Employee Benefits

Defined Benefit Pension Plans and Other Postretirement Benefits

The Company has a noncontributory defined benefit pension plan covering a majority of its employees and postretirement medical and life insurance plans providing coverage to less than half of its employees. Employees hired or rehired after June 30, 2010 are not eligible for the noncontributory defined benefit pension plan and employees hired or rehired after December 31, 1996 are not eligible for the postretirement medical plan and are not eligible to receive basic life coverage once they retire.

Questar funds a trust for Employee Retirement Income Security Act (ERISA)-qualified pension and other postretirement benefit obligations to pay benefits currently due and to build asset balances over time to pay future obligations. Questar is subject to and complies with minimum-required and maximum-allowed annual contribution levels mandated by ERISA and by the Internal Revenue Code. Subject to these limitations, the Company seeks to fund the qualified pension plan in amounts that are at a minimum equal to the yearly net cost. The Company commingles postretirement medical plan assets with those of the ERISA-qualified pension plan as permitted by section 401(h) of the Internal Revenue Code. The qualified pension plan has settled benefits for some terminated vested employees and is offering lump-sum benefits to retiring employees starting January 1, 2015. Due to the number of employees that elected the lump-sum benefit, the Company incurred a one-time $16.7 million pre-tax noncash qualified pension settlement accounting cost in the the fourth quarter of 2015.

The Company also has a nonqualified pension plan that covers a group of management employees in addition to the qualified pension plan. The nonqualified pension plan provides for defined benefit payments upon retirement of the management employee, or to the spouse upon death of the management employee, above the benefit limit defined by the IRS for the qualified plan. The nonqualified pension plan is unfunded; benefits are paid from the Company's general funds.

The Company's Employee Benefits Committee (EBC) has oversight over investment of qualified pension and other postretirement benefit plan assets. The EBC uses a third-party consultant to assist in setting targeted policy ranges for the allocation of assets among various investment categories. The EBC allocates qualified pension, postretirement medical and postretirement life plan assets among broad asset categories and reviews the asset allocation at least annually. Asset allocation decisions consider risk and return, future benefit requirements, participant growth and other expected cash flows. The EBC seeks investment returns consistent with reasonable and prudent levels of liquidity and risk.

The EBC uses asset-mix guidelines that include permissible ranges for each asset category, return objectives for each asset group and the desired level of diversification and liquidity. These guidelines change from time to time based on the EBC's ongoing evaluation of each plan's risk tolerance. The EBC estimates an expected overall long-term rate of return on assets by weighting expected returns of each asset class by its targeted asset allocation percentage. Expected return estimates are developed from analysis of past performance and forecasts of long-term return expectations by third parties.

Qualified pension and other postretirement benefit plan assets were invested as follows:



	Actual Allocation				Policy Range
	December 31,				December 31,
	2015		2014		2015					2014
Total domestic equity securities	36	%	38	%	35	%	-	45	%	35	%	-	45	%
Foreign equity securities
Developed market foreign equity securities	20	%	18	%
Emerging market foreign equity securities	4	%	4	%
Total foreign securities	24	%	22	%	25	%	-	35	%	25	%	-	35	%
Debt securities
Investment-grade intermediate-term debt	5	%	7	%
Investment-grade long-term debt	15	%	14	%
Below-investment-grade debt	10	%	9	%
Total debt securities	30	%	30	%	25	%	-	35	%	25	%	-	35	%
Inflation protection securities	10	%	9	%	—	%	-	10	%	—	%	-	10	%
Cash and short-term investments	—	%	1	%	—	%	-	3	%	—	%	-	3	%

At December 31, 2015, domestic equity assets were invested in a passive total stock market index fund that invests in a diversified portfolio of stocks representative of the whole U.S. stock market and an S&P 500 index fund. Developed market foreign equity assets were invested in funds that hold a diversified portfolio of common stocks of corporations in developed countries outside the United States. These investments are benchmarked against the Morgan Stanley Capital International Europe Australasia and Far East (MSCI EAFE) index. Emerging market foreign equity assets are invested in funds that hold a diversified portfolio of common stocks of corporations in emerging countries outside the United States and are benchmarked against the MSCI Emerging Markets index.

Investment-grade intermediate-term debt assets are invested in funds holding a diversified portfolio of debt of governments, corporations and mortgage borrowers with average maturities of 5 to 10 years and investment-grade credit ratings. The investments are benchmarked against the Barclays Capital Aggregate Bond index. Investment-grade long-term debt assets are invested in a diversified portfolio of debt of governments, corporations and mortgage borrowers with an average maturity of more than 10 years and investment-grade credit ratings. These assets are benchmarked against the Barclays Capital Government/Credit Bond index. Below-investment-grade debt assets are invested in a fund holding a diversified portfolio of debt securities of corporations with an average maturity up to 10 years and below-investment-grade credit ratings. This investment is benchmarked against the Merrill Lynch High Yield II Total Return Bond index.

To mitigate the impact of inflation, assets are allocated to inflation protection funds. These funds invest in indices that comprise the Dow Jones U.S. Select REIT, Dow Jones-UBS Commodity Total Return, S&P Global LargeMidCap Commodity and Resources, and Barclays Capital U.S. Treasury Inflation Protected Securities. Cash and short-term investments are held in a fund that purchases investment-grade short-term debt issued by governments and corporations.

Responsibility for individual security selection rests with each investment manager, who is subject to guidelines specified by the EBC. These guidelines are designed to ensure consistency with overall plan objectives. The EBC sets performance objectives for each investment manager that are expected to be met over a three-year period or a complete market cycle, whichever is shorter. Performance and risk levels are regularly monitored to confirm policy compliance and that results are within expectations.

Employee benefit plan regulations prohibit transactions between a fiduciary and parties-in-interest unless specifically provided for in ERISA. No restricted securities, such as letter stock or private placements, may be purchased for any investment fund. Questar securities may be considered for purchase at an investment manager's discretion, but within limitations prescribed by ERISA and other laws. There was no direct investment in Questar shares for the periods disclosed. Use of derivative securities by any investment manager is prohibited except where the EBC has given specific approval or where commingled funds are utilized that have previously adopted permitting guidelines.

Fair value accounting standards establish a framework for defining, measuring and disclosing fair value in applying GAAP. The standards establish a fair value hierarchy with Levels 1, 2 and 3 ranging from the most observable to the least observable valuation inputs. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The following is a description of the valuation methodologies used at December 31, 2015 and 2014, to value qualified pension and other postretirement benefit plan assets. The Company's pension and other postretirement benefit plan assets did not include any investments measured using Level 3 inputs at December 31, 2015 or 2014.

Corporate bonds and U.S. government securities: Corporate bonds and United States government corporation and agency securities are valued at the closing price reported on the markets on which the individual securities are traded, which in general are less active than the markets for common stocks and registered investment companies.

Registered investment companies: Registered investment companies, also known as mutual funds, are valued at the closing price reported on the active markets on which the individual funds are traded.

Commingled funds and 103-12 investment entity: These are investment vehicles generally restricted to institutional investors and are valued using the net asset value (NAV) of the fund. The NAV is based on the value of the underlying assets owned by the fund excluding transaction costs, and minus liabilities. The underlying assets are valued at the closing prices reported on the markets on which they are traded. No assets that were valued using a NAV methodology were subject to significant redemption restrictions or unfunded commitments on their valuation dates.

The following tables set forth, by level within the fair value hierarchy, qualified pension and other postretirement benefit plan assets at fair value as of December 31, 2015 and 2014:



	December 31, 2015
	Level 1		Level 2		Total
	(in millions)
Corporate bonds	$	—	$	14.1	$	14.1
Registered investment companies:
Fixed income funds	88.9		—		88.9
Inflation protection fund	35.6		—		35.6
Domestic equity fund	0.6		—		0.6
Commingled funds*					519.0
Foreign equity growth 103-12 investment entity*					47.0
Total	$	125.1	$	14.1	$	705.2



	December 31, 2014
	Level 1		Level 2		Total
	(in millions)
Corporate bonds	$	—	$	1.5	$	1.5
U.S. government securities	—		12.9		12.9
Registered investment companies:
Fixed income funds	114.9		—		114.9
Inflation protection fund	34.5		—		34.5
Domestic equity fund	1.6		—		1.6
Commingled funds*					525.6
Foreign equity growth 103-12 investment entity*					46.2
Total	$	151.0	$	14.4	$	737.2

*In accordance with Accounting Standard Update 2015-12 (Subtopic 820-10), certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the Company's statement of financial position.

Pension plan benefits are based on the employee's age at retirement, years of service and highest average annual earnings during 72 consecutive semimonthly pay periods in the last 10 years of employment. Employees retiring on or after January 1, 2015 may elect either a lump-sum or an annuity benefit.

Postretirement health-care and life insurance benefits are provided only to employees hired before January 1, 1997. The Company pays a portion of the costs of health-care benefits determined by an employee's years of service and generally limited to 170% of the 1992 contribution for employees who retired after January 1, 1993.

The qualified pension projected benefit obligation was measured using the following assumptions at December 31:



	2015		2014
Discount rate	4.50	%	4.10	%
Rate of increase in compensation	5.50		5.50
Long-term return on assets	7.00		7.00

The nonqualified pension projected benefit obligation was measured using the following assumptions at December 31:



	2015		2014
Discount rate	3.10	%	2.90	%
Rate of increase in compensation	5.50		5.50

The postretirement accumulated benefit obligation was measured using the following assumptions at December 31:



	2015					2014
Discount rate	4.30				%	4.00				%
Long-term return on assets	7.00					7.00
Health-care inflation rate	7.00					7.50
	decreasing to					decreasing to
	4.50	%	by	2021		4.50	%	by	2021

Questar does not expect any plan assets to be returned during 2016. The qualified and nonqualified pension plan accumulated benefit obligation totaled $646.6 million at December 31, 2015. Plan obligations and fair value of all plan assets are shown in the following table:



	Pension						Other Postretirement Benefits
	Year Ended December 31,						Year Ended December 31,
	2015			2014			2015			2014
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	834.0		$	702.7		$	90.8		$	86.3
Service cost	13.8			11.8			0.6			0.6
Interest cost	32.7			33.4			3.5			3.8
Plan and assumption changes	(53.7		)	109.1			(4.4		)	4.9
Actuarial (gain) loss	7.0			(0.7		)	(1.6		)	(3.0		)
Benefits paid	(73.8		)	(22.3		)	(2.9		)	(1.8		)
Benefit obligation at end of year	760.0			834.0			86.0			90.8

Change in plan assets
Fair value of plan assets at beginning of year	690.2			628.2			47.0			43.8
Actual gain (loss) on plan assets	(15.0		)	40.4			(0.9		)	2.9
Company contributions to the plan	71.8			43.9			0.9			2.1
Benefits paid	(73.8		)	(22.3		)	(2.9		)	(1.8		)
Fair value of plan assets at end of year	673.2			690.2			44.1			47.0
Underfunded status (current and long-term)	$	(86.8	)	$	(143.8	)	$	(41.9	)	$	(43.8	)

The projected 2016 qualified pension plan funding is $18.1 million. Estimated benefit plan payments for the five years following 2015 and the subsequent five years aggregated are as follows:



	Pension		Other Postretirement Benefits
	Years Ending December 31,
	(in millions)
2016	$	50.5	$	4.5
2017	50.1		4.5
2018	63.6		4.7
2019	52.9		4.8
2020	52.8		5.0
2021 through 2025	264.1		25.9

The components of the net pension and other postretirement benefit costs are as follows. The net pension cost includes both the qualified and nonqualified pension plans.



	Pension									Other Postretirement Benefits
	Year Ended December 31,									Year Ended December 31,
	2015			2014			2013			2015			2014			2013
	(in millions)
Service cost	$	13.8		$	11.8		$	13.9		$	0.6		$	0.6		$	0.7
Interest cost	32.7			33.4			30.6			3.5			3.8			3.7
Expected return on plan assets	(47.7		)	(43.6		)	(38.1		)	(3.2		)	(3.0		)	(2.6		)
Prior service and other costs	0.1			0.6			1.1			—			—			—
Recognized net actuarial loss	21.9			15.4			28.9			1.2			0.7			3.0
Pension settlement costs	16.7			—			—			—			—			—
Accretion of regulatory liability	—			—			—			1.0			0.8			0.5
Net periodic cost	$	37.5		$	17.6		$	36.4		$	3.1		$	2.9		$	5.3

Assumptions at January 1, used to calculate the qualified net pension cost for the years, were as follows:



	2015		2014		2013
Discount rate	4.10	%	4.90	%	4.20	%
Rate of increase in compensation	5.50		5.50		5.50
Long-term return on assets	7.00		7.25		7.25

Assumptions at January 1, used to calculate the nonqualified net pension cost for the years, were as follows:



	2015		2014		2013
Discount rate	2.90	%	3.30	%	2.40	%
Rate of increase in compensation	5.50		5.50		5.50

Assumptions at January 1, used to calculate the net postretirement benefit cost for the years, were as follows:



	2015					2014					2013
Discount rate	4.00				%	4.70				%	4.00				%
Long-term return on assets	7.00					7.25					7.25
Health-care inflation rate	7.50					8.00					8.50
	decreasing to					decreasing to					decreasing to
	4.50	%	by	2021		4.50	%	by	2021		4.50	%	by	2021

The 2016 estimated qualified and nonqualified net pension cost is $11.2 million. In 2016, $15.1 million of estimated net actuarial loss for the pension plans will be amortized from AOCI. The 2016 estimated net postretirement benefit cost is $2.1 million, excluding accretion of a regulatory liability. In 2016, $0.9 million of estimated net actuarial loss and $0.1 million of prior service cost for the postretirement benefit plans will be amortized from AOCI.

Postretirement benefit service and interest costs are sensitive to changes in the health-care inflation rate. A 1% increase in the health-care inflation rate would cause a minimal increase in the yearly service and interest costs and would increase the postretirement accumulated benefit obligation by $0.5 million. A 1% decrease in the health-care inflation rate would cause a minimal decrease in the yearly service and interest costs and would decrease the postretirement accumulated benefit obligation by $0.5 million.

Amortization of the net gain or loss resulting from experience different from that assumed and from changes in assumptions is included as a component of net periodic benefit cost. If, as of the beginning of the year, that net gain or loss exceeds 10% of the greater of the projected benefit obligation and the market-related value of plan assets, the amortization is that excess divided by the average remaining service period of participating employees expected to receive benefits under the plan. Under this methodology, the gain/loss amounts recognized in AOCI are not expected to be fully recognized in benefit cost until the plan is terminated (or an earlier event, like a settlement, triggers recognition) because the average expected remaining service of active participants expected to benefit under the plan over which the amounts are amortized is redetermined each year and amounts that fall within the corridor described above are not amortized.

Questar Gas and Questar Pipeline participate in Questar's qualified and nonqualified pension plans as well as its postretirement medical and life plans. Questar Gas's and Questar Pipeline's pension plan and postretirement medical and life insurance plan assets and benefit obligations cannot be separately determined because plan assets are not segregated or restricted to meet the companies' pension and postretirement medical and life obligations. If the companies were to withdraw from the plans, the pension and other postretirement obligations for Questar Gas and Questar Pipeline employees would be retained by the Questar plans. The 2015 pension settlement accounting costs were not allocated to Questar Gas or Questar Pipeline. Pension and other postretirement benefit net cost and plan contribution information for Questar Gas and Questar Pipeline are shown below:



	Pension						Other Postretirement Benefits
	Year Ended December 31,						Year Ended December 31,
	2015		2014		2013		2015			2014			2013
	(in millions)
Questar Gas
Net periodic cost	$	10.4	$	8.5	$	18.1	$	0.9		$	0.8		$	2.4
Share of total plan contributions	34.9		21.8		29.6		0.5			1.1			2.0

Questar Pipeline
Net periodic cost	$	3.8	$	3.2	$	6.7	$	(0.3	)	$	(0.4	)	$	0.2
Share of total plan contributions	13.4		8.1		11.2		0.1			0.4			0.7

401(k) Retirement Income Plan

The 401(k) Retirement Income Plan (401(k) Plan), formerly known as the Employee Investment Plan, is a defined contribution pension plan that allows eligible employees to purchase shares of Questar common stock or other investments through payroll deduction at the fair market value on the transaction date. The Company contributes an overall match of 100% of employees' purchases up to a maximum of 6% of their qualifying earnings. Starting in January 2015, qualified employees who are not eligible for the defined benefit pension plans receive an additional non-matching employer contribution to their 401(k) Plan accounts equal to 4% of their qualifying prior year earnings. To satisfy employee purchases of Questar stock, the 401(k) Plan trustee may purchase Questar shares on the open market with cash received or Questar may issue new shares.

Questar, Questar Gas and Questar Pipeline recognize expense equal to 401(k) Plan employer matching and non-matching contributions earned by employees during the year. Questar's expense amounted to $9.8 million in 2015, $9.1 million in 2014, and $7.2 million in 2013. Questar Gas's 401(k) Plan expense was $4.5 million in 2015 and 2014 and $3.4 million in 2013. Questar Pipeline's 401(k) Plan expense was $1.8 million in 2015 and 2014 and $1.4 million in 2013.