| Retirement Plan And Other Post-Retirement Benefits |
Note H — Retirement Plan and Other Post-Retirement Benefits
The Company has a tax-qualified, noncontributory, defined-benefit retirement plan (Retirement Plan) that covers approximately half of the full-time employees of the Company. The Retirement Plan covers certain non-collectively bargained employees hired before July 1, 2003 and certain collectively bargained employees hired before November 1, 2003. Certain non-collectively bargained employees hired after June 30, 2003 and certain collectively bargained employees hired after October 31, 2003 are eligible for a Retirement Savings Account benefit provided under the Company’s defined contribution Tax-Deferred Savings Plans. Costs associated with the Retirement Savings Account were $0.9 million, $0.7 million and $0.6 million for the years ended September 30, 2012, 2011 and 2010, respectively. Costs associated with the Company’s contributions to the Tax-Deferred Savings Plans, exclusive of the costs associated with the Retirement Savings Account, were $4.3 million, $4.3 million, and $4.2 million for the years ended September 30, 2012, 2011 and 2010, respectively.
The Company provides health care and life insurance benefits (other post-retirement benefits) for a majority of its retired employees. The other post-retirement benefits cover certain non-collectively bargained employees hired before January 1, 2003 and certain collectively bargained employees hired before October 31, 2003.
The Company’s policy is to fund the Retirement Plan with at least an amount necessary to satisfy the minimum funding requirements of applicable laws and regulations and not more than the maximum amount deductible for federal income tax purposes. The Company has established VEBA trusts for its other post-retirement benefits. Contributions to the VEBA trusts are tax deductible, subject to limitations contained in the Internal Revenue Code and regulations and are made to fund employees’ other post-retirement benefits, as well as benefits as they are paid to current retirees. In addition, the Company has established 401(h) accounts for its other post-retirement benefits. They are separate accounts within the Retirement Plan trust used to pay retiree medical benefits for the associated participants in the Retirement Plan. Although these accounts are in the Retirement Plan trust, for funding status purposes as shown below, the 401(h) accounts are included in Fair Value of Assets under Other Post-Retirement Benefits. Contributions are tax-deductible when made, subject to limitations contained in the Internal Revenue Code and regulations.
The expected return on plan assets, a component of net periodic benefit cost shown in the tables below, is applied to the market-related value of plan assets. The market-related value of plan assets is the market value as of the measurement date adjusted for variances between actual returns and expected returns (from previous years) that have not been reflected in net periodic benefit costs.
Reconciliations of the Benefit Obligations, Plan Assets and Funded Status, as well as the components of Net Periodic Benefit Cost and the Weighted Average Assumptions of the Retirement Plan and other post-retirement benefits are shown in the tables below. The date used to measure the Benefit Obligations, Plan Assets and Funded Status is September 30 for fiscal year 2012, 2011 and 2010.
|
|
Retirement Plan
|
Other Post-Retirement Benefits
|
|
|
Year Ended September 30
|
Year Ended September 30
|
|
|
2012
|
2011
|
2010
|
2012
|
2011
|
2010
|
|
|
(Thousands)
|
|
Change in Benefit Obligation
|
|
|
|
|
|
|
|
Benefit Obligation at Beginning of Period..
|
$ 949,777
|
$ 924,493
|
$ 831,496
|
$ 485,452
|
$ 472,407
|
$ 467,295
|
|
Service Cost...........................................................
|
14,202
|
14,772
|
12,997
|
4,016
|
4,276
|
4,298
|
|
Interest Cost...........................................................
|
41,526
|
42,676
|
44,308
|
21,315
|
21,884
|
25,017
|
|
Plan Participants’ Contributions......................
|
—
|
—
|
—
|
1,956
|
1,963
|
1,644
|
|
Retiree Drug Subsidy Receipts......................
|
—
|
—
|
—
|
1,528
|
1,532
|
1,354
|
|
Amendments(1)......................................................
|
—
|
(1,764)
|
—
|
—
|
(7,187)
|
—
|
|
Actuarial (Gain) Loss...........................................
|
120,338
|
21,395
|
85,831
|
71,708
|
15,071
|
(3,635)
|
|
Benefits Paid...........................................................
|
(55,099)
|
(51,795)
|
(50,139)
|
(24,712)
|
(24,494)
|
(23,566)
|
|
Benefit Obligation at End of Period..............
|
$ 1,070,744
|
$ 949,777
|
$ 924,493
|
$ 561,263
|
$ 485,452
|
$ 472,407
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
Fair Value of Assets at Beginning of
Period
|
$ 601,719
|
$ 597,549
|
$ 563,881
|
$ 351,990
|
$ 353,269
|
$ 319,022
|
|
Actual Return on Plan Assets.........................
|
111,034
|
2,412
|
61,625
|
63,552
|
(4,094)
|
30,478
|
|
Employer Contributions......................................
|
44,022
|
53,553
|
22,182
|
21,348
|
25,346
|
25,691
|
|
Plan Participants’ Contributions......................
|
—
|
—
|
—
|
1,956
|
1,963
|
1,644
|
|
Benefits Paid...........................................................
|
(55,099)
|
(51,795)
|
(50,139)
|
(24,712)
|
(24,494)
|
(23,566)
|
|
Fair Value of Assets at End of Period.........
|
$ 701,676
|
$ 601,719
|
$ 597,549
|
$ 414,134
|
$ 351,990
|
$ 353,269
|
|
Net Amount Recognized at End of Period (Funded Status)
|
$ (369,068)
|
$ (348,058)
|
$ (326,944)
|
$ (147,129)
|
$ (133,462)
|
$ (119,138)
|
|
Amounts Recognized in the Balance Sheets Consist of:
|
|
|
|
|
|
|
|
Non-Current Liabilities.........................................
|
$ (369,068)
|
$ (348,058)
|
$ (326,944)
|
$ (147,129)
|
$ (133,462)
|
$ (119,138)
|
|
Accumulated Benefit Obligation.....................
|
$ 986,223
|
$ 874,595
|
$ 843,526
|
N/A
|
N/A
|
N/A
|
|
Weighted Average Assumptions Used to Determine Benefit Obligation at September 30
|
|
|
|
|
|
|
|
Discount Rate.........................................................
|
3.50%
|
4.50%
|
4.75%
|
3.50%
|
4.50%
|
4.75%
|
|
Rate of Compensation Increase....................
|
4.75%
|
4.75%
|
4.75%
|
4.75%
|
4.75%
|
4.75%
|
|
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
Service Cost...........................................................
|
$ 14,202
|
$ 14,772
|
$ 12,997
|
$ 4,016
|
$ 4,276
|
$ 4,298
|
|
Interest Cost...........................................................
|
41,526
|
42,676
|
44,308
|
21,315
|
21,884
|
25,017
|
|
Expected Return on Plan Assets...................
|
(59,701)
|
(59,103)
|
(58,342)
|
(28,971)
|
(29,165)
|
(26,334)
|
|
Amortization of Prior Service Cost...............
|
269
|
588
|
655
|
(2,138)
|
(1,710)
|
(1,710)
|
|
Amortization of Transition Amount................
|
—
|
—
|
—
|
10
|
541
|
541
|
|
Recognition of Actuarial Loss(2)....................
|
39,615
|
34,873
|
21,641
|
24,057
|
23,794
|
25,881
|
|
Net Amortization and Deferral for Regulatory Purposes
|
(6,900)
|
(2,311)
|
(30)
|
6,162
|
10,490
|
351
|
|
Net Periodic Benefit Cost.................................
|
$ 29,011
|
$ 31,495
|
$ 21,229
|
$ 24,451
|
$ 30,110
|
$ 28,044
|
|
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost at September 30
|
|
|
|
|
|
|
|
Discount Rate.........................................................
|
4.50%
|
4.75%
|
5.50%
|
4.50%
|
4.75%
|
5.50%
|
|
Expected Return on Plan Assets...................
|
8.25%
|
8.25%
|
8.25%
|
8.25%
|
8.25%
|
8.25%
|
|
Rate of Compensation Increase....................
|
4.75%
|
4.75%
|
5.00%
|
4.75%
|
4.75%
|
5.00%
|
| (1) |
In fiscal 2011, the Company passed an amendment which changed the definition of annual compensation prospectively to exclude certain bonuses paid by Seneca after September 30, 2011. This decreased the benefit obligation of the Retirement Plan. In fiscal 2011, the Company also increased the prescription drug co-payments for certain retired participants which decreased the benefit obligation of the other post-retirement benefits. |
(2) Distribution Corporation’s New York jurisdiction calculates the amortization of the actuarial loss on a vintage year basis over 10 years, as mandated by the NYPSC. All the other subsidiaries of the Company utilize the corridor approach.
The Net Periodic Benefit Cost in the table above includes the effects of regulation. The Company recovers pension and other post-retirement benefit costs in its Utility and Pipeline and Storage segments in accordance with the applicable regulatory commission authorizations. Certain of those commission authorizations established tracking mechanisms which allow the Company to record the difference between the amount of pension and other post-retirement benefit costs recoverable in rates and the amounts of such costs as determined under the existing authoritative guidance as either a regulatory asset or liability, as appropriate. Any activity under the tracking mechanisms (including the amortization of pension and other post-retirement regulatory assets and liabilities) is reflected in the Net Amortization and Deferral for Regulatory Purposes line item above.
In addition to the Retirement Plan discussed above, the Company also has Non-Qualified benefit plans that cover a group of management employees designated by the Chief Executive Officer of the Company. These plans provide for defined benefit payments upon retirement of the management employee, or to the spouse upon death of the management employee. The net periodic benefit cost associated with these plans were $9.1 million, $8.6 million and $7.4 million in 2012, 2011 and 2010, respectively. The accumulated benefit obligations for the plans were $54.5 million, $46.0 million and $41.8 million at September 30, 2012, 2011 and 2010, respectively. The projected benefit obligations for the plans were $88.5 million, $79.2 million and $73.9 million at September 30, 2012, 2011 and 2010, respectively. The projected benefit obligations are recorded in Other Deferred Credits on the Consolidated Balance Sheets. The actuarial valuations for the plans were determined based on a discount rate of 2.50%, 3.75% and 4.25% as of September 30, 2012, 2011 and 2010, respectively and a weighted average rate of compensation increase of 7.75%, 8.0% and 8.0% as of September 30, 2012, 2011 and 2010, respectively.
The cumulative amounts recognized in accumulated other comprehensive income (loss), regulatory assets, and regulatory liabilities through fiscal 2012, the changes in such amounts during 2012, as well as the amounts expected to be recognized in net periodic benefit cost in fiscal 2013 are presented in the table below:
|
|
Retirement
Plan
|
Other
Post-Retirement
Benefits
|
Non-Qualified
Benefit Plans
|
|
|
(Thousands)
|
|
Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Regulatory Liabilities(1)
|
|
|
|
|
Net Actuarial Loss..........................................................................................................................................
|
$ (458,125)
|
$ (195,305)
|
$ (40,770)
|
|
Transition Obligation.......................................................................................................................................
|
—
|
(8)
|
—
|
|
Prior Service (Cost) Credit.........................................................................................................................
|
(1,304)
|
11,217
|
—
|
|
Net Amount Recognized..............................................................................................................................
|
$ (459,429)
|
$ (184,096)
|
$ (40,770)
|
|
Changes to Accumulated Other Comprehensive Income (Loss), Regulatory Assets and Regulatory Liabilities Recognized During Fiscal 2012(1)
|
|
|
|
|
Increase in Actuarial Loss, excluding amortization(2)....................................................................
|
$ (69,005)
|
$ (37,134)
|
$ (9,559)
|
|
Change due to Amortization of Actuarial Loss..................................................................................
|
39,615
|
24,057
|
4,363
|
|
Reduction in Transition Obligation...........................................................................................................
|
—
|
10
|
—
|
|
Prior Service (Cost) Credit.........................................................................................................................
|
269
|
(2,138)
|
—
|
|
Net Change........................................................................................................................................................
|
$ (29,121)
|
$ (15,205)
|
$ (5,196)
|
|
Amounts Expected to be Recognized in Net Periodic Benefit Cost in the Next Fiscal Year(1)
|
|
|
|
|
Net Actuarial Loss..........................................................................................................................................
|
$ (52,776)
|
$ (20,892)
|
$ (5,280)
|
|
Transition Obligation.......................................................................................................................................
|
—
|
(8)
|
—
|
|
Prior Service (Cost) Credit.........................................................................................................................
|
(238)
|
2,138
|
—
|
|
Net Amount Expected to be Recognized.............................................................................................
|
$ (53,014)
|
$ (18,762)
|
$ (5,280)
|
| (1) |
Amounts presented are shown before recognizing deferred taxes. |
(2) Amounts presented include the impact of actuarial gains/losses related to return on assets, as well as the Actuarial (Gain) Loss amounts presented in the Change in Benefit Obligation.
In order to adjust the funded status of its pension (tax-qualified and non-qualified) and other post-retirement benefit plans at September 30, 2012, the Company recorded a $32.2 million increase to Other Regulatory Assets in the Company’s Utility and Pipeline and Storage segments and a $17.3 million (pre-tax) increase to Accumulated Other Comprehensive Loss.
The effect of the discount rate change for the Retirement Plan in 2012 was to increase the projected benefit obligation of the Retirement Plan by $118.8 million. In 2012, other actuarial experience increased the projected benefit obligation for the Retirement Plan by $1.6 million. The effect of the discount rate change for the Retirement Plan in 2011 was to increase the projected benefit obligation of the Retirement Plan by $26.9 million. The effect of the discount rate change for the Retirement Plan in 2010 was to increase the projected benefit obligation of the Retirement Plan by $75.1 million.
The Company made cash contributions totaling $44.0 million to the Retirement Plan during the year ended September 30, 2012. The Company expects that the annual contribution to the Retirement Plan in 2013 will be in the range of $30.0 million to $45.0 million. Changes in the discount rate, other actuarial assumptions, and asset performance could ultimately cause the Company to fund larger amounts to the Retirement Plan in 2013 in order to be in compliance with the Pension Protection Act of 2006 (as impacted by the Moving Ahead for Progress in the 21st Century Act). In July 2012, the Surface Transportation Extension Act, which is also referred to as the Moving Ahead for Progress in the 21st Century Act (the Act), was passed by Congress and signed by the President. The Act included pension funding stabilization provisions. The Company is currently in the process of evaluating its future contributions in light of the provisions of the Act.
The following Retirement Plan benefit payments, which reflect expected future service, are expected to be paid by the Retirement Plan during the next five years and the five years thereafter: $55.9 million in 2013; $56.5 million in 2014; $57.3 million in 2015; $58.5 million in 2016; $59.6 million in 2017; and $315.2 million in the five years thereafter.
The effect of the discount rate change in 2012 was to increase the other post-retirement benefit obligation by $65.6 million. Other actuarial experience increased the other post-retirement benefit obligation in 2012 by $6.1 million.
The effect of the discount rate change in 2011 was to increase the other post-retirement benefit obligation by $14.5 million. Other actuarial experience decreased the other post-retirement benefit obligation in 2011 by $6.6 million, primarily attributable to the impact of the change in prescription drug co-payments as noted above.
The effect of the discount rate change in 2010 was to increase the other post-retirement benefit obligation by $39.4 million. Other actuarial experience decreased the other post-retirement benefit obligation in 2010 by $43.1 million, primarily attributable to updated pharmaceutical drug rebate experience as well as updated claim costs assumptions based on experience.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 provides for a prescription drug benefit under Medicare (Medicare Part D), as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. Since the Company is assumed to continue to provide a prescription drug benefit to retirees in the point of service and indemnity plans that is at least actuarially equivalent to Medicare Part D, the impact of the Act was reflected as of December 8, 2003.
The estimated gross other post-retirement benefit payments and gross amount of Medicare Part D prescription drug subsidy receipts are as follows (dollars in thousands):
|
|
Benefit Payments
|
Subsidy Receipts
|
|
2013..........................................................................................................................................................................................
|
$ 26,559
|
$ (1,828)
|
|
2014..........................................................................................................................................................................................
|
$ 27,852
|
$ (2,021)
|
|
2015..........................................................................................................................................................................................
|
$ 29,154
|
$ (2,220)
|
|
2016..........................................................................................................................................................................................
|
$ 30,506
|
$ (2,420)
|
|
2017..........................................................................................................................................................................................
|
$ 31,859
|
$ (2,606)
|
|
2018 through 2022.............................................................................................................................................................
|
$ 175,145
|
$ (15,964)
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
Rate of Increase for Pre Age 65 Participants............................................................................................................
|
7.46%
|
(1)
|
7.64%
|
(1)
|
7.82%
|
(1)
|
|
Rate of Increase for Post Age 65 Participants.........................................................................................................
|
6.84%
|
(1)
|
6.89%
|
(1)
|
6.95%
|
(1)
|
|
Annual Rate of Increase in the Per Capita Cost of Covered Prescription Drug Benefits....................
|
8.08%
|
(1)
|
8.39%
|
(1)
|
8.69%
|
(1)
|
|
Annual Rate of Increase in the Per Capita Medicare Part B Reimbursement.............................................
|
6.84%
|
(1)
|
6.89%
|
(1)
|
6.95%
|
(1)
|
|
Annual Rate of Increase in the Per Capita Medicare Part D Subsidy............................................................
|
7.13%
|
(1)
|
7.30%
|
(1)
|
7.60%
|
(1)
|
(1) It was assumed that this rate would gradually decline to 4.5% by 2028.
The health care cost trend rate assumptions used to calculate the per capita cost of covered medical care benefits have a significant effect on the amounts reported. If the health care cost trend rates were increased by 1% in each year, the other post-retirement benefit obligation as of October 1, 2012 would increase by $69.7 million. This 1% change would also have increased the aggregate of the service and interest cost components of net periodic post-retirement benefit cost for 2012 by $3.4 million. If the health care cost trend rates were decreased by 1% in each year, the other post-retirement benefit obligation as of October 1, 2012 would decrease by $58.1 million. This 1% change would also have decreased the aggregate of the service and interest cost components of net periodic post-retirement benefit cost for 2012 by $2.8 million.
The Company made cash contributions totaling $21.2 million to its VEBA trusts and 401(h) accounts during the year ended September 30, 2012. In addition, the Company made direct payments of $0.1 million to retirees not covered by the VEBA trusts and 401(h) accounts during the year ended September 30, 2012. The Company expects that the annual contribution to its VEBA trusts and 401(h) accounts in 2013 will be in the range of $15.0 million to $20.0 million.
Investment Valuation
The Retirement Plan assets and other post-retirement benefit assets are valued under the current fair value framework. See Note F — Fair Value Measurements for further discussion regarding the definition and levels of fair value hierarchy established by the authoritative guidance.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Below is a listing of the major categories of plan assets held as of September 30, 2012 and 2011, as well as the associated level within the fair value hierarchy in which the fair value measurements in their entirety fall, based on the lowest level input that is significant to the fair value measurement in its entirety (dollars in thousands):
|
|
Total Fair Value
Amounts at
September 30, 2012
|
Level 1
|
Level 2
|
Level 3
|
|
Retirement Plan Investments
|
|
|
|
|
|
Domestic Equities (1).........................................................................................................
|
$ 358,679
|
$ 231,978
|
$ 126,701
|
$ —
|
|
International Equities (2)....................................................................................................
|
96,451
|
2,090
|
94,361
|
—
|
|
Domestic Fixed Income (3).............................................................................................
|
165,130
|
70,730
|
94,400
|
—
|
|
International Fixed Income (4)........................................................................................
|
65,835
|
1,941
|
63,894
|
—
|
|
Hedge Fund Investments.................................................................................................
|
39,956
|
—
|
—
|
39,956
|
|
Real Estate..............................................................................................................................
|
6,170
|
—
|
—
|
6,170
|
|
Cash and Cash Equivalents ..........................................................................................
|
12,874
|
—
|
12,874
|
—
|
|
Total Retirement Plan Investments..............................................................................
|
745,095
|
306,739
|
392,230
|
46,126
|
|
401(h) Investments.............................................................................................................
|
(43,311)
|
(17,818)
|
(22,813)
|
(2,680)
|
|
Total Retirement Plan Investments (excluding 401(h) Investments)...........
|
$ 701,784
|
$ 288,921
|
$ 369,417
|
$ 43,446
|
|
Miscellaneous Accruals, Interest Receivables, and Non-Interest Cash.....
|
(108)
|
|
|
|
|
Total Retirement Plan Assets..........................................................................................
|
$ 701,676
|
|
|
|
|
|
Total Fair Value
Amounts at
September 30, 2011
|
Level 1
|
Level 2
|
Level 3
|
|
Retirement Plan Investments
|
|
|
|
|
|
Domestic Equities (1).........................................................................................................
|
$ 313,193
|
$ 215,524
|
$ 97,669
|
$ —
|
|
International Equities (2)....................................................................................................
|
79,732
|
11,163
|
68,569
|
—
|
|
Domestic Fixed Income (3).............................................................................................
|
146,587
|
77,657
|
68,930
|
—
|
|
International Fixed Income (4)........................................................................................
|
43,153
|
887
|
42,266
|
—
|
|
Hedge Fund Investments.................................................................................................
|
39,296
|
—
|
—
|
39,296
|
|
Real Estate..............................................................................................................................
|
6,443
|
—
|
—
|
6,443
|
|
Cash and Cash Equivalents ..........................................................................................
|
10,629
|
—
|
10,629
|
—
|
|
Total Retirement Plan Investments..............................................................................
|
639,033
|
305,231
|
288,063
|
45,739
|
|
401(h) Investments.............................................................................................................
|
(37,176)
|
(17,744)
|
(16,773)
|
(2,659)
|
|
Total Retirement Plan Investments (excluding 401(h) Investments)...........
|
$ 601,857
|
$ 287,487
|
$ 271,290
|
$ 43,080
|
|
Miscellaneous Accruals, Interest Receivables, and Non-Interest Cash.....
|
(138)
|
|
|
|
|
Total Retirement Plan Assets..........................................................................................
|
$ 601,719
|
|
|
|
| (a) |
Domestic Equities include mostly collective trust funds, common stock, and exchange traded funds. |
| (b) |
International Equities include mostly collective trust funds and common stock. |
| (c) |
Domestic Fixed Income securities include mostly collective trust funds, corporate/government bonds and mortgages, and exchange traded funds. |
| (d) |
International Fixed Income securities includes mostly collective trust funds and exchange traded funds. |
|
|
Total Fair Value
Amounts at
September 30, 2012
|
Level 1
|
Level 2
|
Level 3
|
|
Other Post-Retirement Benefit Assets held in VEBA Trusts
|
|
|
|
|
|
Collective Trust Funds — Domestic Equities............................................................
|
$ 179,059
|
$—
|
$ 179,059
|
$—
|
|
Collective Trust Funds — International Equities......................................................
|
66,590
|
—
|
66,590
|
—
|
|
Exchange Traded Funds — Fixed Income..................................................................
|
107,597
|
107,597
|
—
|
—
|
|
Real Estate................................................................................................................................
|
1,305
|
—
|
—
|
1,305
|
|
Cash Held in Collective Trust Funds.............................................................................
|
16,397
|
—
|
16,397
|
—
|
|
Total VEBA Trust Investments..........................................................................................
|
370,948
|
107,597
|
262,046
|
1,305
|
|
401(h) Investments................................................................................................................
|
43,311
|
17,818
|
22,813
|
2,680
|
|
Total Investments (including 401(h) Investments)..................................................
|
$ 414,259
|
$ 125,415
|
$ 284,859
|
$ 3,985
|
|
Miscellaneous Accruals (Including Current and Deferred Taxes, Claims Incurred But Not Reported, Administrative)
|
(125)
|
|
|
|
|
Total Other Post-Retirement Benefit Assets..............................................................
|
$ 414,134
|
|
|
|
|
|
Total Fair Value
Amounts at
September 30, 2011
|
Level 1
|
Level 2
|
Level 3
|
|
Other Post-Retirement Benefit Assets held in VEBA Trusts
|
|
|
|
|
|
Collective Trust Funds — Domestic Equities............................................................
|
$ 148,451
|
$—
|
$ 148,451
|
$—
|
|
Collective Trust Funds — International Equities......................................................
|
55,411
|
—
|
55,411
|
—
|
|
Exchange Traded Funds — Fixed Income..................................................................
|
91,214
|
91,214
|
—
|
—
|
|
Real Estate................................................................................................................................
|
1,561
|
—
|
—
|
1,561
|
|
Cash Held in Collective Trust Funds.............................................................................
|
12,890
|
—
|
12,890
|
—
|
|
Total VEBA Trust Investments..........................................................................................
|
309,527
|
91,214
|
216,752
|
1,561
|
|
401(h) Investments................................................................................................................
|
37,176
|
17,744
|
16,773
|
2,659
|
|
Total Investments (including 401(h) Investments)..................................................
|
$ 346,703
|
$ 108,958
|
$ 233,525
|
$ 4,220
|
|
Miscellaneous Accruals (Including Current and Deferred Taxes, Claims Incurred But Not Reported, Administrative)
|
5,287
|
|
|
|
|
Total Other Post-Retirement Benefit Assets..............................................................
|
$ 351,990
|
|
|
|
The fair values disclosed in the above tables may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following tables provide a reconciliation of the beginning and ending balances of the Retirement Plan and other post-retirement benefit assets measured at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3). Note: For the year ended September 30, 2012, there was approximately $13.0 million transferred from Level 1 to Level 2, while for the year ended September 30, 2011, there were no significant transfers in or out of Level 1 or Level 2. In addition, as shown in the following tables, there were no transfers in or out of Level 3.
|
|
|
|
Retirement Plan Level 3 Assets
|
|
|
(Thousands)
|
|
|
Equity
|
|
|
|
Excluding
|
|
|
|
Convertible
|
Hedge
|
Limited
|
Real
|
401(h)
|
|
|
|
Securities
|
Funds
|
Partnerships
|
Estate
|
Investments
|
Total
|
|
Balance at September 30, 2010.......................................................
|
$ 337
|
$ —
|
$ 245
|
$ 6,148
|
$ (367)
|
$ 6,363
|
|
Realized Gains/(Losses)......................................................................
|
53
|
—
|
(4,846)
|
20
|
278
|
(4,495)
|
|
Unrealized Gains/(Losses)..................................................................
|
(36)
|
(789)
|
4,853
|
159
|
(268)
|
3,919
|
|
Purchases, Sales, Issuances, and Settlements (Net)..........
|
(354)
|
40,085
|
(252)
|
116
|
(2,302)
|
37,293
|
|
Balance at September 30, 2011.......................................................
|
—
|
39,296
|
—
|
6,443
|
(2,659)
|
43,080
|
|
Realized Gains/(Losses)......................................................................
|
—
|
—
|
—
|
60
|
(4)
|
56
|
|
Unrealized Gains/(Losses)..................................................................
|
—
|
660
|
—
|
(362)
|
(15)
|
283
|
|
Purchases, Sales, Issuances, and Settlements (Net)..........
|
—
|
—
|
—
|
29
|
(2)
|
27
|
|
Balance at September 30, 2012 .....................................................
|
$ —
|
$ 39,956
|
$ —
|
$ 6,170
|
$ (2,680)
|
$ 43,446
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement Benefit Level 3 Assets
|
|
|
|
(Thousands)
|
|
|
VEBA
|
|
|
|
|
|
Trust
|
|
Other
|
|
|
|
Investments
Real
|
Including
401(h)
|
Post-Retirement
Benefit
|
|
|
|
Estate
|
Investments
|
Investments
|
|
|
Balance at September 30, 2010.........................................................................
|
$ 3,824
|
$ 367
|
$ 4,191
|
|
|
Realized Gains/(Losses)........................................................................................
|
—
|
(278)
|
(278)
|
|
|
Unrealized Gains/(Losses)....................................................................................
|
(2,263)
|
268
|
(1,995)
|
|
|
Purchases, Sales, Issuances, and Settlements (Net)............................
|
—
|
2,302
|
2,302
|
|
|
Balance at September 30, 2011.........................................................................
|
1,561
|
2,659
|
4,220
|
|
|
Realized Gains/(Losses)........................................................................................
|
—
|
4
|
4
|
|
|
Unrealized Gains/(Losses)....................................................................................
|
(256)
|
15
|
(241)
|
|
|
Purchases, Sales, Issuances, and Settlements (Net)............................
|
—
|
2
|
2
|
|
|
Balance at September 30, 2012.........................................................................
|
$ 1,305
|
$ 2,680
|
$ 3,985
|
|
|
|
|
|
|
|
The Company’s assumption regarding the expected long-term rate of return on plan assets is 8.0%, effective for fiscal 2013. The return assumption reflects the anticipated long-term rate of return on the plan’s current and future assets. The Company utilizes historical investment data, projected capital market conditions, and the plan’s target asset class and investment manager allocations to set the assumption regarding the expected return on plan assets.
The long-term investment objective of the Retirement Plan trust, the VEBA trusts and the 401(h) accounts is to achieve the target total return in accordance with the Company’s risk tolerance. Assets are diversified utilizing a mix of equities, fixed income and other securities (including real estate). The target allocation for the Retirement Plan is 55-70% equity securities, 25-40% fixed income securities and 5-20% other. The target allocation for the VEBA trusts (including 401(h) accounts) is 60-75% equity securities, 25-40% fixed income securities and 0-15% other. Risk tolerance is established through consideration of plan liabilities, plan funded status and corporate financial condition. The assets of the Retirement Plan trusts, VEBA trusts and the 401(h) accounts have no significant concentrations of risk in any one country (other than the United States), industry or entity.
Investment managers are retained to manage separate pools of assets. Comparative market and peer group performance of individual managers and the total fund are monitored on a regular basis, and reviewed by the Company’s Retirement Committee on at least a quarterly basis.
The discount rate which is used to present value the future benefit payment obligations of the Retirement Plan and the Company’s other post-retirement benefits is 3.50% as of September 30, 2012. The discount rate which is used to present value the future benefit payment obligations of the Non-Qualified benefit plans is 2.50% as of September 30, 2012. The Company utilizes a yield curve model to determine the discount rate. The yield curve is a spot rate yield curve that provides a zero-coupon interest rate for each year into the future. Each year’s anticipated benefit payments are discounted at the associated spot interest rate back to the measurement date. The discount rate is then determined based on the spot interest rate that results in the same present value when applied to the same anticipated benefit payments.
|