- BENEFITS

Pensions and Other Post-retirement Benefits: We have defined benefit pension plans that cover substantially all of our employees. Generally, employees who started with the company after 1995 receive a benefit based on a percentage of their annual salary plus an interest credit, while employees who started before 1996 receive a benefit based upon years of service and final average salary. Approximately half of our projected benefit obligation relates to benefits based upon years of service and final average salary.

We also have OPEB plans covering substantially all of our employees. The health care plans are contributory with participants' contributions adjusted annually; the life insurance plans are noncontributory. The accounting for the health care plans anticipates future cost-sharing changes to the written plans that are consistent with our expressed intent to maintain the current cost sharing levels. The post-retirement health care plans include a limit on our share of costs for recent and future retirees.

We use a year-end measurement date to measure the funded status of all of our pension and OPEB plans. Due to the regulated nature of our business, we have concluded that substantially all of the unrecognized costs resulting from the recognition of the funded status of our pension and OPEB plans qualify as a regulatory asset.

The following table presents details about our pension and OPEB plans:



	Pension						OPEB
	2013			2012			2013			2012
	(Millions of Dollars)
Change in Benefit Obligation
Benefit Obligation at January 1	$	1,508.5		$	1,330.6		$	381.2		$	389.7
Service cost	14.6			21.7			10.0			10.3
Interest cost	60.4			65.5			15.6			20.3
Participants' contributions	—			—			8.9			9.6
Plan amendments	(1.0		)	—			—			0.5
Actuarial loss (gain)	(81.9		)	166.5			(27.7		)	(23.8		)
Other accrued benefits	—			31.4			—			—
Gross benefits paid	(90.4		)	(107.2		)	(26.3		)	(26.3		)
Federal subsidy on benefits paid	N/A			N/A			1.0			0.9
Benefit Obligation at December 31	$	1,410.2		$	1,508.5		$	362.7		$	381.2

Change in Plan Assets
Fair Value at January 1	$	1,385.4		$	1,262.5		$	285.4		$	255.4
Actual earnings on plan assets	147.3			127.4			45.5			29.0
Employer contributions	8.7			102.7			14.1			17.7
Participants' contributions	—			—			8.9			9.6
Gross benefits paid	(90.4		)	(107.2		)	(26.3		)	(26.3		)
Fair Value at December 31	$	1,451.0		$	1,385.4		$	327.6		$	285.4

Net asset (liability)	$	40.8		$	(123.1	)	$	(35.1	)	$	(95.8	)

As of December 31, 2013, our qualified pension plan was over-funded by $138.7 million and our non-qualified pension plan was under-funded by $97.9 million. As of December 31, 2012, our qualified and non-qualified pension plans were under-funded by $20.9 million and $102.2 million, respectively.

Amounts recognized in our Consolidated Balance Sheets as of December 31 related to the funded status of the benefit plans consisted of:



	Pension				OPEB
	2013		2012		2013		2012
	(Millions of Dollars)

Other long-term assets	$	138.7	$	—	$	40.2	$	25.1
Other long-term liabilities	$	97.9	$	123.1	$	75.3	$	120.9

The accumulated benefit obligation for all defined pension plans was $1,409.5 million and $1,507.1 million as of December 31, 2013, and 2012, respectively.

The following table shows the amounts that have not yet been recognized in our net periodic benefit cost as of December 31 and are recorded as a regulatory asset on our balance sheet:



	Pension				OPEB
	2013		2012		2013			2012
	(Millions of Dollars)

Net actuarial loss	$	528.8	$	719.2	$	9.8		$	65.3
Prior service costs (credits)	8.8		12.2		(1.7		)	(3.7		)
Total - Regulatory Assets	$	537.6	$	731.4	$	8.1		$	61.6

We estimate that 2014 periodic pension and OPEB costs will include the amortization of previously unrecognized benefit costs (credits) referred to above of $38.7 million and $(0.9) million, respectively.

The components of net periodic pension and OPEB costs for the years ended December 31 are as follows:



	Pension									OPEB
	2013			2012			2011			2013			2012			2011
	(Millions of Dollars)
Net Periodic Benefit Cost
Service cost	$	14.6		$	21.7		$	15.9		$	10.0		$	10.3		$	10.4
Interest cost	60.4			65.5			67.6			15.6			20.3			20.8
Expected return on plan assets	(95.8		)	(89.6		)	(82.1		)	(21.3		)	(19.0		)	(16.9		)
Amortization of:
Transition obligation	—			—			—			—			0.3			0.3
Prior service cost (credit)	2.3			2.2			2.2			(2.0		)	(1.9		)	(1.9		)
Actuarial loss	54.5			41.0			34.0			3.7			7.3			6.2
Settlement charge	2.5			—			—			—			—			—
Other	—			0.4			—			—			—			—
Net Periodic Benefit Cost	$	38.5		$	41.2		$	37.6		$	6.0		$	17.3		$	18.9



	Pension			OPEB
	2013	2012	2011	2013	2012	2011
Weighted-Average assumptions used to
determine benefit obligations as of Dec. 31
Discount rate	5.00%	4.10%	5.05%	4.95%	4.15%	5.20%
Rate of compensation increase	4.0%	4.0%	4.0%	N/A	N/A	N/A

Weighted-Average assumptions used to
determine net cost for year ended Dec. 31
Discount rate	4.10%	5.05%	5.60%	4.15%	5.20%	5.70%
Expected return on plan assets	7.25%	7.25%	7.25%	7.50%	7.50%	7.50%
Rate of compensation increase	4.0%	4.0%	4.0%	N/A	N/A	N/A



Assumed health care cost trend rates as of Dec. 31	2013	2012	2011
Health care cost trend rate assumed for next year (Pre 65 / Post 65)	7.5%/7.5%	7.5%/7.5%	8.0%/12%
Rate that the cost trend rate gradually adjusts to	5.0%	5.0%	5.0%
Year that the rate reaches the rate it is assumed to remain at (Pre 65 / Post 65)	2021/2021	2017/2017	2017/2017

The expected long-term rate of return on pension and OPEB plan assets was 7.25% and 7.50%, respectively, in 2013, 2012 and 2011. We consult with our investment advisors on an annual basis to help us forecast expected long-term returns on plan assets by reviewing historical returns as well as calculating expected total trust returns using the weighted-average of long-term market returns for each of the major target asset categories utilized in the fund.

A one-percentage-point change in assumed health care cost trend rates would have the following effects:



	1% Increase		1% Decrease
	(Millions of Dollars)
Effect on
Post-retirement benefit obligation	$	26.4	$	(22.3	)
Total of service and interest cost components	$	3.2	$	(2.6	)

We use various Employees' Benefit Trusts to fund a major portion of OPEB. The majority of the trusts' assets are mutual funds.

Plan Assets: Current pension trust assets and amounts which are expected to be contributed to the trusts in the future are expected to be adequate to meet pension payment obligations to current and future retirees.

The Investment Trust Policy Committee oversees investment matters related to all of our funded benefit plans. The Committee works with external actuaries and investment consultants on an on-going basis to establish and monitor investment strategies and target asset allocations. Forecasted cash flows for plan liabilities are regularly updated based on annual valuation results. Target allocations are determined utilizing projected benefit payment cash flows and risk analyses of appropriate investments. They are intended to reduce risk, provide long-term financial stability for the plans and maintain funded levels which meet long-term plan obligations while preserving sufficient liquidity for near-term benefit payments.

Our current pension plan target asset allocation is 45% equity investments and 55% fixed income investments. The current OPEB target asset allocation is 60% equity investments and 40% fixed income investments. Equity securities include investments in large-cap, mid-cap and small-cap companies primarily located in the United States. Fixed income securities include corporate bonds of companies from diversified industries, mortgage and other asset backed securities, commercial paper, and U.S. Treasuries.

The following table summarizes the fair value of our pension plan assets by asset category within the fair value hierarchy (for further level information, see Note M):



	As of December 31, 2013
Asset Category - Pension	Level 1		Level 2		Level 3		Total
	(Millions of Dollars)

Cash and Cash Equivalents	$	21.0	$	—	$	—	$	21.0
Equities:
U.S. Equity	519.5		—		—		519.5
International Equity	146.2		35.7		—		181.9
Fixed Income
Short, Intermediate and Long-term Bonds (a)
U.S. Bonds	108.4		505.2		—		613.6
International Bonds	78.1		36.9		—		115.0
Total	$	873.2	$	577.8	$	—	$	1,451.0



	As of December 31, 2012
Asset Category - Pension	Level 1		Level 2		Level 3		Total
	(Millions of Dollars)

Cash and Cash Equivalents	$	13.7	$	—	$	—	$	13.7
Equities:
U.S. Equity	466.3		—		—		466.3
International Equity	134.7		30.4		—		165.1
Fixed Income
Short, Intermediate and Long-term Bonds (a)
U.S. Bonds	67.7		546.6		—		614.3
International Bonds	80.7		45.3		—		126.0
Total	$	763.1	$	622.3	$	—	$	1,385.4


(a)	This category represents investment grade bonds of U.S. and foreign issuers denominated in U.S. dollars from diverse industries.

The following table summarizes the fair value of our OPEB plan assets by asset category within the fair value hierarchy:



	As of December 31, 2013
Asset Category - OPEB	Level 1		Level 2		Level 3		Total
	(Millions of Dollars)

Cash and Cash Equivalents	$	2.6	$	—	$	—	$	2.6
Equities:
U.S. Equity	148.0		—		—		148.0
International Equity	46.9		2.8		—		49.7
Fixed Income:
Short, Intermediate and Long-term Bonds (a)
U.S. Bonds	8.4		96.3		—		104.7
International Bonds	16.8		5.8		—		22.6
Total	$	222.7	$	104.9	$	—	$	327.6



	As of December 31, 2012
Asset Category - OPEB	Level 1		Level 2		Level 3		Total
	(Millions of Dollars)

Cash and Cash Equivalents	$	1.7	$	—	$	—	$	1.7
Equities:
U.S. Equity	125.9		—		—		125.9
International Equity	39.9		2.2		—		42.1
Fixed Income:
Short, Intermediate and Long-term Bonds (a)
U.S. Bonds	5.0		89.9		—		94.9
International Bonds	15.4		5.4		—		20.8
Total	$	187.9	$	97.5	$	—	$	285.4


(a)	This category represents investment grade bonds of U.S. and foreign issuers denominated in U.S. dollars from diverse industries.

Cash Flows:

Historical employer contributions:



	Pension
Year	Qualified		Non-Qualified		OPEB
	(Millions of Dollars)

2011	$	236.4	$	6.5	$	48.4
2012	$	95.6	$	7.1	$	17.7
2013	$	—	$	8.7	$	14.1

Estimated benefit payments:



Year	Pension		Gross OPEB
	(Millions of Dollars)

2014	$	103.9	$	24.2
2015	$	98.6	$	21.6
2016	$	100.3	$	22.0
2017	$	100.9	$	22.6
2018	$	100.2	$	23.4
2019-2023	$	495.6	$	119.7

Savings Plans: We sponsor savings plans which allow employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan-specified guidelines. Under these plans, we expensed matching contributions of $14.2 million, $13.8 million and $14.1 million during 2013, 2012 and 2011, respectively.

Postemployment Benefits: Postemployment benefits provided to former or inactive employees are recognized when an event occurs. The estimated liability for such benefits was $4.2 million and $4.0 million as of December 31, 2013 and 2012, respectively.