
 
(29.6
)
Total
$
(203.4
)
 
$
(185.9
)
 
$
(157.7
)
 
$
(156.2
)
 
$
(45.7
)
 
$
(29.6
)

*    Includes Alagasco.
**    Nine-month transition period ended September 30.
Pre-tax amounts recognized in accumulated other comprehensive income not yet recognized as components of net periodic pension cost consist of:
 
Laclede Group
 
Laclede Gas
 
Alagasco
 
2015
 
2014*
 
2015
 
2014
 
2015
 
2014**
Net actuarial loss
$
143.9

 
$
7.7

 
$
121.9

 
$
7.7

 
$
22.0

 
$
1.5

Prior service costs
3.5

 
0.5

 
3.5

 
0.5

 
—

 
—

Subtotal
147.4

 
8.2

 
125.4

 
8.2

 
22.0

 
1.5

Adjustments for amounts included in Regulatory Assets
(144.9
)
 
(7.9
)
 
(122.9
)
 
(7.9
)
 
(22.0
)
 
(1.5
)
Total
$
2.5

 
$
0.3

 
$
2.5

 
$
0.3

 
$
—

 
$
—

*    Includes Alagasco.
**    Nine-month transition period ended September 30.
At September 30, 2015, the following pre-tax amounts are expected to be amortized from accumulated other comprehensive income into net periodic pension cost during fiscal year 2016:
 
Laclede Group
 
Laclede Gas
 
Alagasco
Amortization of net actuarial loss
$
7.8

 
$
7.8

 
$
—

Amortization of prior service cost
0.4

 
0.4

 
—

Subtotal
8.2

 
8.2

 
—

Regulatory adjustment
(7.9
)
 
(7.9
)
 
—

Total
$
0.3

 
$
0.3

 
$
—


Alagasco has no amounts to be amortized from accumulated other comprehensive income into net periodic pension cost during fiscal 2016.
The assumptions used to calculate net periodic pension costs for Laclede Gas are as follows:
 
2015
 
2014
 
2013
Weighted average discount rate - Laclede Gas plans
4.30%
 
4.70%
 
3.95%
Weighted average discount rate - MGE plans
4.45%
 
5.00%
 
5.05%
Weighted average rate of future compensation increase *
3.00%
 
3.00%
 
3.00%
Expected long-term rate of return on plan assets *
7.75%
 
7.75%
 
7.75%

*
Assumptions for weighted average rate of future compensation increase and expected long-term rate of return on plan assets are the same for both Laclede Gas and MGE plans.
The assumptions used to calculate net periodic pension costs for Alagasco are as follows:
 
2015
 
2014 *
 
2013 **
Weighted average discount rate
4.15% /4.25%
 
4.00% / 4.05%
 
3.63%
Weighted average rate of future compensation increase
2.92%
 
2.92%
 
3.71%
Expected long-term rate of return on plan assets
7.00% / 7.25%
 
7.00% / 7.25%
 
7.00%
*    Nine-month transition period ended September 30.
**    Year Ended December 31.
The weighted average discount rate is based on long-term, high quality bond indices at the measurement date. The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the investment portfolio. Assumed projected rates of return for each asset class were selected after analyzing historical experience and future expectations of the returns. The overall expected rate of return for the portfolio was developed based on the target allocation for each class. The expected return is a long-term assumption that generally does not change annually. However, in 2012 and 2011, the expected return assumption was adjusted to reflect capital market volatility in recent years.
The assumptions used to calculate the benefit obligations are as follows:
 
2015
 
2014
Weighted average discount rate - Laclede Gas
4.40%
 
4.30%
Weighted average discount rate - MGE
4.50%
 
4.45%
Weighted average discount rate - Alagasco
4.25%/4.30%
 
4.15% / 4.25%
Weighted average rate of future compensation increase (Laclede Gas and MGE)
3.00%
 
3.00%
Weighted average rate of future compensation increase (Alagasco)
3.00%
 
2.92%

Following are the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for plans that have a projected benefit obligation and an accumulated benefit obligation in excess of plan assets:
 
Laclede Group
 
Laclede Gas
 
Alagasco
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Projected benefit obligation
$
652.3

 
$
692.4

 
$
497.6

 
$
543.6

 
$
154.7

 
$
148.8

Accumulated benefit obligation
591.4

 
613.7

 
456.9

 
484.1

 
134.5

 
129.6

Fair value of plan assets
448.9

 
506.6

 
339.9

 
387.4

 
109.0

 
119.2


Following are the targeted and actual plan assets by category as of September 30 of each year for Laclede Gas:
 
2015 Target
 
2015
Actual
2014 Target
 
2014
Actual
Growth Strategy
 
 
 
 
 
 
Equity markets
52.0
%
 
48.4
%
50.0
%
 
51.2
%
Debt securities
48.0
%
 
50.1
%
50.0
%
 
48.7
%
Other*
—
%
 
1.5
%
—
%
 
0.1
%
Total
100.0
%
 
100.0
%
100.0
%
 
100.0
%
* Other investments in 2015 and 2014 consist of cash equivalents.
Laclede Gas' investment policies are designed to maximize, to the extent possible, the funded status of the plan over time, and minimize volatility of funding and costs. The policy seeks to maximize investment returns consistent with these objectives and Laclede Gas' tolerance for risk. The duration of plan liabilities and the impact of potential changes in asset values on the funded status are fundamental considerations in the selection of plan assets. Outside investment management specialists are utilized in each asset class. Such specialists are provided with guidelines, where appropriate, designed to ensure that the investment portfolio is managed in accordance with the policy. The policy seeks to avoid significant concentrations of risk by investing in a diversified portfolio of assets. Investments in corporate, US government and agencies, and, to a lesser extent, international debt securities seek to provide duration matching with plan liabilities, and typically have investment grade ratings and reflect allocations across various entities and industries. During 2012, exposures to additional asset types were added to the target portfolio: commodities, real estate and inflation-indexed securities. During 2015, the target portfolio was rebalanced to include a higher weighting for the growth (equity) component and a lower weighting to the liability-driven (debt) component. The investment policy permits the use of derivative instruments, which may be used to achieve the desired market exposure of an index, adjust portfolio duration, or rebalance the total portfolio to the target asset allocation. The Growth Strategy utilizes a combination of derivative instruments and debt securities to achieve diversified exposure to equity and other markets while generating returns from the fixed-income investments and providing further duration matching with the liabilities. The assets acquired with the MGE pension plan include diversified funds that are equity-oriented and larger holdings of cash. These are being evaluated along with the liabilities of the MGE plan. Performance and compliance with the guidelines is regularly monitored. The policy calls for increased allocations to debt securities as the funded status improves.
Following are the targeted and actual plan assets by category as of September 30 of each year for Alagasco:
 
2015 Target
 
2015
Actual
 
2014 Target
 
2014
Actual
Equity markets
60.0
%
 
52.9
%
 
46.0
%
 
46.0
%
Debt securities
29.0
%
 
27.9
%
 
33.0
%
 
29.0
%
Other*
11.0
%
 
19.2
%
 
21.0
%
 
25.0
%
Total
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
* Other investments in 2015 and 2014 include cash and cash equivalents, hedge funds, real estate, and all asset funds, which can invest in equities or fixed income.
Alagasco employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets with a prudent level of risk. Risk tolerance is established through consideration of plan liabilities, plan funded status, corporate financial condition and market conditions. Alagasco has developed an investment strategy that focuses on asset allocation, diversification and quality guidelines. The investment goals are to obtain an adequate level of return to meet future obligations of the plan by providing above average risk-adjusted returns with a risk exposure in the mid-range of comparable funds. Investment managers are retained Alagasco to manage separate pools of assets. Funds are allocated to such managers in order to achieve an appropriate, diversified, and balanced asset mix. Comparative market and peer group benchmarks are utilized to ensure that investment managers are performing satisfactorily.  Alagasco seeks to maintain an appropriate level of diversification to minimize the risk of large losses in a single asset class. Accordingly, plan assets for the pension plans and the postretirement health care and life insurance benefit plan do not have a concentration of assets in a single entity, industry, country, commodity or class of investment fund. During 2015, the target portfolio was rebalanced to include a higher weighting for the growth (equity) component and a lower weighting to the liability-driven (debt) component and the inflation hedging / cash (other) component.
Following are expected pension benefit payments for the succeeding five fiscal years, and in aggregate for the five years thereafter for Laclede Group, Laclede Gas, and Alagasco:
 
 
Laclede Group
 
Laclede Gas
 
Alagasco
 
 
 Pensions from
Qualified Trust
 
Pensions from
Company
Funds
 
 Pensions from
Qualified Trust
 
Pensions from
Laclede Gas
Funds
 
 Pensions from
Qualified Trust
2016
 
$
45.9

 
$
0.5

 
$
36.4

 
$
0.5

 
$
9.5

2017
 
45.7

 
0.6

 
35.7

 
0.6

 
10.0

2018
 
43.5

 
0.5

 
33.9

 
0.5

 
9.6

2019
 
44.9

 
0.4

 
35.0

 
0.4

 
9.9

2020
 
46.4

 
0.5

 
35.4

 
0.5

 
11.0

2021 – 2025
 
235.0

 
2.1

 
177.3

 
2.1

 
57.7

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. Contributions to the pension plans in fiscal year 2016 are anticipated to be $26.0 into the qualified trusts, and $0.5 into the non-qualified plans.
The funding policy of Alagasco 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. There are no required contributions to the qualified pension plans during 2016. Additionally, it is not anticipated that the funded status of the qualified pension plans will fall below statutory thresholds requiring accelerated funding or constraints on benefit levels or plan administration. During fiscal 2016 the Company may make additional discretionary contributions to the qualified pension plans depending on the amount and timing of employee retirements and market conditions.
Postretirement Benefits
The Utilities provide certain life insurance benefits at retirement. Laclede Gas plans provide for medical insurance after early retirement until age 65. For retirements prior to January 1, 2015, the MGE plans provided medical insurance after retirement until death. For retirements after January 1, 2015, the MGE plans provide medical insurance after early retirement until age 65. The transition obligation not yet included in postretirement benefit cost is being amortized over 20 years. Under the Alagasco plans, medical insurance is currently available upon retirement until death for certain retirees depending on the type of employee and the date the employee was originally hired.
Net periodic postretirement benefit costs consist of the following components:
Laclede Group
2015
 
2014*
 
2013
Service cost – benefits earned during the period
$
12.8

 
$
11.3

 
$
10.2

Interest cost on accumulated postretirement benefit obligation
11.2

 
8.9

 
5.2

Expected return on plan assets
(13.2
)
 
(7.3
)
 
(4.5
)
Amortization of prior other comprehensive loss
—

 
(0.2
)
 
—

Amortization of transition obligation
—

 
—

 
0.1

Amortization of prior service credit
0.8

 
—

 
—

Amortization of actuarial loss
5.1

 
6.0

 
5.3

Subtotal
16.7

 
18.7

 
16.3

Regulatory adjustment
(11.0
)
 
(9.6
)
 
(6.8
)
Net postretirement benefit cost
$
5.7

 
$
9.1

 
$
9.5

 
* Includes Alagasco.
 
 
 
 
 
 
 
 
Laclede Gas
2015
 
2014
 
2013
Service cost – benefits earned during the period
$
12.3

 
$
11.2

 
$
10.2

Interest cost on accumulated postretirement benefit obligation
8.6

 
8.7

 
5.2

Expected return on plan assets
(8.1
)
 
(6.8
)
 
(4.5
)
Amortization of transition obligation
—

 
—

 
0.1

Amortization of prior service credit
0.8

 
—

 
—

Amortization of actuarial loss
5.1

 
6.0

 
5.3

Subtotal
18.7

 
19.1

 
16.3

Regulatory adjustment
(9.2
)
 
(9.6
)
 
(6.8
)
Net postretirement benefit cost
$
9.5

 
$
9.5

 
$
9.5

 
 
 
 
 
 
Alagasco
2015
 
2014 *
 
2013 **
Service cost – benefits earned during the period
$
0.5

 
$
0.4

 
$
1.7

Interest cost on accumulated postretirement benefit obligation
2.6

 
1.9

 
3.5

Expected return on plan assets
(5.1
)
 
(3.6
)
 
(5.0
)
Amortization of transition obligation
—

 
—

 
1.3

Amortization of actuarial loss
—

 
(1.0
)
 
(0.1
)
Curtailment gain
—

 
—

 
(1.2
)
Subtotal
(2.0
)
 
(2.3
)
 
0.2

Regulatory adjustment
(1.8
)
 
(0.2
)
 
—

Net postretirement benefit cost
$
(3.8
)
 
$
(2.5
)
 
$
0.2

 
* Nine months ended September 30
 
** Year ended December 31
Other changes in plan assets and postretirement benefit obligations recognized in other comprehensive income include the following:
Laclede Group
2015
 
2014*
 
2013
Current year actuarial (gain) loss
$
(8.5
)
 
$
(3.1
)
 
$
16.3

Amortization of actuarial loss
(5.1
)
 
(6.0
)
 
(5.3
)
Amortization of prior service credit
(0.8
)
 
2.5

 
—

Current year prior service credit
(4.9
)
 
—

 
—

Amortization of transition obligation
—

 
—

 
(0.1
)
Subtotal
(19.3
)
 
(6.6
)
 
10.9

Regulatory adjustment
19.3

 
6.6

 
(10.9
)
Total recognized in other comprehensive income
$
—

 
$
—

 
$
—

*Includes Alagasco.
 
 
 
 
 
 
 
 
 
 
 
Laclede Gas
2015
 
2014
 
2013
Current year actuarial (gain) loss
$
(2.4
)
 
$
(4.2
)
 
$
16.3

Amortization of actuarial loss
(5.1
)
 
(6.0
)
 
(5.3
)
Amortization of prior service credit
(0.8
)
 
2.5

 
—

Current year prior service credit
(4.9
)
 
—

 
—

Amortization of transition obligation
—

 
—

 
(0.1
)
Subtotal
(13.2
)
 
(7.7
)
 
10.9

Regulatory adjustment
13.2

 
7.7

 
(10.9
)
Total recognized in other comprehensive income
$
—

 
$
—

 
$
—

 
 
 
 
 
 
Alagasco
2015
 
2014
 
2013
Current year actuarial (gain) loss
$
(6.1
)
 
$
1.1

 
$
(8.1
)
Amortization of actuarial loss
—

 
—

 
0.6

Amortization of transition obligation
—

 
—

 
(0.3
)
Subtotal
(6.1
)
 
1.1

 
(7.8
)
Regulatory adjustment
6.1

 
(1.1
)
 
—

Total recognized in other comprehensive income
$
—

 
$
—

 
$
(7.8
)
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 Laclede Gas' postretirement benefit plans is based on an annual allowance of $9.5 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.
The following table sets forth the reconciliation of the beginning and ending balances of the postretirement benefit obligation at September 30:
 
Laclede Group
 
Laclede Gas
 
Alagasco
($ Millions)
2015
 
2014*
 
2015
 
2014
 
2015
 
2014 **
Benefit obligation, beginning of year
$
258.5

 
$
180.1

 
$
197.9

 
$
180.1

 
$
60.6

 
$
63.3

Service cost
12.8

 
11.3

 
12.3

 
11.2

 
0.5

 
0.4

Interest cost
11.2

 
8.9

 
8.6

 
8.7

 
2.6

 
1.9

Actuarial loss (gain)
(23.7
)
 
1.2

 
(10.9
)
 
2.2

 
(12.8
)
 
4.3

Plan amendments
(4.9
)
 
2.5

 
(4.9
)
 
2.5

 
—

 
—

Energen divestiture
—

 
—

 
—

 
—

 
—

 
(5.6
)
Alagasco acquisition
—

 
61.8

 
—

 
—

 
—

 
—

Retiree drug subsidy program
0.4

 
—

 
—

 
—

 
0.4

 
0.3

Gross benefits paid
(15.1
)
 
(7.3
)
 
(11.1
)
 
(6.8
)
 
(4.0
)
 
(4.0
)
Benefit obligation, end of year
$
239.2

 
$
258.5

 
$
191.9

 
$
197.9

 
$
47.3

 
$
60.6

 
 * Includes Alagasco.
 
 ** Nine-month transition period ended September 30.

The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets at September 30:
 
Laclede Group
 
Laclede Gas
 
Alagasco
 
2015
 
2014*
 
2015
 
2014
 
2015
 
2014
Fair value of plan assets at beginning of year
$
222.5

 
$
111.6

 
$
137.2

 
$
111.6

 
$
85.3

 
$
98.6

Actual return on plan assets
(2.0
)
 
11.6

 
(0.4
)
 
13.3

 
(1.6
)
 
1.4

Employer contributions
17.9

 
19.1

 
17.9

 
19.1

 
—

 
0.3

Energen divestiture
—

 
—

 
—

 
—

 
—

 
(11.0
)
Alagasco acquisition
—

 
87.5

 
—

 
—

 
—

 
—

Gross benefits paid
(15.1
)
 
(7.3
)
 
(11.1
)
 
(6.8
)
 
(4.0
)
 
(4.0
)
Fair value of plan assets, end of year
$
223.3

 
$
222.5

 
$
143.6

 
$
137.2

 
$
79.7

 
$
85.3

Funded status of plans, end of year
$
(15.9
)
 
$
(36.0
)
 
$
(48.3
)
 
$
(60.7
)
 
$
32.4

 
$
24.7

 
 * Includes Alagasco.
 
 ** Nine-month transition period ended September 30.
The following table sets forth the amounts recognized in the balance sheets at September 30:
 
Laclede Group
 
Laclede Gas
 
Alagasco
 
2015
 
2014*
 
2015
 
2014
 
2015
 
2014
Noncurrent assets
$
35.5

 
$
25.0

 
$
3.1

 
$
0.3

 
$
32.4

 
$
24.7

Current liabilities
(0.3
)
 
(0.3
)
 
(0.3
)
 
(0.3
)
 
—

 
—

Noncurrent liabilities
(51.1
)
 
(60.7
)
 
(51.1
)
 
(60.7
)
 
—

 
—

Total
$
(15.9
)
 
$
(36.0
)
 
$
(48.3
)
 
$
(60.7
)
 
$
32.4

 
$
24.7

Pre-tax amounts recognized in accumulated other comprehensive income not yet recognized as components of net periodic postretirement benefit cost consist of:
 
Laclede Group
 
Laclede Gas
 
Alagasco
 
2015
 
2014*
 
2015
 
2014
 
2015
 
2014
Net actuarial loss
$
40.8

 
$
54.4

 
$
45.8

 
$
53.3

 
$
(5.0
)
 
$
1.1

Prior service credit
(3.1
)
 
2.5

 
(3.1
)
 
2.5

 
—

 
—

Subtotal
37.7

 
56.9

 
42.7

 
55.8

 
(5.0
)
 
1.1

Adjustments for amounts included in Regulatory Assets
$
(37.7
)
 
$
(56.9
)
 
$
(42.7
)
 
$
(55.8
)
 
$
5.0

 
$
(1.1
)
Total
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

At September 30, 2015, the following pre-tax amounts are expected to be amortized from accumulated other comprehensive income into net periodic postretirement benefit cost during fiscal year 2016:
 
Laclede Group
 
Laclede Gas
 
Alagasco
Amortization of net actuarial loss
$
3.7

 
$
3.9

 
$
(0.2
)
Amortization of prior service cost
0.3

 
0.3

 
—

Subtotal
4.0

 
4.2

 
(0.2
)
Regulatory adjustment
(4.0
)
 
(4.2
)
 
0.2

Total
$
—

 
$
—

 
$
—

The assumptions used to calculate net periodic postretirement benefit costs for Laclede Gas are as follows:
 
2015
 
2014
 
2013
Weighted average discount rate Laclede Gas plans
4.15
%
 
4.60
%
 
3.80
%
Weighted average discount rate MGE plans
4.40
%
 
4.95
%
 
5.00
%
Weighted average rate of future compensation increase (Laclede Gas and MGE Plans)
3.00
%
 
3.00
%
 
3.00
%
Expected long-term rate of return on plan assets - Laclede Gas plans
6.25% / 7.75%

 
6.25% / 7.75%

 
7.75
%
Expected long-term rate of return on plan assets - MGE plans
5.00
%
 
3.75% / 5.75%

 
5.75
%

The assumptions used to calculate net periodic postretirement benefit costs for Alagasco are as follows:
 
2015
 
2014
 
2013
Weighted average discount rate
4.40
%
 
4.25
%
 
4.26
%
Expected long-term rate of return on plan assets
4.75% / 7.50%

 
4.75% / 7.25%

 
7.00
%

The weighted average discount rate is based on long-term, high quality bond indices at the measurement date. The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the investment portfolio. Assumed projected rates of return for each asset class were selected after analyzing historical experience and future expectations of the returns. The overall expected rate of return for the portfolio was developed based on the target allocation for each class. The expected return is a long-term assumption that generally does not change annually. However, in 2012 and 2011, the expected return assumption was adjusted to reflect capital market volatility in recent years.
The assumptions used to calculate the accumulated postretirement benefit obligations for Laclede Gas are as follows:
 
2015
 
2014
Weighted average discount rate - Laclede Gas plans
4.00
%
 
4.15
%
Weighted average discount rate - MGE Plans
4.30
%
 
4.40
%
Weighted average rate of future compensation increase
3.00
%
 
3.00
%
The assumptions used to calculate the accumulated postretirement benefit obligations for Alagasco are as follows:
 
2015
 
2014
Weighted average discount rate
4.50
%
 
4.40
%
Weighted average rate of future compensation increase
n/a

 
n/a


The assumed medical cost trend rates at September 30 are as follows:
 
2015
 
2014
Medical cost trend assumed for next year - Laclede Gas & MGE
7.00
%
 
7.50
%
Medical cost trend assumed for next year - Alagasco
7.00
%
 
7.25
%
Rate to which the medical cost trend rate is assumed to decline (the ultimate medical cost trend rate)
5.00
%
 
5.00
%
Year the rate reaches the ultimate trend
2020

 
2020

The following table presents the effect of an assumed 1% change in the assumed medical cost trend rate:
 
1% Increase
 
1% Decrease
Laclede Group
 
 
 
Effect on net periodic postretirement benefit cost
$
1.6

 
$
(1.5
)
Effect on accumulated postretirement benefit obligation
9.2

 
(8.5
)
 
 
 
 
Laclede Gas
 
 
 
Effect on net periodic postretirement benefit cost
$
1.5

 
$
(1.4
)
Effect on accumulated postretirement benefit obligation
8.7

 
(8.0
)
 
 
 
 
Alagasco
 
 
 
Effect on net periodic postretirement benefit cost
$
0.1

 
$
(0.1
)
Effect on accumulated postretirement benefit obligation
0.5

 
(0.5
)
Following are the targeted and actual plan assets by category as of September 30 of each year for Laclede Gas:
 
Target
 
2015
Actual
 
2014
Actual
Equity securities
60.0
%
 
59.6
%
 
59.0
%
Debt securities
40.0
%
 
39.7
%
 
39.0
%
Other
—
%
 
0.7
%
 
2.0
%
Total
100.0
%
 
100.0
%
 
100.0
%

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 and Rabbi Trusts as its external funding mechanisms. Laclede Gas’ investment policy seeks to maximize investment returns consistent with Laclede Gas' tolerance for risk. Outside investment management specialists are utilized in each asset class. Such specialists are provided with guidelines, where appropriate, designed to ensure that the investment portfolio is managed in accordance with policy. Performance and compliance with the guidelines is regularly monitored. Laclede Gas' current investment policy targets an asset allocation of 60% to equity securities and 40% to debt securities, excluding cash held in short-term debt securities for the purpose of making benefit payments. Laclede Gas currently invests in a mutual fund which is rebalanced on an ongoing basis to the target allocation. The mutual fund is diversified across US stock and bond markets.
Following are the targeted and actual plan assets by category as of September 30 of each year for Alagasco:
 
Target
 
2015
Actual
 
2014
Actual
Equity securities
60.0
%
 
59.7
%
 
60.0
%
Debt securities
40.0
%
 
40.3
%
 
40.0
%
Total
100.0
%
 
100.0
%
 
100.0
%

Following are expected postretirement benefit payments for the succeeding five fiscal years, and in aggregate for the five years thereafter for Laclede Group, Laclede Gas, and Alagasco:
 
 
Laclede Group
 
Laclede Gas
 
Alagasco
 
 
 Benefits from
Qualified Trust
 
Benefits from
Company
Funds
 
 Benefits from
Qualified Trust
 
Benefits from
Laclede Gas
Funds
 
Benefits from
Qualified Trust
2016
 
$
15.1

 
$
0.4

 
$
12.3

 
$
0.4

 
$
2.8

2017
 
16.2

 
0.4

 
13.3

 
0.4

 
2.9

2018
 
17.5

 
0.4

 
14.6

 
0.4

 
2.9

2019
 
18.3

 
0.4

 
15.4

 
0.4

 
2.9

2020
 
19.2

 
0.4

 
16.3

 
0.4

 
2.9

2021 – 2025
 
104.9

 
2.3

 
90.4

 
2.3

 
14.5

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. Contributions to the postretirement plans in fiscal year 2016 are anticipated to be $14.3 to the qualified trusts, and $0.4 paid directly to participants from Laclede Gas funds.
Alagasco's funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. In fiscal 2016 it is not anticipated that contributions will be made to the postretirement plans.
Other Plans
Laclede Gas and Alagasco sponsor 401(k) plans that cover substantially all employees. The plans allow employees to contribute a portion of their base pay in accordance with specific guidelines. Laclede Gas provides a match of such contributions within specific limits. The cost of the defined contribution plans of Laclede Gas amounted to $8.0, $6.7, and $5.0 for fiscal years 2015, 2014, and 2013, respectively. Alagasco also provides a match of employee contributions within specific limits. The cost of the defined contribution plans of Alagasco amounted to $3.0, $4.7, and $7.1 for the fiscal year 2015, the transition period ended September 30, 2014, and calendar year 2013, respectively.
Fair Value Measurements of Pension and Other Postretirement Plan Assets
Laclede Group
The table below categorizes the fair value measurements of the Laclede Group's pension plan assets:
 
Quoted Prices in
Active Markets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
As of September 30, 2015
 
 
 
 
 
 
 
Cash and cash equivalents
$
43.4

 
$
0.2

 
$
—

 
$
43.6

Stock/bond mutual fund
46.4

 
74.6

 
9.6

 
130.6

Debt Securities
 
 
 
 
 
 
 
US bond mutual funds
—

 
9.3

 
—

 
9.3

US government
58.7

 
—

 
—

 
58.7

US corporate
123.7

 
42.9

 
—

 
166.6

US municipal
—

 
5.9

 
—

 
5.9

International
—

 
31.3

 
—

 
31.3

Derivative instruments (a)
—

 
2.9

 
—

 
2.9

Total
$
272.2

 
$
167.1

 
$
9.6

 
$
448.9

 
 
 
 
 
 
 
 
As of September 30, 2014
 
 
 
 
 
 
 
Cash and cash equivalents
$
8.6

 
$
1.6

 
$
—

 
$
10.2

Stock/bond mutual fund
54.2

 
74.7

 
9.3

 
138.2

Debt Securities
 
 
 
 
 
 
 
US bond mutual funds
73.6

 
—

 
—

 
73.6

US government
—

 
64.5

 
—

 
64.5

US corporate
—

 
164.0

 
—

 
164.0

US municipal
—

 
8.2

 
—

 
8.2

International
—

 
35.5

 
—

 
35.5

Derivative instruments (b)
—

 
(1.0
)
 
—

 
(1.0
)
Other
—

 
13.4

 
—

 
13.4

Total
$
136.4

 
$
360.9

 
$
9.3

 
$
506.6

(a)
Cash collateral of $8.3 net of derivative liabilities of $5.4.
(b)
Derivative assets of $2.9 net of cash margin payable of $3.9.
The table below categorizes the fair value measurements of Laclede Group's postretirement plan assets:
 
Quoted Prices in
Active Markets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
As of September 30, 2015
 
 
 
 
 
 
 
Cash and cash equivalents
$
1.6

 
$
—

 
$
—

 
$
1.6

US stock/bond mutual fund
115.5

 
92.8

 
—

 
208.3

International fund
—

 
13.4

 
—

 
13.4

Total
$
117.1

 
$
106.2

 
$
—

 
$
223.3

 
 
 
 
 
 
 
 
As of September 30, 2014
 
 
 
 
 
 
 
Cash and cash equivalents
$
2.3

 
$
—

 
$
—

 
$
2.3

US stock/bond mutual fund
213.0

 
—

 
—

 
213.0

International fund
7.2

 
—

 
—

 
7.2

Total
$
222.5

 
$
—

 
$
—

 
$
222.5

Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values of derivative instruments are calculated by investment managers who use valuation models that incorporate observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities.
Laclede Gas
The table below categorizes the fair value measurements of Laclede Gas' pension plan assets:
 
Quoted Prices in
Active Markets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
As of September 30, 2015
 
 
 
 
 
 
 
Cash and cash equivalents
$
31.8

 
$
—

 
$
—

 
$
31.8

Stock/bond mutual fund
—

 
67.6

 
0.1

 
67.7

Debt Securities
 
 
 
 
 
 
 
US government
37.7

 
—

 
—

 
37.7

US corporate
123.7

 
42.9

 
—

 
166.6

US municipal
—

 
5.9

 
—

 
5.9

International
—

 
27.3

 
—

 
27.3

Derivative instruments (a)
—

 
2.9

 
—

 
2.9

Total
$
193.2

 
$
146.6

 
$
0.1

 
$
339.9

 
 
 
 
 
 
 
 
As of September 30, 2014
 
 
 
 
 
 
 
Cash and cash equivalents
$
8.3

 
$
—

 
$
—

 
$
8.3

Stock/bond mutual fund
—

 
39.2

 
9.3

 
48.5

Debt Securities
 
 
 
 
 
 
 
US bond mutual funds
73.6

 
—

 
—

 
73.6

US government
—

 
60.5

 
—

 
60.5

US corporate
—

 
154.5

 
—

 
154.5

US municipal
—

 
8.2

 
—

 
8.2

International
—

 
34.8

 
—

 
34.8

Derivative instruments (b)
—

 
(1.0
)
 
—

 
(1.0
)
Total
$
81.9

 
$
296.2

 
$
9.3

 
$
387.4

(a)
Cash collateral of $8.3 net of derivative liabilities of $5.4.
(b)
Derivative assets of $2.9 net of cash margin payable of $3.9.


The table below categorizes the fair value measurements of Laclede Gas' postretirement plan assets:
 
Quoted Prices in
Active Markets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
As of September 30, 2015
 
 
 
 
 
 
 
Cash and cash equivalents
$
1.6

 
$
—

 
$
—

 
$
1.6

US stock/bond mutual fund
115.5

 
26.5

 
—

 
142.0

Total
$
117.1

 
$
26.5

 
$
—

 
$
143.6

 
 
 
 
 
 
 
 
As of September 30, 2014
 
 
 
 
 
 
 
Cash and cash equivalents
$
2.3

 
$
—

 
$
—

 
$
2.3

US stock/bond mutual fund
134.9

 
—

 
—

 
134.9

Total
$
137.2

 
$
—

 
$
—

 
$
137.2


Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values of derivative instruments are calculated by investment managers who use valuation models that incorporate observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities.
Alagasco
The table below categorizes the fair value measurements of Alagasco's pension plan assets:
 
Quoted Prices in
Active Markets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
As of September 30, 2015
 
 
 
 
 
 
 
Cash and cash equivalents
$
11.6

 
$
0.2

 
$
—

 
$
11.8

Stock/bond mutual fund
46.4

 
7.0

 
9.5

 
62.9

Debt Securities
 
 
 
 
 
 
 
US bond mutual funds
—

 
9.3

 
—

 
9.3

US government
—

 
21.0

 
—

 
21.0

International
—

 
4.0

 
—

 
4.0

Derivative instruments (a)
—

 
—

 
—

 
—

Total
$
58.0

 
$
41.5

 
$
9.5

 
$
109.0

 
 
 
 
 
 
 
 
As of September 30, 2014
 
 
 
 
 
 
 
Cash and cash equivalents
$
0.3

 
$
1.6

 
$
—

 
$
1.9

Stock/bond mutual fund
54.2

 
35.5

 
—

 
89.7

Debt Securities
 
 
 
 
 
 
 
US government
—

 
4.0

 
—

 
4.0

US corporate


 
9.5

 
—

 
9.5

International


 
0.7

 
—

 
0.7

Other
—

 
13.4

 
—

 
13.4

Total
$
54.5

 
$
64.7

 
$
—

 
$
119.2

The table below categorizes the fair value measurements of Alagasco's postretirement plan assets:
 
Quoted Prices in
Active Markets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
As of September 30, 2015
 
 
 
 
 
 
 
US stock/bond mutual fund
$
—

 
$
66.3

 
$
—

 
$
66.3

International Fund
—

 
13.4

 
—

 
13.4

Total
$
—

 
$
79.7

 
$
—

 
$
79.7

 
 
 
 
 
 
 
 
As of September 30, 2014
 
 
 
 
 
 
 
Cash and cash equivalents
$
0.1

 
$
—

 
$
—

 
$
0.1

US stock/bond mutual fund
43.6

 
34.4

 
—

 
78.0

International Fund
7.2

 
—

 
—

 
7.2

Total
$
50.9

 
$
34.4

 
$
—

 
$
85.3


Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values of derivative instruments are calculated by investment managers who use valuation models that incorporate observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities.