PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Pension Plans

The pension plans of Spire consist of plans for employees at the Missouri Utilities, plans covering employees of Alagasco, and plans for employees of EnergySouth since September 12, 2016.

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 United States (US) government obligations and a growth segment consisting of exposure to equity markets, commodities, real estate and inflation-indexed securities, achieved through derivative instruments.

Alagasco has non-contributory, defined benefit, trusteed forms of pension plans covering the majority of its employees. Qualified plan assets are comprised of mutual and commingled funds consisting of US equities with varying strategies, global equities, alternative investments, and fixed income investments.

The net periodic pension cost included the following components:



	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Spire
Service cost – benefits earned during the period	$	5.0		$	3.8		$	15.5		$	11.5
Interest cost on projected benefit obligation	7.0			6.9			20.8			21.0
Expected return on plan assets	(9.4		)	(8.6		)	(29.0		)	(26.3		)
Amortization of prior service cost	0.2			0.1			0.7			0.3
Amortization of actuarial loss	3.0			1.9			9.6			5.9
Loss on lump-sum settlements	—			0.2			11.9			2.4
Special termination benefits	—			—			—			1.6
Subtotal	5.8			4.3			29.5			16.4
Regulatory adjustment	3.1			4.4			0.3			11.1
Net pension cost	$	8.9		$	8.7		$	29.8		$	27.5



Laclede Gas
Service cost – benefits earned during the period	$	3.0		$	2.5		$	9.6		$	7.5
Interest cost on projected benefit obligation	4.8			5.4			14.5			16.2
Expected return on plan assets	(6.8		)	(6.7		)	(21.2		)	(20.1		)
Amortization of prior service cost	0.2			0.1			0.7			0.3
Amortization of actuarial loss	2.5			1.9			8.2			5.9
Loss on lump-sum settlements	—			—			11.5			—
Special termination benefits	—			—			—			1.6
Subtotal	3.7			3.2			23.3			11.4
Regulatory adjustment	1.3			3.0			(4.5		)	8.8
Net pension cost	$	5.0		$	6.2		$	18.8		$	20.2



Alagasco
Service cost – benefits earned during the period	$	1.6		$	1.3		$	4.7		$	4.0
Interest cost on projected benefit obligation	1.6			1.5			4.6			4.8
Expected return on plan assets	(1.8		)	(1.9		)	(5.4		)	(6.2		)
Amortization of actuarial loss	0.5			—			1.4			—
Loss on lump-sum settlements	—			0.2			0.4			2.4
Subtotal	1.9			1.1			5.7			5.0
Regulatory adjustment	1.6			1.4			4.3			2.3
Net pension cost	$	3.5		$	2.5		$	10.0		$	7.3

Pursuant to the provisions of the Missouri Utilities’ and Alagasco’s pension plans, pension obligations may be satisfied by monthly annuities, lump-sum cash payments, or special termination benefits. 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. Special termination benefits, when offered, are also recognized as settlements which can result in gains or losses. In the quarter ended March 31, 2017, the Laclede Gas plan and one of the Alagasco plans met the criteria for settlement recognition, resulting in the remeasurement of the obligation of the plans using updated census data and assumptions for discount and mortality. The total lump-sum payments recognized as settlements for plan remeasurement were $36.3 and $1.9 for the Laclede plan and Alagasco plan, respectively. The lump-sum settlements resulted in losses of $11.5 and $0.4 for the Laclede plan and Alagasco plan, respectively. In the quarters ended March 31 and June 30, 2016, an Alagasco plan met the criteria for settlement recognition. The lump-sum payments recognized as settlements for the Alagasco remeasurements totaled $12.6. The lump-sum settlement resulted in a loss of $2.2 and $0.2 in the quarters ended March 31 and June 30, 2016, respectively. In the quarter ended December 31, 2015, the Laclede Gas pension plans provided qualified employees with voluntary early retirement packages that qualified as special termination benefits, resulting in a charge of $1.6. All gains and losses on lump-sum settlements were recorded with a regulatory adjustment and did not impact income.

The funding policy of the Utilities 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 2017 contributions to Laclede Gas’ pension plans through June 30, 2017 were $22.5 to the qualified trusts and $0.2 to non-qualified plans. There were no fiscal 2017 contributions to the Alagasco pension plans through June 30, 2017.

Contributions to the Missouri Utilities’ pension plans for the remainder of fiscal 2017 are anticipated to be $6.5 to the qualified trusts and $0.4 to the non-qualified plans. No contributions to Alagasco’s pension plans are expected to be required for the remainder of fiscal 2017, but a voluntary contribution is likely in September.

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. 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 cost for the Company consisted of the following components:



	Three Months Ended June 30,						Nine Months Ended June 30,
	2017			2016			2017			2016
Spire
Service cost – benefits earned during the period	$	2.7		$	2.7		$	8.2		$	8.2
Interest cost on accumulated postretirement benefit obligation	2.2			2.6			6.5			7.6
Expected return on plan assets	(3.5		)	(3.3		)	(10.3		)	(10.1		)
Amortization of prior service credit	—			0.1			—			0.2
Amortization of actuarial loss	0.6			0.9			1.8			2.7
Special termination benefits	—			—			—			2.6
Subtotal	2.0			3.0			6.2			11.2
Regulatory adjustment	(0.8		)	(1.7		)	(2.4		)	(7.6		)
Net postretirement benefit cost	$	1.2		$	1.3		$	3.8		$	3.6



Laclede Gas
Service cost – benefits earned during the period	$	2.6		$	2.6		$	7.8		$	7.9
Interest cost on accumulated postretirement benefit obligation	1.7			2.1			5.1			6.1
Expected return on plan assets	(2.3		)	(2.1		)	(6.8		)	(6.4		)
Amortization of prior service credit	0.1			0.1			0.2			0.2
Amortization of actuarial loss	0.6			1.0			1.9			2.9
Special termination benefits	—			—			—			2.6
Subtotal	2.7			3.7			8.2			13.3
Regulatory adjustment	(0.4		)	(1.2		)	(1.1		)	(6.2		)
Net postretirement benefit cost	$	2.3		$	2.5		$	7.1		$	7.1



Alagasco
Service cost – benefits earned during the period	$	—		$	0.1		$	0.2		$	0.3
Interest cost on accumulated postretirement benefit obligation	0.4			0.5			1.2			1.5
Expected return on plan assets	(1.1		)	(1.2		)	(3.3		)	(3.7		)
Amortization of prior service credit	(0.1		)	—			(0.2		)	—
Amortization of actuarial gain	—			(0.1		)	(0.1		)	(0.2		)
Subtotal	(0.8		)	(0.7		)	(2.2		)	(2.1		)
Regulatory adjustment	(0.5		)	(0.5		)	(1.4		)	(1.4		)
Net postretirement benefit income	$	(1.3	)	$	(1.2	)	$	(3.6	)	$	(3.5	)

Missouri and Alabama state law provide for the recovery in rates of costs accrued pursuant to GAAP provided that such costs are funded through an independent, external funding mechanism. The Utilities have established Voluntary Employees’ Beneficiary Association (VEBA) and Rabbi Trusts as external funding mechanisms. The assets of the VEBA and Rabbi Trusts consist primarily of money market securities and mutual funds invested in stocks and bonds. During the quarter ended December 31, 2015, the Laclede Gas postretirement plan offered qualified employees voluntary enhanced early retirement packages that resulted in a special termination benefits charge of $2.6.

The Utilities’ funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. Year-to-date contributions to the postretirement plans through June 30, 2017 totaled $8.8 for the Missouri Utilities. Contributions to the postretirement plans for the remainder of fiscal year 2017 are anticipated to be $5.1 to the qualified trusts and $0.4 paid directly to participants from the Missouri Utilities’ funds. For Alagasco, there were no contributions to the postretirement plans during the nine months of fiscal year 2017, and none are expected to be required for the remainder of the fiscal year.