PENSION AND OTHER POSTRETIREMENT BENEFITS:

For the three months ended March 31, 2018 and 2017, net periodic benefit cost related to the employee and officer pension and other postretirement benefit plans for SJI consisted of the following components (in thousands):



	Pension Benefits
	Three Months Ended March 31,
	2018			2017
Service Cost	$	2,177		$	1,382
Interest Cost	5,108			2,955
Expected Return on Plan Assets	(7,633		)	(3,524		)
Amortizations:
Prior Service Cost	71			33
Actuarial Loss	4,132			2,613
Net Periodic Benefit Cost	3,855			3,459
Capitalized Benefit Cost	(483		)	(1,271		)
Deferred Benefit Cost	(751		)	(161		)
Total Net Periodic Benefit Expense	$	2,621		$	2,027



	Other Postretirement Benefits
	Three Months Ended March 31,
	2018			2017
Service Cost	$	81		$	247
Interest Cost	217			601
Expected Return on Plan Assets	(305		)	(853		)
Amortizations:
Prior Service Cost	(31		)	(86		)
Actuarial Loss	111			312
Net Periodic Benefit Cost	73			221
Capitalized Benefit Cost	(5		)	(55		)
Total Net Periodic Benefit Expense	$	68		$	166

The Pension Benefits Net Periodic Benefit Cost incurred by SJG was approximately $2.5 million of the totals presented in the table above for both the three months ended March 31, 2018 and 2017.During the three months ended March 31, 2018, and 2017, the Other Postretirement Benefits Net Periodic Benefit Cost incurred by SJG was less than $0.1 million and approximately $0.1 million, respectively, of the totals presented in the table above.

Capitalized benefit costs reflected in the table above relate to SJG’s construction program. Effective January 1, 2018, SJI and SJG adopted FASB ASU 2017-07 which stipulates that only the service cost component of net benefit cost is eligible for capitalization. In SJG's rate case settlement in October 2017, The BPU allowed the deferral until the next base rate case of incremental expense associated with the adoption.

SJI contributed $10.0 million to the pension plans, of which SJG contributed $8.0 million, in January 2017. No contributions were made to the pension plans by either SJI or SJG during the three months ended March 31, 2018. SJI and SJG do not expect to make any additional contributions to the pension plans in 2018; however, changes in future investment performance and discount rates may ultimately result in a contribution. Payments related to the unfunded supplemental executive retirement plan (SERP) are expected to be approximately $2.4 million in 2018. Prior to the base rate case settlement in October 2017, SJG also had a regulatory obligation to contribute approximately $3.6 million annually to the other postretirement benefit plans’ trusts, less direct costs incurred. The recent rate case settlement allows SJG to modify the future funding requirement level up to a limit that represents full funding of its obligation and to the maximum tax deduction allowed.

See Note 12 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, 2017 for additional information related to SJI’s and SJG's pension and other postretirement benefits.